A single word in a contract can push a company across the boundary into a regulated activity. “The materials are advisory and preparatory in nature" sounds neutral. Until you compare it with the statutory definition of insurance distribution, which includes, among other things, “preparatory work for the conclusion of contracts". And carrying out agency activities without being entered in the register maintained by the Polish Financial Supervision Authority (KNF) may result in criminal liability – including imprisonment for up to 2 years.
If your Polish company supports a foreign group entity in selling insurance – collecting market data, preparing marketing materials, analysing prices – an inappropriate description of the services and remuneration in an intragroup agreement creates risks in three areas at once: regulatory, tax and criminal.
In this article, I will explain exactly where the boundary lies between permissible intragroup advisory services and insurance distribution, how to structure the scope of services and remuneration in a service agreement within an insurance group, and why the contract itself is only half the job – the other half involves job descriptions, bonuses and the team’s operational discipline.
Key terms before we proceed
Before going into detail, it is worth clarifying the terminology. Several terms will recur throughout this article, and each has a precise legal meaning.
| Term | What it means | Why it matters |
|---|---|---|
| Insurance distribution | The list-based definition in Article 4 of the Insurance Distribution Act – it includes advising on, proposing and concluding contracts, assisting in their administration and in handling claims, as well as “other preparatory work" | Any activity of the service company that falls within this list may be classified as distribution – regardless of the title of the agreement |
| Service company | A Polish subsidiary within a corporate group that provides support services (market research, marketing, analyses) to a foreign group entity | Its function is to produce an “intermediate product" – analyses and materials. The insurer decides whether to use them in dealings with customers |
| Freedom to provide services (FOS) | A framework under which a foreign EU insurance undertaking operates in Poland without establishing a branch, based on a notification from its home regulator to the KNF | The predominant market entry route – according to the 2025 report of the Office of the KNF, 582 foreign insurance undertakings were notified in Poland under the FOS regime |
| Transfer pricing | Rules for determining remuneration in transactions between related parties – they must reflect market conditions (Article 11c of the Corporate Income Tax Act) | The service company’s remuneration is subject to review regardless of whether the transaction exceeds the documentation threshold of PLN 2 million |
| Exclusion clause | A contractual provision listing, point by point, activities excluded from the scope of the agreement – mirroring the statutory list | Evidence of the parties’ intent, not a shield. It provides protection only if operational practice is consistent with it |
The definition of insurance distribution – why it is so broad
Article 4(1) of the Insurance Distribution Act of 15 December 2017 defines distribution by reference to a specific list. It is not a general term such as “intermediation" – it is a list of activities, each of which independently triggers the regulatory regime.
The list includes:
- Advising customers and potential customers on insurance contracts
- Proposing insurance contracts
- Preparatory work aimed at concluding a contract
- Concluding insurance contracts and assisting in their conclusion
- Assisting in the administration of contracts and in matters relating to claims or benefits
Article 4(2) extends this scope to the provision of information about products according to criteria selected by a customer, where the customer is able to conclude a contract directly or indirectly.
Note item 3. The word “preparatory" in the description of the service company’s services – “the materials are advisory and preparatory in nature" – directly echoes one of the items on the statutory list. A regulator will not regard this as a coincidence.
Classification depends on practice, not the name of the service
There is no publicly available KNF position that precisely distinguishes support activities from distribution in a service company model (KNF Guidelines on Insurance Distribution). Nor is there any case law addressing this exact model – as established by a search of the Central Database of Administrative Court Judgments.
This means two things:
- Classification is based on a functional interpretation of Article 4 – that is, on an analysis of what the company actually does, not what it calls the service in the agreement
- The absence of case law does not mean the absence of risk – it means the absence of guidance from judicial decisions
Membership in a corporate group does not disapply the Act. A service company is subject to the same rules as any other market participant.
