The Framework

Poland has adopted a multi-layered digital tax regime targeting foreign technology companies. The current system includes a 1.5 percent Digital Services Tax (DST) on audio-visual media services, a 1.5 percent tax on video-on-demand (VOD) providers paid to the Polish Film Institute, and a proposed 7 percent tax on companies with significant digital presence in Poland.[1] Companies must generate at least EUR 750 million in global revenue and EUR 5 million in Polish revenue to be subject to these taxes. Additionally, non-EU vendors face stricter value-added tax (VAT) registration and collection requirements, while EU-based companies benefit from a more lenient threshold. The framework may become even more burdensome with a proposed advertising revenue tax targeting both traditional and online advertisers.

Implications for U.S. Technology Companies

Poland’s digital tax structure creates significant financial and operational challenges for U.S. technology companies. The cumulative impact of the DST, VOD tax, and VAT obligations increases costs, particularly for firms operating with thin margins. Non-EU vendors are at a disadvantage, as they must register and collect VAT regardless of sales volume, while EU-based competitors are exempt up to a EUR 10,000 threshold. The proposed 7 percent tax would be one of the highest rates globally, forcing U.S. firms to either absorb additional costs or pass them on to Polish consumers, potentially reducing competitiveness in the market.

How China Benefits

Chinese digital platforms may be better positioned to navigate Poland’s tax framework due to their state-backed business model. With strong government support and experience in managing restrictive regulatory environments, Chinese firms can absorb financial burdens that may force U.S. companies to scale back operations or increase prices. Their ability to sustain long-term investments, even under high taxation, allows them to gain market share while U.S. firms struggle to maintain profitability. If Poland implements both the expanded DST and the new advertising tax, American companies will face even greater financial strain, while Chinese competitors, backed by strategic state subsidies, could consolidate their presence in the Polish digital market.

Endnotes