Month: December 2025

Withholding Tax (WHT) in Poland

Posted on by kancelaria

Withholding tax (WHT) constitutes one of the key elements of the Polish tax system, directly affecting the profitability of cross-border capital flows. For foreign investors conducting business in Poland or receiving payments from Polish entities, understanding WHT mechanisms is essential for proper investment structure planning and tax burden optimization.

The Essence of Withholding Tax

Withholding tax is a form of taxation in which an entity making certain payments to a non-resident is obligated to deduct tax and remit it to the Polish tax office. This mechanism transfers responsibility for tax settlement to the payer, significantly simplifying tax collection from entities without a registered seat in Poland.

The Polish WHT system primarily covers payments of a passive nature – dividends, interest, royalties – but also remuneration for certain intangible services. The obligation to withhold tax arises at the moment of payment or making funds available to the recipient, regardless of the actual monetary transfer.

Scope of Taxation

Payments subject to WHT include those made to non-residents in respect of dividends and other income from participation in profits of legal persons, interest on loans, credits, bonds and other debt instruments, royalties for the use of copyrights, patents, trademarks and know-how, as well as remuneration for advisory services, accounting services, market research, legal services, advertising services, management and control, data processing, employee recruitment services, and sureties and guarantees.

Particular attention should be paid to the broad category of intangible services, which in Polish tax practice tends to be interpreted expansively by tax authorities, also encompassing services of a mixed nature if they contain advisory or management elements.

Withholding Tax Rates

The basic WHT rates under Polish tax legislation are 19% for dividends and other income from participation in profits of legal persons, 20% for interest, royalties and remuneration for intangible services, and 10% for income from maritime shipping and air transport in international traffic.

These rates may be reduced or entirely eliminated based on double taxation treaties concluded by Poland with individual countries or provisions implementing EU directives. Poland is party to over 90 tax treaties that provide for differentiated preferential rates depending on the type of payment and the recipient’s status.

Double Taxation Treaties

Application of preferential rates under tax treaties requires fulfillment of specific formal and substantive conditions. The payer must primarily possess a current tax residence certificate of the payment recipient, confirming their place of residence for tax purposes. The certificate should be issued by the competent tax authority of the state of residence and remain valid at the time of payment.

Of key importance is also verification of whether the payment recipient is the beneficial owner of the amounts paid. The beneficial owner concept, derived from the Commentary to the OECD Model Convention, requires establishing that the recipient does not act merely as an intermediary or agent, but has the right to freely dispose of the received funds and bears the associated economic risk.

Exemptions Under EU Directives

Polish provisions implement EU directives providing for WHT exemptions for certain intra-group payments. The Parent-Subsidiary Directive enables exemption from withholding tax on dividends paid by a Polish subsidiary to a parent company from another EU or EEA member state, provided that at least 10% of shares are held for an uninterrupted period of minimum two years.

The Interest-Royalties Directive provides for analogous exemption for interest and royalties paid between related companies from different member states, with the required capital link threshold of 25% and a two-year holding period.

Application of directive exemptions additionally requires fulfillment of the test of genuine economic activity of the recipient and demonstration that the main purpose or one of the main purposes of the transaction is not obtaining a tax benefit contrary to the object and purpose of the provisions.

The Pay and Refund Mechanism

Since 2019, the Polish WHT system has included the pay and refund mechanism, which applies to payments exceeding PLN 2 million annually to the same taxpayer. When this threshold is exceeded, the payer is obligated to withhold tax at the full statutory rate, regardless of preferences under tax treaties or EU directives.

The payment recipient may subsequently apply for a refund of overpaid tax by submitting an appropriate application to the Polish tax authority. The refund procedure requires presentation of documentation confirming entitlement to apply the preferential rate and may take up to six months.

Alternatively, the payer may obtain an opinion on the application of preferences, which authorizes direct application of reduced rates without the need to subsequently apply for a refund. The opinion is issued upon application by the payer or taxpayer and remains valid for 36 months, provided the factual circumstances remain unchanged.