Where the boundary lies – neutral and high-risk activities
The boundary is not clear-cut, but distinct risk zones can be identified.
| Activity | Risk level | Why |
|---|---|---|
| Collecting market data (without customer contact) | Low | Neutral market research, with none of the elements listed in Article 4 |
| Analysing communication channels and competitors | Low | Internal work product for the customer |
| Preparing marketing materials (provided to the customer) | Low–medium | Safe if the customer decides whether to use them in dealings with customers |
| Comparative analyses of product price levels | Medium | Safe if prepared for the customer’s internal purposes; high-risk if provided to customers |
| Providing a customer with information about specific products | High | Falls directly within Article 4(2) |
| Comparing offers according to a customer’s criteria | High | Meets the definition of distribution in Article 4(2) |
| Identifying a customer’s demands and needs and selecting a product | High | Advising within the meaning of Article 4(1) |
| Servicing a customer’s contract or claims | High | Assistance in administration – Article 4(1) |
Conclusion: neutral market research conducted without contact with a specific customer and without recommending a product will generally fall outside distribution. However, this is an interpretive conclusion, not an express position of the KNF.
Penalties – the consequences of crossing the line
Article 89(1) of the Insurance Distribution Act provides the following penalties for carrying out agency activities without authorisation or brokerage activities without a licence:
- A fine (the monetary limits follow from the general provisions of the Criminal Code – Article 33 of the Criminal Code)
- Restriction of liberty
- Imprisonment for up to 2 years
Article 89(2) extends liability to persons acting on behalf of a legal entity – but only for the offences specified in item 1 (agency activities in breach of the applicable requirements) and item 3 (brokerage activities without a licence).
This is not a theoretical risk. It involves the criminal liability of those managing the company and can derail the entire market entry project.
Contact us – we will review your service agreement to determine whether it crosses the boundary into a regulated activity before performance begins.
How to structure the scope of services in a service agreement
Four drafting changes can alter the service company’s legal position. Each concerns the same part of the agreement – the description of the scope of services.
1. Identify the recipient of the work product
Analyses and materials must be provided exclusively to the customer and must not be communicated by the contractor to customers. Without this reservation, any marketing material may be treated as preparatory work for the conclusion of a contract.
2. Specify that price analyses are for internal use
Comparative analyses of price levels must be prepared for the customer’s internal purposes. If they are provided to customers, this amounts to comparing offers according to a customer’s criteria within the meaning of Article 4(2).
3. Remove the word “preparatory"
It sounds neutral, but directly echoes an item on the statutory list. Replace it with a description of the function: “the materials are analytical and informational in nature".
4. Add an exclusion clause mirroring the statutory list
A general statement that “the services do not constitute intermediation" is not enough. The exclusion clause should list the exclusions point by point, mirroring Article 4.
Model exclusion clause:
- General statement: the services do not include insurance distribution within the meaning of Article 4 of the Act
- The contractor does not advise customers or potential customers on insurance contracts and does not propose such contracts
- The contractor does not conclude insurance contracts or assist in their conclusion
- The contractor does not assist in administering contracts or in matters relating to claims or benefits
- The contractor does not organise or supervise agency or brokerage activities
- The contractor does not collect premiums
- The contractor has no authority to act in dealings with the customer’s customers
This structure allows the clause to be compared with the legislation on a point-by-point basis. It is not merely decorative – it is evidence of the parties’ intent.
Important: an exclusion clause is evidence of intent, not a shield. It provides protection only if the company’s actual operations are consistent with it.
Who is responsible for customer-facing materials
The agreement should assign responsibility to the customer for the content and use of customer-facing materials, including their compliance with distribution regulations. The contractor produces an intermediate product. The insurer decides whether to use it.
Remuneration – how to meet the requirements of two regimes at once
Fixed remuneration that is independent of the number and value of insurance contracts and of premiums is a rare instance in which the requirements of two branches of law – regulatory and tax law – reinforce rather than conflict with each other.
Regulatory perspective
Remuneration linked to the number of policies or the amount of premiums is the strongest indicator of distribution activity. Fixed remuneration removes this indicator.
State expressly in the agreement: the remuneration is not dependent on the number or value of insurance contracts concluded by the customer, an insurance undertaking or other entities, or on the amount of premiums.
