Taxation of a foreign company’s representative office in Poland

A representative office is one of the possible forms of business for a foreign entrepreneur in Poland. It is a legal institution that allows operations exclusively in a specific area. Namely, in the area of advertising and promoting the foreign company. What are the rules for establishing and operating a representative office in Poland? What does the taxation of a representative office of a foreign company in Poland look like? Find answers to these questions below.

Table of Contents

• Representative office of a foreign company in Poland – rules for formation and operations
• Taxation of a foreign company’s representative office in Poland – Corporate Income Tax (CIT)
• Taxation of a foreign company’s representative office in Poland – Value Added Tax (VAT)
• Summary

Representative office of a foreign company in Poland – rules for formation and operations

The Act on the Rules of Participation of Foreign Entrepreneurs and Other Foreign Persons in Economic Transactions on the Territory of the  Republic of Poland contains regulations on this form of business.

According to it, foreign entrepreneurs can establish and operate representative offices in Poland. Their scope of activity may include only advertising and promoting the foreign entrepreneur.

Formation of a representative office of a foreign company in Poland requires registration. It is based on a submitted application and in accordance with its content. Registration is valid for a period of 2 years. Upon the request of the foreign entrepreneur, the application submitted within the last 90 days of its validity can be extended for another 2 years. The aforementioned Act defines the formal requirements of the application.

The application is prepared in Polish and includes:

1. The name, registered office, and legal form of the foreign entrepreneur.
2. The subject of the main economic activity of the foreign entrepreneur.
3. The name of the person authorized to represent the representative office in Poland.
4. The address of the representative office in the territory of the Republic of Poland.

The following documents must be enclosed to the application:

• An official extract confirming the registration of the foreign entrepreneur. Namely, a document based on which the entity conducts business activity.
• An officially certified document specifying the address of the foreign entrepreneur’s registered office, its policy, and the identification of individuals authorized to represent it.
• A document confirming the authorization of the person indicated in the application to represent the foreign company in the representative office.

You should submit the above documents along with their translation into Polish. Additionally, the document confirming the registration of the foreign company, based on which it conducts its business activity, must be authenticated. This requires an apostille or legalization.

A foreign entrepreneur who established a representative office in Poland must:

• use the original name of the foreign company with the addition of the words “representative office in Poland”.
• keep separate accounting in the Polish language and in compliance with accounting regulations.
• report to the minister any changes in factual and legal status within 14 days,
• appoint a person authorized to represent the foreign company in the representative office.

Taxation of a foreign company’s representative office in Poland – Corporate Income Tax (CIT)

A foreign company must pay CIT in Poland if it meets the conditions for forming its foreign establishment. The Corporate Income Tax Act specifies entities that qualify as foreign establishment. It refers, among others, to a permanent establishment through which an entity with its registered office or management in one country conducts its entire business activities in another. The representative office of a foreign company is considered such a foreign establishment.

However, the case-law shows that a foreign establishment is not a taxable entity. It is the foreign company itself that remains subject to corporate income tax. So, the representative office of a foreign company in Poland is not a CIT taxpayer. Yet, it has certain obligations similar to independent Polish taxpayers.

You should remember that if the representative office of a foreign company in Poland hires employees, it must pay:

• Personal income tax.
• Social security and health insurance contributions.

Taxation of a foreign company’s representative office in Poland – Value Added Tax (VAT)

The representative office is a part of a foreign company. It does not conduct its own economic activity. This is why it does not qualify as a VAT taxpayer. Moreover, the representative office of a foreign company does not have to be entered in the register of VAT taxpayers.

As a result, only a foreign company has the right to apply for a refund of VAT paid as part of the representative office’s activities.

You should remember that a foreign entrepreneur must keep separate accounting for the representative office. It must be maintained in the Polish language. This results from the provisions of the Accounting Act.

Summary

Conducting business in Poland by a foreign entrepreneur can take various legal forms. One of them is the representative office of a foreign company. The scope of its operations may include advertising and promotion activities.

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