Author: kancelaria

Transfer Pricing in Poland: Guide for Foreign Investors

Posted on by kancelaria

For foreign investors operating in Poland through capital groups or engaging in cross-border transactions with related entities, understanding transfer pricing regulations is critical. Polish transfer pricing rules, aligned with OECD guidelines, impose strict documentation requirements and significant penalties for non-compliance. This comprehensive guide covers everything foreign investors need to know about transfer pricing obligations in Poland.

What is Transfer Pricing?

Transfer pricing refers to the pricing of transactions between related entities within a multinational group. According to Polish tax law (Article 11a of the Corporate Income Tax Act), a transfer price is the financial result of conditions established or imposed due to existing relationships between entities, including prices, remuneration, financial results, or financial indicators.

In practice, transfer pricing applies to:

  • Sale of goods and services
  • Licensing of intellectual property rights
  • Loan agreements and financial transactions
  • Cost allocation and management fees
  • Guarantees and sureties
  • Allocation of profits to permanent establishments

The Arm’s Length Principle

Core Concept

The arm’s length principle is the cornerstone of Polish transfer pricing regulations. It requires that transactions between related parties be priced as if they were conducted between independent, unrelated entities under comparable circumstances.

This principle is codified in Article 9 of the OECD Model Tax Convention and incorporated into Polish law through Article 11c of the CIT Act (and Article 23o of the PIT Act). When tax authorities determine that transaction conditions do not meet the arm’s length standard, they can adjust the taxpayer’s taxable income or loss accordingly.

OECD Guidelines Application

While the OECD Transfer Pricing Guidelines are not directly part of Polish law, Polish courts and tax authorities treat them as best practice and a key reference point for interpreting transfer pricing regulations. Poland, as an OECD member country, follows the OECD’s three-tiered approach to transfer pricing documentation with some local modifications.

Who is Considered a Related Entity?

Polish transfer pricing regulations define related entities broadly, encompassing several types of relationships:

Capital Relationships

Entities are related when one holds, directly or indirectly:

  • At least 25% of shares, voting rights, or participation in profits
  • At least 25% of capital

Management Relationships

Entities where one can:

  • Exert significant influence over management or supervision
  • Make key economic decisions affecting the other entity

Family Relationships

Individuals connected through:

  • Marriage
  • Blood relations up to the second degree
  • Affinity relations up to the second degree

Economic Influence

Since 2019, entities are also considered related when an individual can effectively influence key economic decisions in both entities, even without formal capital or management ties.

Important Note: Polish tax authorities can also determine relationships exist when structures lack justified economic reasons and appear designed to manipulate ownership patterns – particularly relevant for foundations, trusts, and investment funds.

Documentation Requirements: The Three-Tier System

Polish transfer pricing follows the OECD three-tiered documentation approach:

1. Local File (Dokumentacja Lokalna)

Who Must Prepare: Taxpayers engaged in controlled transactions with related entities when transaction values exceed specified thresholds.

Documentation Thresholds (2025):

Transaction Type Annual Threshold
Goods/commodities PLN 10,000,000
Financial transactions (loans, credits) PLN 10,000,000
Services PLN 2,000,000
Other transactions PLN 2,000,000
Intangible assets PLN 2,000,000

Important: Thresholds apply separately to homogeneous transactions of the same nature. They are calculated separately for revenue and cost sides.

Required Contents:

The Local File must include (separately for each transaction):

  1. Description of Related Parties:
    • Organizational structure and management
    • Business activities and markets
    • Ownership structure
    • Financial data
  2. Transaction Description:
    • Nature and terms of transactions
    • Transaction amounts and values
    • Contractual terms
    • Payment conditions
  3. Functional Analysis:
    • Functions performed by each party
    • Assets employed
    • Risks assumed
    • Value creation analysis
  4. Transfer Pricing Method:
    • Selected pricing method with justification
    • Comparable analysis (benchmarking study)
    • Calculations and pricing determination
    • Documentation of arm’s length compliance
  5. Financial Information:
    • Financial projections related to transactions
    • Pricing calculations
    • Relevant financial indicators

Format: Must be prepared and stored electronically.

Language: Polish language required.

Deadline: End of the 10th month after the tax year end (October 31, 2025 for calendar-year taxpayers).

2. Master File (Dokumentacja Grupowa)

Who Must Prepare: Related entities forming a capital group that prepares consolidated financial statements, where consolidated revenues exceeded PLN 200 million (approximately EUR 44 million) in the previous fiscal year.

Required Contents:

  1. Group Structure:
    • Organizational chart
    • Description of group’s business activities
    • Supply chain overview
    • Geographical markets
  2. Intangible Assets:
    • Strategy for developing, owning, and exploiting intellectual property
    • List of significant intangibles
    • Transfer pricing policies for intangibles
    • R&D activities and locations
  3. Intercompany Financial Activities:
    • Description of financing arrangements
    • Identification of principal financing entities
    • General transfer pricing policies
  4. Financial and Tax Positions:
    • Consolidated financial statements
    • List and description of APAs and tax rulings
    • Description of transfer pricing methodology

Language: May be prepared in English, but Polish translation must be provided within 30 days of tax authority request.

Deadline: End of the 12th month after the tax year end (December 31, 2025 for calendar-year taxpayers).

3. Transfer Pricing Report (TPR-C)

Who Must File: All taxpayers required to prepare Local File documentation must also submit the electronic TPR-C form.

Contents:

The TPR-C form includes:

  • Detailed information about controlled transactions
  • Methods used for determining transfer prices
  • Financial indicators and analysis
  • Confirmation of compliance with arm’s length principle
  • Management board statement certifying:
    • Local file has been prepared
    • Documentation reflects actual circumstances
    • Transactions comply with arm’s length principle

Format: Electronic submission through tax portal.

Deadline: End of the 11th month after the tax year end (November 30, 2025 for calendar-year taxpayers, or December 1, 2025 as November 30 falls on a Sunday).

Transfer Pricing Methods

Polish law recognizes five standard transfer pricing methods based on OECD Guidelines:

Traditional Transaction Methods

  1. Comparable Uncontrolled Price (CUP) Method
    • Compares price charged in controlled transaction with price in comparable uncontrolled transactions
    • Most direct method when applicable
    • Requires high degree of comparability
  2. Resale Price Method
    • Based on price at which product purchased from related party is resold to independent party
    • Appropriate for distribution activities
    • Gross margin approach
  3. Cost Plus Method
    • Adds appropriate markup to costs incurred by supplier
    • Suitable for manufacturing, assembly, or service provision
    • Common for routine activities

Transactional Profit Methods

  1. Transactional Net Margin Method (TNMM)
    • Examines net profit margin relative to appropriate base
    • Most commonly used in practice
    • Flexible for various transaction types
  2. Profit Split Method
    • Divides combined profits between related parties
    • Used when transactions are highly integrated
    • Appropriate for unique intangibles or complex arrangements

Other Methods: Polish regulations allow use of other methods, including valuation techniques, when the five standard methods cannot be reasonably applied.

Benchmarking Analysis Requirements

When Required

Taxpayers must prepare benchmarking (comparability) analysis as part of Local File to demonstrate arm’s length pricing, except:

Exemptions from Benchmarking:

  • Micro and small enterprises (if not dealing with tax haven jurisdictions)
  • Transactions qualifying for safe harbour provisions
  • Certain domestic transactions between Polish entities without tax losses

Analysis Components

  1. Comparable Search:
    • Identification of potential comparable companies or transactions
    • Use of commercial databases (e.g., Bureau van Dijk, Refinitiv)
    • Selection criteria and screening process
  2. Comparability Analysis:
    • Product/service characteristics
    • Functional analysis comparison
    • Contractual terms
    • Economic circumstances
    • Business strategies
  3. Financial Analysis:
    • Calculation of arm’s length range
    • Tested party selection
    • Profit level indicators
    • Adjustments for comparability
  4. Conclusion:
    • Demonstration that tested transaction falls within arm’s length range
    • Explanation of any deviations
    • Justification of pricing

Update Frequency: Benchmarking studies should be updated every 3 years or more frequently if significant changes in economic circumstances occur.

Safe Harbour Provisions

Polish law provides safe harbour simplifications for certain low value-adding services, reducing documentation burden.

Conditions for Safe Harbour

Service Requirements:

  • Must qualify as low value-adding intragroup services
  • Services of supportive nature
  • Not core business activities
  • Do not involve unique intangibles

Markup Requirements:

  • For service recipients: markup on costs not higher than 5%
  • For service providers: markup on costs not lower than 5%

Exclusions:

  • Service provider located in tax haven jurisdiction
  • Services that form part of entity’s core business
  • Services involving unique value creation

Benefits: If conditions are met, tax authorities do not verify arm’s length nature of remuneration, and Local File documentation may be simplified or eliminated for these transactions.

Note: Polish definition of low value-adding services differs somewhat from OECD Guidelines definition.

Country-by-Country Reporting (CbC-R)

Applicability

Capital groups with consolidated revenues exceeding:

  • EUR 750 million, or
  • PLN 3,250 million (if revenues presented in PLN)

Filing Requirements

Ultimate Parent Entity (UPE): Must file CbC-R in jurisdiction where it’s tax resident.

