Place of effective management and tax residence of a company

by Joanna Litwińska

18 February 2022 ​

The fact that a company is registered in Poland does not mean that it is subject to taxation here. If the company's management board is composed of members who are not Polish citizens and who do not stay in Poland, then, by operation of law, the place of effective management is outside of Poland.
 

Permanent place of effective management

If the place of effective management is outside of Poland, this means that the key and operational decisions regarding the management of the Polish entity are regularly made outside of Poland by management board members who are foreigners. According to the standpoint of tax authorities, a company is tax resident in the country where its management board operates. Consequently, the company's tax residence is strictly connected with the place where its management is located and makes key operational decisions.
 

Change of tax residence

In a situation where a Polish company is managed from abroad, a dispute may arise with foreign tax authorities about where the company is resident for tax purposes. The change of tax residence affects such obligations as bookkeeping, filing tax returns, and paying taxes according to the laws of the country where the management board makes its decisions.
 

Place of effective management in the context of COVID-19

The current epidemic situation has a strong impact on the way in which Polish and foreign companies operate. Key decisions can be made remotely from outside of Poland due to restrictions imposed by individual countries. Business meetings via tele- or video-conferences, project management using dedicated platforms, data stored on network drives – all this often makes the physical presence of management board members in the company's office unnecessary.
 

How can we help?

Please contact Rödl & Partner experts if you have concerns about the permanent place of effective management of your company and need support in arranging your management processes correctly so as to minimise the risk associated with the change of tax residence.