Tax perspective – transfer pricing
For a company performing a support function without significant assets or risks, the typical remuneration model is a cost base plus an arm’s-length mark-up (the cost-plus method). The agreement should name this mechanism rather than merely specifying an amount.
| Remuneration component | What to include in the agreement | What to avoid |
|---|---|---|
| Calculation mechanism | Reimbursement of the costs of providing the services plus an arm’s-length mark-up | A lump-sum amount without identifying the mechanism |
| Periodic review | Mandatory review at least once per financial year | “May be subject to reassessment" (optional) |
| Event-driven review | Upon any material change in the scope or nature of the services | No adjustment mechanism |
| Retrospective adjustment | Mandatory adjustment, including – to the extent permitted by law – for a completed financial year | No possibility of adjustment |
| Independence from sales | Express separation from the number of policies and premiums | Commission, sales performance bonus |
The PLN 2 million threshold – what it really means
Article 11k(2) of the Corporate Income Tax Act sets the documentation threshold for service transactions at PLN 2 million. A transaction below this threshold is exempt from local transfer pricing documentation.
But not from the arm’s-length principle (Article 11c). This means that the tax authority may challenge the arm’s-length nature of the remuneration regardless of the threshold. The belief that a transaction below PLN 2 million is “safe" is mistaken.
Safe harbour for low value-adding services
Polish law provides a simplification: a mark-up of at least 5% of the service provider’s costs, subject to meeting documentation and methodological requirements. The OECD guidelines for low value-adding services indicate a range of 3–10% (Ministry of Finance tax guidance).
Note: strategic services – brand creation, campaign management and marketing decisions – generally do not meet the criteria for low value-adding services and require a separate benchmarking analysis. The mark-up and benchmark should be confirmed by a tax adviser.
Transfer pricing adjustment for a completed year
Article 11e of the Corporate Income Tax Act permits an adjustment if all four of the following conditions are met:
- The original transaction terms were established on an arm’s-length basis
- There has been a change in circumstances or actual data forming the basis of the calculation has become available
- A statement or accounting document from the counterparty confirming an adjustment in the same amount is held
- There is a legal basis for exchanging tax information with the counterparty’s country
Condition 3 is the most operationally challenging – without a corresponding adjustment by the foreign insurer, the adjustment is ineffective for tax purposes (Corporate Income Tax Act – consolidated text).
Liability and other missing clauses
An entity without significant assets or risks that is remunerated on a cost-plus basis cannot bear unlimited contractual liability. The absence of a liability cap is inconsistent with the company’s functional profile – and is also indefensible from a transfer pricing perspective.
A typical service agreement within an insurance group should also include:
- Limitation of the contractor’s liability – proportionate to its function and remuneration
- Intellectual property rights in the work product and analyses – who owns them and who holds a licence
- A GDPR section defining the parties’ roles (controller, processor) and, where applicable, a data processing agreement
- The duration of confidentiality obligations after the agreement ends – without this, market know-how is not protected
- A renewal and termination mechanism
- Payment and reporting terms
- Separation of documentation obligations – each party maintains documentation to the extent required by the laws applicable to it, rather than assuming a joint obligation
Facts beyond the contract – the other half of the job
The agreement may be exemplary. But if the Polish company’s team has quarterly targets linked to the number of “insurance leads" generated, the bonus scheme tells a different story from the exclusion clause. And it is the bonus scheme that will constitute evidence.
What to check beyond the agreement
- Job descriptions – whether they include elements suggesting contact with customers about insurance products
- Scopes of duties – whether they include “sales support", “lead generation" or “customer service"
- Targets and bonus schemes – whether variable remuneration is linked to the number of policies, premiums or the group’s sales performance
- Flow of materials – who provides the work product to customers: the service company or the insurer
- Communication channels – whether employees of the service company speak directly with customers about products
Any link between team remuneration and the sales performance of the group’s products must be removed. Any job description suggesting customer contact must be revised.
Documenting the delivery of work product
Establish a method of documenting the delivery of materials to the customer: a delivery log and an internal distribution channel. This is your audit trail demonstrating that the materials were not provided directly to customers.
