The verification of whether transactions between related entities comply with the arm’s length principle is one of the main areas of interest for tax authorities. Tax assessment decisions resulting in income adjustments based on transfer pricing regulations often prompt tax authorities to consider the criminal tax liability of management personnel under Article 56 of the Penal Fiscal Code (k.k.s.).
However, the key problem from the perspective of criminal law dogmatics is not the objective difference in transaction valuation itself, but the difficulty in proving the subjective element of the act – intent. In an environment of highly complex economic analyses, demonstrating the taxpayer’s fraudulent intent poses an extremely difficult barrier for the prosecutor to overcome.
The Subjective Element of the Act under Art. 56 k.k.s. – The Requirement of Intent
The starting point for the criminal law assessment is the provision of Art. 56 § 1 k.k.s., which penalises the behaviour of a taxpayer who, when submitting a tax return or statement, provides false information or conceals the truth, thereby exposing the tax to a tax loss.
The relationship between the general rule expressed in Art. 4 § 1 k.k.s. and the provision of Art. 56 k.k.s. is of fundamental importance for the classification of this act. According to Art. 4 § 1 k.k.s., a fiscal offence can be committed intentionally, and unintentionally only when the code explicitly states so. Since the provisions regulating liability under Art. 56 k.k.s. do not provide for the possibility of committing this act unintentionally, tax fraud can be committed exclusively intentionally.
This means that the procedural authority must prove beyond any doubt that the perpetrator acted with direct intent (dolus directus – the perpetrator wants to commit the prohibited act) or indirect intent (dolus eventualis – the perpetrator foresees the possibility of committing it and accepts it). Under penal fiscal law, a clear distinction must be made between intent and interpretative error. In cases under Art. 56 k.k.s., there is no room for an objective attribution of liability based solely on the occurrence of a tax loss.
The Complexity of Transfer Pricing vs. Difficulties in Proving Intent
Proving the intent of tax fraud encounters specific evidentiary obstacles in the area of transfer pricing. Determining the arm’s length nature of a transaction is not a simple zero-sum process, but a complex analytical operation. It requires preparing a functional analysis, assessing risk allocation, and conducting a comparative analysis (benchmarking), the result of which is usually not a specific price point, but an arm’s length range.
Since determining a transfer price relies on estimation methods and the selection of a comparative sample, from the perspective of criminal law, any discrepancy between the taxpayer’s valuation and the tax authority’s valuation is a dispute of an evaluative nature, at the intersection of economics and law. The Constitutional Tribunal referred to this in its judgment of September 12, 2005 (ref. no. SK 13/05). The Tribunal ruled in the operative part that, inter alia, “Article 56 § 2 in conjunction with § 1 of the Act of September 10, 1999 – Penal Fiscal Code (Journal of Laws No. 83, item 930, as amended) is consistent with Article 42 sec. 1 in conjunction with Article 2 of the Constitution of the Republic of Poland and is not inconsistent with Article 42 sec. 2 and 3 of the Constitution”.
Although the Constitutional Tribunal upheld the provision, in the justification of this ruling, it set clear limits for its application, protecting taxpayers from penal fiscal automatism. The Tribunal indicated that an error in subsumption (assigning the factual state to a legal norm) and defective classification of economic events cannot be mechanically equated with the intentional provision of false information. If the transaction actually took place, and the dispute concerns only the selection of a specific price verification method or the authority’s rejection of certain entities from the comparative sample, the prosecutor faces the necessity of proving that the taxpayer made that specific methodological choice with the sole intention of falsifying the tax base.
The Role of External Analysis and Documentation as a Shield Against the Charge of Intent
In penal fiscal practice, a key element excluding intent is properly prepared transfer pricing documentation and TPR reporting, and in particular – reliance on an independent comparative analysis.
If a taxpayer commissioned a market analysis from an external entity (e.g., a professional advisory firm) and shaped their pricing policy based on it, this may exclude intent. Acting in reliance on the results of a professional audit is evidence of exercising due diligence and the lack of any intention to expose the tax to a tax loss. Even if the tax authority questions the correctness of this benchmark years later, this shortcoming remains in the sphere of a substantive error. A conviction under Art. 56 k.k.s. would require proving that the company’s management board and the advisory entity acted in collusion, deliberately manipulating data to create economic fiction. Proving such a thesis before a criminal court against reliably operating enterprises is extremely difficult.
Burden of Proof and Jurisdictional Independence of the Court
The barrier for fiscal authorities is reinforced by the principle of jurisdictional independence of the criminal court, explicitly expressed in the regulations. According to Art. 113 § 1 k.k.s. “In proceedings concerning fiscal offences and fiscal petty offences, the provisions of the Code of Criminal Procedure shall apply accordingly, unless the provisions of this Code stipulate otherwise”.
This reference leads directly to Art. 8 § 1 of the Code of Criminal Procedure (k.p.k.), which establishes a fundamental principle for the accused: “The criminal court independently resolves factual and legal issues and is not bound by the resolution of another court or authority”.
From a dogmatic perspective, this means that the mere fact that a tax authority issues a final decision assessing income based on transfer pricing regulations does not constitute binding evidence of committing a crime. The criminal court is not a “hostage” to the tax decision.
According to the principle of the presumption of innocence and the in dubio pro reo rule (unresolvable doubts are resolved in favour of the accused), the entire burden of proof rests on the prosecutor. They must separately prove conscious and deliberate manipulation of the valuation before the criminal court. Given the flexibility of transfer pricing regulations and the multiplicity of estimation methods acceptable in economics, any rationally argued business decision of the taxpayer creates a breach in the prosecutor’s chain of circumstantial evidence, often forcing the discontinuance of the proceedings due to the lack of elements of a prohibited act.
Conclusion
Mechanically translating the effects of tax decisions in the field of transfer pricing onto the ground of criminal tax liability under Art. 56 k.k.s. is a dogmatic error. The nature of estimating market value makes proving intent – a sine qua non condition for the existence of the crime of tax fraud – a challenge with a very high threshold of evidentiary difficulty. Possessing comprehensive documentation and basing the valuation on professional comparative analyses, combined with the principle of jurisdictional independence of the criminal court, effectively protects management personnel, making it impossible to attribute to them the intent of causing a loss to the public revenue.
Bernard Łukomski
Attorney-at-law
Tax Advisor
tel. +48 608 093 541
WhatsApp+48 692 802 229
Warsaw, April 8, 2026