Toll manufacturing creates a fixed establishment in Poland

A Polish court (i.e. the Administrative Court of Warsaw) ruled in one of its recent judgments toll manufacturing to create a fixed establishment for VAT in Poland.

A Finnish manufacturer of boats intended to extend its business activities to Poland. Before it started conducting business in Poland, it applied for a ruling to the Polish Ministry of Finance.

In its request for a ruling, the Finnish company advised that it intended to purchase parts and components needed for the production of the boats. The manufacturing process was envisaged to be outsourced to a Polish manufacturing company.  Once the manufacturing process was completed, the boats were stored at the premises of the Polish manufacturer. The Finnish company intended to sell them to customers in Poland and elsewhere.

The Finnish company emphasized that the components and the boats remain in its ownership and that its right to dispose of the components/goods as an owner will not be transferred to anyone else throughout the whole manufacturing and storage process.

The Finnish company was of the opinion that it did not create a fixed establishment in Poland by reference to the above activity in Poland. Accordingly, it took the view that the services that it purchased from Polish suppliers (e.g. transport, translation work) would be subject to the Finnish reverse charge provisions (i.e. taxable at the main establishment in Finland).

Further, the Finnish company advised that based on the judgments of the Court of Justice of the European Union (“CJEU”), a creation of a fixed establishment requires a sufficient degree of permanence, technical and human resources and that the activity to be carried out by this establishment is independent of the activity of the main establishment.

On the above basis, the Finnish entity was of the opinion that it did not satisfy the above conditions as (i) it did not intend to carry out the activities in Poland permanently, (ii) it did not have any own resources in Poland and that (iii) the resources used in Poland (i.e. machines, tools, employees) belong to the local manufacturer.

Judgment of the administrative court
Taking into consideration the above fact pattern, the court concurred with the ruling of the Ministry of Finance and ruled that Finnish company would conduct business activities in the territory of Poland which would have a sufficient degree of permanence. The main basis for the above decision was that in the view of the court, the involvement of own resources is not required for the purposes of creating a fixed establishment in the meaning of article 44 of the VAT Directive. Instead, the use of third party resources is sufficient to create a fixed establishment.

Finally, the court indicated that a similar conclusion arises from the judgment of CJEU in Welmory (C-605/12), where the CJEU advised that whether a fixed establishment is created or not needs to be determined by the local courts.

The Ministry of Finance did not agree with the Finnish company’s assessment and instead concluded that the business did have a fixed establishment in Poland. The question was subsequently referred to the Court.

Impacts for businesses
Businesses using third-party resources in Poland (specifically businesses using Polish toll manufacturers) should review the nature of the used resources and the purpose for which these resources are used in order to establish whether they create a fixed establishment for VAT in Poland.

If you need further information or wish to discuss the case, you could contact also PwC indirect tax partners in Poland: Marcin Chomiuk ( and Tomasz Kassel (

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