Your subsidiary is registered in Ireland, Estonia, or the Netherlands. It is entered in the local commercial register, has a foreign tax identification number, and formally operates abroad. But its management board members join meetings from Warsaw. Resolutions are drafted by the legal department of the Polish parent company. Agreements are signed by a management board member sitting in an office in Mokotów.
In the eyes of the Polish tax authorities, this company may be a Polish CIT taxpayer – on its entire worldwide income. Retroactively.
Article 3(1) of the CIT Act states explicitly: unlimited tax liability applies to taxpayers whose registered office or place of management is in Poland. It is enough for just one of these conditions to be met. A foreign registered office offers no protection if the company is actually managed from Poland.
In this article, I explain when your foreign subsidiary becomes a Polish tax resident, the financial consequences this entails, and how to mitigate the risk – before the tax authority identifies it on its own.
Key terms you need to know
Before we get to the heart of the matter, it is worth clarifying a few terms. They will appear throughout the article.
| Term | Meaning |
|---|---|
| Unlimited tax liability | The taxpayer pays CIT on all income – regardless of where it is earned. This applies to entities whose registered office or place of management is in Poland (Article 3(1) of the CIT Act). |
| Place of effective management (POEM) | The place from which you actually manage the company – where day-to-day decisions are made, business activities are directed, and assets and risks are supervised. |
| Article 3(1a) of the CIT Act | A provision in force since 1 January 2022 that clarifies when a taxpayer has its place of management in Poland – including where its day-to-day affairs are conducted here in an organised and continuous manner. |
| Tie-breaker clause | A provision of a double tax treaty that determines the state in which a company is resident when both states claim the right to tax it. |
| MAP procedure | The mutual agreement procedure between states – used to resolve double taxation disputes under double tax treaties. |
| Relationships under Article 11a(1)(5) of the CIT Act | Capital, personal, and family relationships between entities – these constitute an independent basis for assessing the place of management of a foreign company. |
When a foreign subsidiary becomes a Polish CIT taxpayer
A factual test, not an arithmetic one
Article 3(1a) of the CIT Act (in force since 1 January 2022) provides that a taxpayer has its place of management in Poland when its day-to-day affairs are conducted here in an organised and continuous manner. The provision identifies three categories of factors:
- Documents governing the company’s operations (agreements, decisions, court judgments).
- Powers of attorney granted.
- Relationships within the meaning of Article 11a(1)(5) of the CIT Act.
The list is non-exhaustive – the phrase “in particular" means that the tax authority may take other circumstances into account.
This is not an arithmetic test. It is not about the number of days spent abroad, the proportion of remuneration, or the place where meetings are formally convened. The tax authority looks at where decisions actually originate.
What the National Revenue Administration examines
In its tax rulings issued in 2025 and 2026, the Director of the National Tax Information Service consistently applies the same assessment criteria:
| Criterion | What the authority examines |
|---|---|
| Strategic and financial decisions | Where decisions on development strategy, budgets, and investments are made |
| Day-to-day management | Who manages the company’s daily operations and from where |
| Supervision of assets and risks | Where control over assets and liabilities is exercised |
| Location of the “head office" | Where decisions actually “originate" – not where the registered address is located |
| Powers of attorney | Whether people based in Poland are authorised to make decisions on behalf of the company |
| Capital and personal relationships | Whether the parent company and subsidiary share management board members or owners, or have family relationships |
Three tax rulings worth knowing
Tax ruling of 17 April 2026 (reference no. 0114-KDIP2-2.4010.80.2026.1.ASK) – concerned a subsidiary with its formal registered office in Austria that was managed from Poland. The Director of the National Tax Information Service found that its place of effective management was in Poland because strategic and financial decisions were made here, day-to-day business activities were managed here, and supervision over its assets was exercised here. The company was deemed a Polish tax resident.
Tax ruling of 7 March 2025 (reference no. 0111-KDIB1-2.4010.746.2024.2.AK) – concerned an offshore company with international company status in the United Arab Emirates. Citing a judgment of the Supreme Administrative Court (II FSK 2475/14), the Director of the National Tax Information Service found that the company’s place of effective management was in Poland. The company was deemed a Polish tax resident.
Tax ruling of 5 April 2024 (reference no. 0114-KDIP2-1.4010.136.2020.16.S.SP.MW) – confirmed that the place of effective management takes precedence over the place of registration.
The position is consistent: a foreign registered office and an entry in the local register do not determine that a company is not a Polish tax resident.
