The taxation of the business activities of foreign companies in Poland frequently raises questions. Foreign entities that are not registered in Poland in certain cases have to face tax obligations in Poland. Under what circumstances will foreign entities be obliged to pay CIT in Poland?

What if foreign entities are not registered in Poland, but carry out business in Poland? They may then be subject Polish CIT. This applies, i.a. when foreign companies in Poland:

  • have an office or warehouse;
  • employ staff (including remote employees);
  • conduct construction or architectural activities (e.g. construction site);
  • cooperate with sales representatives who i.a. conclude contracts on their behalf.

The above may lead to the creation of a permanent establishment (PE). Consequently, such actions are going to result in (but are not limited to):

  • obligation to register for tax purposes in Poland;
  • a requirement to pay income tax on income earned in the territory of Poland, together with interest for any delays in the settlement of the tax. This should include the calculation of advance payments and the submission of corresponding tax returns.

Not fulfilling the above-mentioned obligations could result in severe penal and fiscal consequences, as well as the need to settle tax in Poland and interest for late payments.

What factors determine the constitution of a permanent establishment (PE)?

As long as the relevant double tax treaty does not stipulate otherwise, on the basis of the Polish CIT Act, a permanent establishment should be considered as:

  • a fixed place of business i.e. a situation in which an entity having its registered office or management in the territory of one state carries out all or part of its activities in the territory of another state. A branch, representative office, factory, workshop or place of exploitation of natural resources should also be concerned;
  • a building site, construction, assembly or installation operated in the territory of one country by an entity having its registered office or management in the territory of another country;
  • a person (so called dependent agent concept) who acts in the territory of one state for and on behalf of an entity having its registered office or management in the territory of another state and who has the power of attorney to enter into contracts on its behalf and who actively performs those contracts.

As a consequence of the applicability of the relevant double taxation agreement, the above can only be an open catalogue. Therefore, it only indicates the basic prerequisites. However, please note, based on our experience, the most common risks we observe are the risk of a PE arising in connection with the concepts of „fixed place of business” and „dependent agent”.

What is particularly important in determining whether there will be a PE based on „fixed place of business” concept?

Polish tax authorities tend to define premises within the PE in a very broad manner and often unfavourably for taxpayers. For example, according to the position presented by the Director of the National Fiscal Information in some of the issued binding tax rulings, „a place of business” [being a prerequisite for PE based on fixed place of business concept] may be defined as any premises, means or equipment used to conduct the business of an enterprise, regardless of whether they are used exclusively for this purpose. In the opinion of the tax authorities, a permanent establishment (PE) may arise even in the case of the lease of an office or warehouse space. The risk will also arise in situations where a remote staff is employed.

According to paragraph 18 of the commentary to Article 5 of the OECD Model Convention, a permanent establishment may be established even if the employee uses an office maintained in his or her own premise. This applies if the premise is regularly used for the employer’s business as a result of orders received from the employer. A PE (based on the fixed place of business) may therefore also arise if the employee is not provided with an office, even though the need for an office arises from the nature of the employment relationship.

Please note that even when certain conditions apply, the activity of the business does not always result in a permanent establishment. This is sometimes the case, when the business activities conducted are carried out as auxiliary or preparatory activities in nature. The decisive factor in determining the nature of the activities carried out by the foreign entity is whether those activities associated with the permanent establishment in themselves constitute a substantial and significant part of the activities of the enterprise as a whole. Please note, an activity that is auxiliary in nature corresponds to an activity that is carried out to support the main activity of the enterprise as a whole (at the same time, without being part of it).

In addition, it is also particularly worth considering whether persons acting on behalf of a company outside its country of residence have powers of attorney to enter into contracts on behalf of that company. Please note, whether their activities are not limited to activities auxiliary to the core business in country of your residence. If this is the case, a permanent establishment may arise under the concept of „dependent agent”.

As regulations are complex and the positions of tax authorities and administrative courts in Poland are often not consistent, it is worth taking advantage of professional support. Arena Tax can carry out an overview of your group’s activities. We will also provide you with support in assessing whether there are grounds for registering your activity and settling tax in Poland.


Licensed Tax Adviser (No. 13656) and Attorney-at-Law (Lb-1952) with 15 years of professional experience in tax advisory services and representation Clients in tax disputes with tax authorities and before administrative courts.

Dawid has extensive professional experience in representing clients in tax disputes before tax authorities (in tax proceedings, tax inspections, customs, tax audits and control procedures), as well as in proceedings before administrative courts. He participates in outgoing tax advisory on behalf of national and foreign entities, in particular, in the scope of VAT and corporate income tax. He advises also in the issues of criminal fiscal liability, tax risk management and in the scope of MDR. He started career in one of the leading international advisory companies from Big Four. He constantly was improving his professional qualifications, incl. advising institutional clients in the tax law teams in consulting companies, law firms and running his own legal practice.

Michał specializes in income taxes and international taxation. He has extensive experience in supporting clients with fulfilling obligations related to reporting tax schemes (MDR). He is also involved in preparing defense file documentation and conducting tax due diligence reviews. He has participated in numerous projects involving ongoing advisory, reorganizations, compliance, tax audits, and proceedings. Before joining the Arena Tax team, Michał gained professional experience in leading tax advisory firms and at the Ministry of Finance. He is the author of publications in the field of tax law. Michał is a graduate of the Faculty of Law and Administration at the University of Warsaw. He also completed the German and European Law School at the University of Bonn and DAAD.