Permanent establishment risk when hiring in Poland

Claire called us sure of what she wanted. She’d done her homework — she knew more about the Polish options than some of our clients.

She runs a French company that sells industrial software, and she had just decided to enter the Polish market. She’d found the ideal person: an experienced sales manager from Warsaw who knows the sector, has the contacts, and is ready to lead Poland as “Country Manager”. He was to do exactly what you hire such a person for — build the client portfolio, negotiate terms, sign contracts and make commercial decisions on the company’s behalf.

Claire had read about the arrangement that companies like the ones in our other stories use — direct employment in Poland without setting up a company. She called with a ready-made plan: “I’ll hire him the same way. No branch, a flat fee. When can we start?”

We asked her one question: “Will this person negotiate and sign contracts with clients on your company’s behalf in Poland?”

“Of course. That’s what I’m hiring him for.”

And that “of course” was the whole problem. We had to tell Claire something she didn’t want to hear: in her case the method of employment barely matters, because the difficulty lies not in the contract but in what the person is going to do. And that can pull her company into Polish income tax — regardless of whether she signs an employment contract, a B2B deal, or uses an EOR platform.

This story is here so that — if you’re planning a “decision-making” role in Poland — you spot the problem earlier than Claire did. Before you make the offer.

(Legal state: July 2026. This is general information, not legal or tax advice. The tax consequences depend on the specific facts and on the wording of the applicable double-tax treaty — we confirm them in writing, with a tax adviser. The characters are illustrative examples.)

The short answer: it’s not the method of employment, it’s the role

If a person employed in Poland habitually negotiates and concludes contracts on a foreign company’s behalf, they can create a permanent establishment (PE) in Poland for that company. In plainer terms: the tax authorities may find that the company — despite having no subsidiary or branch — is present in Poland enough that part of its profit should be taxed here. (Making key management decisions in Poland raises a separate question — the company’s place of effective management and tax residence — which we come to below.)

And the crucial point: simply changing the form of employment usually doesn’t remove that. An employment contract, an EOR platform, a B2B contract — these are all answers to the question “how do we hire them”. PE answers an entirely different one: “what do they do there”. That’s why, for Claire, it wasn’t about choosing a model, but about the role itself.

What a PE is — in plain terms, for a CFO

A “permanent establishment” is a tax “presence” of a company in another country without setting up a company there. If one arises, it brings real obligations: taxation in Poland of the part of the profit attributable to that activity (corporate income tax, CIT), registrations, reporting, and — between head office and that activity — a transfer-pricing question. A “simple” hire of one person turns into a matter for the board and the group finance function.

That doesn’t mean a PE is “illegal” — it’s a standard concept in tax law. It just means it has to be recognised and managed deliberately, not discovered by chance during an audit.

Typical situations that create a PE

A permanent establishment most often arises in one of a few ways:

• A dependent agent — Claire’s case. A person who, in Poland, holds and actually exercises authority to conclude contracts on the company’s behalf can create a PE, even working from home. (In some treaties the test is broader and covers “the principal role leading to the conclusion of contracts”, but in most Polish double-tax treaties — including the one with France — the classic authority-to-conclude test applies.) This is the most common trap in commercial and managerial roles.
• A fixed place of business. An office, workshop or leased space from which the company actually carries on activity in Poland can be an establishment in itself — regardless of who is employed there and how.
• Construction or installation projects. Long construction or installation works exceeding a time threshold (usually 12 months, depending on the treaty) can be treated as a PE.
• Management decisions. Regularly making key management decisions in Poland is a separate, more serious matter — the analysis then covers not only PE but also the place of effective management and the tax residence of the whole company (Article 3(1a) of the CIT Act), and the effect is far wider than an establishment alone.

These paths can occur together — one is enough to create an establishment. There’s also the other side: purely preparatory or auxiliary activities (e.g. market research alone, or attending trade fairs without negotiating and concluding contracts) do not, as a rule, create a PE — and many clients fall exactly there. The details depend on the applicable double-tax treaty between Poland and the company’s country — which is why we read each case individually, not from a general rule.

Why changing the form of employment doesn’t help

A common reflex is: “let’s just hire them differently — on B2B or through a platform.” Usually that doesn’t help, because PE doesn’t follow from the type of contract but from the actual activity carried on in Poland. A salesperson who genuinely concludes contracts on the company’s behalf creates the same permanent-establishment risk whether they’re on an employment contract or an invoice. (The theoretical exception for an independent agent doesn’t work in practice when someone works mainly for one company.) Changing the paper changes the form — not what is actually happening.

What can be done about it

There are usually two honest routes:

• Redesign the role. Sometimes the scope of duties can be arranged so the person supports sales but doesn’t conclude contracts on the company’s behalf. And here’s the crucial part: this has to be a genuine change to how the work is done, not just to the wording of the contract. The tax office examines how the arrangement actually operates in practice, not the documents (Article 199a of the Tax Ordinance) — if the negotiations genuinely close in Poland while head office merely signs pro forma, that isn’t enough. It has to be analysed on the specific facts, not at a glance.
• Deliberately choose a Polish structure. If the role has to be fully decision-making and commercial, a structure of your own is often more predictable. One thing here needs honesty: a limited company (sp. z o.o.) is a separate Polish taxpayer, so it removes the “hidden” establishment problem; a branch, by contrast, will typically constitute a permanent establishment for tax purposes — it formalises it rather than removing it (still profit attribution, transfer pricing, income tax). Both routes need proper tax and corporate implementation. It’s not the failure of a plan, just matching the structure to the ambition.

Which route to take depends on how “decision-making” the person really has to be. It’s also worth knowing that a permanent establishment can apply retrospectively — it counts from the moment it actually arose, not from the audit, which with arrears means interest and, in more serious cases, exposure under Polish fiscal criminal law. A separate, parallel topic can be VAT (a so-called fixed establishment). That’s why we start with a conversation and an analysis of the role with a tax adviser — before anyone signs anything.

Warning signs: when PE risk starts to rise

A few specifics that, in practice, most often draw the authorities’ attention:

• the person in Poland negotiates terms and ultimately concludes contracts,
• has hard sales targets and freedom to set prices or discounts,
• the company leases an office or fixed space in Poland,
• the business card, LinkedIn title or email signature say “Country Manager / Sales Director Poland”,
• clients treat the person as the company’s local representative in Poland.

None of these settles it on its own, but the more of them that stack up, the more seriously the risk has to be analysed.

What to check before you make an offer to a “decision-making” person

• Will this person negotiate or conclude contracts on the company’s behalf — or only support sales?
• Will they make key management decisions in Poland?
• Will there be an office, workshop or fixed space you operate from?
• What does the double-tax treaty between Poland and your company’s country say?
• Can the role be redesigned — or do you actually need a Polish structure?

Planning a commercial or managerial role in Poland? Let’s check it before you make the offer

Like Claire — if your future employee is to negotiate, sign contracts or make decisions on the company’s behalf, the method of employment won’t answer the permanent-establishment question. Book a free assessment — we’ll do an initial review of the role and the risk, and where the matter calls for it, confirm it with a tax adviser; we’ll tell you honestly whether it can be arranged without a PE, or whether the right answer is a Polish company.

Book a free assessment →

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Related:

• When you don’t need a branch: Hans’s story and direct employment
• Hire an employee in Poland without your own entity
• Packages and how the routes compare: Assessment / Setup / Ongoing

Legal state: July 2026. This page is general information about a service, not legal or tax advice. Assessing permanent-establishment risk depends on the specific facts and the applicable double-tax treaty; we confirm it in writing, with a tax adviser.