Permanent Establishment in Poland

Last updated: 27.02.2025

In Poland, the creation of a permanent establishment (PE) does not require filing any formal applications. Instead, it is determined based on factual circumstances, meaning that a foreign enterprise’s business activities in Poland must be sufficiently permanent to establish a tax presence and trigger the obligation to pay Polish income tax.

Income generated in Poland by non-residents is considered taxable if it results from business operations conducted within the country, including through a fixed place of business that qualifies as a permanent establishment (PE). This classification applies regardless of whether the business is conducted solely or partly carried out in Poland.

The permanent establishment concept is defined under three key sources of domestic tax laws and international agreements:

• Polish CIT Act, which serves as the primary legislation governing taxable presence in Poland.
• Applicable tax treaties, including bilateral tax agreements, which may modify or refine the permanent establishment status depending on the agreement between Poland and the foreign entity’s home country.
• OECD Model Tax Convention, which provides interpretative guidance on PE definitions used in most income fiscal arrangements worldwide.

What are the main ways to establish a Permanent Establishment in Poland?

Under the Polish CIT Act, a foreign enterprise may create a permanent establishment (PE) in Poland under three main circumstances. Each scenario defines a specific type of business presence that may result in tax presence under domestic tax laws and income tax treaties.

1. Fixed Place of Business

A fixed place of business refers to a physical location in Poland where a foreign entity conducts its enterprise’s business in a permanent and stable manner. To qualify as a permanent establishment, the following conditions must be met:

• The entity must have a physical presence in Poland, such as an office, factory, or workshop.
• The location must be fixed, meaning it is used on a continuous basis rather than being temporary.
• Core business operations must be carried out at this fixed place rather than through ancillary or preparatory activities.

Examples of fixed places of business that may create a permanent establishment (PE) include:

• Branch office or management branch of a foreign parent company operating in Poland.
• Factory or warehouse, particularly if used for purchasing goods or storing merchandise owned by the foreign company.
• Mining site, gas well, or other locations involved in the extraction of natural resources.

2. Construction PE

A Construction PE is established when a foreign company carries out building, assembly, or installation works in Poland. Unlike a fixed place of business, which requires a continuous physical location, a Construction PE is based on the nature and duration of the project.

The key factors that determine a Construction PE include:

• Engaging in building sites, construction projects, or major infrastructure developments within Poland.
• Conducting assembly or installation works, such as setting up industrial equipment or constructing facilities.
• The Polish CIT Act does not specify a minimum duration for a project to be considered a permanent establishment. However, most capital gains tax treaties define a time threshold (often 6 to 12 months) beyond which a tax presence is established in the host country.

To determine whether a Construction PE exists, businesses must review the relevant bilateral tax treaties between Poland and the home country of the foreign entity. These treaties often outline specific exclusions or additional tax risk considerations for temporary projects.

3. Dependent Agent PE

A dependent agent PE is established when a foreign corporation operates in Poland through an agent whose activities create a taxable presence. Unlike a fixed place of business, which requires a physical location such as an office, factory, or workshop, a dependent agent PE is based on the agent’s authority to act on behalf of the foreign company.

• Acting on behalf of a foreign enterprise – A dependent agent in Poland represents a foreign entity from another country and plays a crucial role in its ability to conduct business. If the agent works solely or primarily for one foreign company, their activities may trigger a permanent establishment status, leading to capital gains taxes in the host country.
• Habitually exercises authority to conclude contracts – If an agent in Poland habitually exercises the authority to negotiate or finalize agreements that bind the foreign company, a permanent establishment exists. This applies to agency PE cases where contracts involve purchasing goods, selling merchandise belonging to the foreign entity, or managing long-term enterprise maintenance operations.
• Contracts are binding for the foreign company – When a foreign enterprise relies on an agent to sign legally binding contracts in Poland, tax authorities may classify this as a taxable presence. In many income tax treaties, this triggers obligations for filing a tax return in the contracting state where the business operates.
• Independent agents do not create a PE – An other agent, such as a broker or intermediary operating in the ordinary course of business, typically does not create a permanent establishment. However, if the agent works solely for one foreign company, they may lose their independent status, leading to tax exposure under most income tax treaties and treaty purposes provisions.

How do Double Tax Treaties affect Permanent Establishment?

The definition of permanent establishment (PE) in Poland may be modified by double tax treaties, which set specific conditions for tax presence.

• Time thresholds for construction sites – Many income tax agreements define a Construction PE if a project lasts 6 to 12 months in the host country.
• Exclusions for preparatory and auxiliary activities – A fixed place of business used solely for collecting information, warehousing merchandise belonging to a foreign entity, or minor enterprise maintenance may not establish a PE.
• Prevention of artificial avoidance – Treaties help limit profit shifting and base erosion, ensuring fair taxation in both the home country and contracting state.

Businesses must review relevant tax agreements to determine their tax return obligations and avoid double taxation risks.

FAQ – Permanent Establishment in Poland