Recent developments regarding fixed establishment in Poland

The lack of a uniform approach to the definition of a fixed establishment (FE) in Poland generates plenty of concern both among Polish service providers as well as foreign entities providing or purchasing services in Poland.

For many years the term “fixed establishment” received a very broad construal from the Polish tax authorities. It started after the judgement of the ECJ of 16 October 2014 (C-605/12; Welmory), on the basis of which the Polish tax authorities began to consider any cooperation between Polish and foreign entities, which had the signs of stability, as a FE. Such understanding of a FE was significantly broader than the one presented in other EU member states.  

However, this approach appears to have been changing lately. In the latest tax rulings issued by the Director of National Tax Information it s indicated that the mere continuity of a business is not enough to create a FE for VAT purposes. In order to have a FE in Poland it is necessary to possess own personnel and technical resources located in Poland or to use someone else's resources in Poland while maintaining a control typically exercised by an entity over its employees or technical resources.

Such standpoint has also been supported by the Supreme Administrative Court (SAC) in its judgement No. I FSK 396/21 issued on 11 October 2022. In this judgement the SAC stated that having a contract for logistic services with a Polish company does not create a FE for the foreign entity, which does not have its own warehouses in Poland. In the oral justification the SAC’s judge rightly pointed out that accepting that the requirement of “human and technical resources” is fulfilled, even in lack of supervision/control would effectively mean that the foreign entity will have a fixed establishment in the service provider’s country whenever that entity buys services supplied in a different country than the one in which it has established its business. Such interpretation is not acceptable. To determinate whether a FE is created for a foreign entity the extent of its power to manage the Polish supplier’s personnel or to exercise control over it must be verified.

It is also worth mentioning that the FE issue is attracting increasing attention of the European Union. June 2022 saw a much-welcomed opinion issued by the VAT Expert Group in which similar conclusions were presented. The VAT Expert Group puts pressure on the EU countries to determine clear conditions to be met in order to have a FE in another country.

The interpretation of a FE presented by the Polish tax authorities is closer and closer to how this definition is interpreted in the ECJ’s case law. However, lack of regulations in this respect in Poland still cast a cloud of uncertainty on when a FE is created and therefore each cooperation within which services are provided to or by a foreign entity must be analysed in detail – preferably before such cooperation is started.

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