Month: April 2026

EU Inc. and Poland: A Strategic Guide for Foreign Investors Setting Up in the EU Before 2028

Posted on by kancelaria

The European Commission’s proposal for a single, EU-wide company form (EU Inc.) raises an immediate question for foreign investors planning to enter the European market: should you incorporate now, or wait? For those looking at Poland, the answer is more nuanced than it first appears.

The question every foreign founder is now asking

If you are a US, UK, Asian or Middle Eastern investor planning to launch operations in the European Union in the next three years, you are now facing a strategic decision that did not exist a year ago.

Until recently, your choice was relatively simple: pick a Member State, set up a local company (in Poland typically a spółka z ograniczoną odpowiedzialnością — sp. z o.o.), and accept that scaling into other EU countries would mean either local subsidiaries or complex cross-border structures.

The European Commission’s recent proposal for EU Inc. — formally Societas Europaea Unificata — changes that calculus. The proposal envisages an optional, fully digital, EU-wide company form that would be recognised across all 27 Member States under a single set of rules.

If the legislative timetable holds, the first EU Inc. companies could be incorporated in 2028.

That leaves foreign investors with a planning window of roughly two years — and several decisions to make now.

What EU Inc. actually offers

The proposal is built around six core features, each designed to address a specific pain point that has long pushed European founders toward Delaware rather than EU jurisdictions:

Feature EU Inc. proposal
Minimum share capital EUR 1
Incorporation time Up to 48 hours
Maximum incorporation cost EUR 100
Filing model “Once only” — data submitted once, tax and VAT numbers issued automatically
Notary requirement on share transfers None
Lifecycle Fully digital from incorporation to liquidation

In addition, EU Inc. is expected to permit flexible share classes and simplified employee stock option plans — two features that have historically been awkward to deliver under several Member State company laws, and that matter enormously to venture-backed companies.

Crucially, EU Inc. is intended as a parallel option rather than a replacement for national company forms. Polish sp. z o.o., German GmbH and French SARL will all continue to exist. EU Inc. simply adds a 28th regime — one designed to be neutral across borders.

Why Poland still matters in an EU Inc. world

It is tempting to assume that a single EU-wide company form will make the choice of incorporation jurisdiction irrelevant. It will not. Several factors keep Poland firmly on the map for foreign investors, even after EU Inc. enters into force:

Operational footprint, not legal form, drives tax exposure. EU Inc. does not create a unified EU tax residence and does not establish a common corporate income tax regime. Where your company has its actual place of management, its permanent establishments, and its workforce will continue to determine where it pays tax.

Talent and operational costs. Poland remains one of the most cost-competitive locations in the EU for engineering, finance and shared-service operations, with a deep IT talent pool and growing R&D capacity.

Domestic market access. Poland is the largest economy in Central and Eastern Europe and the sixth largest in the EU. Many foreign investors enter the EU specifically to serve this market, and a Polish entity is operationally easier to manage than a remote EU Inc. structure when the substance is in Poland.

Existing tax incentives. Poland offers regimes — including the Polish Investment Zone (Polska Strefa Inwestycji), R&D tax relief, IP Box and the Estonian CIT model — that are tied to Polish tax residence and Polish entity status. EU Inc. does not unlock these automatically.

In short: EU Inc. simplifies the legal vehicle, but it does not simplify the economic and tax reality of doing business in Poland.

The tax trap foreign investors must understand

The single most important point for foreign investors evaluating EU Inc. is this: the legal harmonisation does not extend to taxation.

The proposal does not create:

  • a unified EU corporate tax residence,
  • a common corporate income tax base,
  • harmonised rules on permanent establishments,
  • a single VAT regime for EU Inc. companies.

In practice, an EU Inc. company will still need to determine — under the existing rules of each Member State concerned — where its place of effective management is located, where it has permanent establishments, where it should be VAT-registered, and how its cross-border payments (dividends, interest, royalties, board remuneration) are taxed under applicable double tax treaties.

For a foreign investor running operations from Warsaw, Kraków or Wrocław, this means:

  1. Polish CIT will apply if Poland is the place of effective management or if a Polish PE exists.
  2. Withholding tax obligations on payments to non-resident shareholders, board members and service providers will continue to apply under Polish law and the relevant double tax treaty.
  3. Polish anti-avoidance rules — including the General Anti-Avoidance Rule (GAAR), beneficial ownership requirements, and “due diligence” obligations on Polish payers — will continue to apply.
  4. Recent CJEU case law on board member liability for corporate tax arrears (rulings C-277/24 and C-278/24 of 2025) and Poland’s pending implementation in the Tax Ordinance amendments (UC138) will apply equally to EU Inc. board members operating in Poland.

