Ewelina Buczkowska, Paweł Kempa

A construction-related permanent establishment (PE) generally arises 12 months after commencement of the construction or installation works. However, when advance CIT payments must be commenced is a debatable matter, at least for the taxman. Double tax treaties do not address the technicalities of tax payment. Thus, if a foreign taxpayer has a construction-related PE in Poland, it is necessary to establish when it becomes required to make advance tax payments, and specifically whether the payments must be commenced:

  • following the expiry of the 12-month time, or
  • already by reference to the month in which the construction works began.

It seems reasonable to say that the foreign taxpayer may not be required to make advance tax payments until its PE arises in Poland, i.e. prior to the expiry of the first 12 months of construction works. Consequently, the first advance payment would be due for the entire 12 months’ period that had to pass for the PE to arise in the first place.

Despite the clear PE rules here (PE arises after 12 months), Polish tax authorities have claimed in some of their rulings that, even though the PE only comes into being after 12 months, the first advance tax payment should be made by the foreign taxpayer already by reference to the month in which the works that led to the PE arising first commenced. In so ruling, the authorities made a distinction in terms of tax point between a charge to tax (Polish obowiązek podatkowy) and a tax liability (Polish zobowiązanie podatkowe). They argued that the charge to tax arises following 12 months of constructions works, but the tax liability (the duty to pay advance tax) should be construed to apply as of commencement of the installation or construction works.


ExampleCompany GmbH commenced construction works in Poland on 2 February 2022. According to the taxman, the first advance tax payment should be made by ExampleCompany GmbH until 20 March 2022, not 20 March 203.

Tax regulations are silent on when a taxpayer having a construction PE in Poland should make its first advance tax payment. With that said, it is not right to construe the regulations as requiring such payment to be made already as of commencement of the works because this would mean that the duty to make advance tax payments is on an entity that has not even become a taxpayer in Poland. Indeed, in light of double tax treaties and the Polish Tax Code, there is something to be said for an opposite approach whereby the first advance tax payment should be made only after the first 12 months of the works and, admittedly, cover the entire 12-month period.

However, note that these rules apply only where the PE involves a construction project. The duties that arise with respect to other PE types (fixed place of business, depending agent) are different and each case needs to be analysed on its own merits.