Transfer pricing documentation – translation case study
Company ABC in Poland, a subsidiary of a foreign concern, contacted me with a task to translate their transfer pricing documentation. They needed to submit the document to the Tax Office. This meant that the translation had to be fast and accurate. I had two business days to translate 34 pages of text.
Companies that carry out transactions with their related parties have the formal obligation to prepare transfer pricing documentation and present it to the tax authorities upon their request.
The document presented the pricing methods used by the parent company in transactions with its subsidiaries. It was crucial to show that these arrangements were made following the arm’s length principle.
Document translation – challenge
Other than translation itself, the document required me to become familiar with the specificity of the company. I also had to research its products, history, and organizational structure. Because ABC doesn’t have website, I had to come up with the Polish names of products or departments from scratch. I had to make sure that they would be clear to the Polish reader and as faithful as possible to the English original.
The main translation problems concerned the following:
– Adjusting English abbreviations to their Polish equivalents
– Summarizing the operations of the company ABC
– Presenting valuation methods used by ABC
The source of difficulties was the fact that the original document was written by the American parent company but the recipient was a Polish official. My main goal was for the translation to present the facts about the Polish company in a manner that was both faithful and understandable.
Document translation – solution
Adjusting acronyms
The first pages of the document presented a table of abbreviations used in the text. Abbreviations are quite popular in English documents. They allow the text to be concise and cohesive. In contrast, Polish tends to avoid abbreviations, unless they are widely known and used. In the case of my translation, the acronyms were made for the internal needs of the text. This meant that in Polish, I had to provide and translate them in full.
For example:
| CUP | Comparable Uncontrolled Price | PCN | Porównywalna cena niekontrolowana |
| CPC | Custom Performance Colors | KN | Kolory niestandardowe |
| DS | Distribution Services | UD | Usługi dystrybucyjne |
| OpCo | Operating Company | SpOp | Spółka operacyjna |
| RPM | Resale Price Method | MCO | Metoda ceny odsprzedaży |
Further in the document, I used the Polish equivalents of full English terms. Using abbreviations would make the text convoluted and difficult to understand.
Presenting the company operations
The company ABC operates in the field of specialised technical products. It was, therefore, necessary to become familiar with ABC products and develop their Polish counterparts. Polish branch doesn’t have a website, so I had to look through industry articles and marketing materials. Also, the names of Polish departments were problematic. The names were closely related to specific products made by the company. My task was to develop true and fair Polish names. Due to confidentiality, I can’t disclose the names of specific products names.
For example:
participant in the cash-pool > uczestnik funduszu pieniężnego
description of product families > opis rodzin produktowych
Analysis of the functions performed, risks assumed and assets used > Analiza wykonywanych funkcji, ponoszonego ryzyka i wykorzystywanych aktywów
Presenting the valuation method
The documentation aimed to present methods used by the company ABC to evaluate transaction inside the group. The transactions should be valued based on the arm’s length principle. To prove that, the company had to equate its prices to the prices applied by comparable companies. In addition, the analysis had to apply the 2010 OECD guidelines. The company ABC had to present the method used to set the transfer prices and justify that it isn’t unduly low.
For example:
The selection of a transfer pricing method should take account of the following factors:
The respective strengths and weaknesses of each of the OECD recognized methods;
The appropriateness of the method considered in view of the comparability (including functional) analysis of the controlled transaction under review;
The availability of sufficiently reliable information (in particular on uncontrolled comparables) to apply the selected method and/or other methods;
The degree of comparability of controlled and uncontrolled transactions, including the reliability of comparability adjustments that may be needed to eliminate differences between them.
My translation:
Podczas wyboru metody ustalania cen transferowych należy uwzględnić następujące czynniki:
Odpowiednie mocne i słabe strony każdej metody uznanej przez OECD;
Stosowność sposobu rozważanej metody w świetlej analizy porównywalności (w tym funkcjonalnej) transakcji kontrolowanej będącej przedmiotem przeglądu;
Dostępność wystarczająco niezawodnych informacji (w szczególności przy niekontrolowanych danych porównawczych) w celu zastosowania wybranej metody i/lub innych metod;
Stopień porównywalności kontrolowanych i niekontrolowanych transakcji, w tym wiarygodność korekt porównawczych, które mogą być konieczne, aby wyeliminować różnice między nimi.
Document translation – the outcome
The intensive work bore highly satisfactory results – the customer didn’t have any remarks. They also didn’t made any changes to the names of products and departments suggested by me. The Tax office accepted the document without any reservations. The translation required a lot of extra (non-translation) work from me. It included extensive research of the most suitable technical names for products and departments. It required from me, so to speak, to walk in the customer shoes and look at the company ABC from its perspective.
Feel free to contact me if you would like me to translate for your company important corporate documents. If needed, I will discuss with you the details of our cooperation. Let me take your company to the next level on the Polish market.