The risk is not theoretical. Because interpretation of EU Inc. rules will largely fall to national courts, the same legal form may be treated differently across Member States. Investors should expect divergent practice — and plan accordingly.

Strategic options for foreign investors today

Given that EU Inc. is at least two years away from being operational, foreign investors planning to enter the Polish or wider EU market should not wait. Three approaches are worth considering:

Option 1: Incorporate a Polish sp. z o.o. now, convert later if useful.

For investors with a clear Polish operational footprint — a local team, local clients, local supply chain — incorporating a sp. z o.o. now is the lowest-risk path. The form is well-understood, eligible for Polish tax incentives, and operationally efficient. If EU Inc. proves attractive after 2028, conversion or restructuring can be evaluated then.

Option 2: Build the structure now with EU Inc. in mind.

For founders planning genuinely cross-border operations from day one — typically VC-backed startups expecting to scale into multiple EU markets within 2–3 years — it makes sense to design today’s holding and operational structure so that an EU Inc. holding company can be inserted later without triggering significant tax friction. This usually means clean cap tables, well-documented share classes, and avoiding contractual lock-ins that complicate restructuring.

Option 3: Wait — but only if the timing works.

For investors whose go-to-market is genuinely 2028 or later, waiting may be defensible. But it carries opportunity cost: two years of lost market presence, lost talent acquisition, and lost regulatory familiarity.

In practice, the first two options will fit the vast majority of cases.

What to watch in the legislative process

Several elements of the EU Inc. proposal remain open and will materially affect its attractiveness:

  • Final position on minimum substance requirements — to prevent purely “letterbox” incorporations.
  • Interaction with national tax incentives — whether Polish tools such as Estonian CIT and IP Box will be available to EU Inc. companies with Polish tax residence.
  • Role of the Court of Justice of the EU — the stronger the role of the CJEU in interpreting EU Inc., the lower the risk of 27 divergent national approaches.
  • Transitional rules for existing Societas Europaea companies — relevant for the small number of investors already using SE structures.

The Polish legislative response — adapting the Court Register (KRS), notarial law, and tax procedure to accommodate EU Inc. — will also matter. ATL Law is monitoring the legislative process at both EU and Polish level.

Key takeaways

EU Inc. is, on paper, the most ambitious reform of European company law in decades. It directly addresses the structural disadvantages that have pushed European founders toward Delaware: cost, speed, fragmentation, and inflexibility. For cross-border founders, VC and PE funds, and scale-ups, it has the potential to become the default choice from 2028 onward.

But EU Inc. is not a tax solution. Foreign investors operating in Poland will continue to face Polish CIT, Polish withholding tax, Polish VAT, and Polish anti-avoidance rules — regardless of whether they use a sp. z o.o. or an EU Inc. The legal form simplifies; the tax substance does not.

For most foreign investors planning entry into Poland and the wider EU between now and 2028, the practical course is to incorporate locally now and review the EU Inc. option as soon as the final text and Polish implementing rules are known.

Planning to set up in Poland? ATL Law advises foreign investors on choice of legal form, cross-border tax structuring, and the interaction between Polish corporate and tax law and emerging EU instruments such as EU Inc. Get in touch to discuss your entry strategy: office@atl-law.pl

Poland’s 5% Tax Rate on Software IP

Posted on by kancelaria

Tax incentives for technology companies operating in Poland – a practical overview based on recent tax authority rulings

Poland has emerged as one of Europe’s most attractive destinations for technology investment. Beyond its deep pool of engineering talent and competitive labour costs, the country offers a powerful – yet still underutilised – tax incentive specifically designed for businesses generating income from intellectual property. Known as the IP Box (Innovation Box), this regime allows qualifying taxpayers to apply an effective rate of just 5% on income derived from eligible IP rights, compared to the standard 19% flat rate for business income (podatek liniowy) or progressive rates of up to 32% under the general tax scale.

