Poland is progressively altering its attitude regarding the conception of ‘fixed establishment’ for VAT purposes.
The Polish tax authorities and courts are taking an expanding approach concerning those activities of foreign companies which give rise to a fixed establishment.
As a general rule, a ‘fixed establishment’ shall be any establishment categorised by a adequate degree of permanence and a appropriate structure in terms of human and technical resources to allow a company to deliver the service or goods supplied as part of its activity.
Nonetheless, the Polish tax authorities in connection with Welmory Sp z o.o. case (C-605/12) of the ECJ, have extended this model announcing that the resources do not require to belong to the company, so that a ‘fixed establishment’ may be also formed by using third-party resources.
How do I identify if my company has a ‘fixed-establishment’ in Poland?
If you require to know if a company has a ‘fixed-establishment’ the following questions must be taken into account:
- Has your company sent a delegation of its employees to Poland in order to supervise services rendered there?
- Are your company’s tangible assets located in Poland?
- Does your company have employees or plans to have them in Poland?
- Does your company acquire certain services, especially: rent of storage space, production (especially from related entities), transportation, logistics trade-related and research and technical development in Poland?
If the answer is ‘yes’ to any of these above, then you could have a ‘fixed-establishment’.
How could this affect your company in terms of VAT?
Having a ‘fixed-establishment’ may deviate the VAT management of your transactions in Poland. For certain suppliers, reverse charge sales would not relate. In case the Polish tax authorities consider that VAT should have been charged due to a ‘fixed-establishment’ in Poland, they would assess penalties in the amounts not paid to the tax authorities.
Additionally, in case the concept is extended to permanent establishment for corporate tax purposes, the foreign company would be subject to Polish corporate tax on the revenue connected to their activity in Poland.
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