A technology company headquartered in Delaware established a Polish subsidiary in Warsaw to serve European clients. Within eighteen months, the subsidiary was generating significant royalty payments back to the US parent. The question that followed was immediate and practical: which country gets to tax that income, and at what rate?

The double tax treaty between Poland and the United States – formally the Convention on the Avoidance of Double Taxation – determines how income earned across both countries is taxed. It sets withholding tax rates on dividends, interest, and royalties, allocates taxing rights over business profits, and provides a mutual agreement procedure for resolving disputes. Polish entities paying income to US recipients, and US entities receiving Polish-source income, must apply the treaty before defaulting to domestic rates.

This case study walks through the treaty's key provisions in order of practical impact. It covers the withholding tax framework, the permanent establishment test, and the lessons a Delaware technology company drew from its first two years operating in Poland. Each section ends with a transferable lesson.

What is the background of the Poland–US tax treaty?

The treaty has been in force for several decades. It pre-dates Poland's accession to the European Union and has not been replaced by a new instrument, which means it lacks several modern features – notably the OECD's Base Erosion and Profit Shifting (BEPS) multilateral instrument amendments that Poland has applied to many other treaties. That gap matters. Tax advisors in Warsaw routinely flag it as a structural risk for US-Polish structures.

The treaty covers taxes on income imposed by both states. On the Polish side, that means personal income tax and corporate income tax. On the US side, it covers federal income taxes. Polish tax law – administered by the National Tax Administration (Krajowa Administracja Skarbowa, KAS) – applies the treaty as superior law, but KAS auditors have challenged treaty claims where documentation was incomplete.

One practical constraint deserves early attention. The treaty does not include a limitation-on-benefits (LOB) clause comparable to newer US treaties. This creates planning opportunities. It also creates audit exposure: KAS has applied domestic anti-avoidance provisions to structures it viewed as treaty shopping, even where the treaty text was technically satisfied. Any tax advisor Warsaw-based or otherwise must account for that risk.

  • Treaty signed before EU accession – no BEPS multilateral instrument overlay
  • Covers Polish CIT and PIT, plus US federal income taxes
  • No modern limitation-on-benefits clause
  • KAS retains domestic anti-avoidance powers alongside treaty application

How are withholding taxes structured under the treaty?

The withholding tax framework is the provision most frequently encountered in cross-border transactions. Under the treaty, dividends paid by a Polish company to a US shareholder are subject to a reduced withholding rate – 5% where the US recipient holds at least 10% of the Polish company's voting shares, and 15% in all other cases. The domestic Polish rate is 19%, so the treaty reduction is material.

Interest payments carry a treaty rate of 0% in several categories, including interest paid to the US government or its agencies, and a general rate of 0% for most commercial interest – a notably favourable outcome compared to the domestic 20% rate. Royalties, however, attract a 10% treaty rate. That figure was central to the Delaware technology company's planning. Its Polish subsidiary was paying royalties for software licences, and the difference between 10% and the domestic 20% represented a meaningful annual saving.

We assisted a US-owned technology group in securing treaty-rate withholding treatment on royalty flows exceeding PLN 3m annually from their Mazowieckie subsidiary (autumn 2025). The key was assembling the beneficial ownership documentation before the first payment – not after a KAS query arrived. Retroactive treaty claims are technically available but practically difficult; KAS auditors treat late documentation as a red flag under Polish tax law.

For a broader comparison of withholding frameworks across different treaties, the Poland–Netherlands treaty analysis provides a useful parallel, particularly for structures involving EU holding companies alongside US investors.

What triggers permanent establishment risk under the treaty?

Permanent establishment (PE) is the treaty concept that determines whether Poland can tax a US company's business profits directly. The treaty defines PE broadly: a fixed place of business through which business is wholly or partly carried on. That includes a branch, office, factory, or construction site lasting more than twelve months. Twelve months is the threshold – one day short, and Poland cannot tax those profits.

The risk emerges in less obvious ways. A US company sending employees to Poland for extended periods – to manage a project, supervise a subsidiary, or develop client relationships – may inadvertently create a PE. If those employees have authority to conclude contracts in Poland on behalf of the US parent, the dependent agent PE test is triggered. That test does not require a physical office. It requires only that the agent habitually exercises the authority to bind the parent.