Documentation and Reporting Obligations

WHT payers are obligated to maintain detailed documentation confirming entitlement to apply preferential rates or exemptions. Documentation should include residence certificates, recipient statements on beneficial owner status, documents confirming fulfillment of directive exemption conditions, and analyses concerning the genuine economic activity of recipients.

Payers submit annual information on withheld tax using IFT-2R forms (for payments to legal persons) or IFT-1R forms (for payments to natural persons) by the end of January of the year following the tax year. Additionally, for certain payments, monthly PIT-8AR or CIT-10Z declarations are required.

Sanctions for Irregularities

Incorrect WHT settlement may result in serious consequences for the payer. In the case of failure to withhold tax or withholding it in an understated amount, the payer is liable with their entire assets for the tax obligation together with late payment interest. Additionally, in cases of culpable conduct, fiscal penal sanctions may be imposed, the extent of which depends on the degree of public liability reduction.

Tax authorities intensively verify the correctness of WHT settlements, particularly regarding beneficial owner status and fulfillment of exemption conditions. Audits frequently focus on transactions with entities from jurisdictions with favorable tax systems and on intra-group payments.

Practical Aspects of Tax Planning

Effective WHT burden management requires a comprehensive approach encompassing analysis of the capital group structure for flow optimization purposes, verification of available preferences under tax treaties and EU directives, proper documentation of payment recipient status, and ongoing monitoring of legislative and interpretative changes.

Particularly important is obtaining residence certificates and opinions on the application of preferences sufficiently in advance, which helps avoid the necessity of applying the pay and refund mechanism and its associated administrative complications.

Our law firm specializes in comprehensive legal and tax services for foreign investors in Poland. We offer support in analyzing WHT obligations, preparing documentation necessary for applying preferential rates, representing clients before tax authorities in overpaid tax refund procedures, and ongoing advisory services regarding optimization of the tax structure of cross-border capital flows. Our multilingual team of experts ensures smooth communication and full understanding of the specifics of international clients’ operations.

EDPS: New AI Risk Management Guidelines

Posted on by kancelaria

The European Data Protection Supervisor has published a groundbreaking document setting standards for personal data protection in the era of artificial intelligence. The guidelines serve as a practical handbook for all EU institutions implementing AI systems.

A Landmark Document in the Age of Digital Transformation

On 11 November 2025, the European Data Protection Supervisor (EDPS) published comprehensive guidelines on risk management for artificial intelligence systems. The document, spanning over 50 pages, responds to the growing challenges associated with integrating AI technology in European Union Institutions, Bodies, Offices and Agencies (EUIs).

The guidelines are not intended to be an exhaustive catalogue of requirements. The EDPS emphasises that each institution should conduct its own tailored risk assessment. The document was issued within the EDPS’s supervisory competence in data protection matters, independently of its role as a market surveillance authority under the EU Artificial Intelligence Act.

Methodological Foundation: ISO 31000 Standard

The guidelines are based on the internationally recognised ISO 31000:2018 standard for risk management. The adopted methodology encompasses the full risk management cycle: from establishing the organisational context, through risk identification and analysis, to evaluation, treatment and continuous monitoring.

The document defines risk in the context of personal data processing by AI systems. The risk source is the data processing itself within the AI system implementation. The risk event is a situation where such processing may infringe upon the rights and freedoms of data subjects. The consequence is the material or non-material harm that these individuals may suffer.

The AI System Lifecycle as a Risk Management Framework

The EDPS provides a detailed analysis of the artificial intelligence system lifecycle, indicating that different risks emerge at different stages of development and deployment. A typical lifecycle comprises nine phases: from inception and analysis, through data acquisition and preparation, system development, verification and validation, deployment, operational functioning with monitoring, continuous validation, re-evaluation, to system retirement.

The guidelines pay particular attention to the procurement process. The EDPS emphasises that this stage represents a crucial intervention point, allowing potential issues to be avoided at later stages of implementation. The document recommends involving data protection officers at the tender specification stage to prevent subsequent difficulties with ready-made solutions that may not comply with requirements.