Constituent Entity in Poland: Must either:

  • File CbC-R if UPE is not required to file in its jurisdiction, or
  • Notify Polish authorities where CbC-R is filed

Contents:

  • Allocation of income, taxes paid, and business activities by jurisdiction
  • List of constituent entities by jurisdiction
  • Key financial and employee data

Deadline:

  • CbC-R: 12 months after end of reporting fiscal year
  • Notification: 3 months after end of reporting fiscal year

Documentation Exemptions

Not every related-party transaction requires documentation. Key exemptions include:

1. Domestic Transactions

Transactions between Polish related entities that:

  • Both have tax residence in Poland
  • Neither benefits from tax exemptions (e.g., Special Economic Zones until exemption periods)
  • Neither incurred tax loss in the relevant tax year
  • Neither is subject to Estonian CIT regime

2. Safe Harbour Transactions

Certain transactions meeting safe harbour conditions for:

  • Low value-adding services (5% markup rule)
  • Loan transactions meeting statutory requirements
  • Cost allocation without markup between certain entities

3. Below-Threshold Transactions

Transactions not exceeding documentation thresholds (though arm’s length principle still applies).

Penalties and Consequences of Non-Compliance

Polish transfer pricing regulations impose severe penalties for violations:

Documentation Penalties

Missing or Incomplete Local File:

  • Criminal penalty: up to 720 daily penalty rates
  • Daily rate depends on minimum wage (ranges from PLN 300 to several thousand)
  • Potential total penalty: hundreds of thousands of PLN

Late or Incorrect TPR-C Filing:

  • Administrative penalty for failure to submit: PLN 500 – 1,000,000
  • Criminal penalties for false statements in management board declaration

Missing Master File:

  • Penalties similar to Local File violations
  • Additional sanctions for group-level non-compliance

Tax Adjustments

Income Adjustment: If tax authorities determine prices were not at arm’s length:

  • Adjustment to taxable income or loss
  • CIT arrears with penalty interest (currently significant due to high interest rates)

Additional Tax Liability:

  • 10% to 30% of overstated loss or understated income
  • Percentage depends on circumstances and severity
  • Applied in addition to primary tax liability

Statute of Limitations Impact

Proper documentation can limit exposure:

  • With proper documentation: 5-year statute of limitations
  • Without proper documentation: extended assessment period
  • Missing documentation can trigger expanded tax audits

Practical Compliance Steps for Foreign Investors

1. Assessment Phase (Q1 annually)

Identify Related Parties:

  • Review all group structures and relationships
  • Consider both direct and indirect relationships
  • Evaluate new investments and structural changes

Transaction Mapping:

  • List all cross-border and domestic related-party transactions
  • Categorize by transaction type
  • Estimate annual values for each transaction category

Threshold Analysis:

  • Compare transaction values to documentation thresholds
  • Determine which transactions require documentation
  • Identify transactions eligible for exemptions or safe harbours

2. Documentation Preparation (Q2-Q3)

Functional Analysis:

  • Document functions, assets, and risks for each entity
  • Prepare DEMPE analysis for intangibles
  • Update for material changes in business operations

Transfer Pricing Method Selection:

  • Choose most appropriate method for each transaction
  • Document method selection rationale
  • Ensure consistency with prior years unless justified changes

Benchmarking Studies:

  • Conduct or update comparability analyses
  • Use appropriate databases and screening criteria
  • Calculate arm’s length ranges
  • Document all assumptions and adjustments

Local File Drafting:

  • Prepare comprehensive documentation in Polish
  • Include all required elements per regulations
  • Ensure internal consistency across sections
  • Update for current year facts

3. Filing and Reporting (Q4)

Deadline Compliance:

  • October 31: Finalize Local File (for calendar-year taxpayers)
  • November 30: Submit TPR-C electronically
  • December 31: Complete Master File if required

Quality Review:

  • Management board reviews documentation
  • Legal and tax advisors verify compliance
  • Confirm alignment between Local File and TPR-C
  • Secure management board signatures for declarations

Recordkeeping:

  • Maintain all documentation electronically
  • Keep supporting materials and analysis
  • Preserve for 5 years minimum
  • Ensure accessibility in case of audit

4. Ongoing Monitoring

Quarterly Reviews:

  • Monitor actual transaction volumes vs. projections
  • Assess whether thresholds are exceeded mid-year
  • Identify new transactions requiring documentation

Annual Updates:

  • Review and update functional analysis
  • Refresh benchmarking studies as needed (minimum every 3 years)
  • Update for regulatory changes
  • Adjust transfer pricing policies if necessary

Special Considerations for Foreign Investors

Branch vs. Subsidiary Structures

Branch (Permanent Establishment):

  • Transfer pricing rules apply to profit attribution
  • Deemed transactions between branch and head office must be documented
  • Special rules for allocation of costs and revenues
  • Separate Local File requirements

Subsidiary:

  • Standard transfer pricing rules for all transactions with foreign parent
  • Full documentation requirements
  • Potential Master File obligation at parent level
  • CbC-R considerations for large groups

Common Transaction Types

Management Fees and Services:

  • High scrutiny from tax authorities
  • Detailed description of services required
  • Benefit test documentation essential
  • Consider safe harbour for qualifying services

Intellectual Property:

  • Complex DEMPE analysis required
  • Detailed valuation documentation
  • Ongoing royalty justification
  • Higher penalty risk for non-compliance

Financing Transactions:

  • Interest rate justification
  • Credit rating analysis
  • Implicit support considerations
  • Thin capitalization rules also apply

Cost Contributions:

  • Clear allocation methodology
  • Documentation of cost pools
  • Benefit analysis for participants
  • Arm’s length allocation keys

Tax Haven Considerations

Transactions with entities in jurisdictions recognized as tax havens require:

  • Enhanced documentation regardless of thresholds
  • Cannot qualify for safe harbour provisions
  • Higher scrutiny during audits
  • Potential need for compliance analysis instead of benchmarking

Current Tax Haven List: Published by Polish Minister of Finance (updated March 2025). Includes traditional tax havens but excludes many jurisdictions that signed exchange of information agreements.

Advance Pricing Agreements (APAs)

Unilateral APAs

Foreign investors can apply for advance confirmation of transfer pricing methodology:

Benefits:

  • Certainty regarding tax treatment
  • Protection from adjustments for covered periods
  • Reduced audit risk

Process:

  • Application to Polish tax authorities
  • Detailed documentation and proposed methodology
  • Negotiations and revisions
  • Typical duration: 6-12 months

Validity: Usually 3-5 years with possible extension

Bilateral and Multilateral APAs

Involving tax authorities from multiple jurisdictions:

  • Greater certainty across jurisdictions
  • Eliminates double taxation risk
  • More complex and time-consuming process
  • Involves competent authority negotiations

Poland’s Network: Poland has extensive treaty network supporting bilateral APAs with major trading partners.

Summary

Transfer pricing compliance is a critical obligation for foreign investors operating in Poland. The Polish system, while aligned with OECD standards, has specific local requirements that demand careful attention. Key takeaways:

Documentation is Mandatory: Prepare Local File, file TPR-C, and potentially Master File based on transaction volumes and group structure.

Deadlines are Strict: October 31 for Local File, November 30 for TPR-C, December 31 for Master File – missing deadlines triggers severe penalties.

Arm’s Length Principle: All transactions with related parties must be priced as if conducted between independent entities – applies regardless of documentation thresholds.

Penalties are Severe: Non-compliance can result in criminal penalties up to 720 daily rates plus 10-30% additional tax liability on adjustments.

Professional Guidance Essential: Given complexity and high stakes, engage experienced Polish transfer pricing advisors to ensure full compliance.

With proper planning, systematic documentation, and professional support, foreign investors can successfully navigate Polish transfer pricing requirements while minimizing tax risk and maintaining compliance with both Polish and international standards.

Withholding Tax (WHT) in Poland

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Withholding tax (WHT) constitutes one of the key elements of the Polish tax system, directly affecting the profitability of cross-border capital flows. For foreign investors conducting business in Poland or receiving payments from Polish entities, understanding WHT mechanisms is essential for proper investment structure planning and tax burden optimization.

The Essence of Withholding Tax

Withholding tax is a form of taxation in which an entity making certain payments to a non-resident is obligated to deduct tax and remit it to the Polish tax office. This mechanism transfers responsibility for tax settlement to the payer, significantly simplifying tax collection from entities without a registered seat in Poland.

The Polish WHT system primarily covers payments of a passive nature – dividends, interest, royalties – but also remuneration for certain intangible services. The obligation to withhold tax arises at the moment of payment or making funds available to the recipient, regardless of the actual monetary transfer.

Scope of Taxation

Payments subject to WHT include those made to non-residents in respect of dividends and other income from participation in profits of legal persons, interest on loans, credits, bonds and other debt instruments, royalties for the use of copyrights, patents, trademarks and know-how, as well as remuneration for advisory services, accounting services, market research, legal services, advertising services, management and control, data processing, employee recruitment services, and sureties and guarantees.

Particular attention should be paid to the broad category of intangible services, which in Polish tax practice tends to be interpreted expansively by tax authorities, also encompassing services of a mixed nature if they contain advisory or management elements.

Withholding Tax Rates

The basic WHT rates under Polish tax legislation are 19% for dividends and other income from participation in profits of legal persons, 20% for interest, royalties and remuneration for intangible services, and 10% for income from maritime shipping and air transport in international traffic.

These rates may be reduced or entirely eliminated based on double taxation treaties concluded by Poland with individual countries or provisions implementing EU directives. Poland is party to over 90 tax treaties that provide for differentiated preferential rates depending on the type of payment and the recipient’s status.

