Are you planning to open a branch in Poland? This strategic move can unlock numerous growth opportunities within the EU market.
Our detailed article demystifies the process of establishing a branch in Poland, outlines the legal status and operational scope of a Polish branch, and clarifies the roles and responsibilities of the foreign parent company.
Whether you are an EU-based entrepreneur or hail from outside the EU, understanding the practical implications of setting up a branch in Poland is crucial.
From registration nuances to taxation specifics, this guide provides you with the essential knowledge to establish and run a successful branch in Poland, ensuring compliance and operational efficiency in your business’s international ventures.
Branch in Poland – summary
|Branch in Poland||Subsidiary in Poland|
|Registration by notary required||NO||YES|
|The scope of activity||Identical with the scope of the parent entity activity||Any economic activity allowed by law (resulting from the parent entity’s agreement)|
|Share capital (minimum)||NON-APPLICABLE||5000 PLN|
|Entity’s assets||Part of the parent company’s assets||Separate from the parent company|
|Name||The original name of a foreign company with the legal form translated into Polish and with a designation of “oddzial w Polsce” [“branch in Poland”].||Any name with a designation: „spółka z ograniczoną odpowiedzialnością”|
|Governing bodies||NONE||Management board|
Meeting of shareholders
(optionally) Supervisory board
Branch in Poland – legal status of a Polish branch
First of all, it should be emphasized that branch does not have a legal personality. It does constitute a separate organizational unit but it is still only a part of the foreign entrepreneurship. This means that foreign entrepreneur is responsible for the undertakings of the branch company.
Essentially, the branch also does not have the capacity to be a party in court proceedings. Consequently, it is the foreign entrepreneur who will constitute a party (either plaintiff or defendant) in the event of a possible court trial. It does not apply, however, to cases concerning employees’ issues.
In the event of litigation between a foreign branch and its employee (either former or present one), the branch will always constitute a representative party to the proceedings. In other words, if the investor wants that his Polish part of business have a legal personality he has to open a subsidiary in Poland.
Branch in Poland for EU companies
In Poland, those entrepreneurs who originate from the European Union may establish a branch of their business practically without restrictions. Entrepreneurs originating from countries not belonging to the EU may establish a branch in Poland on the basis of reciprocity. This means that the possibility to establish a branch in Poland depends on whether the international agreements ensure Polish entrepreneurs similar rights.
How to go through the process of a branch registration in Poland?
Moreover, registration of a branch in Poland also requires:
- making an appropriate decision by a parent entity (e.g. the resolution of an appropriate body of foreign entity, such as management or board of directors);
- the application for the branch’s entry into the Polish National Court Register [Polish: KRS] rand by a district court;
- if a foreign entrepreneur operates on the basis of the partnership agreement, deed of foundation, contract, statute and/or entry into the Polish Company Register, a certified copy of such documents together with their certified translation into Polish language should be submitted along with the application for entry of the branch into the Polish register.
Obviously, a branch in Poland should also have a legal title for its registered office in Poland (e.g. rent agreement). There are no legal obstacles to use a virtual office.
Keep in mind that foreign entrepreneur may start his business activity within the branch in Poland only after obtaining an entry into the Polish National Court Register [Polish: KRS].
Branch in Poland – who can be a representative of the branch in Poland?
An entrepreneur performing registration has to assign a person who will be authorized to represent the parent entity (a branch representative). The branch representative shall act on behalf of and for the entrepreneur in relation to the activities of the branch in Poland.
There are no particular requirements regarding the person indicated as a branch representative. Such person does not need to be a Polish citizen or an employee of the branch. There is no requirement for a branch representative to speak Polish language. More than one branch representative may be assigned.
The representative may be dismissed by a foreign company at any time. Both assigning and dismissing a branch representative shall be confirmed in writing.
What happens after the branch registration in Poland is completed?
After the branch’s registration in the Polish Commercial Register one should fulfil a few more formalities. The most important ones constitute:
- reporting the parent entity to the Internal Revenue Service – as a consequence, the tax office shall issue a unique Tax Identification Number [Polish: NIP] for a parent entity;
- reporting a branch in Poland to the Internal Revenue Service – if the branch in Poland is going to hire employees, it must apply for a separate Tax Identification Number [Polish NIP] in order to comply with the responsibilities to cover Social Insurance contributions and advance personal income tax payments;
- registering as VAT payer– if the branch in Poland will conduct business activities covered by this type of taxation (it is worth noting that the foreign entrepreneur is subject to registration, not the branch itself).
Business activity of the branch in Poland
The economic activity of the branch in Poland may cover only such scope of activities that is conducted by a parent entity. It is a significant restriction in comparison to registration of subsidiary. Subsidiary’s range of operations is unrestricted as long as it is legally permissible.
The branch in Poland obliged to pay corporate income tax (CIT) on the income generated on the territory of Poland. The branch office is also a VAT payer. Moreover, if the branch hires employees, it also becomes a payer of Social Insurance contributions. It should also pay and advance personal income tax payments for its employees.
The branch in Poland has to keep and maintain accounting in Polish language and in accordance with Polish accounting rules.
The branch of the foreign entrepreneur should have the original name of the parent entity with its legal form translated into Polish and an additional designation: ‘oddział w Polsce’ [branch in Poland].
Branch in Poland vs. representative office
On the other hand promoting foreign companies is the only goal of the representative office. Nonetheless, it might be beneficial for businesses that operate globally and want to avoid tax establishment assumptions.