Interpretability and Explainability: A Sine Qua Non

One of the key elements of the guidelines is the requirement for AI system interpretability and explainability. The EDPS treats these characteristics as an absolute condition for compliance with data protection regulations.

Interpretability concerns the ability to understand how an AI model operates – its internal logic and the connections between input data and results. Explainability, on the other hand, focuses on the ability to explain why the system generates specific results in a manner comprehensible to end users.

The guidelines point to specific technical tools for ensuring explainability. Among them are methods such as LIME (Local Interpretable Model-agnostic Explanations) and SHAP (SHapley Additive exPlanations), based on cooperative game theory, which assign values to individual model features and enable understanding of their impact on specific predictions.

Five Key Data Protection Principles in the AI Context

The central part of the guidelines comprises a detailed analysis of five data protection principles in the specific context of artificial intelligence systems: fairness, accuracy, data minimisation, security, and data subjects’ rights.

The Fairness Principle and Algorithmic Bias

Artificial intelligence systems tend to replicate and amplify existing human biases, and even create new ones. The EDPS identifies several types of bias: those resulting from poor quality training data, from non-representative datasets, from model overfitting, from algorithm design itself, and from misinterpretation of results.

The guidelines cite the example of the COMPAS system used in the American justice system to predict recidivism. The system exhibited bias against African American individuals, which resulted, among other factors, from an erroneous assumption of a linear relationship between certain features and the prediction.

As remedial measures, the document indicates: data quality audits, regularisation techniques to prevent overfitting, diversity in project teams, training for those interpreting results, and the use of bias audit tools such as AI Fairness 360 and Aequitas.

The Accuracy Principle: Legal and Statistical Dimensions

The EDPS distinguishes two dimensions of accuracy. Legal accuracy, stemming from data protection regulations, requires that processed personal data be correct and up to date. Statistical accuracy, on the other hand, refers to the correctness of results generated by the AI system.

A particular challenge is the phenomenon of data drift – the gradual change in data characteristics over time, which can cause model accuracy degradation. The guidelines recommend implementing drift detection mechanisms, continuous quality monitoring, and regular model retraining.

The Data Minimisation Principle

AI systems have a natural tendency to utilise as much data as possible. The EDPS warns against unjustified data collection exceeding what is necessary to achieve a specific purpose. The guidelines recommend prior assessment of data utility, using sampling instead of complete datasets, and anonymisation and pseudonymisation techniques.

The Security Principle: New Attack Vectors

AI systems introduce new categories of security threats. The EDPS identifies three main risk areas: data disclosure through model outputs (for example, through attacks involving training data reconstruction), breaches related to storing large datasets, and leaks through API interfaces.

As protective measures, the guidelines indicate: differential privacy, encryption, synthetic data, secure programming practices, multi-factor authentication, role-based access control, API query rate limiting, and regular security audits.

Data Subjects’ Rights

Exercising the rights of access, rectification and erasure of personal data in the context of AI systems encounters specific difficulties. Data may be dispersed across model parameters, making identification and extraction difficult. Furthermore, the phenomenon of data memorisation by models may prevent their effective deletion.

The guidelines point to the developing field of machine unlearning, which allows the removal of the influence of specific data from a model without the need for complete retraining from scratch.

Practical Tools: Annexes to the Guidelines

The document contains three practical annexes. The first presents metrics and benchmarks for evaluating AI systems, including recognised standards such as GLUE, SuperGLUE and HELM for language models, as well as ImageNet and COCO for image recognition systems.

The second annex offers a synthetic overview of all identified risks. The third contains checklists assigned to individual phases of the AI system lifecycle, enabling systematic compliance verification at each stage.

The Significance of the Guidelines for the Future of AI in the EU

The EDPS guidelines fill an important gap between abstract regulatory principles and the practical implementation of artificial intelligence systems. Although addressed directly to EU institutions, they constitute a valuable model for organisations outside the public sector as well.

The document fits into the broader context of the European approach to artificial intelligence regulation, supplementing AI Act provisions with a data protection dimension. The EDPS emphasises that the guidelines should be used in conjunction with other tools it has developed, particularly the guidelines on data protection impact assessments and the orientations on generative artificial intelligence from June 2024.