Double Taxation Treaties

Application of preferential rates under tax treaties requires fulfillment of specific formal and substantive conditions. The payer must primarily possess a current tax residence certificate of the payment recipient, confirming their place of residence for tax purposes. The certificate should be issued by the competent tax authority of the state of residence and remain valid at the time of payment.

Of key importance is also verification of whether the payment recipient is the beneficial owner of the amounts paid. The beneficial owner concept, derived from the Commentary to the OECD Model Convention, requires establishing that the recipient does not act merely as an intermediary or agent, but has the right to freely dispose of the received funds and bears the associated economic risk.

Exemptions Under EU Directives

Polish provisions implement EU directives providing for WHT exemptions for certain intra-group payments. The Parent-Subsidiary Directive enables exemption from withholding tax on dividends paid by a Polish subsidiary to a parent company from another EU or EEA member state, provided that at least 10% of shares are held for an uninterrupted period of minimum two years.

The Interest-Royalties Directive provides for analogous exemption for interest and royalties paid between related companies from different member states, with the required capital link threshold of 25% and a two-year holding period.

Application of directive exemptions additionally requires fulfillment of the test of genuine economic activity of the recipient and demonstration that the main purpose or one of the main purposes of the transaction is not obtaining a tax benefit contrary to the object and purpose of the provisions.

The Pay and Refund Mechanism

Since 2019, the Polish WHT system has included the pay and refund mechanism, which applies to payments exceeding PLN 2 million annually to the same taxpayer. When this threshold is exceeded, the payer is obligated to withhold tax at the full statutory rate, regardless of preferences under tax treaties or EU directives.

The payment recipient may subsequently apply for a refund of overpaid tax by submitting an appropriate application to the Polish tax authority. The refund procedure requires presentation of documentation confirming entitlement to apply the preferential rate and may take up to six months.

Alternatively, the payer may obtain an opinion on the application of preferences, which authorizes direct application of reduced rates without the need to subsequently apply for a refund. The opinion is issued upon application by the payer or taxpayer and remains valid for 36 months, provided the factual circumstances remain unchanged.

Documentation and Reporting Obligations

WHT payers are obligated to maintain detailed documentation confirming entitlement to apply preferential rates or exemptions. Documentation should include residence certificates, recipient statements on beneficial owner status, documents confirming fulfillment of directive exemption conditions, and analyses concerning the genuine economic activity of recipients.

Payers submit annual information on withheld tax using IFT-2R forms (for payments to legal persons) or IFT-1R forms (for payments to natural persons) by the end of January of the year following the tax year. Additionally, for certain payments, monthly PIT-8AR or CIT-10Z declarations are required.

Sanctions for Irregularities

Incorrect WHT settlement may result in serious consequences for the payer. In the case of failure to withhold tax or withholding it in an understated amount, the payer is liable with their entire assets for the tax obligation together with late payment interest. Additionally, in cases of culpable conduct, fiscal penal sanctions may be imposed, the extent of which depends on the degree of public liability reduction.

Tax authorities intensively verify the correctness of WHT settlements, particularly regarding beneficial owner status and fulfillment of exemption conditions. Audits frequently focus on transactions with entities from jurisdictions with favorable tax systems and on intra-group payments.

Practical Aspects of Tax Planning

Effective WHT burden management requires a comprehensive approach encompassing analysis of the capital group structure for flow optimization purposes, verification of available preferences under tax treaties and EU directives, proper documentation of payment recipient status, and ongoing monitoring of legislative and interpretative changes.

Particularly important is obtaining residence certificates and opinions on the application of preferences sufficiently in advance, which helps avoid the necessity of applying the pay and refund mechanism and its associated administrative complications.

Our law firm specializes in comprehensive legal and tax services for foreign investors in Poland. We offer support in analyzing WHT obligations, preparing documentation necessary for applying preferential rates, representing clients before tax authorities in overpaid tax refund procedures, and ongoing advisory services regarding optimization of the tax structure of cross-border capital flows. Our multilingual team of experts ensures smooth communication and full understanding of the specifics of international clients’ operations.

EDPS: New AI Risk Management Guidelines

Posted on by kancelaria

The European Data Protection Supervisor has published a groundbreaking document setting standards for personal data protection in the era of artificial intelligence. The guidelines serve as a practical handbook for all EU institutions implementing AI systems.

A Landmark Document in the Age of Digital Transformation

On 11 November 2025, the European Data Protection Supervisor (EDPS) published comprehensive guidelines on risk management for artificial intelligence systems. The document, spanning over 50 pages, responds to the growing challenges associated with integrating AI technology in European Union Institutions, Bodies, Offices and Agencies (EUIs).

The guidelines are not intended to be an exhaustive catalogue of requirements. The EDPS emphasises that each institution should conduct its own tailored risk assessment. The document was issued within the EDPS’s supervisory competence in data protection matters, independently of its role as a market surveillance authority under the EU Artificial Intelligence Act.

Methodological Foundation: ISO 31000 Standard

The guidelines are based on the internationally recognised ISO 31000:2018 standard for risk management. The adopted methodology encompasses the full risk management cycle: from establishing the organisational context, through risk identification and analysis, to evaluation, treatment and continuous monitoring.

The document defines risk in the context of personal data processing by AI systems. The risk source is the data processing itself within the AI system implementation. The risk event is a situation where such processing may infringe upon the rights and freedoms of data subjects. The consequence is the material or non-material harm that these individuals may suffer.

The AI System Lifecycle as a Risk Management Framework

The EDPS provides a detailed analysis of the artificial intelligence system lifecycle, indicating that different risks emerge at different stages of development and deployment. A typical lifecycle comprises nine phases: from inception and analysis, through data acquisition and preparation, system development, verification and validation, deployment, operational functioning with monitoring, continuous validation, re-evaluation, to system retirement.

The guidelines pay particular attention to the procurement process. The EDPS emphasises that this stage represents a crucial intervention point, allowing potential issues to be avoided at later stages of implementation. The document recommends involving data protection officers at the tender specification stage to prevent subsequent difficulties with ready-made solutions that may not comply with requirements.

Interpretability and Explainability: A Sine Qua Non

One of the key elements of the guidelines is the requirement for AI system interpretability and explainability. The EDPS treats these characteristics as an absolute condition for compliance with data protection regulations.

Interpretability concerns the ability to understand how an AI model operates – its internal logic and the connections between input data and results. Explainability, on the other hand, focuses on the ability to explain why the system generates specific results in a manner comprehensible to end users.

The guidelines point to specific technical tools for ensuring explainability. Among them are methods such as LIME (Local Interpretable Model-agnostic Explanations) and SHAP (SHapley Additive exPlanations), based on cooperative game theory, which assign values to individual model features and enable understanding of their impact on specific predictions.

Five Key Data Protection Principles in the AI Context

The central part of the guidelines comprises a detailed analysis of five data protection principles in the specific context of artificial intelligence systems: fairness, accuracy, data minimisation, security, and data subjects’ rights.

The Fairness Principle and Algorithmic Bias

Artificial intelligence systems tend to replicate and amplify existing human biases, and even create new ones. The EDPS identifies several types of bias: those resulting from poor quality training data, from non-representative datasets, from model overfitting, from algorithm design itself, and from misinterpretation of results.

The guidelines cite the example of the COMPAS system used in the American justice system to predict recidivism. The system exhibited bias against African American individuals, which resulted, among other factors, from an erroneous assumption of a linear relationship between certain features and the prediction.

As remedial measures, the document indicates: data quality audits, regularisation techniques to prevent overfitting, diversity in project teams, training for those interpreting results, and the use of bias audit tools such as AI Fairness 360 and Aequitas.

The Accuracy Principle: Legal and Statistical Dimensions

The EDPS distinguishes two dimensions of accuracy. Legal accuracy, stemming from data protection regulations, requires that processed personal data be correct and up to date. Statistical accuracy, on the other hand, refers to the correctness of results generated by the AI system.

A particular challenge is the phenomenon of data drift – the gradual change in data characteristics over time, which can cause model accuracy degradation. The guidelines recommend implementing drift detection mechanisms, continuous quality monitoring, and regular model retraining.

The Data Minimisation Principle

AI systems have a natural tendency to utilise as much data as possible. The EDPS warns against unjustified data collection exceeding what is necessary to achieve a specific purpose. The guidelines recommend prior assessment of data utility, using sampling instead of complete datasets, and anonymisation and pseudonymisation techniques.

The Security Principle: New Attack Vectors

AI systems introduce new categories of security threats. The EDPS identifies three main risk areas: data disclosure through model outputs (for example, through attacks involving training data reconstruction), breaches related to storing large datasets, and leaks through API interfaces.

As protective measures, the guidelines indicate: differential privacy, encryption, synthetic data, secure programming practices, multi-factor authentication, role-based access control, API query rate limiting, and regular security audits.

Data Subjects’ Rights

Exercising the rights of access, rectification and erasure of personal data in the context of AI systems encounters specific difficulties. Data may be dispersed across model parameters, making identification and extraction difficult. Furthermore, the phenomenon of data memorisation by models may prevent their effective deletion.

The guidelines point to the developing field of machine unlearning, which allows the removal of the influence of specific data from a model without the need for complete retraining from scratch.

Practical Tools: Annexes to the Guidelines

The document contains three practical annexes. The first presents metrics and benchmarks for evaluating AI systems, including recognised standards such as GLUE, SuperGLUE and HELM for language models, as well as ImageNet and COCO for image recognition systems.

