A German-owned manufacturing subsidiary registered in the Mazowieckie region spent three years filing Polish corporate income tax returns without a local tax advisor. The parent company assumed its group tax function covered Polish requirements. It did not. A routine audit by the Krajowa Administracja Skarbowa (National Revenue Administration, KAS) in autumn 2024 exposed four separate compliance gaps – including missing transfer pricing documentation and an unrecognised IP Box election window.

Foreign subsidiaries operating in Poland must meet CIT obligations governed by Polish tax law, including annual return filing, transfer pricing documentation, and – from 2025 – JPK_CIT reporting. Failure to maintain compliant records exposes the subsidiary and its board to personal liability and back-tax assessments with interest accruing at statutory rates. A structured compliance checklist, reviewed annually, is the most direct way to prevent irreversible exposure.

This case study traces how the subsidiary identified its gaps, rebuilt its compliance framework, and closed the audit without penalties. The lessons apply to any foreign-owned entity operating in Poland, regardless of sector or group size.

What compliance gaps does a KAS audit typically expose?

The KAS audit opened with a standard request for JPK_VAT files and CIT workings for three prior years. Within six weeks, the auditors identified four issues. Transfer pricing documentation for intra-group service fees was absent for two of the three years under review. The subsidiary had also failed to notify the National Court Register (KRS) of a change in its registered address, creating a discrepancy between KRS records and tax filings. Third, the entity had claimed an R&D cost deduction without the supporting activity log required under Polish tax law. Fourth, an IP Box rate election – potentially reducing the effective CIT rate to 5% on qualifying intellectual property income – had never been made, despite the subsidiary developing proprietary tooling software.

Each gap carried a different risk profile. Missing transfer pricing documentation triggers a penalty rate of up to 50% on the reassessed income. The R&D deduction, unsupported by documentation, faced reversal with interest. The IP Box gap was a lost opportunity rather than a penalty risk, but it represented a material overstatement of tax paid across three years. The KRS discrepancy, while administrative, threatened to invalidate service-of-process for the audit correspondence itself.

  • Absent transfer pricing documentation for two fiscal years
  • R&D deduction claimed without activity log
  • IP Box election never filed despite qualifying income
  • KRS address mismatch creating procedural exposure

The pattern is not unusual. Foreign subsidiaries often inherit a compliance framework designed for the parent jurisdiction. Polish tax law imposes its own documentation cadence – and the KAS has significantly expanded its data-matching capability since the introduction of JPK_CIT reporting in 2025.

How did the subsidiary rebuild its compliance framework?

The subsidiary engaged our tax practice in Warsaw in winter 2024. The first task was triage: separate the correctable from the contested. Transfer pricing documentation for the earliest year under audit was reconstructed using intercompany agreements, cost allocation schedules, and benchmarking data drawn from publicly available databases. The reconstruction took eight weeks and was submitted to KAS before the audit formally concluded. For the second year, documentation had existed in draft form at the parent level; localising it to Polish requirements took three weeks.

The R&D deduction was the most delicate issue. Polish tax law requires contemporaneous records of qualifying research and development activities – not retrospective summaries. We advised the client to withdraw the deduction for the contested year and file a corrected return, eliminating the penalty exposure entirely. The correction reduced the dispute to the transfer pricing matter. We secured a settlement on the transfer pricing reassessment, with the final back-tax figure below PLN 400,000 – materially lower than the initial KAS estimate of PLN 1.1m – for the Mazowieckie subsidiary (winter 2024).

In parallel, we filed an IP Box election for the current fiscal year and structured the qualifying income stream to meet the nexus requirements under Polish corporate income tax rules. The 5% preferential rate applies to income attributable to qualifying IP assets developed by the entity itself. The election requires a separate calculation methodology and a dedicated register – neither of which the subsidiary had maintained previously.

The KRS address correction was filed within 14 days of engagement. That single administrative step restored the formal validity of all subsequent audit correspondence and removed a procedural risk that could have complicated any appeal.

What does the transferable CIT compliance checklist look like?