How the IP Box Works in Practice

Introduced on 1 January 2019, the IP Box regime is codified in Article 30ca of the Polish Personal Income Tax Act (ustawa o PIT) and the corresponding provisions of the Corporate Income Tax Act (ustawa o CIT). It applies to income generated from a closed list of qualified intellectual property rights, which includes patents, registered designs, plant variety rights and – crucially for the technology sector – copyrights to computer programs (autorskie prawo do programu komputerowego). To benefit from the preferential rate, the taxpayer must demonstrate that the qualifying IP was created, developed or improved as part of research and development activities (działalność badawczo-rozwojowa) carried out within the taxpayer’s own business.

The qualifying income is then multiplied by the so-called nexus coefficient – a fraction that rewards taxpayers who conduct R&D in-house rather than outsourcing it or acquiring finished IP from related parties. The formula, modelled on the OECD’s modified nexus approach under BEPS Action 5, effectively ensures that the tax benefit is proportional to the taxpayer’s own contribution to the creation of the IP. Where all R&D is performed directly by the taxpayer, the nexus coefficient reaches its maximum value, and the full qualifying income benefits from the 5% rate.

Software Development as R&D – Confirmed by Tax Authorities

A recurring concern among foreign investors and their Polish subsidiaries or contractors is whether bespoke software development genuinely qualifies as R&D under Polish law. The definition, rooted in Article 4(3) of the Law on Higher Education and Science (Prawo o szkolnictwie wyższym i nauce), requires that the activity involve acquiring, combining, shaping and applying existing knowledge and skills to design and create new or improved products, processes or services – excluding routine and periodic modifications. Recent rulings by the Director of the National Tax Information Authority (Dyrektor Krajowej Informacji Skarbowej) have consistently confirmed that custom software development meets this threshold, provided three conditions are satisfied.

First, the work must be creative in nature – resulting in original, individually designed solutions rather than mechanical reproduction of existing code. Second, it must be conducted systematically, meaning in an organised and methodical manner with defined objectives, milestones and verification stages. Third, it must be aimed at increasing the developer’s knowledge base and applying that knowledge to produce new solutions. Importantly, the Polish tax authorities have clarified that “systematic” does not mean “continuous” – even a single, well-structured project may satisfy this criterion.

A November 2025 ruling confirmed that a sole-trader developer creating bespoke applications qualified for IP Box across all four tested criteria – from the R&D classification of their work through to the eligibility of vehicle and bookkeeping costs in the nexus formula.

Deductible Costs and the Nexus Coefficient

The nexus formula distinguishes four categories of costs, labelled “a” through “d” in the statute. Category “a” – costs of R&D conducted directly by the taxpayer – carries the greatest weight and is the most relevant for developers performing their own work. Polish tax rulings have accepted a broad interpretation of these costs, encompassing hardware and peripherals used for development, software tools and licences, telecommunications and mobile devices, vehicle expenses (including lease payments, fuel and insurance) where the car is used for client consultations related to the software, accounting services connected with maintaining the required IP records, and professional training and technical literature.

The statute explicitly excludes interest, financial charges and real-estate-related costs from the nexus calculation. Beyond these statutory exclusions, the key requirement is a direct, functional link between the expenditure and the creation of a specific qualifying IP right. Taxpayers must be able to allocate costs to individual IP rights – where direct allocation is not feasible, a revenue-based apportionment key (klucz przychodowy) has been accepted by the authorities as a permissible method.

Record-Keeping Requirements – a Non-Negotiable Condition

Foreign investors should be aware that the IP Box benefit is conditional on meticulous contemporaneous documentation. Article 30cb of the PIT Act requires taxpayers to maintain a separate ledger (odrębna ewidencja) that identifies each qualifying IP right individually, tracks revenues, costs and profit or loss attributable to each right, and isolates the cost components needed for the nexus calculation. This ledger must be maintained from the outset of the R&D activity – not reconstructed after the fact. Failure to maintain adequate records disqualifies the taxpayer from the preferential rate entirely, reverting the income to standard taxation.

For companies with Polish development teams or individual contractors engaged on B2B terms, this means that the compliance infrastructure should be designed and implemented before the first line of qualifying code is written. Retroactive record-keeping carries significant audit risk and may lead to the entire benefit being denied.

Structuring Considerations for Foreign-Owned Operations

The IP Box regime is available to both individual entrepreneurs (jednoosobowa działalność gospodarcza) and corporate taxpayers. For foreign investors, this creates planning opportunities at multiple levels. A Polish subsidiary developing proprietary software may apply the 5% CIT rate to qualifying income generated from that IP – whether through direct sales, licensing arrangements, or by embedding the IP in products and services sold to customers. Similarly, individual Polish contractors engaged on B2B terms may apply the 5% PIT rate to the portion of their income attributable to the transfer of copyrights in software they create.