The second annex offers a synthetic overview of all identified risks. The third contains checklists assigned to individual phases of the AI system lifecycle, enabling systematic compliance verification at each stage.

The Significance of the Guidelines for the Future of AI in the EU

The EDPS guidelines fill an important gap between abstract regulatory principles and the practical implementation of artificial intelligence systems. Although addressed directly to EU institutions, they constitute a valuable model for organisations outside the public sector as well.

The document fits into the broader context of the European approach to artificial intelligence regulation, supplementing AI Act provisions with a data protection dimension. The EDPS emphasises that the guidelines should be used in conjunction with other tools it has developed, particularly the guidelines on data protection impact assessments and the orientations on generative artificial intelligence from June 2024.

The publication of these guidelines signals that the era of unregulated AI development in public institutions is coming to an end. Technological innovation must go hand in hand with responsibility for protecting citizens’ fundamental rights.

Corporate Income Tax (CIT) in Poland

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Poland has long attracted foreign investors with its stable legal environment, European Union membership, and competitive tax system. Understanding the principles of corporate income tax (CIT) is one of the key elements when planning business activities in Poland. This guide presents the most important aspects of Polish CIT from the perspective of a foreign investor.

Legal Framework and Scope of Taxation

Polish corporate income tax is regulated by the Act of 15 February 1992 on Corporate Income Tax. Taxation applies to legal persons, capital companies in organisation, and organisational units without legal personality, with the exception of enterprises in inheritance and partnerships without legal personality.

The distinction between limited and unlimited tax residency is of crucial importance for foreign investors. Taxpayers with their registered office or place of management in Poland are subject to unlimited tax liability, meaning taxation on all income regardless of where it is generated. Foreign entities that do not have their registered office or place of management in Poland are subject to limited tax liability only on income earned in Poland.

CIT Tax Rates

The Polish CIT system provides for two basic tax rates. The standard rate is 19% of the tax base and applies to most taxpayers. A preferential rate of 9% is available for small taxpayers and taxpayers commencing business activity. Small taxpayer status is granted to entities whose gross sales revenues in the previous tax year did not exceed the equivalent of 2 million euros.

However, it should be noted that the reduced 9% rate is subject to certain limitations. It cannot be used by entities created as a result of certain transformations, divisions, or contributions of an enterprise or its organised part. This restriction aims to prevent tax optimisation involving the artificial creation of new entities solely to benefit from the preferential rate.

Estonian CIT – Lump Sum Tax on Company Income

Polish tax law offers an alternative form of taxation known as Estonian CIT or lump sum tax on company income. This taxation model allows for deferral of tax payment until profit distribution. As long as earned funds remain in the company and are reinvested, no tax is collected.

Estonian CIT rates are 10% for small taxpayers and taxpayers commencing business activity and 20% for other entities. After accounting for the deduction of part of the tax paid by the company from the tax due from the shareholder, the effective combined taxation may be more favourable than under classic CIT.

Estonian CIT is available to limited liability companies, joint-stock companies, simple joint-stock companies, limited partnerships, and limited joint-stock partnerships, provided certain conditions are met. Shareholders of such a company may only be natural persons, and the company may not hold shares in other entities or conduct business in a special economic zone or under a decision on support for new investment.

IP Box Relief

Poland has introduced a preferential tax rate of 5% for income from qualified intellectual property rights, known as IP Box. This relief applies to income from patents, protection rights for utility models, rights from registration of industrial designs, rights from registration of integrated circuit topographies, supplementary protection rights for patents on medicinal products or plant protection products, rights from registration of medicinal products, rights from registration of plant varieties, and copyrights to computer programs.

The condition for using this relief is that the taxpayer conducts research and development activities directly related to the creation, development, or improvement of the qualified intellectual property right. The taxpayer must also maintain appropriate accounting records enabling the separation of revenues and costs related to individual rights.

Research and Development Relief

Taxpayers conducting research and development activities may benefit from an additional deduction of qualified costs from the tax base. This deduction is available regardless of whether these costs are included in tax-deductible expenses, meaning that the same expenditures may be taken into account twice in the tax settlement.

The amount of the deduction is 100% of qualified costs for most taxpayers, while for research and development centres the limit is 150%. Qualified costs include, among others, remuneration of employees engaged in R&D activities, materials and raw materials, expert opinions, advisory services, paid use of scientific and research equipment, and depreciation charges on fixed assets and intangible assets used in R&D activities.

Withholding Tax

Payments made to foreign entities may be subject to withholding tax in Poland. Standard rates are 20% for income from interest, copyrights and related rights, trademarks, know-how, and intangible services such as consulting, accounting, market research, legal services, or advertising. Dividends and other income from participation in the profits of legal persons are taxed at a rate of 19%, while certain payments for entertainment services are taxed at 10%.

These rates may be reduced or the tax may be completely eliminated under double taxation treaties concluded by Poland. The condition for applying a preferential rate is that the payer holds a tax residency certificate of the payment recipient. For payments exceeding 2 million zlotys annually to the same entity, the payer is obliged to withhold tax at the domestic rate, and the foreign entity may then apply for a refund of the overpaid tax.

Special rules apply to payments between related entities within the European Union. Under EU directives implemented into Polish law, dividend, interest, and royalty payments between qualifying related entities may benefit from withholding tax exemption after meeting certain conditions regarding the level of capital links and the period of their maintenance.

Transfer Pricing

Transactions between related entities must be carried out on arm’s length terms. Polish transfer pricing regulations require taxpayers to prepare transfer pricing documentation for controlled transactions exceeding certain value thresholds. These thresholds are 10 million zlotys for goods and financial transactions and 2 million zlotys for service transactions and those involving intangibles.

Local documentation should contain a description of the transaction, functional analysis, benchmarking study or compliance analysis, and financial information. Additionally, entities belonging to capital groups whose consolidated revenues exceed 200 million zlotys are required to prepare group documentation. The largest capital groups with revenues exceeding 750 million euros must submit country-by-country reporting.

Reporting Obligations and Deadlines

The tax year in Poland generally coincides with the calendar year, although taxpayers may choose a different twelve-month period as their tax year. The annual CIT-8 return must be filed by the end of the third month following the end of the tax year. The difference between the tax due and the sum of advance payments made must be paid by the same deadline.

During the tax year, taxpayers are required to make monthly advance tax payments. Small taxpayers may opt for quarterly advance payments. Advances are paid by the 20th day of the month following the month or quarter to which they relate.

Practical Aspects for Foreign Investors

When planning an investment in Poland, foreign entrepreneurs should consider several key tax issues. The choice of legal form of business is of significant importance for tax efficiency. The limited liability company remains the most popular form due to its combination of limited shareholder liability with operational flexibility and access to tax preferences.

Investment location may enable the use of tax exemptions under the Polish Investment Zone. This system replaced the earlier special economic zones and offers CIT exemptions of up to 70% of the value of qualified investment costs, depending on the region and size of the entrepreneur.

The financing structure of activities in Poland also requires careful planning. Polish thin capitalisation rules limit the possibility of including interest on loans from related entities as tax-deductible expenses. The surplus of debt financing costs is subject to a limit of 3 million zlotys or 30% of EBITDA.

How We Can Help – Support for Foreign Investors

Our law firm specialises in comprehensive legal and tax services for foreign investors entering the Polish market. We understand that navigating the Polish tax system can be challenging for entrepreneurs from other jurisdictions, which is why we offer full support at every stage of investment.

In the area of CIT, we help our clients choose the optimal form of taxation, taking into account the specifics of their business and objectives. We advise on the choice between classic CIT and Estonian CIT, analysing the benefits and limitations of each solution in the context of the individual investor’s situation. We also support the implementation of tax reliefs, including IP Box and research and development relief, helping to properly document activities qualifying for preferences.

Our team provides comprehensive transfer pricing services, from preparing transfer pricing policies through preparing required documentation to support in the event of tax audits. We also advise on withholding tax matters, helping with the correct application of double taxation treaties and obtaining refunds of overpaid tax.

For investors planning to start business in Poland, we offer support in choosing the optimal legal structure, company registration, and obtaining a decision on support under the Polish Investment Zone. We also provide ongoing tax services, including preparation of tax declarations and returns, as well as representation before tax authorities.

By working with our firm, foreign investors gain a partner who not only knows Polish tax law but also understands the specifics of conducting cross-border business and can communicate effectively in English and other foreign languages. We invite you to contact us to discuss your investment plans and tax optimisation opportunities.

Investment Restrictions for Foreign Investors in Poland

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Poland, as a European Union member state, applies the principle of free movement of capital to investors from member states. However, the situation differs significantly for investors from outside the EU, who face restrictions in certain economic sectors requiring appropriate approvals and permits. Understanding these regulations is essential for successful market entry and avoiding costly procedural mistakes.

Legal Framework

The Polish system of investment restrictions is based on several key legal acts. The Act of 24 March 1920 on the Acquisition of Real Estate by Foreigners remains the fundamental regulation governing the principles of acquiring land and real estate by foreign entities. The Act of 24 July 2015 on the Control of Certain Investments introduces a mechanism for protecting strategic companies and economic sectors, which was significantly strengthened in response to the COVID-19 pandemic. Additionally, sector-specific regulations govern access to particular industries such as media, energy, and financial services.

The distinction between investors from the EEA and Switzerland versus investors from third countries is of fundamental importance. The former generally benefit from national treatment, while investors from outside this area are subject to additional requirements and control procedures that can significantly impact transaction timelines and structures.