The publication of these guidelines signals that the era of unregulated AI development in public institutions is coming to an end. Technological innovation must go hand in hand with responsibility for protecting citizens’ fundamental rights.

Corporate Income Tax (CIT) in Poland

Posted on by kancelaria

Poland has long attracted foreign investors with its stable legal environment, European Union membership, and competitive tax system. Understanding the principles of corporate income tax (CIT) is one of the key elements when planning business activities in Poland. This guide presents the most important aspects of Polish CIT from the perspective of a foreign investor.

Legal Framework and Scope of Taxation

Polish corporate income tax is regulated by the Act of 15 February 1992 on Corporate Income Tax. Taxation applies to legal persons, capital companies in organisation, and organisational units without legal personality, with the exception of enterprises in inheritance and partnerships without legal personality.

The distinction between limited and unlimited tax residency is of crucial importance for foreign investors. Taxpayers with their registered office or place of management in Poland are subject to unlimited tax liability, meaning taxation on all income regardless of where it is generated. Foreign entities that do not have their registered office or place of management in Poland are subject to limited tax liability only on income earned in Poland.

CIT Tax Rates

The Polish CIT system provides for two basic tax rates. The standard rate is 19% of the tax base and applies to most taxpayers. A preferential rate of 9% is available for small taxpayers and taxpayers commencing business activity. Small taxpayer status is granted to entities whose gross sales revenues in the previous tax year did not exceed the equivalent of 2 million euros.

However, it should be noted that the reduced 9% rate is subject to certain limitations. It cannot be used by entities created as a result of certain transformations, divisions, or contributions of an enterprise or its organised part. This restriction aims to prevent tax optimisation involving the artificial creation of new entities solely to benefit from the preferential rate.

Estonian CIT – Lump Sum Tax on Company Income

Polish tax law offers an alternative form of taxation known as Estonian CIT or lump sum tax on company income. This taxation model allows for deferral of tax payment until profit distribution. As long as earned funds remain in the company and are reinvested, no tax is collected.

Estonian CIT rates are 10% for small taxpayers and taxpayers commencing business activity and 20% for other entities. After accounting for the deduction of part of the tax paid by the company from the tax due from the shareholder, the effective combined taxation may be more favourable than under classic CIT.

Estonian CIT is available to limited liability companies, joint-stock companies, simple joint-stock companies, limited partnerships, and limited joint-stock partnerships, provided certain conditions are met. Shareholders of such a company may only be natural persons, and the company may not hold shares in other entities or conduct business in a special economic zone or under a decision on support for new investment.

IP Box Relief

Poland has introduced a preferential tax rate of 5% for income from qualified intellectual property rights, known as IP Box. This relief applies to income from patents, protection rights for utility models, rights from registration of industrial designs, rights from registration of integrated circuit topographies, supplementary protection rights for patents on medicinal products or plant protection products, rights from registration of medicinal products, rights from registration of plant varieties, and copyrights to computer programs.

The condition for using this relief is that the taxpayer conducts research and development activities directly related to the creation, development, or improvement of the qualified intellectual property right. The taxpayer must also maintain appropriate accounting records enabling the separation of revenues and costs related to individual rights.

Research and Development Relief

Taxpayers conducting research and development activities may benefit from an additional deduction of qualified costs from the tax base. This deduction is available regardless of whether these costs are included in tax-deductible expenses, meaning that the same expenditures may be taken into account twice in the tax settlement.

The amount of the deduction is 100% of qualified costs for most taxpayers, while for research and development centres the limit is 150%. Qualified costs include, among others, remuneration of employees engaged in R&D activities, materials and raw materials, expert opinions, advisory services, paid use of scientific and research equipment, and depreciation charges on fixed assets and intangible assets used in R&D activities.

Withholding Tax

Payments made to foreign entities may be subject to withholding tax in Poland. Standard rates are 20% for income from interest, copyrights and related rights, trademarks, know-how, and intangible services such as consulting, accounting, market research, legal services, or advertising. Dividends and other income from participation in the profits of legal persons are taxed at a rate of 19%, while certain payments for entertainment services are taxed at 10%.

