Does a Polish subsidiary create a VAT fixed establishment for its foreign parent?

A Polish factory manufactures products for a foreign head office, a warehouse dispatches them to customers, and a local team prepares reports and helps process orders. Commercially, this is one effective supply chain. For VAT, the question is whether the head office buys services from independent suppliers or actually has an operational structure at its disposal in Poland. That distinction affects the place of taxation of services, invoices, input VAT and KSeF electronic invoicing. A Polish subsidiary, an exclusive arrangement and a Polish VAT number do not automatically create a fixed establishment. Nor do they guarantee its absence. The answer depends on how people and infrastructure are used and on the function of each service, rather than the group chart alone.

Law and source review: 11 November 2026.

Tax Legal Partner team

Can a Polish subsidiary create a foreign customer’s VAT fixed establishment?

For services covered by the general B2B rule, the starting point is the customer's business establishment. However, where a service is supplied to a fixed establishment in another country which receives and uses it for its own needs, taxation may be allocated there. A sufficiently permanent and suitable structure of human and technical resources is required. First establish whether the service falls under that general rule at all. A service sufficiently connected with a particular property, for example, may have a different place of supply.

Suppose the Polish company manufactures to the head office's specifications. It employs its own staff, arranges shifts, allocates machinery and takes responsibility for the agreed output. The head office specifies the product, deadlines and quality standards. Checking an order in that way does not by itself amount to having the factory at its disposal as its own. A different assessment is needed where the foreign business can continuously direct dedicated people and equipment, and that structure actually receives and uses the services purchased. Share ownership cannot replace these factual findings.

The ability to receive services must also be distinguished from a requirement to take every management decision locally. Berlin Chemie emphasises the functional capacity to receive and use services. A director signing contracts abroad therefore does not eliminate the issue if the real local organisation points elsewhere.

Permanence concerns organisation and recurring activity, rather than a universal number of days. A long-term contract may involve only buying the results of another business's work. Conversely, successive short projects may use an enduring structure. Time limits from tax treaties or worker posting cannot simply be imported into the VAT test.

Is service exclusivity sufficient to create a VAT fixed establishment in Poland?

Exclusivity explains a supplier's economic dependence and may be relevant to the durability of an arrangement. It does not replace the other requirements. Even a factory working almost entirely for one group company may be using its people and machinery to discharge its own service obligation. The customer receives the agreed output, rather than the freedom to manage the supplier's organisation.

Cabot Plastics, C-232/22, decided on 29 June 2023, concerned a Belgian processor working on a Swiss company's materials, storing raw materials and products, and providing extensive additional assistance. The exclusive relationship accounted for almost all the supplier's turnover. The CJEU did not consider those circumstances sufficient to establish a fixed establishment without a suitable structure at the customer's disposal. Assistance with logistics, quality and formalities does not automatically turn a supplier into its customer's establishment.

The practical review therefore concerns rights of access to the plant, replacement of staff, allocation of equipment and organisation of work. Auditing a product is different from giving the supplier's employees daily instructions. Equally, deleting the word “exclusive” from a contract will achieve little if the head office's actual powers and everyday working arrangements remain unchanged. The issue is the substance of the relationship, not a drafting formula intended to avoid a particular label.

Why can the same resources not supply and receive the same services?

A recurring argument becomes circular: local employees provide a service to the head office and, because they do so, are also treated as the head office's resources receiving that service. This overlooks the distinction between supplier and customer. The review must identify what customer-side structure uses the result, and for what purpose, instead of attributing both sides of the same service to the same resources.

Berlin Chemie, C-333/20, decided on 7 April 2022, concerned marketing, regulatory, advertising and representation services supplied in Romania to a German pharmaceutical company. Their substantial effect on sales and the exclusive relationship were insufficient. The Court distinguished resources used to provide services from the structure receiving them. Verification of the underlying facts remained for the national court.

Adient, C-533/22, decided on 13 June 2024, concerned processing and assembling upholstery components for vehicle seats, materials owned by the foreign company, and related storage and quality activities. The CJEU rejected conclusions based merely on group membership or a service agreement and addressed distinct resources and preparatory or auxiliary functions. This does not exempt every contract manufacturing arrangement from examination. A structure's involvement in selling finished goods does not establish that it receives a particular processing service. The purchase of that service and the onward supply of goods require their respective VAT analyses.

Three 2026 rulings: which facts actually mattered?

The ruling of 21 October 2026, 0114-KDIP1-2.4012.518.2026.2.JO, concerned a UK distributor buying products from a Polish group manufacturer and purchasing logistics and support services. The manufacturer organised its own factory. Quality inspections required notice and did not give the head office unrestricted control of production. Polish finance and HR managers' costs had also previously been allocated. KIS accepted the absence of a fixed establishment on the stated facts and lack of appropriate control. Critically, it also denied deduction of Polish VAT on specified historical service invoices because those services were taxable abroad.

The ruling of 27 October 2026, 0114-KDIP1-2.4012.573.2026.2.GK, concerned a US company delivering industrial line projects with a Polish group subcontractor. The activities included production, installation, design and shared services. Occasional visits by specialists did not constitute permanent local personnel; the subcontractor retained control of its work and resources. On those assumptions, KIS confirmed no fixed establishment and no mandatory issuance through KSeF.

The ruling of 26 October 2026, 0114-KDIP1-2.4012.564.2026.2.MGA, included production, European sales support, an external warehouse and functional reporting lines between Poland and the UK. Considering the complete description of rights and operations, KIS also accepted no fixed establishment. The words “reporting”, “warehouse” or “negotiation” do not settle the question independently. All three rulings concern their stated facts and do not automatically protect another group. A similar business description is no substitute for comparing actual rights over resources.