Real Estate Acquisition by Foreigners

Acquisition of real estate by a foreigner from outside the EEA generally requires a permit from the Minister of Internal Affairs and Administration. This obligation applies to natural persons without Polish or EEA citizenship, legal entities with registered offices abroad, and companies controlled by foreign entities.

A permit is required when acquiring real estate ownership rights, perpetual usufruct rights, and when acquiring shares in companies owning real estate if the company becomes controlled by a foreigner as a result of the transaction. The definition of control is broad and includes situations where a foreign entity gains the ability to exercise more than 50% of voting rights at the shareholders’ meeting.

Exemptions from the permit requirement apply in several important situations. These include the acquisition of a self-contained residential unit (apartment), acquisition by a foreigner who has been residing in Poland for at least five years since obtaining permanent residence or EU long-term resident permit, and acquisition by a foreigner who is a spouse of a Polish citizen where the property will become part of marital community property. Additionally, no permit is required for the acquisition of real estate not exceeding 0.4 hectares for business purposes.

The permit procedure requires submission of an application together with documents confirming the applicant’s ties to Poland, specification of the purpose and source of financing for the acquisition, and obtaining opinions from the relevant minister and the Minister of National Defence in the case of real estate located in the border zone. The permit is issued within up to two months, although this period may be extended in complex cases.

Control of Investments in Strategic Companies

The Act on the Control of Certain Investments establishes a mechanism for protecting entities of strategic importance to state security. This system was significantly expanded in 2020 in response to the COVID-19 pandemic and concerns about the acquisition of weakened Polish companies by capital from third countries.

Sectors subject to control include energy infrastructure encompassing generation, distribution, and trading of electricity, gas, and fuels. Telecommunications companies, including network operators and service providers, are also controlled. The defence industry is subject to particular oversight, as is the chemical industry covering the production of fertilizers, plastics, and industrial chemicals. Control also extends to food processing companies, pharmaceutical and medical device manufacturers, and IT companies providing services to public administration.

The obligation to obtain approval applies to the acquisition of significant shareholdings in protected companies. The thresholds triggering the notification obligation are the acquisition of 20%, 25%, and 33% of votes in a company. The notification obligation applies to investors from outside the EEA and OECD, as well as entities controlled by such investors. The competent authority for issuing decisions is the President of the Office of Competition and Consumer Protection (UOKiK), who may oppose a transaction threatening public order or state security.

The control procedure provides for a two-month period for reviewing the notification, with the possibility of extension in particularly complex cases. Completing a transaction without the required approval results in its invalidity and criminal sanctions for the persons responsible.

Sector-Specific Restrictions

Individual economic sectors are subject to additional regulations restricting access for foreign investors, each with its own specific requirements and limitations.

Broadcast media represent one of the most restricted sectors. The Act on Radio and Television Broadcasting requires that a licence for radio and television broadcasting may only be obtained by an entity with its registered office in an EEA member state. An investor from outside the EEA may hold a maximum of 49% of shares in a broadcasting company, making this one of the most restrictive limits in the Polish legal system.

The banking and financial sector requires approval from the Polish Financial Supervision Authority (KNF) for the acquisition of significant shareholdings in banks. The KNF assesses the suitability of the investor, their financial situation, and the impact of the transaction on the stability of the financial sector. Similar requirements apply to insurance companies, investment fund companies, and other financial institutions. The assessment process is thorough and may include requests for additional information about the investor’s group structure and business plans.

The aviation sector requires air carriers to meet ownership and control requirements set out in EU regulations. Entities from outside the EU may hold shares in Polish airlines; however, effective control must remain in the hands of citizens or entities from member states. This requirement is strictly monitored and verified during the licensing process.

Mining activities in the area of exploration and exploitation of hydrocarbon deposits require a licence granted by the Minister of Climate and Environment. When assessing applications, aspects of national energy security are taken into account, which may influence decisions regarding investors from certain third countries.

Procedures and Required Documentation

An investor planning to enter the Polish market in a regulated industry should begin with an analysis of the planned investment structure in terms of applicable restrictions. It is then necessary to identify the relevant administrative authorities and required procedures, as well as prepare complete documentation taking into account the specifics of the given sector.

Typical documentation includes:

  • corporate documents of the investor together with sworn translations and apostille
  • information on the ownership structure down to ultimate beneficial owners
  • business plan or description of the investment strategy
  • documents confirming sources of financing
  • criminal record certificates for management personnel

Indicative timelines for processing applications vary depending on the procedure. A permit for real estate acquisition is issued within up to two months. Approval for the acquisition of shares in a strategic company also requires approximately two months. Sector-specific licences may require three to six months depending on the industry and complexity of the application.

Penalties for Non-Compliance

Completing an investment without the required approval or permit carries serious consequences across multiple dimensions. On the civil law level, a legal transaction made without the required permit is invalid, which can unwind entire transaction structures. Administrative sanctions include financial penalties imposed by the relevant supervisory authorities. In the case of control of strategic investments, the Act also provides for criminal liability of persons who allowed the acquisition of shares without the required approval, with potential imprisonment of up to five years.

How We Support Foreign Investors

We specialise in comprehensive market entry services for foreign companies in Poland, combining legal advisory with expert tax knowledge. Our clients receive full support at every stage of the investment process.

Legal support encompasses detailed analysis of the planned investment for applicable restrictions and regulatory requirements. We help select the optimal legal form for conducting business in Poland, taking into account industry specifics and the investor’s business objectives. We prepare and submit applications for required permits, including real estate acquisition permits and notifications to UOKiK in the case of investments in strategic companies. We represent clients before Polish administrative authorities and oversee the proper conduct of registration procedures with the National Court Register.

Tax support covers investment structure planning in a tax-efficient manner, taking into account double taxation treaties. We advise on VAT registration, payer obligations, and ongoing tax settlements. We help clients take advantage of available investment incentives, including reliefs under the Polish Investment Zone and tax exemptions for certain types of activities. We also support clients in fulfilling reporting and documentation obligations, including transfer pricing requirements.

By combining legal and tax competencies, we ensure coherent and effective support that minimises regulatory risks and optimises fiscal burdens. Our experts are fluent in English and understand the specifics of working with foreign clients, enabling smooth communication and quick response to investor needs.

Contact us to discuss your planned investment and receive a tailored cooperation proposal.

Branch of a Foreign Company in Poland

Posted on by kancelaria

Expanding into the Polish market does not always require establishing a new company. For many foreign entrepreneurs, a much simpler and faster solution is to set up a branch – an organisationally separate part of the parent company’s business operations. This form of presence in Poland allows full business activity without the need to contribute share capital or appoint separate governing bodies.

What is a branch of a foreign entrepreneur

Under the Act on the Rules of Participation of Foreign Entrepreneurs and Other Foreign Persons in Economic Transactions in the Territory of the Republic of Poland, a branch constitutes an organisationally separate and independent part of business activity conducted by an entrepreneur outside their registered office or principal place of business. In practice, this means that a branch has no legal personality – all rights and obligations arising from its operations directly encumber the parent company.

A key principle that foreign investors must consider concerns the scope of activity. A branch may only conduct business within the scope of the foreign entrepreneur’s business activities. This means that the Polish unit cannot carry out projects or provide services beyond the parent company’s business profile registered in its country of domicile.

Who can establish a branch in Poland

The right to establish branches in Poland is granted to entrepreneurs from European Union Member States and Member States of the European Free Trade Association (EFTA), namely parties to the Agreement on the European Economic Area. Entrepreneurs from these countries enjoy full freedom of establishment guaranteed by EU regulations.

Entrepreneurs from outside the EU and EEA may establish branches in Poland on the basis of reciprocity, unless ratified international agreements provide otherwise. In practice, this requires verification of whether appropriate bilateral agreements guaranteeing such possibility exist between Poland and the country where the parent company is domiciled.

Branch registration procedure

The process of establishing a branch requires completing several formal stages. First, the parent company must adopt a resolution on establishing a branch in Poland, specifying its name, registered office, and scope of activity. Subsequently, a person authorised to represent the foreign entrepreneur in the branch must be appointed – this is an absolute requirement arising directly from the regulations.

Branch registration takes place through entry in the National Court Register (KRS). The application is submitted on the official KRS-W10 form along with several attachments, including the KRS-WK form concerning the representative. The application must be accompanied by the founding act, agreement or articles of association of the parent company with a certified translation into Polish, an extract from the foreign register with translation, and a document confirming the authorisation of the person representing the branch.

Documents originating from abroad require appropriate authentication. For documents from states party to the 1961 Hague Convention, an apostille is sufficient, while documents from other countries must be legalised by the appropriate diplomatic mission.

Entry in the KRS is subject to a court fee of PLN 500 and a fee for announcement in the Court and Commercial Gazette of PLN 100. The registration court has 7 days to process a correctly submitted application.

Branch name and designation

A branch must use the original name of the foreign entrepreneur along with the legal form translated into Polish and the additional designation “oddział w Polsce” (branch in Poland). For example, if the parent company is named “TechSolutions GmbH”, its Polish branch will operate as “TechSolutions spółka z ograniczoną odpowiedzialnością oddział w Polsce”. This requirement ensures transparency in business transactions and clearly indicates to counterparties that they are dealing with an organisational unit of a foreign entity.

Branch representative – the person in the branch

A foreign entrepreneur is obliged to appoint a person authorised in the branch to represent it. This person does not need to be a Polish citizen or even a resident – it may be any natural person with full legal capacity. The scope of their authority is determined by the power of attorney granted by the parent company’s governing bodies.