A typical risk pattern – check whether it applies to your group
The risk does not arise overnight. It gradually increases as more elements of management are transferred to Poland. This is the scenario we see most often:
- A foreign subsidiary with a newly appointed management board composed exclusively of Polish tax residents.
- The management board performs its functions on an alternating basis – part of the year in person abroad and the rest remotely from Poland.
- The Board of Directors is also predominantly composed of people from Poland.
- IT support and administration agreements are concluded with the parent company – with the services provided from Poland.
- There are no separate scopes of responsibilities distinguishing roles in the parent company from those in the subsidiary.
- The foreign company has no operational resources of its own in the state where it is registered – no office, staff, or infrastructure.
If at least three of these factors are present in your group, the risk of tax residence being reclassified is elevated.
Management board meeting minutes tell a story
A management board meeting formally convened at a foreign address, but attended by 2 out of 3 members via videoconference from Warsaw, with the materials prepared by the legal department of the Polish parent company – the documentation paints a picture of a de facto Polish management board.
The minutes of such a meeting, where half of the members join from Poland and the resolutions are drafted by the parent company, tell a completely different story from flight records.
Financial and legal consequences – how much could it cost?
CIT on all worldwide income
If the tax authority deems your foreign company to be a Polish tax resident, the company will be subject to CIT on all of its income – regardless of where it is earned. The rate is 19% (or 9% for small taxpayers and taxpayers starting a business, up to the revenue threshold of EUR 2 million).
The tax liability may cover the previous 5 years (Article 70 § 1 of the Tax Ordinance Act – the limitation period runs from the end of the calendar year in which the payment deadline expired).
Late-payment interest
Charged from the day following the payment deadline until the date of payment (Article 53 § 1 and § 4 of the Tax Ordinance Act). Payment of tax abroad does not prevent interest from accruing in Poland – Polish law provides no such mechanism.
Fiscal penal sanctions
Fiscal penal liability applies to individuals – management board members, not the company itself.
| Legal basis | Offence | Penalty |
|---|---|---|
| Article 54 of the Fiscal Penal Code | Tax evasion – failure to disclose the subject or basis of taxation, failure to file a tax return | A fine of 10 to 720 daily rates (with the minimum wage of PLN 4,666 in 2025: minimum daily rate ≈ PLN 155.53, maximum ≈ PLN 62,212) |
| Article 56 of the Fiscal Penal Code | Filing a tax return containing false information or concealing the truth | A fine of 10 to 720 daily rates |
| Article 80 § 1 of the Fiscal Penal Code | Failure to submit required tax information on time | A fine of up to 120 daily rates |
| Article 48 of the Fiscal Penal Code (petty offence) | Minor case | A fine from PLN 466.60 to PLN 93,320 (2025) |
Limitation period for criminal liability: 5 years for offences punishable by a fine, restriction of liberty, or imprisonment for up to 3 years; 10 years for offences carrying a more severe penalty (Article 44 of the Fiscal Penal Code). The commencement of proceedings against the offender extends this period by a further 5 or 10 years.
Dual residence and the MAP procedure
If both states claim the right to tax the company, dual residence arises. This is resolved through:
- A tie-breaker clause in a double tax treaty – the classic version (used, for example, in the Polish-German treaty) is based on the place of effective management (POEM) criterion.
- The MAP procedure – an application to the Minister of Finance, generally within 3 years of the first official notification of an action resulting in taxation that is not in accordance with the treaty.
The MAP procedure is free of charge, but there is no deadline for its completion. Double tax treaties do not set a maximum time for reaching an agreement. The commencement of MAP suspends the limitation period for the tax liability – but for no more than 3 years in total.
There is no right of appeal against the agreement reached. The outcome is uncertain, and the entire process is organisationally costly.
Contact us – we will help you assess the CIT residence risk before changing the composition of the management board.
