This is to alert you to another of a series of unfavourable decisions of the Supreme Administrative Court (“SAC”) on the fixed establishment of a foreign-based undertaking that uses the services of a Polish subcontractor (judgment of 26 February 2020, case no. I FSK 1313/17).
In this case, the Polish subcontractor is an affiliate of a foreign company which delivers the subcontractor materials and equipment for the subcontractor to perform certain processing and assembly as well as providing storage and transportation of finished goods back to the company. In addition, the company has one employee in Poland whose responsibilities include, among other things, looking for new customers in Poland and abroad. All business decisions are made by the company in its home country (outside Poland).
SAC has not published a written statement of reasons for its judgment yet but clearly maintains the decision of the lower court (case no. III SA/Wa 1033/16, judgment of 23 March 2017) that the company’s structure in Poland meets the definition of a fixed establishment for VAT purposes. The key argument for such a conclusion is that the company’s Polish activities are continuous, recurrent and not transient. One evidence for that is the fact that the contract with the Polish party is termless. According to the lower court, there is no relevance to the fact that the warehouses and human and technical resources belong to the Polish affiliate or that the foreign company’s management is based entirely outside Poland.
The matter may be important both for Polish businesses providing services to foreign companies and for foreign companies purchasing those services. Whether or not services are deemed to be provided for a fixed establishment in Poland affects their Polish VAT treatment. We will relate more details of the commented judgment once SAC publishes a written statement of reasons for it.
If these issues pertain to your business and you are interested in our assistance, please contact us.
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