The activity of foreign companies on Polish territory increasingly results in these entities being recognized by Polish tax authorities as Polish tax residents, which in turn implies taxation in Poland.
However, the position of the tax authorities is not always correct – which requires precise and fact-based argumentation tailored to the individual circumstances of the case. We have previously addressed the issue of the place of effective management, including the implications of double taxation treaties, on our blog.
In the case where we represented our Client, we initially submitted a request for an individual tax ruling, asking whether a company with board members who are exclusively German tax residents, and which is registered in Poland, should be subject to CIT in Poland. In Nexia Advicero’s opinion, the company’s place of effective management was located in Germany; therefore, it should be treated as a German tax resident and taxed accordingly. Initially, the Director of the National Tax Information (hereinafter: “Director of KIS”) refused to initiate the proceedings, which we appealed to the Provincial Administrative Court in Warsaw. The Court, in its judgment of 16th June 2021 (case ref. III SA/Wa 2529/20), ordered the issuance of an individual interpretation. This position was later upheld by the Supreme Administrative Court in a ruling dated 9th August 2023 (case ref. II FSK 1235/21) after the cassation appeal was dismissed.
Essence of the dispute
Based on the above judgments, the Director of KIS issued an individual interpretation on 5 April 2024 (ref. 0114-KDIP2-1.4010.136.2020.16.S/SP/MW), confirming that:
- if a company is registered in Poland but its place of effective management is located in Germany, it can be considered a German tax resident,
- the company does not and will not have a permanent establishment in Poland within the meaning of the Polish CIT Act.
Tax proceedings regarding CIT overpayment
Despite receiving a favorable interpretation from the Director of KIS, the Company continued to pay monthly CIT advances for a certain period. However, we recommended that the Client file applications for the recognition and refund of CIT overpayment for 2021 and 2022 (we also plan to submit similar applications for subsequent years).
In both the overpayment applications and ongoing tax proceedings, we provided the necessary documentation and explanations to support that the Company is not a Polish tax resident, but a German tax resident – thus eligible for a CIT refund.
Our argumentation was based on the fact that the place of effective management is entirely located in Germany, as all business decisions – both strategic and operational – are made in that jurisdiction. Additionally, most documents (accounting and organizational) are stored in Germany.
The Company has no permanent staff or offices in Poland, nor does it rent any premises that would allow it to conduct or expand business activities there. Furthermore, all board members are German tax residents, which we confirmed with appropriate residency certificates.
We also submitted the positive tax ruling from the Director of KIS, which significantly supported our position.
The tax authority agreed with the Company’s position and refunded the overpaid CIT for 2021 and 2022, confirming that the Company is not a Polish tax resident and therefore not subject to CIT in Poland.
Registering a company in Poland does not automatically mean that Poland will be the jurisdiction of taxation. For companies where the place of effective management is located outside Poland, the jurisdiction of taxation may in fact be the country where that management is exercised – which can lead to significantly more favorable tax treatment. Each case, however, requires individual analysis of the specific facts and circumstances. If your company is in a similar situation, or you have doubts about the applicable tax residency and obligations, we encourage you to contact our experts at Nexia Advicero. Our team will guide you through the entire process – effectively and safely.