What to check and what to change – a checklist for the management board
Actions to take before changing the composition of the management board (priority: immediate)
The critical time is before appointing a new management board. Once its composition has changed, any adjustment to the model is a change to the facts already in progress – and looks like a response to risk rather than a carefully designed arrangement.
| No. | Action | Priority | Category |
|---|---|---|---|
| 1 | Conduct a CIT residence risk assessment – compile a complete set of corporate documents, agreements, and descriptions of operational practices | Mandatory | Legal review |
| 2 | Prepare separate, non-overlapping scopes of responsibilities for each person holding roles in both the parent company and the subsidiary | Mandatory | Documentation |
| 3 | Introduce rigorous documentation rules for management board meetings – each set of minutes must record the meeting location, the method of attendance (in person/remotely), and the place where the resolution was signed | Mandatory | Process change |
| 4 | Audit intragroup agreements (IT, administration, support) to determine whether they indicate that the day-to-day affairs of the foreign company are actually conducted from Poland | Mandatory | Audit |
| 5 | Shift decision-making authority over the company’s day-to-day affairs to a body with genuine local representation – consider changing the scope of the Board of Directors’ powers | Recommended | Process change |
| 6 | Ensure that the company has genuine operational resources abroad – its own resources, staff, and office | Recommended | Process change |
| 7 | Limit the remote performance of management functions from Poland during critical periods: approval of financial statements, strategic decisions, and conclusion of agreements | Recommended | Process change |
| 8 | Collect and archive tax residence certificates for every management board member of the foreign company | Recommended | Documentation |
Scope of responsibilities – the document that is usually missing
A scope of responsibilities specifying which decisions are made for which company is the most important document in the entire set. And usually the one that is missing.
If the same person sits on the management boards of both the parent company and the subsidiary, there must be a precise division: which decisions they make as a management board member of the Polish company and which they make as a management board member of the foreign company. Without this document, the tax authority sees one person making all decisions from Poland.
Intragroup agreements – the strongest evidence
Service agreements between the parent company and the foreign company (IT, administration, legal support, accounting) can reveal where the company’s day-to-day affairs are actually conducted. They are sometimes the strongest evidence against the claim that management takes place abroad.
Check:
- Whether the scope of services includes management functions of the subsidiary.
- Whether the remuneration for the services reflects market terms.
- Whether the foreign company has its own resources to perform the functions that it formally outsources to the parent company.
Substance abroad – without it, the structure of the governing bodies will not help
A company with no substance in the state where it is registered – no office, staff, or infrastructure – is difficult to defend regardless of the structure of its governing bodies. Even a perfect management structure will not support the claim that management takes place abroad if all services are provided by the parent company from Poland.
OECD and double tax treaty context
Place of effective management in the OECD Model Tax Convention
Article 4(3) of the OECD Model Tax Convention (classic version) resolves conflicts concerning the residence of legal entities based on the place of effective management (POEM) criterion. The Commentary on the OECD Model Tax Convention (paragraph 24) defines POEM as the place where key management and commercial decisions necessary for the conduct of the entity’s business are made.
Newer versions of the OECD Model Tax Convention move away from an automatic POEM test in favour of resolution through the mutual agreement procedure. Poland’s treaty with Germany (dated 14 May 2003) still applies the classic POEM test in Article 4(3) – work on an amending protocol is ongoing.
Legislative trend – expanding the scope of CIT
Since 2021, the Polish legislature has been systematically expanding the range of entities subject to CIT:
- May 2021 – making limited partnerships subject to CIT.
- January 2021 – registered partnerships with a specified composition of partners (Article 1(3)(1a) of the CIT Act) – the “registered office or place of management in Poland" criterion.
- January 2022 – clarification of the concept of place of management in Article 3(1a) of the CIT Act.
- January 2026 – addition of the “or place of management" criterion to the provisions on fund exemptions.
The explanatory memorandum to the 2026 amendment explicitly confirms that “the concept of tax residence is determined according to the registered office or place of effective management in a given state". Adding the words “or place of management" to further provisions “aligns them more consistently with the concept of tax residence".
The direction is clear: the place of management criterion is becoming increasingly important as an independent basis for tax residence.
Scale of the issue – how many Polish groups have foreign subsidiaries?
At the end of 2023, Polish corporate groups had 3,654 foreign subsidiaries in 100 countries (Statistics Poland data). At the end of 2024, there were 24,773 domestic entities belonging to enterprise groups operating in Poland, while the total equity of all groups amounted to PLN 1,080.5 billion.
Statistics Poland does not collect data on the place of effective management of foreign subsidiaries. It is not known how many of the 3,654 companies are actually managed from Poland.
Enforcement activity by the National Revenue Administration is increasing – in 2025, it carried out 2.64 million verification activities, while findings from enforcement activities increased by 29.1% compared with 2024. The paradigm is also changing: the National Revenue Administration is reducing the number of customs and tax inspections (8,722 in 2025, down 11.3%) while increasing the effectiveness of verification activities – the amount identified through this procedure increased by more than PLN 1 billion in 2024 compared with 2023.