However, the regime rewards substance, not mere structuring. The nexus coefficient penalises arrangements where the IP is acquired from related parties or where the R&D is outsourced to affiliates. The maximum tax benefit is achieved when the Polish entity or individual performs the qualifying R&D work directly. This aligns well with the typical model of foreign companies establishing development centres in Poland – the very structure that generates the highest nexus coefficient also corresponds to genuine economic activity on the ground.

How ATL Law Supports Foreign Investors with IP Box Implementation

ATL Law provides end-to-end advisory services for foreign companies and international entrepreneurs seeking to leverage Poland’s IP Box regime. Our team combines deep expertise in Polish tax law with practical experience advising technology businesses, enabling us to guide clients through each stage of the process: from the initial assessment of whether their Polish operations generate qualifying IP income, through the design and implementation of compliant record-keeping systems, to the preparation of advance tax ruling applications (wnioski o interpretację indywidualną) that provide legal certainty and protection in the event of a future audit.

We also review existing contractual arrangements between foreign parent companies and their Polish subsidiaries or contractors to ensure that the transfer of IP rights is properly documented and that the remuneration structure supports the application of the preferential rate. For groups operating across multiple jurisdictions, we coordinate with international tax advisors to ensure that the Polish IP Box benefit integrates seamlessly with the group’s overall transfer pricing and IP ownership strategy.

 

This article is for informational purposes only and does not constitute tax or legal advice. The application of the IP Box regime depends on the specific facts and circumstances of each case. Professional advice should be sought before making any decisions based on the information provided.

Foreign Board Members in Poland – Who Is Liable for Tax on Their Remuneration?

Posted on by kancelaria

A guide for international groups delegating employees to management positions in Polish subsidiaries

A common structure, an uncommon tax trap

International corporate groups operating in Poland frequently second their own employees to serve on the management boards of Polish subsidiaries. The arrangement makes business sense: the parent company retains oversight, the seconded manager maintains employment continuity abroad, and the Polish entity benefits from experienced leadership aligned with the group’s strategy.

From a tax perspective, however, this structure is far from straightforward. The interplay between Polish domestic tax law, applicable double tax treaties, and the internal remuneration flow within the group creates a set of obligations that Polish subsidiaries cannot afford to overlook. A recent individual tax ruling issued by the Director of the National Tax Information Office (KIS) on 22 April 2025 (ref. 0115-KDIT1.4011.176.2025.1.MR) provides a useful framework for understanding these obligations.

Substance over form – how Poland classifies board remuneration

One might expect that a person employed under a foreign employment contract would be taxed in Poland under the rules applicable to employment income. Polish tax law takes a different approach. Under Article 13(7) of the Personal Income Tax Act (PIT Act), income received by members of the management boards of legal entities is classified as income from personally performed activities (działalność wykonywana osobiście), irrespective of the formal legal basis of appointment. However, in practice, where remuneration is split between board functions and other roles (e.g. employment or management services), different tax classifications may apply to each component.

This means that even where the secondment is formalised through an addendum to a foreign employment contract, the nature of the functions actually performed – not the label attached to the contractual relationship – determines the tax classification. If the individual serves on the management board of a Polish company and exercises management functions, Article 13(7) applies to the board-related portion of their remuneration.

Poland’s right to tax – limited tax liability of non-residents

A non-resident – that is, an individual who does not have their place of residence in Poland – is subject to Polish tax only on income sourced in Poland (Article 3(2a) of the PIT Act). The critical question is therefore whether remuneration for serving on the board of a Polish company constitutes Polish-source income, even if it is paid by a foreign entity.

The tax authorities have consistently confirmed that it does. In practice, primary importance is attached to the registered seat of the company whose board the individual serves on. The place where management functions are exercised may be relevant in specific cases, but is generally not decisive for directors’ fees under double tax treaties. The technical payment channel – including scenarios where the parent company pays the manager and subsequently recharges the cost to the Polish subsidiary – is irrelevant to this classification.

Double tax treaties – the directors’ fees article

Where a double tax treaty is in force between Poland and the board member’s country of residence, its provisions must be applied in conjunction with Polish domestic law (Article 4a of the PIT Act). Most treaties concluded by Poland include a “directors’ fees” clause (typically Article 16), which permits the country where the company is established to tax such remuneration, without excluding taxation in the country of residence (subject to double taxation relief mechanisms).