Taxation of a branch in Poland – Corporate Income Tax (CIT)
A branch in Poland is “active” when it actually operates in Poland. In such cases, the foreign company must pay CIT on the income generated in Poland.
To determine whether a foreign company must pay CIT, it is necessary to verify whether it qualifies as a foreign establishment.
According to the CIT Act, the “foreign establishment” means:
- a permanent agency used by an entity whose registered office or management is located in the territory of one state to perform all or part of its activities in the territory of another state, in particular a branch, representation, office, factory, workshop, or a natural resource extraction site.
- a construction site, construction, assembly, or system operated in the territory of one state by an entity that has its registered office or management in the territory of another state
- a person who acts in the territory of one state for and on behalf of an entity that has its management in the territory of another state, if he is authorized to conclude agreements on behalf of that entity and actually exercises that authority
– unless otherwise provided for in a double taxation agreement to which the Republic of Poland is a party.
According to case-law, the branch in Poland is not a taxable entity. It is the foreign entity itself that is subject to taxation. Thus, the branch in Poland is not a separate CIT taxpayer. However, it is subject to the same obligations as independent Polish taxpayers.
For example, it must make monthly advance tax payments and submit an annual tax return. Furthermore, the Accounting Act obliges the Polish branch to maintain accounting books.
The law doesn’t specify the registration procedure for a CIT taxpayer in Poland. Therefore, it is sufficient to submit a written notification to the appropriate tax office about the establishment of a Polish branch.
Along with it, a confirmation of previous registration for NIP purposes with the tax office competent for the VAT should be submitted. The abbreviation NIP stands for the Polish tax identification number.
Taxation of a branch in Poland – Value Added Tax (VAT)
According to the VAT Act, entities running VAT-taxable business in Poland must be registered.
Entities referred to in Art. 15 of the Act, must submit a registration application before performing for the first time an activity specified in Art. 5 of the Act. Namely:
- Paid delivery of goods and paid provision of services within the territory of the country,
- Exporting goods,
- Importing goods into the country,
- Intra-Community acquisition of goods for payment in the territory of the country,
- Intra-Community supply of goods.
The statutory definition of a VAT taxpayer includes entities residing or having a registered office both inside and outside the country. The legislator didn’t use the criterion of residence or registered office when defining the term “taxpayer.” This means that a foreign company conducting activities in Poland through its branch must apply for VAT registration.
There are exceptions to the above rule. The regulation of the Minister of Finance on the identification of taxpayers who are not obliged to apply for registration specifies them.
According to the regulation, taxpayers who do not have:
- a registered office in Poland (in the case of legal entities or organizational units not having legal personality),
- permanent residence or usual place of residence in Poland- in the case of natural persons,
- a permanent place of conducting business activity in Poland,
are exempt from the obligation to submit a VAT registration application.
EU regulations define a permanent place of business as any place other than the seat of the taxpayer’s company. It must be characterized by stability and appropriate structure. Therefore, most branches of foreign companies in Poland should register as VAT taxpayers. Even a minimal range of services they provide can create a permanent place of business for them.
If this article was interesting for you and you want to know more on the topic it concerned we encourage you to contact us. Specialists from our law firm in Poland, will be happy to help. If you are interested in company registration in Poland visit our dedicated landing page.
Frequently asked questions (FAQ) related to branch in Poland
Can a branch of a foreign company in Poland employ workers in Poland?
Yes, a branch of a foreign company in Poland can acquire a status of employer under the provisions of Polish labor code.
How much time does branch registration in Poland take?
The procedure of registering of a branch of a foreign company in Poland takes around 1 -3 months
Who can be appointed as a representative of a branch of a foreign company in Poland?
There are no particular requirements regarding the person indicated as a branch representative. Such person does not need to be a Polish citizen or an employee of the company’s branch. There is no requirement for a branch representative to speak Polish. More than one branch representative may be assigned.
What is a Polish branch and how does it operate?
A branch in Poland operates as an extension of a foreign parent company, lacking separate legal personality but maintaining the same scope of activity as the parent entity.
What are the legal requirements for opening a branch in Poland?
Opening a branch requires a resolution from the parent company’s governing body and registration with the Polish National Court Register, among other legal formalities.
Can EU-based companies establish a branch in Poland without restrictions?
Yes, entrepreneurs from the EU can establish a branch in Poland with minimal limitations, while non-EU companies may be subject to reciprocity agreements.
What is the role of a branch representative in Poland?
A branch representative acts on behalf of the foreign parent company and has the authority to represent it in activities related to the branch’s operation in Poland.
Are there any nationality or language requirements for the branch representative?
No, there are no specific requirements regarding nationality or language proficiency for a branch representative in Poland.
What happens after the branch is registered in Poland?
The branch must be reported to the Internal Revenue Service for tax identification, register for VAT if necessary, and comply with Polish accounting and tax regulations.
How does the taxation of a branch in Poland work?
A branch in Poland is taxed on income generated within Poland and must adhere to Polish tax laws, including corporate income tax (CIT) and value-added tax (VAT), as applicable.
How does a branch differ from a subsidiary in Poland?
Unlike a branch, a subsidiary has its own legal personality, separate assets, and can conduct any legal economic activity. It also requires a minimum share capital and registration by a notary.
What accounting obligations does a branch in Poland have?
A branch must maintain accounting records in Polish and according to Polish accounting standards.
How is a Polish branch’s name determined?
The name must include the parent company’s name with a legal form translated into Polish, followed by “oddział w Polsce” (branch in Poland).
Do branches in Poland have governing bodies?
No, branches do not have separate governing bodies as they are part of the foreign parent company.