There is no publicly available data on the number of inspections concerning the residence of foreign companies with Polish management. This does not mean that the National Revenue Administration is not analysing this area – increasing data exchange between EU tax authorities and automatic reporting (CbC reporting, DAC6) make such structures more likely to be identified.
Additional risk – the general anti-avoidance rule
A restructuring of management motivated exclusively by tax considerations may be challenged under the general anti-avoidance rule. The authorities may challenge how profits are taxed if they conclude that the actions had no business rationale.
Therefore, every change to the management structure of a foreign company must have a business rationale – not merely a tax rationale. Document the reasons for the changes: market development, the need for local expertise, or a change in operational strategy.
None of these measures eliminates the risk
None of the mitigating measures eliminates the risk. Taken together, they shift it from a level where the tax authority already has a ready-made case to one where it would first have to prove that case.
The difference is fundamental: a company with well-organised documentation, non-overlapping scopes of responsibilities, genuine resources abroad, and a consistent management model is a completely different subject of an inspection from a company where everything points to management from Poland.
Planning to change the management board of a foreign company? Assess the CIT risk before appointing its new members
A CIT residence risk assessment is not something that can be postponed until “after the management board has been appointed". Once its composition has changed, any adjustment to the model looks like a response to risk – not a carefully designed arrangement.
We help corporate groups in the IT, SaaS, and e-commerce sectors with:
- Assessing the CIT residence risk of a foreign subsidiary – before changing the composition of its management board.
- Auditing intragroup agreements for evidence of management from Poland.
- Preparing scopes of responsibilities that distinguish roles in the parent company from those in the subsidiary.
- Organising corporate documentation – meeting minutes, powers of attorney, and residence certificates.
- Designing the governing body structure of a foreign company to mitigate the risk of Polish tax residence.
Contact us – arrange an assessment before appointing the new management board.
Frequently asked questions
I have a company in an EU country with a Polish management board – am I already on the Polish tax authorities’ radar?
The mere appointment of Polish residents to the management board of a foreign company does not determine that it is a Polish tax resident. The tax authority assesses all the circumstances: where decisions are actually made, where day-to-day business activities are managed, what relationships exist between the companies, and what intragroup agreements are in place. If most of these factors point to Poland, the risk is elevated. Tax rulings issued by the National Tax Information Service in 2025 and 2026 confirm this approach.
How many days a year must the management board spend abroad for the company to be safe?
There is no numerical threshold. The residence test under Article 3(1a) of the CIT Act is a factual test – the authority examines where the company’s day-to-day affairs are conducted in an organised and continuous manner. The number of days spent abroad is one of many factors considered, but it does not determine the outcome on its own. What matters more is where decisions actually “originate" and who prepares them.
Is it enough for management board meetings to be formally held at a foreign address?
No. If management board members attend meetings remotely from Poland and the materials are prepared by the parent company, the formal place where the meeting is convened does not change the overall picture. The tax authority analyses meeting minutes, the method of attendance, where documents were prepared, and where resolutions were signed. A formal address without genuine substance does not protect against being deemed a Polish tax resident.
Which intragroup agreements may be problematic during an inspection?
Agreements for the provision of IT, administration, accounting, legal support, and HR services between the parent company and the foreign company. If the scope of these services includes functions that the subsidiary should perform itself (e.g. bookkeeping, personnel management, or customer service), the authority may conclude that the day-to-day affairs of the foreign company are actually conducted from Poland. This is sometimes the strongest evidence available to the tax authority.
I have already appointed the management board – is it too late to adjust the structure?
It is not too late, but any adjustment requires caution. Every change made after the management board has been appointed is a change to the facts already in progress – and may be interpreted as a response to risk. The changes must therefore have a business rationale (not merely a tax rationale), be consistent with the actual operating model, and be implemented in an organised manner. It is worth consulting the scope and sequence of the changes with an adviser who can assess the risk of the general anti-avoidance rule being applied.
What happens if the tax authorities deem my foreign company to be a Polish taxpayer – how much could it cost?
The company will be subject to CIT on all worldwide income (at a rate of 19% or 9%). The liability may cover up to the previous 5 years, plus late-payment interest charged from the day after the payment deadline. Management board members may face fiscal penal sanctions under Article 54 of the Fiscal Penal Code (a fine of 10 to 720 daily rates). There is also a risk of dual residence – resolution through the MAP procedure has no guaranteed completion date and does not guarantee a favourable outcome.
