Entrepreneurs looking for new markets or innovative goods for the Polish market are looking for solutions in the field of international trade. In 2018, Polish exports and imports amounted to almost EUR 500 billion. This translates into increased relations with foreign partners, not only from the European Union. Foreign trade is not only business risk related to contractors or product quality, but also the risk of compliance with tax regulations. International trade agreements may have serious tax consequences for Polish tax residents.
The most important ones include issues of transfer pricing, WHT (withholding tax), CFC (Controlled Foreign Company) regulation and analysis of double taxation avoidance agreements.
Provision of services or delivery of goods using subsidiaries is one of the most common methods of foreign investment. Agreements between related companies may cause increase of risk of transfer pricing. They may also require preparation of documentation justifying the marketability of transactions between companies. The obligation to prepare local documentation in accordance with article 11k of the CIT Act, and article 23 in the PIT Act is created after exceeding:
- PLN 10,000,000 – in the case of commodity or financial transactions,
- PLN 2,000,000 – in the case of a service or other transaction.
Controlled Foreign Companies
Persons conducting business in the form of foreign investments must also take into account the circumstances of taxing the transaction on the grounds of a foreign company (in the case of being a beneficiary of such a company) on the basis of Polish tax laws. If company meets the requirements related to CFC regulations, taxation of revenues will amount to 19% of the tax base. Issues of changing the structure of an international entity or contract may decide on taxation in accordance with CFC regulations.
International trade agreements and transactions related to them are strictly related to international tax law, due to their transnational nature. Countries seek ways to reconcile the universality of taxation and attract investments. To do that they conclude agreements defining the rights and obligations of States towards taxpayers earning revenues on their territory. Analysis of these contracts will indicate investment opportunities in a given country. It will also reduce the risk of double or unfavourable taxation. Possible solutions related to international transactions between entrepreneurs may turn out to be more advantageous in other jurisdictions. Precisely because of double tax treaties.
We must also remember about withholding tax, in case of our company being provided with services from foreign companies. It may turn out that the Polish entity will be a tax payer for the Polish tax office. Such services include advisory services, trademark rights, management and control as well as entertainment activities. Analysis of the services provided and document requirements will help to match the commercial agreement with standards that allow you to maintain favourable taxation.
Thanks to many years of experience in the field of international trade agreements, experts from CGO Legal are eager to support entrepreneurs in issues related to the maximization of security in international trade, in relation to contractors as well as Polish and foreign tax authorities. Moreover lawyers from our Tax department had the opportunity to create and analyse commercial contracts, including ones with the USA, Cyprus, Georgia, Singapore and other jurisdictions in Europe and beyond. Extensive knowledge and years of practice, allow us to provide maximum security for clients and effective implementation of international investments. If you need help in creating or analysing an existing international trade agreement, please contact our tax specialists.