It is worth emphasising that the branch representative is not equivalent to a member of the company’s management board. Their competences are limited to matters related to the branch’s operations and derive solely from the content of the power of attorney granted. In practice, the representative often handles day-to-day contacts with authorities, concludes commercial contracts on behalf of the parent company, and represents the branch before courts.

Reporting and accounting obligations

A branch of a foreign entrepreneur is subject to Polish accounting regulations regarding units operating in Poland. This means an obligation to maintain accounting books in accordance with the Accounting Act and to prepare annual financial statements. These statements must be submitted to the National Court Register within 15 days of approval, but no later than 12 months from the balance sheet date.

The foreign entrepreneur is also obliged to submit to the branch’s registration files the annual financial statements of the parent company, if required in its country of domicile. These documents require sworn translation into Polish.

Branch taxation

From a tax perspective, a branch of a foreign entrepreneur constitutes a permanent establishment within the meaning of double taxation treaties. This means that profits attributed to the branch are subject to corporate income tax in Poland at the standard rate of 19% or the preferential rate of 9% for small taxpayers and taxpayers commencing business activity, provided revenues do not exceed the equivalent of EUR 2 million.

A branch is also an independent VAT taxpayer in Poland. It is subject to registration as an active VAT taxpayer if it performs taxable activities and settles accounts with the Polish tax authorities on general principles. Transactions between the branch and the parent unit generally do not constitute activities subject to VAT, as they occur within the same legal entity, although there are exceptions to this rule arising from CJEU case law.

Branch versus subsidiary – comparison

The choice between a branch and a subsidiary depends on the investor’s strategic objectives and the specifics of the planned activity. A branch offers a simpler organisational structure, no capital requirements, and a faster registration procedure. On the other hand, the parent company is liable with all its assets for the branch’s obligations, which may constitute a significant risk in the case of higher-risk activities.

A subsidiary, although requiring more formalities and expenditure to establish, provides full limitation of liability to the amount of contributed capital. It also constitutes a separate legal entity, which may be important from the perspective of perception by counterparties and when applying for certain permits or licences.

Branch liquidation

Closure of a branch occurs by decision of the foreign entrepreneur or ex officio in specified cases, such as liquidation of the foreign entrepreneur or gross violation of Polish law. The liquidation process includes settling obligations to counterparties and employees, fulfilling tax obligations, and submitting an application for removal of the branch from the National Court Register.

The minister responsible for the economy may issue a decision prohibiting the branch from conducting business if the foreign entrepreneur grossly violates Polish law, has been declared bankrupt, or fails to fulfil the obligation to submit reports to the registration files.

Practical recommendations for investors

Before deciding to establish a branch, it is advisable to conduct a detailed analysis of the planned activity. A branch works best as a form of market entry for entrepreneurs who want to quickly commence operational activity, do not plan a complicated ownership structure, and accept full liability of the parent company.

It is recommended to use the services of a professional representative when registering a branch, particularly regarding document preparation and translation. Formal errors extend the procedure and generate additional costs. It is equally important to establish in advance with a tax specialist the optimal structure of settlements between the branch and the parent unit to avoid transfer pricing problems and correctly allocate revenues and costs.

Poland Investment Zone (PSI) – a guide

Posted on by kancelaria

1. Introduction – what is the Poland Investment Zone?

The Poland Investment Zone (PSI) is an innovative investment-support instrument which since 2018 has replaced the traditional Special Economic Zones (SSE). With this program, the whole territory of Poland effectively became one economic zone, allowing entrepreneurs to obtain corporate income tax (CIT) or personal income tax (PIT) relief regardless of the location of their planned investment.

Under PSI, support is granted by means of a “decision on support” (DoW), which entitles the beneficiary to tax relief for a period of 12 to 15 years. The amount of tax relief depends on the investment location, the size of the company, and the amount of eligible costs incurred.

According to the 2025 update, from July 2025 companies operating in the defence and security sector may also use PSI instruments – including tax relief and access to prepared investment sites.

1.1. PSI in numbers – latest data 2025

In the first half of 2025, according to the Ministry of Development and Technology, 213 decisions on support were issued for total investments exceeding PLN 5.7 billion, which will result in about 1,600 new jobs. That represents a 5% increase in the number of decisions compared to the same period the previous year.

For the whole 2024: 551 decisions, PLN 15.5 billion of investments, about 4,000 new jobs. Since inception (2018–2024): 3,054 decisions, PLN 132.5 billion investments, and nearly 51,924 jobs.

PSI is particularly beneficial for micro, small, and medium enterprises (SMEs). In 2024, 72% of decisions went to Polish SMEs (up by 5 percentage points compared to 2023). In H1 2025, that share is 73%. Since the beginning of the programme SMEs have received 1,913 decisions (63% of all), corresponding to PLN 20.4 billion in investments.

1.3. Key changes in 2025

  • Extension of the program to include the defence sector — companies operating for security and defence may now benefit from PSI.
  • New regional aid map — from 1 January 2025 new intensities of support; for example, for Wrocław and Poznań (and the Poznań sub-region) the support rate drops from 20% to 15%.
  • Extended periods for decisions — 12 years for regions with 25–40% aid intensity, 15 years for regions with 50% aid intensity.
  • Additional support for strategic technology projects (STEP) — increased aid intensity by 5–10% for projects in digital technologies, ecology, and biotechnology.

2. Key benefits for investors

  • Relief from CIT or PIT — possibility of obtaining tax exemption up to 70% of the value of the investment.
  • Long duration of relief — from 12 to 15 years depending on location.
  • Nationwide availability — no territorial limitations known from former SSE.
  • Fast decision process — up to 30 days for evaluating the application.
  • Preferential treatment for SMEs — lower entry thresholds and higher aid intensity.

3. Conditions to obtain support

3.1. Who can use PSI?

Support under PSI is available to companies of any size — micro, small, medium and large — operating in the following sectors:

  • Industrial sector (with certain exclusions).
  • Modern business services (BSS), including IT, R&D services, accounting, architecture, engineering, call-centres.
  • Defence sector (since July 2025).

3.2. Activities excluded from support

Not all types of activity qualify. Excluded are: wholesale and retail trade, construction works and construction-related services, accommodation and catering, gambling facilities.

3.3. Definition of a “new investment”

Support may only be granted for a “new investment,” defined as:

  • Setting up a new production facility;
  • Increasing the production capacity of an existing plant;
  • Diversifying production by introducing products not previously manufactured;
  • Fundamentally changing the production process;
  • Acquisition of assets of a plant that has been closed (or would be closed). (

Important: for large companies operating in certain “region c” provinces (Lower Silesia, Greater Poland, Warsaw-region) support may be granted only for investments involving new economic activity.

4. Qualification criteria

4.1. Quantitative criteria — minimum eligible investment outlays

Minimum investments depend on the company size, location, and type of activity. For re-investments, thresholds are halved.

Company size Minimum investment (new) Minimum (reinvestment)
Micro-enterprise 200,000 PLN 100,000 PLN
Small enterprise 500,000 PLN 250,000 PLN
Medium enterprise 1,000,000 PLN 500,000 PLN
Large enterprise 10,000,000 PLN 5,000,000 PLN

4.2. Qualitative criteria

Investments are also evaluated on qualitative criteria assessing their value to regional development. Depending on location, a company must obtain from 4 to 6 out of the required points.

5. Public aid intensity – 2025 regional aid map

Aid intensity depends on the region and for 2025 is as follows (for large enterprises):

  • Lubelskie, Podkarpackie, Warmińsko-Mazurskie, Podlaskie, “Siedlce sub-region” — 50%, 15 years relief.
  • Świętokrzyskie, Mazowieckie (eastern region) — 40%, 12–15 years.
  • Kujawsko-Pomorskie, Lubuskie, Łódzkie, Małopolskie, Opolskie, Pomorskie, Śląskie, Zachodniopomorskie — 30–40%, 12 years.
  • Lower Silesia (excluding Wrocław), Wielkopolska (excluding Poznań) — 25%, 12 years.
  • Wrocław, Poznań and Poznań sub-region — 15%, 12 years (as of 2025 change).
  • Warsaw and surrounding counties — 0%, no support.

5.1. SME bonus

  • Micro and small enterprises: +20 percentage points;
  • Medium enterprises: +10 points;
  • Additional bonus from the Just Transition Fund: +10 points;
  • For STEP projects (strategic technologies): +5–10 points.

This means that under favorable conditions SMEs may get support up to 70% of qualifying costs.

6. Eligible costs

6.1. Investment outlays

Qualifying costs include: purchase of land (up to 10% of total eligible costs), construction or modernization of buildings and structures, purchase of machinery and equipment, acquisition of intangible and legal assets, financial leasing of fixed assets.

6.2. Two-year labour costs

Also included are labour costs for newly employed staff over two years: gross salaries, employer’s social security contributions, and other mandatory employer contributions.

7. Process of obtaining a decision on support (DoW)

  1. Project analysis — verifying compliance with PSI criteria.
  2. Contact with the appropriate managing SSE.
  3. Preparation of documentation — application, business plan, attachments.
  4. Submitting the application — before starting the investment.
  5. Verification — up to 30 days.
  6. Issuing the decision — obtaining DoW.

Important: The application must be submitted before beginning the investment. Purchase of land or preparatory works do not count as starting the investment.

