When an agent is considered to be of an independent status or when of a dependent status?

In order to explain the difference between an agent of a dependent status and an agent of an independent status we need to provide explanation of a permanent establishment first.

The term permanent establishment – according to the CIT Act – means a fixed place of business through which the entity having a seat or management on the territory of a given country, wholly or partially carries on business of the enterprise on the territory of another country.


Within the meaning of the OECD Model Convention, being the template for the bilateral Double Tax Treaties signed by Poland, permanent establishment constitutes not only fixed place of business spatially separated through which the entity carries business but also a person acting on behalf of an enterprise having, and habitually exercising, in another country authority to conclude contracts on behalf of the company. One of the exceptions is the situation where activity of that person is limited only to activities of preparatory or auxiliary character.

To determine whether the presence of a representative abroad creates a permanent establishment in another country, important is the scope of activities undertaken by him for that enterprise. It should be emphasized that not every activity carried out on behalf of the company will result in establishing a permanent establishment. Activities carried on by a such person must be of regular and permanent character. Concluding contracts on behalf of the company does not include only the final stage i.e. signing of a contract, but also determining terms and conditions of a contract. Therefore negotiating powers given by a company may be sufficient to recognize such person as an agent of an dependent status. Even in the case when person signing a given contract is in the country where the seat of the company is located.

An important issue is that the person acting on behalf of the foreign entrepreneur must remain with him of an appropriate dependence relation. If the person does not fall into the self-employed category and does not bear the risk arising from contracts concluded, and the employer is entitled to issue binding instructions and commands, the risk of the foreign establishment is largely reduced. Person pursuing an activity in another country for the enterprise may be deemed as an agent of an independent status.