Additional risks – VAT, permanent establishment and outsourcing
Fixed establishment (VAT)
If the foreign insurer does not have a fixed establishment in Poland, the Polish company issues an invoice without Polish VAT – with the reverse charge applied by the recipient. The CJEU has confirmed (including in C-547/18) that merely having a subsidiary does not create a fixed establishment for a foreign taxable person. The risk increases when the Polish company provides the insurer with human and technical resources that are effectively at its disposal.
Permanent establishment (CIT)
Article 4a(11) of the Corporate Income Tax Act defines a foreign permanent establishment as a fixed place of business or a person acting in Poland in the name and on behalf of a foreign entity, if that person is authorised to conclude contracts and actually exercises that authority. Merely having a subsidiary does not determine that a permanent establishment exists – but a formal restriction of authority in the agreement is insufficient if the company’s actual activities bind the insurer (List of double taxation treaties).
Outsourcing under Solvency II
The Insurance and Reinsurance Activity Act permits the outsourcing of governance system functions, but requires the KNF to be notified at least 30 days before implementation if the agreement concerns a governance system function or a fundamental or important activity (Commission Delegated Regulation (EU) 2015/35). Not every service agreement requires such notification, but the classification must be assessed on a case-by-case basis.
Business activities disclosed in the register – the detail everyone forgets
PKD code 70.20.Z (business and other management consultancy activities) does not cover market research or advertising activities. Yet a typical service agreement provides for them.
Check the register of entrepreneurs to ensure that the disclosed scope of business activities covers the services actually provided. If not, amend the company’s articles of association and register the change before performance of the agreement begins.
A separate issue: PKD code 66.29.Z (activities auxiliary to insurance) in the register of entrepreneurs does not replace registration in the register of intermediaries maintained by the KNF. These are two different registers with two different functions – statistical classification versus regulatory licensing.
Checklist – four areas to verify before signing the agreement
Area 1: before the agreement
| No. | Action | Status |
|---|---|---|
| 1 | Confirm who will sell the products in Poland (a notified undertaking under the FOS regime, a branch or a registered intermediary) | ☐ |
| 2 | Check whether the scope of the notification covers the planned classes of insurance | ☐ |
| 3 | Verify the company’s scope of business activities in the register – whether it covers market research and advertising activities | ☐ |
| 4 | Assess whether the agreement may be regarded as outsourcing a function within the meaning of the Insurance and Reinsurance Activity Act (requiring the KNF to be notified 30 days in advance) | ☐ |
Area 2: scope of services
| No. | Action | Status |
|---|---|---|
| 5 | Compare the list of services, point by point, with the definition of distribution in Article 4 | ☐ |
| 6 | Delete every word suggesting activities aimed at concluding a contract: “preparatory", “sales support", “customer service", “lead generation" | ☐ |
| 7 | Identify the recipient of the work product (the customer exclusively) | ☐ |
| 8 | Specify that price analyses are for internal use | ☐ |
| 9 | Add an exclusion clause listing each exclusion point by point and mirroring the statutory list | ☐ |
| 10 | Assign responsibility for customer-facing materials to the customer | ☐ |
Area 3: remuneration
| No. | Action | Status |
|---|---|---|
| 11 | State that the remuneration is not dependent on the number/value of insurance contracts or on premiums | ☐ |
| 12 | Name the mechanism: reimbursement of costs plus an arm’s-length mark-up | ☐ |
| 13 | Replace the optional “possibility of reassessment" with a mandatory review at least once per financial year | ☐ |
| 14 | Add an event-driven review in the event of a material change in the scope of services | ☐ |
| 15 | Add a mandatory adjustment – including for a completed financial year, to the extent permitted by law | ☐ |
| 16 | Compare the annual transaction value with the PLN 2 million threshold and note that the arm’s-length principle applies regardless | ☐ |
| 17 | Have the mark-up and benchmark confirmed by a tax adviser | ☐ |
Area 4: facts beyond the contract
| No. | Action | Status |
|---|---|---|
| 18 | Review job descriptions and scopes of duties – remove elements suggesting distribution activities | ☐ |
| 19 | Review targets and bonus schemes – remove any link to the number of policies or premiums | ☐ |
| 20 | Establish a method of documenting the delivery of work product to the customer | ☐ |
| 21 | Train the team on the boundary of permissible activities and appoint a person responsible for monitoring compliance with it | ☐ |
| 22 | Determine the VAT treatment and have the agreement reviewed by a lawyer qualified in the governing law | ☐ |
Reviewing intragroup agreements – before they take effect
The cost of prevention is incomparably lower than the cost of a mistake. A few rounds of drafting revisions to two sections of an agreement, plus changing the scope of business activities in the register, represent the cost of a one-off advisory project. If the model is challenged, this means suspending sales, registering an intermediary, exposing managers to criminal liability and reassessing taxable income with interest.