The audit exposed a gap that recurs across foreign subsidiaries in Poland: compliance is treated as a filing function, not a documentation function. Returns are submitted on time, but the underlying records that support each line item are not maintained to the standard Polish tax law requires. The KAS can look back five years. Any documentation gap within that window is an open risk.

The checklist below reflects the framework we implemented for the client after the audit closed. It is structured around four annual checkpoints, each mapped to a specific deadline or regulatory trigger. Foreign subsidiaries with a December fiscal year should begin the cycle no later than February of the following year.

  • Transfer pricing: local file and master file completed within nine months of fiscal year-end; benchmarking updated every three years or on material transaction change
  • JPK_CIT: structured data file submitted alongside the annual CIT return; mapping between accounting records and tax adjustments documented
  • IP Box / R&D: qualifying activity register maintained throughout the year; election filed before the fiscal year closes
  • KSeF readiness: from 1 February 2026, structured e-invoicing is mandatory for large taxpayers; subsidiaries should confirm their ERP integration is live well in advance – see also what KSeF means for businesses in Romania and what KSeF means for businesses in Slovakia for regional context
  • KRS hygiene: registered address, board composition, and share capital verified against KRS extract at least once per year

One further point deserves attention. Foreign subsidiaries that are part of a group with consolidated revenue above EUR 750m must also assess their Pillar Two obligations under Polish law. The qualified domestic minimum top-up tax became effective for fiscal years beginning after 1 January 2025. This is a separate compliance stream from standard CIT and requires its own data collection process.

For subsidiaries considering a dispute with the tax authority, the quality of contemporaneous documentation is the single most important factor in the outcome. Reconstructed records carry less weight than records maintained in real time. The audit in this case study was resolved favourably precisely because the transfer pricing reconstruction was credible and the client accepted the R&D correction early.

A specific situation at your subsidiary requires assessment before the next KAS data-matching cycle closes. Gaps identified after an audit notice arrives are significantly harder – and more costly – to remedy than gaps identified through a proactive review.

If your foreign subsidiary in Poland has not conducted a CIT compliance review in the past 12 months – covering transfer pricing, JPK_CIT, IP Box eligibility, and KSeF readiness – our tax practice will conduct a structured gap analysis and deliver a prioritised action plan: info@kordeckipartners.com.

Frequently asked questions

Q: How far back can the KAS audit a foreign subsidiary's CIT position?

A: The standard limitation period under Polish tax law is five years from the end of the calendar year in which the tax liability arose. This means a 2026 audit can cover returns filed for fiscal years 2021 through 2025. Transfer pricing documentation obligations apply to each year within that window, and the absence of documentation for any single year triggers the elevated penalty rate independently.

Q: Is a family foundation relevant to a foreign subsidiary's CIT position in Poland?

A: A fundacja rodzinna (family foundation) is a Polish legal entity used primarily for succession and wealth structuring by Polish-resident founders. It is generally not relevant to the CIT position of a foreign-owned operating subsidiary. However, if a foreign investor holds Polish assets through a mixed structure that includes a family foundation, specific CIT exemption rules and benefit-in-kind provisions may apply at the foundation level. This requires separate analysis.

Q: What does JPK_CIT require, and when does it apply to foreign subsidiaries?

A: JPK_CIT is a structured XML data file that maps a company's accounting records to its CIT return adjustments. From fiscal year 2025, it is mandatory for large taxpayers – broadly, entities with annual revenue above PLN 50m. Foreign subsidiaries meeting that threshold must submit the file together with their annual CIT return. The file requires a mapping layer between the local chart of accounts and the CIT calculation; most subsidiaries need three to six months of preparation time to implement this correctly.

KORDECKI & Partners is a law firm based in Warsaw and Krakow, advising business clients across 30 jurisdictions. Our team combines expertise in Polish and international law with a practical approach to CIT compliance, transfer pricing, KSeF onboarding, and tax audit defence. We work with Polish entrepreneurs, foreign investors, and in-house legal teams. To discuss your situation, contact info@kordeckipartners.com.

Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. KORDECKI & Partners assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@kordeckipartners.com.