How do taxpayers operate their businesses and where does the tax problem lie?

For many months, the acronym “KSeF” has been appearing in virtually every possible context across all types of media. I have many friends among finance professionals, accountants and IT specialists, and I know that KSeF has appeared in countless roles: as a substitute for morning coffee, as a substitute for a spouse at dinner (eaten on one’s lap, in the office and at the computer), or as a universal small‑talk opener during first meetings with foreign clients (because for some time now they begin with the question: “Do I need KSeF?”).

Everyone already knows that as of 1 February 2026, Poland has implemented KSeF – the National e‑Invoicing System, an electronic platform for issuing, transmitting, receiving and storing invoices. These are structured invoices (not to be confused with electronic invoices), i.e. created in XML format and assigned a unique identification code – the so‑called e‑invoices. From 1 April 2026, KSeF will become part of everyday life for the majority of VAT taxpayers (and no, this is not an April Fool’s joke), and from that point the excitement surrounding this digital VAT compliance tool will most likely begin to fade.

The problem is that while Polish taxpayers are absolutely up to date with the series titled “KSeF”, foreign taxpayers are not necessarily in the same position. It turns out that KSeF may also apply to foreign VAT taxpayers, if they have a so‑called fixed establishment in Poland, known by the English abbreviation FE (Fixed Establishment). The Ministry of Finance is also promoting a new Polish abbreviation: SMPD. A little less charming perhaps, as it sounds somewhat like ADHD.

But how can one determine – with a sufficient degree of certainty – whether a foreign taxpayer has an FE, a.k.a. SMPD, in Poland?

What do EU and Polish domestic rules provide and how does the Ministry of Finance interpret them?

The concept of a fixed establishment for VAT purposes is one of those “long‑standing” concepts. 

The need to distinguish situations where a taxpayer has its registered seat in one EU Member State but at the same time performs part of its business using its permanent presence in another Member State, was recognised by the Court of Justice of the European Union already in the late 1990s, when it issued its first specific judgment on FE in 1997 (C‑190/95, Aro Lease). 

More than a decade later, the EU adopted the Implementing Regulation to the VAT Directive (2006/112/EC), which contains the definition of FE in Article 11 (see Regulation 282/2011). Although we now have a set of criteria, each individual case still requires careful consideration to determine whether an FE exists. For this reason, the guidelines of the Minister of Finance and Economy will certainly be useful – particularly because they include a range of interesting, practical examples.

The (relatively) firm criteria are as follows:

• there must be a place (other than the taxpayer’s registered seat), established on a lasting basis (not merely temporarily), with human and technical resources,
• and such a fixed establishment must be able to receive goods or services acquired and to use them for its own needs.

Importantly, for an FE to exist, it is not decisive whether the FE is capable of independently performing supplies of goods or providing services. This may be the case, but in practice we currently observe two types of FE:

• passive (not making supplies independently), and
• active (making supplies independently).

Additionally, for several years now there has been an ongoing debate on whether (and to what extent) a human component is essential for an FE to exist. Meanwhile, in the era of rapidly growing digital economy, the stability criterion is becoming increasingly difficult to apply in practice. The Ministry’s guidelines acknowledge this issue as well, so I assume that similar nuances will be reflected in the instructions for the National Revenue Administration – meaning each case should be assessed individually, with due consideration for the need to interpret the criteria flexibly. We know for certain that for online‑based business activities, the physical location of servers will not be decisive (in the context of determining whether an FE exists), as this alone does not provide sufficient components for an FE to independently receive goods or services for its own needs.

However, it may soon turn out that machines (especially those powered by AI) will increasingly be capable of autonomously performing a range of tasks to such an extent that this could be considered receiving and using goods or services for their own needs. Are we ready for that in the VAT system? 

At the end of 2025, the Faculty of Law and Administration of Adam Mickiewicz University in Poznań hosted a Tax Forum. One of the most interesting points of discussion concerned the future of the FE definition in light of the dynamic development of the digital economy. Tomasz Michalik even provocatively argued that the FE concept no longer makes much sense in the digital era. In my view, he is justified in calling for the redefinition of FE and the prompt launch of a dispute‑resolution mechanism for FE‑related conflicts between EU Member States. 

Nevertheless, I believe that the FE concept will survive the digitalisation of parts of the economy. VAT is a multi‑stage tax – meaning that at each stage of the supply chain, a portion of VAT is charged “on credit”, long before the total VAT is paid by the final consumer. Consequently, individual countries are deeply interested in verifying FE structures properly. An FE indicates where a significant portion of the taxable added value is generated, and its existence often results in taxable consumption emerging. FE is therefore an element of tracing the place where consumption should be taxed or at least where consumption tax should be levied “on account” until the Member State of final consumption becomes clear. Geography matters here and will continue to matter – we are competing for the territory where consumption expenditures may be taxed.

The Ministry’s brochure with guidelines also contains several entirely new and/or very interesting points:

• it emphasises clearly that FE is not the same as PE (permanent establishment ‒ meaning a taxable presence under double tax treaties and income tax laws), nor must the two concepts necessarily occur together (though they may),
• it notes that fixed facilities where only ancillary activities are performed, relative to the taxpayer’s primary business, will generally not constitute an FE,
• it provides very interesting examples of situations where an FE should be considered not to participate in a given transaction (a supply of goods, provision of services),
• it confirms the general lack of obligation for a Polish taxpayer to determine whether their foreign contracting party has an FE in Poland (introducing clear presumptions).

In conclusion, it is worth noting that with the rollout of KSeF in Poland, all foreign taxpayers should carefully verify whether they have an FE in Poland. If they do not, they must remember to inform their Polish suppliers (who are subject to KSeF) – otherwise, by providing their Polish VAT‑EU number, they may inadvertently order an invoice issued via KSeF…

And now, our coffee has probably gone cold... 😉