We support corporate groups entering the Polish market through three service options:
- Operational minimum – review of two critical sections (scope of services and remuneration), including proposed wording and a self-assessment checklist
- Solid foundation – comprehensive review of the intragroup agreement package, with proposed amendments in track changes, explanatory comments and an amendment to the scope of business activities in the register
- Comprehensive protection – agreement review plus an audit of the factual layer (job descriptions, targets and bonuses, flow of materials), team training on the boundary of permissible activities, and coordination with a tax adviser and a lawyer qualified in the foreign law
If your group is planning to enter the Polish market or already operates through a service company – contact us. We will review the agreement package before it takes effect.
Frequently asked questions
If we expressly state in the agreement that the company does not engage in insurance distribution, are we safe?
No. An exclusion clause is evidence of the parties’ intent, not a shield. Classification depends on how the company actually operates – not the name of the service in the agreement. If the team talks to customers about products, compares offers or identifies their needs, the clause does not change the legal classification. This is why job descriptions, scopes of duties, targets and bonus schemes must be aligned in addition to the agreement.
Is PKD code 66.29.Z in the register of entrepreneurs sufficient for our company to carry out sales-related activities?
No. PKD code 66.29.Z (activities auxiliary to insurance) is a statistical classification in the register of entrepreneurs. Entry in the register of intermediaries maintained by the KNF is a separate regulatory requirement. These are two different registers with two different functions. A PKD code does not replace entry in the KNF register and does not authorise agency or brokerage activities.
How should we determine remuneration so that it does not look like a commission and can withstand a transfer pricing audit?
Fixed remuneration that is independent of the number and value of insurance contracts and of premiums meets the requirements of both regimes at once. Name the mechanism in the agreement: reimbursement of the costs of providing the services plus an arm’s-length mark-up. Add a mandatory review at least once per financial year and an adjustment mechanism. The mark-up and benchmark should be confirmed by a tax adviser – not a lawyer.
Our intragroup transaction is worth tens of thousands of euros annually. At this scale, do we need to be concerned about transfer pricing at all?
Yes. The PLN 2 million threshold under Article 11k(2) of the Corporate Income Tax Act provides an exemption only from local transfer pricing documentation, not from the arm’s-length principle (Article 11c). The tax authority may challenge the arm’s-length nature of the remuneration regardless of the transaction value. Record this in an internal memorandum and retain the justification for the mark-up.
Can bonuses for our team in Poland be linked to the sales performance of the group’s products?
This is highly risky. A bonus scheme linked to the number of policies or premiums is evidence that the company actually participates in the sales process – regardless of the wording of the service agreement. Remove any link between variable remuneration and the sales performance of the group’s insurance products.
The agreement is governed by the law of the parent company’s jurisdiction – why do we need a Polish legal analysis at all?
A Polish legal analysis covers the agreement’s impact on the company’s activities in Poland and its compliance with Polish law: insurance distribution regulations, transfer pricing, VAT, the scope of business activities disclosed in the register and employment law. The agreement itself must be reviewed by a lawyer qualified in the governing law – but Polish risks do not disappear simply because the agreement is governed by foreign law.
