Tax residence and fiscal domicilei Corporate residence
Companies, other legal persons, limited partnerships issuing shares and organisational units without legal personality (e.g., tax units), except for other partnerships, are taxpayers liable to CIT. Taxpayers having their seat or place of management in Poland are tax residents liable to CIT on their worldwide income. Other taxpayers are non-residents liable only to tax on income derived in Poland unless an applicable DTT states differently. An entity incorporated outside Poland may become a Polish tax resident if its place of management is relocated to the territory of Poland. Conversely, a locally incorporated entity may cease to be a Polish tax resident if its place of management is relocated from Poland to another jurisdiction. To determine under Polish rules where an entity has its place of management, one must look at where the entity is actually managed (namely, where decisions regarding the entity's matters are actually taken). It is a question of facts rather than law. Any legal deeds or other formal indicators of a place where the entity is managed and where decisions are made (e.g., relevant rules in articles of association or management agreements executed with the entity) may be considered by the tax authorities, but they are neither final nor prevailing in determining the place of management. In practice, however, there exists no tax or court ruling in which local tax authorities would claim that a given entity became or ceased to be a Polish tax resident owing to the relocation of the place of its actual management. Nevertheless, the place of actual management may be effectively moved for tax purposes. In many cases, such movement could not be challenged by the tax authorities of the exit jurisdiction, since many DTTs executed by Poland state that in cases of disputes regarding where a corporate taxpayer is tax resident, it must be considered a tax resident of the contracting state in which it has a place of management.
A company incorporated in any EU Member State, including SEs, may also become Polish tax residents, and a company incorporated in Poland may relocate to another EU Member State by way of a statutory merger between such companies. SEs and SCEs may also move their corporate seat between EU Member States. Another Polish company would have to open a liquidation procedure if it decides to move its seat to another country.
In Poland, no corporate immigration or emigration taxes were levied on entities that became or ceased to be Polish tax residents. However, as of 2019 Poland introduced exit tax, as part of Polish corporate tax. Exit tax is imposed on unrealised gains in cases where, in connection with the following events, Poland would not be able to impose CIT on income that would be realised from sale of assets in the future:
- relocation of the corporate taxpayer's seat (place of management) from Poland to another jurisdiction;
- relocation of corporate assets from Poland to another jurisdiction;
- gratuitous transfer of assets located in Poland to any Polish or foreign entity; or
- in-kind contribution of assets to an entity other than a corporation or a cooperative.
The exit tax should apply at a rate of 19 per cent to a surplus of the fair market value of assets of the CIT payer being relocated from Poland over costs that would be deductible, were such assets sold before their relocation from Poland.ii Branch or permanent establishment
A foreign entrepreneur has its fiscal presence in Poland and is liable to Polish income tax if it derives income locally through its PE in Poland within the meaning of local definitions or a pertinent DTT. A PE is defined as a fixed place where the business activity of the foreign entrepreneur is conducted, in part or in whole, in Poland. A PE is created, in particular, if the foreign entrepreneur has a place of management, a branch office or a workshop in Poland.
PEs frequently take the form of a local branch office. A locally registered partnership of one or more of its non-resident partners may also constitute their PE. A PE may also be created without such formal presence in Poland, in particular where a foreign entrepreneur seconds to Poland an employee authorised to conclude agreements in Poland on behalf of the foreign entrepreneur, and such individual customarily exercises such authorisation.
In practice, activities of a foreign entrepreneur will create a PE if they are conducted in Poland permanently. Therefore, such establishment does not exist if activities generating local income are performed outside Poland on a permanent basis rather than in Poland. However, neither Polish domestic regulations nor DTTs define the permanency of such local activities; thus, activities conducted for a few months (e.g., six months) may create a PE. For example, pursuant to a court judgment, cross-border advisory and other services of a Japanese company aimed at the implementation in Poland of a licence granted to a Polish company constitute a local PE within the meaning of the Poland–Japan DTT.
Owing to the protection of DTTs executed by Poland, the PE condition may not be enough to tax local income of the foreign entrepreneur. With few exceptions, most DTTs require that tax authorities prove a nexus between the local business activities of the PE and any items of income derived by the entrepreneur in Poland. In the absence of such nexus, no item of local income may be taxed. However, a few treaties, such as the DTT between Poland and Italy, set forth the presumption that one must assume that such nexus exists between the PE and all items of income (if any) derived by that taxpayer in Poland, unless the taxpayer proves the absence of such nexus with a given item of local income.
In addition, DTTs executed by Poland provide which local permanent activities and places may not be considered to be a PE. Although such activities and places differ to some extent, Polish tax treaties are based on the OECD Model Convention; therefore, such definitions are similar in all treaties. In general, a fixed place of business in Poland does not constitute a PE if it constitutes a construction site or installation for a certain period (usually lasting not more than 12 to 18 months), or if the fixed place is designated solely for the storage or delivery of products, or the purchase of goods or gathering of information (or for the combination of some or all of these). In the absence of a DTT, most such activities would constitute a PE, and any income generated by the taxpayer from such activities would have to be taxed in Poland.