In the context of the April 2025 ruling, the relevant treaty was the Poland-Germany double tax convention of 14 May 2003. Article 16(1) of this treaty grants Poland the right to tax the remuneration of a German resident serving as a board member of a Polish company. This provision operates as a specific provision (lex specialis) in relation to the general employment income rules under Article 15 of the treaty, meaning that the directors’ fees article takes precedence where management board functions are at issue.

The OECD Model Tax Convention Commentary, while not legally binding, serves as an important interpretive tool in this area and is routinely referenced by Polish tax authorities to distinguish management board remuneration from ordinary employment income.

The method for eliminating double taxation – whether by exemption or by tax credit – depends on the relevant treaty and should be verified in each case.

Tax rate – flat 20% on gross income

Once Poland’s taxing right is established, the default rate is set out in Article 29(1)(1) of the PIT Act: a flat-rate withholding tax of 20% on gross income, unless a double tax treaty or specific circumstances justify a different treatment. Unlike the general rules applicable to Polish tax residents, this rate is applied to the gross amount of remuneration, with no deduction for income-earning costs.

The tax is generally final in nature in Poland, although the taxpayer may opt for taxation under general rules in certain cases, and may still have reporting obligations in their country of residence.

Who acts as the withholding agent – the parent or the subsidiary?

In group structures where remuneration is technically paid by the foreign parent and recharged to the Polish subsidiary, it is not immediately obvious which entity bears the withholding obligation. An earlier ruling by the Director of KIS, dated 19 December 2022 (ref. 0112-KDIL2-1.4011.754.2022.1.KF), addressed this question directly.

In the circumstances described in the ruling, the tax authority concluded that the Polish subsidiary – as the entity that ultimately bears the economic cost of the remuneration – acts as the withholding agent within the meaning of Article 41(4) of the PIT Act. The parent company may be treated as an intermediary in such structures, particularly where the costs are fully recharged to the Polish subsidiary. However, this assessment depends on the specific structure and allocation of economic burden within the group, and should not be treated as a universal rule.

Consequences of non-compliance

Failure to fulfil withholding obligations exposes the Polish subsidiary to liability under the Tax Ordinance Act. A withholding agent that fails to collect tax, or collects it in an incorrect amount, is liable with its entire assets for the shortfall, together with late payment interest. In parallel, the board member as taxpayer may also face liability, since the absence of withholding does not extinguish the underlying tax obligation.

For international groups, the practical takeaway is clear: the fact that the seconded individual formally remains employed abroad does not relieve the Polish subsidiary of its fiscal responsibilities. A systematic review of secondment arrangements is essential to identify cases where delegated employees are, in substance, performing management board functions.

Practical checklist for Polish subsidiaries

Based on the rulings discussed above and the applicable provisions, Polish subsidiaries should take the following steps when a foreign employee is seconded to a management board position. First, confirm whether the individual actually performs management functions within the meaning of Polish company law – registration in the National Court Register (KRS) is a strong indicator, although the actual scope of functions performed remains decisive. Second, verify whether a double tax treaty is in force between Poland and the board member’s country of tax residence, and identify the applicable directors’ fees provision. Third, determine whether the Polish entity bears the economic cost of the remuneration – if so, it is likely the entity responsible for withholding the 20% tax. Fourth, obtain a valid certificate of tax residence from the board member, which is a prerequisite for applying treaty provisions. Fifth, consider applying for an individual tax ruling, particularly where the remuneration structure is non-standard.

Separate social security considerations should also be reviewed, as different rules may apply depending on whether the remuneration is based on a formal appointment to the management board or on contractual arrangements such as an employment or service agreement.

Key takeaways

The taxation of foreign board members’ remuneration in Poland is an area where the employment structure and payment mechanics can easily distract from what truly matters: the nature of the functions performed and the seat of the company. The April 2025 ruling confirms that Polish tax authorities apply a substance-over-form approach, looking through contractual arrangements to the economic reality of the situation. Polish subsidiaries that engage foreign nationals in management roles should proactively ensure compliance with their withholding obligations to avoid exposure to tax liability and penalties.

 

At ATL Law, we regularly advise Polish subsidiaries of international groups on withholding obligations arising from the secondment of foreign employees to management board positions. We help determine whether remuneration is taxable in Poland, identify the applicable tax rate, and establish which entity within the group is responsible for tax collection. If your company uses secondment arrangements or plans to appoint a foreign resident to its management board, we invite you to get in touch.