How Should a Polish Subsidiary Invoice Its Foreign Parent Company?

How does a Polish subsidiary get paid, through funding or through invoicing the parent?

Both, at different stages. A Polish subsidiary and its foreign parent are separate legal entities, so the Polish company needs either funding or revenue of its own; it does not automatically have access to the parent’s cash. Before the team is generating billable work, the company is normally funded through share capital, a shareholder loan, or another documented form, a question covered separately in our guide to financing a Polish subsidiary. Once the Polish team is doing real work for the parent, software development or another service, the standard model changes: the company provides that service under a written intercompany service agreement and issues the parent regular invoices, usually monthly or quarterly, rather than continuing to rely on capital contributions.

What should the invoice to the parent actually cover?

The invoice covers the service actually performed in that period, development, engineering, or whatever the agreement describes, not a generic management fee; the agreement and the invoice together should make clear what was delivered and over what period. Whether Polish VAT applies to that invoice, and how it is issued through KSeF for a foreign contractor, is a separate question from pricing; see our KSeF checklist for the invoicing mechanics.

Does the Polish company need to earn a profit on this work?

Not as an abstract rule for every period, but in practice, usually yes. The arm’s length principle requires the price to reflect what an unrelated business would charge for the same work (Article 11c of the ustawa o podatku dochodowym od osob prawnych, the Polish CIT Act); it does not say every subsidiary must show a profit in every year regardless of circumstances, and a loss can be market-justified in some situations. For a routine development or service centre working mainly or only for its parent, continuously billing only costs with no margin would need strong justification, and the standard, defensible approach is to build in a market-level margin from the start, benchmarked against what unrelated businesses earn for comparable work, not copied from another company or industry. Note that mispricing is a transfer pricing question, not a question of whether the service itself is real: a genuinely performed service can still be priced incorrectly.

When do Polish transfer pricing rules and minimum tax become relevant?

Table 1

Annual value of services billed to the parent	Pricing rule	Documentation duty
Any amount	Arm’s length price required (Article 11c of the CIT Act)	No Local File solely because of the PLN 2,000,000 transaction-value threshold
Above PLN 2,000,000 net	Arm’s length price required (Article 11c of the CIT Act)	May trigger additional transfer pricing documentation and reporting obligations (Article 11k of the CIT Act)

Table 2, minimum tax timeline

Period	Minimum tax status
The tax year in which the company starts its activity and the following two tax years	Exempt, regardless of profitability (Article 24ca(14) of the CIT Act)
From the fourth tax year	If the income-to-revenue ratio falls to 2% or below, a 10% minimum tax may apply, subject to other statutory exemptions (Article 24ca(1) of the CIT Act)

Track the cumulative value of services billed to the parent through the year against the PLN 2,000,000 threshold, rather than checking only at year-end; both this and the profitability trigger depend on the company’s actual figures and are worth reviewing with a tax adviser before the tax year closes.

FAQ

Can our Polish IT subsidiary invoice its foreign parent?

Yes. Once the Polish team is doing real work for the parent, invoicing for that work under a written agreement is the standard model, not a continued reliance on funding.

What should the Polish company invoice the parent for?

The service actually performed in the period, development, engineering, or whatever the agreement describes. The agreement and invoice together should show what was delivered and over what period.

Can the parent simply cover the Polish company’s costs?

Not on an ongoing basis without justification. A subsidiary that only recovers its costs, with no margin, is not automatically compliant with Polish transfer pricing rules; the standard, defensible approach is a market-level margin from the start.

Does the Polish subsidiary need to make a profit?

Not as an abstract rule for every single period, but in practice, for a routine development or service centre working mainly for its parent, continuous cost-only billing needs strong justification, and building in a market-level margin is the standard approach.

Does the invoice to a foreign parent include Polish VAT?

That depends on the type of service and where the parent is established, a separate question from the pricing question this article covers. See our KSeF checklist for the invoicing mechanics, and confirm VAT treatment with a tax adviser.

When do Polish transfer pricing rules become relevant?

Once the annual value of services billed to the parent is approaching PLN 2,000,000 net, additional documentation and reporting obligations may apply (Article 11k of the CIT Act). The pricing rule itself applies from the first invoice, regardless of amount.

Summary

A Polish subsidiary and its foreign parent are separate entities: the company is funded first, then invoices the parent for real work under a written agreement once that work starts. The price has to reflect a market rate, not just costs, though this does not mean every period must show a profit regardless of circumstances. Above PLN 2,000,000 a year in billed services, extra documentation duties may apply; a persistently low margin can also raise minimum tax questions after the company’s first three years.