A company is considered to be a resident in Poland if its registered office or management is located in Poland.
Permanent establishment (PE)
PE under Polish CIT law
According to Polish CIT law, the following are understood to be a PE:
- A permanent place of business through which a non-Polish tax resident conducts its business activities, in whole or in part, within the territory of Poland; in particular, a branch, agency, office, factory, workshop, or place of extraction of natural resources.
- A construction site, construction, assembly, or installation works carried on within the territory of Poland by a non-Polish tax resident.
- A person who, on behalf and for the benefit of a non-Polish tax resident, operates in Poland, provided such person holds and exercises a power of attorney to enter into agreements on one's behalf.
We note that Polish CIT law:
- does not encompass any provisions concerning the period required for construction works to create a PE
- does not include provisions indicating that an independent agent does not create a PE, and
- does not include provisions indicating that actions of an auxiliary or preparatory character do not lead to creation of a PE in Poland.
PE from a DTT perspective
In general, the provisions of DTTs concluded by Poland are based on the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention on Income and on Capital (OECD Model), except for provisions related to taxation of royalties, which are based on the United Nations (UN) Model Double Taxation Convention.
As a principle, treaties based on the OECD Model provide for the following concepts, which determine whether activities of a foreign entrepreneur constitute a PE (usually in Article 5):
- Fixed place of business concept.
- Dependent agent concept.
- Construction PE concept.
Note that some DTTs concluded by Poland also encompass other PE concepts (e.g. service PE concept or offshore PE concept).
As of 1 January 2019, exit tax (i.e. taxation of unrealised capital gains in the case of transfer of assets, change of tax residence, or taxpayer's PE outside the territory of Poland) has been introduced. The exit tax rate has been established at 19%. Under certain conditions, taxpayers may be able to apply for payment in instalments for a period not exceeding five years.