What exactly is a tax residency certificate?
In its most basic sense, the certificate we are talking about acts as a certificate indicating the taxpayer’s domicile, if the taxpayer is a legal entity, or the taxpayer’s place of residence, in case we are talking about an individual.
The tax residency certificate is issued to prevent tax abuses resulting from the improper application of the provisions of international agreements for the avoidance of double taxation.
What does a tax residency certificate contain?
A properly prepared tax residency certificate should consist of:
- Data of the entity: address of the registered office or residence, name, surname, name;
- the date of issuance of the document;
- Information on the duration of the certificate (this is not a prerequisite);
- certificates of domicile (or residence address) for tax purposes (within the country);
- data of the issuing authority.
The latter criterion is particularly relevant – the mention of a certificate of residency appears in Art. 4a pt. 12 of the CIT Law and Art. 5a pt. 21 of the PIT Law and specifies that the document can only be called such if it is issued by the competent tax administration authority of the taxpayer’s country of residence.
Important!
There is no single common template for a tax residency certificate that is valid in different countries. Moreover, a document of this kind does not necessarily have to bear the name of a certificate – the most important thing is that it contains all the above-mentioned. information.
In particular, the date of issuance of the certificate or the duration is important from the perspective of income taxation. The income received should be within the timeframe covered by the certificate – this is the only way to obtain confirmation of tax residency at the time of income.
Validity and validity of the certificate
If the certificate of residence does not include a validity period, it means that it should be considered for a period of twelve months from the date of issuance. If the taxpayer’s business address changes in the meantime, it is necessary to obtain a new certificate of residency.
Important!
If the taxpayer changes his place of residence within twelve months from the date of issuance of the certificate of residence, and fails to comply with the obligation to promptly document this change for tax purposes with a new certificate, he shall be solely responsible for the payer’s failure to withhold tax or to withhold tax in an amount lower than due.
For more details on certificates that have been stripped of their validity period, see Art. 26, para. 1i-1l of the CIT Law.
Sometimes one encounters certificates indicating an expiration date (usually the current fiscal year) – still, to be sure, it should be recognized that a change of business address (or residential address in the case of an individual) interrupts the validity period of the certificate.
Important!
The residency certificate confirms the past and/or present state, never the future.
How do you get your company’s tax residency certificate?
Certificates of tax residency in Poland are issued by the tax office competent for the taxpayer. First, download the CFR-1 form template (for example, from here) or obtain a blank form from the tax office. After completing the document, you will need to apply for a certificate of residency – it is worth remembering that you will also be required to pay a stamp duty of PLN 17. Then all you have to do is wait up to 7 days for the proper certificate to be issued.
Important!
The tax residency certificate is issued for tax purposes in the territory of the Republic of Poland and is applicable if the taxpayer conducts transactions with entities registered outside the country.
Electronic certificate of tax residency
Until 2017, obtaining tax residency certificates from foreign counterparties was problematic, as the only acceptable form was the traditional paper document. Fortunately, the onerous obligation has been abolished for several years now – so if there is a possibility to obtain a certificate of residence for tax purposes electronically, it has an equivalent status to paper.
The above has not been confirmed by provisions in Polish law. In the relevant laws we do not find a provision specifically indicating the form of the certificate of residence. However, we have interpretations from the Director of the National Fiscal Information and the Head of the National Fiscal Administration, which accept the tax residency certificate in electronic form as properly prepared:
- Interpretation of the Director of the KIS dated November 21, 2017 (No. 0114-KDIP-3.4011.434.2017.1.JK2),
- Interpretation of the Head of KAS dated June 26, 2017 (No. DPP7.8221.33.2017.GFQV).
A copy of the tax residency certificate
In 2019, another convenience has been introduced, this time allowing (to a limited extent) the use of a copy of the certificate of residency when it is necessary to confirm the residence of a counterparty for tax purposes.
A copy of the tax residency certificate must meet each of the three conditions:
- Withholding tax applies to:
- market research,
- legal services,
- advertising services,
- consulting services,
- accounting services,
- data processing,
- management,
- recruitment,
- guarantees or sureties.
- The total amount of receivables paid to a given contractor does not exceed 10 thousand. PLN in the year in question – exceeding this amount means that an original residency certificate must be obtained.
- The information contained in the copy of the certificate does not raise any questions of fact.
Unfortunately, the first condition already indicates that the use of a copy of the certificate in practice is a privilege available only to a narrow group of taxpayers.
Tax residency certificate – when do you need it?
Having a tax residency certificate allows entities to avoid double taxation when they do business both at home and abroad. The certificate confirms that the counterparty in question has a permanent place of residence or a place of business in the territory of the country that issued the certificate, and therefore full tax liability is imposed.
Even if our counterparty has a tax residency certificate and presents it to us, we can – as a party to the transaction – request an updated certificate at any time. This is because, by definition, the certificate confirms the state at the time of its issuance and retroactively – in theory, the contractor could change the location of the company shortly after receiving the document, which, as I mentioned in an earlier part of the article, results in the cancellation of the certificate.
A tax residency certificate is also necessary if a foreign company has a business in Poland, or if you yourself earn income abroad, but want to settle income tax in Poland (of course, only if the company’s headquarters is actually located in the Republic of Poland).
Residency certificate needed in marketing
If you are actively promoting your products or services online and using paid advertising on Google, Facebook, LinkedIn, Twitter or TikTok in the process, you need a certificate to avoid double taxation. However, this is not a certificate issued for your company, but for the service provider.
You can obtain such a document by contacting the customer service office of any of the listed companies directly. Some corporations also provide certificates of residency on their websites, but unfortunately – as the example of Google shows – they do not pay much attention to updating them. Currently – as of November 2024 – Google’s latest publicly available certificate of residency is dated 2020.
As we mentioned earlier, you do not need to have the original residency certificate of your foreign counterparty. From 2019, a digital copy will suffice. However, remember the condition regarding expenses. If the expenses for advertising services exceed PLN 10,000 in a calendar year, try to get the original – preferably by contacting the contractor directly.