8. Most common mistakes

Typical errors include:

  • submitting the application too late — after the investment has already started;
  • incorrect classification of the company size;
  • misclassification of eligible costs;
  • lack of separate accounting records for the supported investment;
  • failure to meet the requirement to maintain the investment for a certain period — 5 years for large enterprises, 3 years for SMEs.

9. Summary

Poland Investment Zone remains one of the most attractive investment-support instruments in Central and Eastern Europe. Data for the first half of 2025 show increasing interest in the programme (+5% y/y), and expansion to the defence sector opens new opportunities. (ATL Prawo)

 

Specifics of Polish VAT, Split Payment, Deduction Mechanism, and Common Pitfalls

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The Value Added Tax (VAT) system in Poland, while based on EU directives, features a range of specific solutions that can pose challenges for both Polish entrepreneurs and foreign investors. Understanding these mechanisms is crucial for proper tax settlement and avoiding costly mistakes.

Basic Structure of Polish VAT

Poland applies four VAT rates: the standard rate of 23%, reduced rates of 8% and 5%, and a 0% rate for specific goods and services. This multi-rate system, while serving socio-economic objectives, introduces considerable complexity in daily business practice.

Entrepreneurs are required to register as active VAT taxpayers when their turnover exceeds PLN 200,000 annually, though they may register voluntarily earlier. For foreign entities commencing operations in Poland, registration is mandatory from the first taxable transaction, regardless of turnover value.

Split Payment – The Divided Payment Mechanism

Split payment is one of the most distinctive solutions in the Polish VAT system, introduced in 2018 as a tool to combat tax fraud. The mechanism involves dividing payment into two parts: the net amount going to the supplier’s standard account and the VAT amount flowing to a special VAT account.

Since July 2020, the use of split payment has been obligatory for transactions involving goods and services listed in Annex 15 to the VAT Act, when the transaction value exceeds PLN 15,000 gross or when the invoice bears the designation “split payment mechanism.” The list includes construction materials, scrap metal, fuels, electronics, and construction services, among others.

Failure to comply with the obligation to use split payment in mandatory cases results in the buyer’s joint and several liability for VAT due from the supplier, making this mechanism an essential element of due diligence in B2B transactions.

Using split payment, even when not mandatory, can bring benefits. The buyer does not lose the right to deduct VAT in case of the supplier’s insolvency, and the supplier can recover funds from the VAT account more quickly after meeting specified conditions.

Right to VAT Deduction – Rules and Limitations

The right to deduct input VAT is a fundamental principle of the VAT system, ensuring its neutrality for entrepreneurs. In Poland, a taxpayer may deduct VAT on purchases related to taxable activities, provided they possess a valid invoice and meet formal requirements.

A key requirement is the direct or indirect connection of the purchase to taxable activity. In practice, this means that VAT on expenses strictly related to taxable activities is fully deductible, while expenses related simultaneously to taxable and exempt activities require the application of a proportion (pre-deduction coefficient).

The timing of VAT deduction is equally important. Generally, a taxpayer may deduct VAT in the settlement for the period in which the tax obligation arose for the seller, provided they possess an invoice. If the invoice arrived later, deduction is possible within the next two settlement periods. After this deadline, a correction of the declaration for the appropriate period is necessary.

Most Common Pitfalls in Polish VAT

Incorrect Classification of Goods and Services

One of the most frequent problems is incorrect determination of the VAT rate. The boundary between services eligible for reduced rates or exemption and those taxed at the standard rate is particularly problematic. For example, electronic publications may be subject to different rates depending on form and content, while renovation services differ in taxation from construction services.

Documentation and Deadlines

The Polish VAT Act imposes rigorous documentation requirements. Invoices must contain all mandatory elements specified in regulations, and their absence or irregularities may result in denial of the right to deduction. Particular attention should be paid to correct identification data, transaction descriptions, and dates.

Filing deadlines are rigid. Taxpayers settling monthly must submit JPK_V7 by the 25th day of the month following the settlement period, while quarterly filers have until the 25th day of the month after the quarter. Delays result in sanctions, even when VAT has been paid.

Cross-Border Transactions

Special attention should be paid to intra-Community transactions. Errors in verifying contractors’ VAT numbers, improper documentation of goods transport, or incorrect application of reverse charge can lead to double taxation or loss of the right to the 0% rate.

For transactions with entities outside the EU, correct determination of the place of supply of services is crucial, which varies depending on the type of service and the recipient’s status.

Passenger Cars and Representation Costs

Polish regulations introduce significant limitations on VAT deduction for passenger cars. As a rule, VAT on the purchase, leasing, or operation of passenger cars is deductible only at 50%, unless the vehicle is used exclusively for business purposes, which requires strict documentation.

Complete exclusion from the right to deduction applies to fuel expenses for cars from which VAT was not fully deducted, and to representation costs such as client entertainment or small gifts.

Corrective Invoices

Issuing corrective invoices is an area where entrepreneurs frequently make errors. A downward correction requires possession of confirmation of receipt by the buyer, and its absence may prevent reduction of the tax base. In practice, many disputes with tax authorities concern precisely the moment of recognizing a downward correction.

Practical Recommendations

To minimize the risk of errors in VAT settlements, entrepreneurs should implement several best practices. First, regular monitoring of changes in regulations is essential, as Polish tax law changes extremely dynamically. Second, it’s worth investing in proven accounting systems adapted to Polish requirements, including JPK_V7 generation.

Collaboration with experienced advisors, especially for transactions of an unusual nature, can prevent costly mistakes. For foreign investors, understanding the differences between the Polish system and solutions in their country of origin is crucial, as seemingly similar transactions may receive different treatment.

Finally, due diligence in selecting contractors and verifying their VAT status is not only a formal-legal requirement but real protection against liability for other entities’ tax obligations. The white list of VAT taxpayers maintained by the Ministry of Finance should be a standard tool in every company.

The Polish VAT system, despite its complexity, offers transparent rules for those who invest time in understanding them. Awareness of specific mechanisms such as split payment and knowledge of typical pitfalls enables smooth business operations and minimizes tax risk.

Foreigners Buying Property: Notaries to Switch to CREWAN System

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The government has prepared a draft law that introduces full digitalization of procedures related to the acquisition of real estate by foreigners. The new regulations mean the end of paper-based document circulation and the introduction of an electronic transaction reporting system. However, clients of notary offices will pay for the new service.

What’s Changing?

The amendment project from October 30, 2025, provides for changes to two key acts: the Act on the Acquisition of Real Estate by Foreigners from 1920 and the Notarial Law from 1991. The main objective of the reform is to implement a fully electronic mode of transmitting documents concerning transactions made by foreigners.

Under the new regulations, notaries will be obliged to place extracts of notarial deeds and other documents concerning the acquisition of real estate or shares in companies by foreigners in the Central Repository of Electronic Extracts of Notarial Deeds (CREWAN). These documents will be automatically transmitted to the Minister of Internal Affairs via a teleinformation system, for which the National Council of Notaries will be responsible.

Why Are These Changes Necessary?

Currently, notaries have 7 days to send paper documents to the Ministry of Internal Affairs. Data from these documents are then manually entered into registers maintained in the IT system. This is a time-consuming and inefficient process, especially since notaries already prepare digital versions of documents for other systems, such as the National Court Register or the National Tax Administration.

The problem is growing with the increase in the number of transactions. Analysis of reports from 2022-2024 shows a significant increase in the number of applications for permits to acquire real estate by foreigners and the transactions themselves. This results in an avalanche of paper documents flowing to the ministry.

New Obligations and a New Fee

Key changes include:

Digital reporting – all documents concerning transactions involving foreigners must be entered into the CREWAN system.

Searchable format – documents will be saved in a format that enables electronic searching of content, which will facilitate the work of the minister responsible for examining the legality of transactions.

Automatic data transmission – the National Council of Notaries will ensure prompt transmission of documents from CREWAN to the Ministry of Internal Affairs.

New fee – for placing a document in the system, the notary will collect a fee from the parties to the transaction, which will be transferred to the National Council of Notaries. The amount of the fee will be determined by regulation by the Minister of Internal Affairs after consulting the National Council of Notaries. It is intended to cover the administrative costs of operating the system and its development.

Security and Control

The legislators expect that digitalization will minimize the problem of non-submission or late submission of documents. The introduction of the requirement for searchable document content is expected to positively impact the performance of tasks by the minister responsible for examining the legality of acquisitions by foreigners. As a result, this should improve the security of real estate transactions in Poland and tighten the control system.

When Will the New Regulations Take Effect?

The amendment is to enter into force after three months from the date of announcement. Such a vacatio legis period is intended to enable the implementation of necessary technical changes in the CREWAN system. Previous regulations will continue to apply to documents prepared before the amendment enters into force – meaning they will be sent to the minister in paper form.

The new regulations represent another step in the digitalization of Polish administration and the simplification of procedures for notaries. For clients of notary offices, however, they mean an additional cost related to operating the new electronic system.

Poland Salary Transparency Law 2025: New Recruitment Rules December 24

Posted on by kancelaria

From December 24, 2025, revolutionary changes in labor law will come into force in Poland, fundamentally transforming the recruitment process. The amendment to the Labor Code, which partially implements EU Directive 2023/970 on pay transparency, introduces an obligation for pay transparency at the employee search stage.

These changes aim to eliminate pay discrimination, increase labor market transparency, and equalize opportunities for all candidates. For employers, this means the necessity of a thorough review of compensation policies and adjustment of recruitment procedures to new legal requirements.