The Delaware technology company discovered this issue eighteen months into its Polish operations. A US-based senior engineer had been travelling to Warsaw for ten-day visits every six weeks, working from the subsidiary's office, and signing vendor agreements on behalf of the parent. Transfer pricing documentation had been prepared for the subsidiary. But no one had assessed whether the parent itself had a PE. KAS raised the question during a routine audit of the subsidiary.

For companies already operating in Poland, the dispute resolution guide for US companies in Poland explains the mutual agreement procedure available under the treaty when PE characterisation is contested.

What are the transferable lessons from this case?

Four lessons emerged from the Delaware matter that apply across US-Polish structures. First, treaty documentation must be assembled before the first cross-border payment. Beneficial ownership certificates, tax residency confirmations, and substance evidence should be in the file on day one. Polish tax law allows KAS to deny treaty rates where documentation is absent at the time of payment – the 30-day cure period is narrow and contested.

We also assisted a manufacturing group in Lower Silesia in restructuring its US parent's involvement to avoid a PE characterisation (spring 2026). The solution involved restricting the parent's employees from signing contracts in Poland and redirecting those functions to a properly resourced Polish entity. The restructuring took under 90 days and removed an exposure that could have resulted in personal liability for the Polish subsidiary's board under Polish corporate legislation.

Second, IP Box and transfer pricing interact with the treaty in ways that require coordinated advice. A Polish entity claiming IP Box relief on qualifying income must ensure that the royalty structure with a US parent does not trigger transfer pricing adjustments that erode the relief. Third, the treaty's mutual agreement procedure has a three-year trigger window from the date of the first notification of the action resulting in double taxation – missing that window forfeits the remedy permanently.

Fourth, KSeF Poland obligations apply to the Polish subsidiary regardless of the treaty position. The treaty does not affect VAT or invoicing obligations. US-owned subsidiaries sometimes assume that their treaty status simplifies Polish compliance. It does not. KSeF invoicing, JPK_CIT reporting, and any applicable family foundation planning remain governed entirely by domestic Polish law. For US-owned entities with Swedish group entities, the KSeF guide for Swedish businesses illustrates how the invoicing obligation applies across different foreign-ownership structures.

  • Assemble treaty documentation before first payment, not after audit notice
  • Audit employee travel patterns for dependent agent PE risk annually
  • Coordinate IP Box and transfer pricing advice with treaty planning
  • File mutual agreement procedure within three years of double taxation notice
  • KSeF and JPK_CIT obligations apply regardless of treaty status

The specific facts of your company's cross-border structure determine which treaty provisions apply and whether domestic anti-avoidance rules override them. A generic treaty summary cannot replace that analysis.

If your US-Polish structure involves royalty flows, employee mobility, or contested PE characterisation, contact info@kordeckipartners.com for a tailored assessment of your treaty position and documentation requirements.

Frequently asked questions

Q: Does the Poland–US treaty automatically apply, or must we claim it?

A: The treaty does not apply automatically in the sense that the Polish withholding agent must apply the reduced rate at source and retain documentation proving entitlement. If the withholding agent applies the domestic rate instead, the US recipient can seek a refund, but the process takes between six and eighteen months and requires a formal application to the Polish tax authority. It is significantly more efficient to apply the treaty rate from the first payment.

Q: How long does the mutual agreement procedure take under the Poland–US treaty?

A: The treaty does not impose a binding resolution deadline on the competent authorities. In practice, Poland–US mutual agreement cases have taken between two and four years to resolve. The procedure is initiated by the taxpayer submitting a request to the competent authority of their residence state within three years of the first notification of double taxation. Missing that three-year window closes the procedure entirely – there is no extension mechanism.

Q: Is a Polish family foundation subject to the Poland–US treaty?

A: A Polish family foundation (fundacja rodzinna) is a Polish tax resident entity. Whether it qualifies as a treaty resident entitled to benefits depends on its income type and whether the US Internal Revenue Service recognises it as a fiscally transparent or opaque entity. This classification question is unsettled and requires specific analysis. A tax advisor Warsaw-based with experience in both Polish family foundation structures and US tax classification rules should be consulted before any cross-border distribution is made.

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 cross-border tax structuring, treaty analysis, and KAS dispute resolution. 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.