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Poland VAT fixed establishment risk

  • EU VAT
  • 25 May 2018 | Richard Asquith

Poland VAT fixed establishment risk

Poland has recently been extending the liability of foreign companies to VAT register under the fixed establishment rules for services.

Under EU VAT Directive rules, where businesses have a sufficient degree of permanence of human and technical resources to allow it to receive and use the services supplied to it, is has a fixed establishment for VAT purposes. For services, this would mean the foreign customer could no longer rely on the reverse charge mechanism, and instead VAT register in Poland to record the purchases. This would make the business liable to Polish VAT on the purchase for the first time.

The scope or scale of resources is not clearly defined in the EU or Polish VAT rules. However, in a number of recent Polish tax court judgements, the hurdle for fixed establishment has been lowered. For example, merely transacting on a permanent basis via subcontractors’ resources can now  trigger fixed establishment. This appears to be overreach of conclusions from the ECJ Welmory case C-605/12

Aside from creating a new Polish VAT liability, this risks double taxation since there are conflicting rules with other EU states.

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.