Important: The amendment comes into force on December 24, 2025. Full implementation of the EU directive must occur by June 7, 2026, which means further changes next year.

Key Changes in the Recruitment Process

Obligation to Inform About Compensation

The most important change concerns the obligation to inform candidates about anticipated compensation. The employer will be required to provide candidates with information about:

  • Anticipated compensation – initial amount or range (so-called salary brackets)
  • All compensation components – not just the base, but also bonuses, allowances, benefits
  • Work-related benefits – both monetary and non-monetary (e.g., private medical care, sports passes, insurance)
  • Provisions of collective agreements – if the employer is covered by a collective labor agreement or remuneration regulations

When Should Information Be Provided?

Information about compensation should be provided to candidates:

  • Preferably in the job posting – although not absolutely required, it significantly facilitates the recruitment process
  • No later than before the recruitment interview begins – in paper or electronic form
  • With appropriate advance notice – so the candidate can review the information and prepare for negotiations

Prohibition on Asking About Salary History

The new regulations introduce a categorical prohibition on asking candidates about their salary in current or previous workplaces. This obligation stems from the amendment to Article 22¹ of the Labor Code.

The purpose of this regulation is to prevent perpetuation of unfair salary rates and increase equal opportunities in access to employment. Candidates who were previously undervalued in terms of pay will no longer be automatically discriminated against in new workplaces.

Gender Neutrality in Job Postings

Job postings must be formulated in a gender-neutral manner. Employers are required to:

  • Use neutral job titles (e.g., “specialist” or impersonal form)
  • Avoid wording suggesting a preferred candidate gender
  • Base compensation criteria on objective, neutral factors

Employees’ Right to Information

The new regulations also give current employees the right to obtain information about:

  • Compensation criteria applied in the company
  • Average salaries for similar positions
  • Salary levels broken down by gender (in larger companies)

Penalties for Violating Regulations

Failure to comply with new obligations may result in fines imposed by the National Labor Inspectorate. According to the Labor Code, financial penalties currently amount to:

Type of Violation Fine Amount
Violation of basic information obligations PLN 1,000 – 30,000
Asking about salary history PLN 1,000 – 30,000
Pay discrimination Up to PLN 30,000

The fine amount will depend on the nature and scale of the violation. Particularly severely punished will be:

  • Lack of salary information in postings or at the recruitment stage
  • Asking candidates about salary history
  • Offering compensation lower than declared brackets
  • Using salary confidentiality clauses in contracts

Consequences for Employers

The new regulations pose a number of challenges for employers:

  • Need to revise pay policy – many companies will have to organize their compensation structure and eliminate unjustified differences
  • Risk of team conflict – disclosure of brackets may cause dissatisfaction among employees earning below market rates
  • Employee attrition – people who discover they are underpaid may seek better offers
  • Need to train HR staff – recruiters and managers must be prepared for compensation discussions
  • Documentation updates – work regulations, job posting templates, and recruitment procedures require adjustment

Despite the challenges, salary transparency also brings tangible benefits:

  • More efficient recruitment – salary brackets eliminate candidates with excessively high expectations, speeding up the process
  • Strengthened employer branding – transparency builds trust and the image of a fair employer
  • Competitive advantage – companies with clear pay policies attract better candidates
  • Greater team motivation – employees who understand compensation principles feel more valued
  • Reduced risk of disputes – clear compensation criteria minimize conflicts and claims

Market Data

Market research clearly shows that salary transparency is expected by candidates:

Market Data Percentage
Candidates expecting brackets in postings 89%
Candidates not applying without brackets 68%
Companies without transparent salaries (currently) 64%
IT specialists considering transparency crucial 58%

In Poland, the pay gap between women and men is currently about 4.5-8.5% (depending on methodology), while the EU average is 13%. The new regulations aim to further reduce these differences.

How to Prepare for Changes?

Step 1: Compensation Policy Audit

Conduct a comprehensive analysis of the current salary structure in your organization:

  • Inventory all positions and compensation levels
  • Identify unjustified differences in pay for similar positions
  • Check if there is a gender pay gap
  • Analyze all compensation components and benefits

Step 2: Job Evaluation

Job evaluation is the foundation of fair pay policy. This process involves:

  • Evaluating each position according to objective criteria (competencies, responsibility, working conditions)
  • Creating a coherent job hierarchy
  • Determining salary ranges for each level
  • Establishing clear rules for promotions and raises

Step 3: Documentation Updates

Adjust internal documents to new requirements:

  • Modify job posting templates – add section with salary brackets
  • Update recruitment procedures – remove questions about salary history
  • Develop or amend compensation regulations
  • Prepare templates for candidate information about compensation components
  • Remove salary confidentiality clauses from employment contracts

Step 4: Team Training

Prepare HR department employees and managers for new obligations:

  • Conduct training on new regulations
  • Practice recruitment interviews taking salary transparency into account
  • Prepare answers to typical candidate questions about compensation
  • Develop internal communication strategy for current employees

Step 5: Communication with Employees

Transparent implementation of changes requires appropriate communication:

  • Inform the team about upcoming changes and their justification
  • Explain compensation criteria used in the company
  • Ensure opportunity to ask questions and express concerns
  • Be prepared for conversations about salary equalization

Further Changes in 2026

The regulations in force from December 24, 2025, are only the first stage of implementing the EU directive. By June 7, 2026, Poland must implement further requirements, including:

Pay Gap Reporting Obligation

  • Companies employing 250+ employees – will report pay gap annually
  • Companies employing 100-249 employees – will report pay gap every 3 years

Joint Pay Assessment

If the pay gap exceeds 5% and cannot be justified by objective criteria, the employer will have to – in cooperation with employee representatives – conduct a joint pay assessment within 6 months.

Strengthened Employee Protection

  • Burden of proof shift – in pay discrimination cases, the employer will have to prove lack of discrimination
  • Right to compensation – employees will be able to claim back pay and damages
  • Report availability – pay gap reports will be available to employees and supervisory bodies

What Will Be Best Practices?

Formulating Salary Brackets

When determining salary ranges, it’s worth:

  • Avoiding too wide brackets (difference should not exceed 30-40%)
  • Clearly defining factors affecting position within the range (experience, competencies)
  • Including all compensation components (base + variable + benefits)
  • Regularly updating brackets based on market data

Communication with Candidates

During recruitment interviews:

  • Prepare detailed information about the compensation package
  • Explain how the candidate can reach the upper bracket limit
  • Be prepared for questions about the bonus system and benefits
  • Document provided information

Managing Team Expectations

To minimize the risk of internal conflicts:

  • Prepare a plan to equalize salaries for underpaid employees
  • Create a clear development and promotion path
  • Regularly communicate compensation principles
  • Conduct systematic salary reviews

Implementation Checklist

Use the checklist below to ensure your organization is ready for changes:

  • ☐ Conducting compensation policy audit
  • ☐ Job evaluation
  • ☐ Establishing salary ranges for all positions
  • ☐ Updating job posting templates
  • ☐ Modifying recruitment procedures
  • ☐ Developing/updating compensation regulations
  • ☐ Removing salary confidentiality clauses from contracts
  • ☐ Training HR department and managers
  • ☐ Preparing internal communication strategy
  • ☐ Informing team about changes
  • ☐ Preparing information templates for candidates
  • ☐ Verifying gender neutrality of job titles
  • ☐ Preparing for pay gap reporting (2026)
  • ☐ Consulting with lawyer/legal advisor

Support in Implementing Changes

As a law firm specializing in HR matters, we offer comprehensive support in adapting your company to new pay transparency regulations.

Our Competencies

Labor and HR Law:

  • Compensation policy audit and adaptation to new requirements
  • Preparation of compensation regulations and recruitment procedures
  • Job evaluation and creation of pay structures
  • Representation before the National Labor Inspectorate

Tax Law:

  • Tax optimization of compensation and benefits systems
  • Advisory on personal income tax (PIT)
  • Structuring motivational packages and bonus programs
  • Consultations on social security (ZUS) and insurance contributions

Comprehensive Approach:

  • Training for HR departments and management staff
  • Internal communication strategies about pay changes
  • Preparation for pay gap reporting (2026)
  • Ongoing legal and tax advisory on employment matters

We combine legal knowledge with tax and HR expertise – we comprehensively support your company

Summary

Changes in recruitment regulations introduced from December 24, 2025, represent a fundamental transformation of the Polish labor market. The obligation of salary transparency, prohibition on asking about salary history, and requirement for gender neutrality are not only new legal obligations but above all an opportunity to build a more fair and transparent work environment.

For employers, it is crucial to use the time until December 2025 for comprehensive preparation of the organization for changes. This requires not only adjustment of formal documentation but above all conducting a pay policy audit, job evaluation, and training teams responsible for recruitment.

It’s worth remembering that this is only the first stage of implementing the EU directive – in 2026 we can expect further changes, including the obligation to report pay gaps. Companies that invest now in building a transparent and fair compensation system will be better prepared for future requirements and gain a competitive advantage in attracting the best talent.

Salary transparency is not only a legal obligation – it’s an investment in organizational culture, employer branding, and the company’s long-term success in the labor market.

Legal Basis

  • Act of June 4, 2025, amending the Act – Labor Code (Journal of Laws 2025, item 807)
  • Directive (EU) 2023/970 of the European Parliament and of the Council of May 10, 2023, on strengthening the application of the principle of equal pay
  • Labor Code (Articles 18³ᶜ, 22¹, 94³ᵃ)