Poland has been an attractive place for foreign direct investment for years. It has become one of the main locations for outsourcing financial functions for corporations around the world. And its location between the East and the West, in a complicated geopolitical situation and supply chain disruptions, makes many companies choose Poland when moving or planning to move production closer to their largest markets. With its stable economy, Poland, the largest country in Central and Eastern Europe and the sixth largest in Europe remains competitive in terms of labour costs, yet offers a high quality of work thanks to an educated, qualified and highly motivated workforce.
Business conditions are the most important factor that businesses consider when choosing a location for foreign direct investment. In addition to the geographical location, low investment costs and qualified staff, investors take into account the quality of the institutions (political stability), tax incentives, and the general fiscal climate for entrepreneurs.
Each foreign investment is a complex and demanding undertaking, which by its nature gives rise to numerous consequences under tax regulations. And this means the need for appropriate and conscious tax planning. Ideally, in key issues, tax consequences and their financial aspects can be clearly defined at an early stage and agreed with the tax authority, so that the subsequent implementation of the investment does not create a tax risk. Businesses considering expansion and serious direct investments on the Polish market are primarily looking for solutions that will ensure fiscal security for their investments.
The Cooperative Compliance Programme and the Investment Agreement are two independent solutions, introduced by the Minister of Finance and the National Tax Administration (KAS) in response to the expectations of investors interested in doing business in Poland.
Cooperative Compliance Programme (CCP)
The Cooperative Compliance Programme is a new form of relationship between the taxpayer and the tax authority, based on an agreement and partnership. In implementing the CCP, the Ministry of Finance is faithfully basing its actions on the concept proposed by the OECD – Horizontal Monitoring Compliance.
The aim is to take action to ensure correct tax settlements while taking into account the individual needs and expectations of key taxpayers. This model of cooperation between tax authorities and taxpayers, based on the OECD’s concept, is well known and practiced in developed countries.
The CCP is relatively young, being launched in mid-2020. This programme is a form of cooperation between the National Tax Administration and taxpayers based on mutual trust, understanding and transparency, to ensure better conditions for doing business in Poland.
Under the CCP, KAS provides an individual service tailored to a given taxpayer with its level of supervision and monitoring adjusted to the internal processes implemented at the taxpayer, including supervision over tax issues.
The Cooperative Compliance Programme – unlike a tax audit – does not constitute supervision directly over the taxpayer, but is supervision over the taxpayers’ internal mechanisms to properly fulfil their tax obligations. In other words, taxpayers controls their own settlements, and the tax administration only supervises the taxpayers’ internal control mechanisms.
Large entities with annual revenues for CIT purposes exceeding €50 million can join the CCP. The Ministry of Finance has announced the continuation and the expansion of the CCP. It is to be open to capital groups (from 2025) and later to medium-sized companies.
Participation in the CCP is voluntary and initiated by the taxpayer. The will to participate should be expressed in writing; a ready-made template of a taxpayer’s application to join the CCP is available on the KAS website.
The CCP supports the proper implementation of tax obligations, bringing multidimensional and specific benefits in various areas. Business gains certainty that the tax settlement will not be questioned in the future. Other benefits include replacing control with a monitoring audit, the possibility of concluding tax agreements with the National Tax Administration, lower fees and interest or their complete absence, and limiting or excluding fiscal penal liability.
A full assessment of the benefits for a given taxpayer always requires taking into account numerous aspects of the business. In other words, there are a whole range of benefits; you just need to consider what is most important to you when considering entering the CCP.
Business benefits fall into four main categories:
- Tax safety and minimisation of tax risk
- Financial benefits
- Preferential and individual treatment by KAS
- Credibility and image of the company, which translates into corporate social responsibility and increased investor confidence
Greater tax safety and minimisation of tax risk are the elements most frequently raised by companies covered by the programme evaluation study carried out by researchers from the Kozminski University.
Importantly, the taxpayer in the CCP is assigned a dedicated KAS officer for ongoing service, who remains in working contact with the taxpayer. When joining the CCP, you must also be ready for transparency towards the National Tax Administration, because the initial audit involves verifying both the maturity of your internal procedures (the so-called Internal Tax Supervision Framework) and the correctness of the current implementation of tax obligations.
The process of joining the CCP is demanding for companies. However, the experience gained by the National Tax Administration, taxpayers and tax advisors now helps to significantly improve this process. Companies that have already joined the CCP agree that this effort is worth making.
Investment agreement
Another useful tool for investors in Poland is the investment agreement. An investment agreement is a tax-law instrument that enables an investor to manage tax risk and determine the tax consequences of the investment well in advance.
Anyone who is planning or has started an investment in Poland worth 100 million złotys, and from 2025 – 50 million złotys, may apply for the conclusion of the agreement.
An investment agreement is one concluded between the investor and the Minister of Finance regarding the tax consequences of the investment. This agreement guarantees the investor certainty in the interpretation of tax-law provisions and predictability of tax consequences.
The scope of the agreement may vary depending on the planned investment and the investor’s needs. In this way, the investor, at their request, can obtain from the tax authority the most complete explanation of all the tax consequences of the planned investment.
The investment agreement is binding on the investor and the tax authorities, giving the investor a guarantee of stability in how tax law is applied, crucial from a business viewpoint.