How should control over staff, warehouses and systems be examined?

Following an actual order often provides the clearest explanation. Who receives it from the customer, changes the deadline, chooses resources, approves a quality deviation and bears the consequences of failure? Then establish whether the head office requires an agreed result from the Polish company or can directly reorganise its employees' work. Product specifications and quality indicators commonly describe a purchase. Continuing powers to direct a particular team require a different assessment.

Similarly, access to goods in storage need not mean access to the operator's space and employees as one's own. Stock counts, inspection rights and restrictions on moving goods can protect ownership of the goods. The complete set of rights shows whether the business controls its stock or the operator's business resources. A shared IT system is not decisive on its own: user roles, authority to issue instructions and the functions actually performed within that system matter.

Compare contracts with operating instructions, system permissions, reporting lines and real correspondence. Regular instructions from abroad may undermine a statement that the head office has “no control”. Conversely, using group software or attending meetings does not itself establish that resources have been placed at the foreign company's disposal.

For example, the head office may order a thousand units a week while the Polish manager chooses staffing and production sequence. A larger order leads to a new price and timetable. This differs from directly directing a permanently available crew and reallocating its members without a new supplier instruction. The second model needs detailed examination; the example alone does not establish every fixed establishment requirement.

What must a Polish service provider establish under Dong Yang?

In Dong Yang, C-547/18, decided on 7 May 2020, a Polish supplier assembled printed circuit boards using a Korean customer's materials. Component flows and further manufacturing involved the customer's Polish subsidiary. The authority expected the supplier to reconstruct the group's internal relationship. The CJEU rejected inferring a fixed establishment merely from the subsidiary and imposing an obligation to investigate internal parent–subsidiary contracts which would generally be unavailable to the supplier.

That does not mean filing a customer's declaration and ignoring known facts. The supplier examines the nature and use of the service. If that does not identify the relevant establishment, its own contract, order, the VAT number communicated and the entity paying are relevant. A declaration should describe the operating model to which it relates, rather than merely state that no fixed establishment exists.

Where available information indicates a separate local structure receiving the service, the discrepancy needs to be resolved before determining invoicing. Conversely, delivery of the work's output to a Polish group site does not by itself identify the customer establishment for VAT. The limits on a supplier's investigation do not relieve the head office of properly assessing its own organisation and tax treatment. The evidential responsibilities of those two parties are different because they have access to different information.

KSeF: a fixed establishment and its involvement are separate questions

For KSeF, the assessment does not stop at “we have a fixed establishment”. A foreign taxpayer without a Polish business establishment can also be outside mandatory issuance where it has a Polish fixed establishment which does not intervene in the supply being invoiced. The review concerns resources used to fulfil that transaction, not simply the presence of an office. Pure administrative support, such as accounting, invoicing or collecting debts, does not itself constitute that intervention.

The tax explanations of 28 January 2026 address fixed establishments for KSeF, principally on the seller's side. They expressly distinguish their scope from determining the place of supply of services. Their examples therefore cannot be mechanically applied to every head office purchase. How an invoice is made available to a foreign customer whose local establishment is not involved in the purchase is another question requiring its own answer.

A Polish VAT number alone does not establish a fixed establishment. If one already exists, however, using that state's VAT number when issuing an invoice matters for the presumption of intervention under Article 53 of the implementing regulation, subject to contrary evidence. Customer records and invoicing settings should follow a documented classification, rather than create it. An electronic invoicing decision must therefore be linked to the actual seller, transaction and resources used.

Why no fixed establishment can require a VAT correction

A practical problem is assuming that charging Polish VAT “to be safe” protects both parties. Where the place of supply of a service is outside Poland, Polish VAT shown on the invoice does not become properly deductible merely because it has been charged. The October 2026 ruling illustrates the consequence: no fixed establishment supported taxation abroad, but did not permit the customer to retain its historical Polish input VAT deduction.

Before corrections, identify each service, its supply period, the resource model then in place and treatment in the customer's country. Invoices, tax reporting and cash settlement must then be reconciled. The seller's error cannot be cured by assuming that every purchase may carry Polish VAT because the customer is registered in Poland and sells goods here.

For an illustrative fee of PLN 100,000 plus PLN 23,000 incorrectly charged Polish VAT, this is more than changing an invoice note. The parties must address repayment or settlement of that amount, correction of deduction and any foreign accounting for the service. These figures do not establish the rate for every service or automatic financial neutrality. Timing of refunds may matter for both parties' cash flow.

No VAT fixed establishment also does not determine whether there is a corporate income tax permanent establishment, a registration obligation for goods transactions, customs duties or employee obligations. Those are separate tests. A review should identify its tax, transaction and period so that a favourable conclusion is not extended across the entire business model.

How to prepare a defensible assessment of the group model

The practical deliverable should describe goods and service flows, map resources and record decisions for individual transactions: customer, place of taxation, invoicing and KSeF involvement. Each conclusion should be linked to a document or someone able to explain the process. A shareholding chart and independence clause alone do not identify who actually controls people and infrastructure.

Reassess when operations change: a permanent head office team arrives in Poland, management powers expand, a production line becomes available or the scope of services changes. Where a ruling is needed, the description should include difficult features such as exclusivity, warehouse access and reporting arrangements. Omitting them may deprive a favourable answer of practical value. The question is not whether an attractive description can be written, but whether it corresponds to everyday operations.

The Tax Legal Partner team in Kraków reviews contracts alongside actual processes. The result can include classification of services and resources, required corrections and consistent instructions for finance and sales. This gives the business an explanation of the treatment of a particular invoice and helps identify when an organisational change calls for a new assessment. A clear conclusion should state the assumptions on which it remains valid.