US Army Suppliers Tax Exemption in Poland (2024)

Updated: 26.06.2024

Enhanced Defense Cooperation Agreement (EDCA) between the U.S. and Poland

The Enhanced Defense Cooperation Agreement (EDCA) between the United States and Poland is a bilateral agreement that strengthens the strategic military partnership between the two nations. Signed to enhance defense cooperation, the EDCA establishes a framework for the presence and operations of U.S. forces in Poland.

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One of the critical aspects of the EDCA is its provision of various tax exemptions and financial benefits. This is designed to facilitate the operational efficiency of U.S. forces and support the local economy by easing the financial burden on U.S. military personnel, civilian components, and contractors stationed in Poland.

The agreement includes comprehensive tax regulations that offer exemptions from a range of Polish taxes, including income tax, Value Added Tax (VAT), and excise tax.

These exemptions ensure that U.S. forces and associated personnel can operate without being subject to the standard tax obligations that would typically apply under Polish law.

Key tax-related provisions of the EDCA include:

  • Corporate and Personal Income Tax Exemptions: Income earned from U.S. Government employment by members of the force, civilian components, and their dependents is exempt from Polish taxation. This includes income from specified non-commercial organizations and sources outside Poland.
  • VAT and Excise Tax Exemptions: Goods imported by or for U.S. forces, as well as goods and services acquired for their use, are exempt from VAT and excise taxes. These exemptions apply at the point of importation or purchase and are supported by proper documentation.
  • Exemptions on Personal Property and Motor Vehicles: U.S. military personnel and their dependents are exempt from taxes on the purchase, ownership, and use of personal property and motor vehicles. This includes exemptions from VAT and other related taxes, with certain conditions for documentation and use.

The EDCA’s tax exemptions play a crucial role in reducing the administrative and financial barriers for U.S. forces, thereby enhancing their operational readiness and strengthening the defense capabilities in the region.

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Article 19 of EDCA Between Poland and US – Tax Exemptions

Tax Exemptions that are introduced by article 19 of EDCA between Poland and US include the following regulations:

Exemption on imported goods:

  • Goods imported by or for U.S. forces for their exclusive use or for supporting their military service activities are exempt from Value Added Tax (VAT), excise tax, or similar taxes.
  • The exemption applies if the goods are declared on the specified NATO SOFA certificate (Form 302) and consigned to U.S. forces.
  • Importation and exportation include movements to or from any country, including those sharing a joint customs territory with Poland.

Exemption on acquired goods and services:

  • Goods and services acquired by or for U.S. forces for specified purposes are exempt from VAT, excise tax, or similar taxes.
  • The exemption applies at the time of purchase if confirmed by a document issued by U.S. forces and submitted to the Polish tax authority.
  • For excise-taxed goods, the exemption applies at the time of sale if acquired from a tax warehouse and confirmed by the appropriate document. Otherwise, the exemption is granted by reimbursem*nt on a quarterly basis, processed within thirty days of the reimbursem*nt request.

Certification for Exemptions:

  • Polish authorities will receive appropriate documentation from U.S. forces certifying the goods and services consigned to or acquired by U.S. forces for their use or support activities.
  • A single certification may cover contracts requiring multiple deliveries.

Procedural Requirements:

  • Procedures, forms, and any limitations on quantities for these exemptions will be detailed in an implementing arrangement.

Income Tax Withholding and Prepayment:

  • Polish laws on employer or self-employed income tax withholding or prepayment do not apply to income exempt from taxation under this agreement.

Social Security Provisions:

  • Polish social security laws do not apply to salaries and emoluments of U.S. force members, civilian component members, U.S. contractors, and their employees who are U.S. citizens and not ordinarily residents in Poland, EU Member States, or European Free Trade Association States.

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Income tax exemption for deliveries and services to US army in Poland

Poland has introduced an internal tax exemption policy aimed at supporting local businesses that engage in contracts with the U.S. Army. Effective from January 1, 2022, this policy provides an exemption from corporate income tax (CIT) and personal income tax (PIT) for Polish companies and subcontractors supplying goods, services, or construction work to the U.S. Army stationed in Poland.

Key Aspects of the Tax Exemption:

Scope and Coverage:

  • The exemption applies to all income derived from contracts with the U.S. Army, including direct sales, services, and construction work.
  • Subcontractors involved in these projects also qualify for the exemption.

Objective:

  • The primary aim is to alleviate the tax burden on Polish businesses, thereby encouraging more local companies to participate in defense-related contracts and support the strategic military presence of the U.S. in Poland.

Compliance Requirements:

  • Beneficiary companies must adhere to specific reporting and documentation standards set by the Polish Ministry of Finance.
  • Detailed records of transactions and contracts related to the U.S. Army must be maintained to validate the tax-exempt status of the income earned.

Legal and Legislative Framework:

  • This policy is part of broader amendments to Poland’s tax regulations designed to create a favorable business environment for enterprises engaged with foreign military forces.

US Army Suppliers Tax Exemption in Poland (4)

VAT Exemption for Deliveries to US Army in Poland

In accordance with the bilateral agreement between the Government of the Republic of Poland and the Government of the United States of America regarding the status of U.S. Armed Forces in Poland dated December 11, 2009 (Journal of Laws 2010, No. 66, item 422) – Status of Forces Agreement (SOFA), Polish entities acting as contractors or subcontractors in tenders for the U.S. government are entitled to a VAT exemption.These provisions apply exclusively to contracts executed within the territory of the Republic of Poland.

Key Aspects of the VAT Exemption:

Documentation and Certification:

  • Upon winning a tender for the U.S. Armed Forces, it is crucial for the company to obtain a written order detailing the delivery (which may be in the form of a contract) and a VAT exemption certificate signed by both a U.S. military representative and the commander of the base where the contract will be executed.
  • This certificate allows the company to issue an invoice to the U.S. Armed Forces with a zero VAT rate.

Timing and Submission:

  • The VAT exemption certificate must be obtained within 30 days of issuing the invoice. This certificate should be provided to the company’s accounting department no later than the 25th day of the month following the month (or quarter for taxpayers who choose such a settlement period) in which the transaction is accounted for.

Compliance and Coordination:

  • Failure to obtain the tax exemption certificate and order with specifications within the specified time frame will prevent the application of the 0% VAT rate for the delivery of goods and services to the U.S. Armed Forces. This necessitates appropriate adjustments to the company’s accounting documentation.
  • It is essential to coordinate closely with the company’s documentation officer, the American liaison officer, and the Polish officer responsible for administrative matters at the base where the delivery or service is provided.

Subcontractor Provisions:

  • If a company is a subcontractor to a primary contractor who won the tender for the U.S. Forces, it can also benefit from the described process. Effective coordination with the primary contractor is critical, as the primary contractor is responsible for obtaining the necessary certificate and bearing the associated responsibilities.

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Legal and tax services to suppliers to US army in Poland

We provide comprehensive legal and tax services to suppliers and contractors working with the U.S. Army in Poland. Our expert team offers guidance on navigating the complex regulatory landscape, ensuring compliance with the Enhanced Defense Cooperation Agreement (EDCA) and Polish tax laws.

From securing VAT exemptions to managing corporate income tax obligations, our services are designed to optimize your operations and support your business success in fulfilling U.S. military contracts. Trust us to handle your legal and tax needs with professionalism and precision.

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