These rates may be reduced or the tax may be completely eliminated under double taxation treaties concluded by Poland. The condition for applying a preferential rate is that the payer holds a tax residency certificate of the payment recipient. For payments exceeding 2 million zlotys annually to the same entity, the payer is obliged to withhold tax at the domestic rate, and the foreign entity may then apply for a refund of the overpaid tax.

Special rules apply to payments between related entities within the European Union. Under EU directives implemented into Polish law, dividend, interest, and royalty payments between qualifying related entities may benefit from withholding tax exemption after meeting certain conditions regarding the level of capital links and the period of their maintenance.

Transfer Pricing

Transactions between related entities must be carried out on arm’s length terms. Polish transfer pricing regulations require taxpayers to prepare transfer pricing documentation for controlled transactions exceeding certain value thresholds. These thresholds are 10 million zlotys for goods and financial transactions and 2 million zlotys for service transactions and those involving intangibles.

Local documentation should contain a description of the transaction, functional analysis, benchmarking study or compliance analysis, and financial information. Additionally, entities belonging to capital groups whose consolidated revenues exceed 200 million zlotys are required to prepare group documentation. The largest capital groups with revenues exceeding 750 million euros must submit country-by-country reporting.

Reporting Obligations and Deadlines

The tax year in Poland generally coincides with the calendar year, although taxpayers may choose a different twelve-month period as their tax year. The annual CIT-8 return must be filed by the end of the third month following the end of the tax year. The difference between the tax due and the sum of advance payments made must be paid by the same deadline.

During the tax year, taxpayers are required to make monthly advance tax payments. Small taxpayers may opt for quarterly advance payments. Advances are paid by the 20th day of the month following the month or quarter to which they relate.

Practical Aspects for Foreign Investors

When planning an investment in Poland, foreign entrepreneurs should consider several key tax issues. The choice of legal form of business is of significant importance for tax efficiency. The limited liability company remains the most popular form due to its combination of limited shareholder liability with operational flexibility and access to tax preferences.

Investment location may enable the use of tax exemptions under the Polish Investment Zone. This system replaced the earlier special economic zones and offers CIT exemptions of up to 70% of the value of qualified investment costs, depending on the region and size of the entrepreneur.

The financing structure of activities in Poland also requires careful planning. Polish thin capitalisation rules limit the possibility of including interest on loans from related entities as tax-deductible expenses. The surplus of debt financing costs is subject to a limit of 3 million zlotys or 30% of EBITDA.

How We Can Help – Support for Foreign Investors

Our law firm specialises in comprehensive legal and tax services for foreign investors entering the Polish market. We understand that navigating the Polish tax system can be challenging for entrepreneurs from other jurisdictions, which is why we offer full support at every stage of investment.

In the area of CIT, we help our clients choose the optimal form of taxation, taking into account the specifics of their business and objectives. We advise on the choice between classic CIT and Estonian CIT, analysing the benefits and limitations of each solution in the context of the individual investor’s situation. We also support the implementation of tax reliefs, including IP Box and research and development relief, helping to properly document activities qualifying for preferences.

Our team provides comprehensive transfer pricing services, from preparing transfer pricing policies through preparing required documentation to support in the event of tax audits. We also advise on withholding tax matters, helping with the correct application of double taxation treaties and obtaining refunds of overpaid tax.

For investors planning to start business in Poland, we offer support in choosing the optimal legal structure, company registration, and obtaining a decision on support under the Polish Investment Zone. We also provide ongoing tax services, including preparation of tax declarations and returns, as well as representation before tax authorities.

By working with our firm, foreign investors gain a partner who not only knows Polish tax law but also understands the specifics of conducting cross-border business and can communicate effectively in English and other foreign languages. We invite you to contact us to discuss your investment plans and tax optimisation opportunities.

Investment Restrictions for Foreign Investors in Poland

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Poland, as a European Union member state, applies the principle of free movement of capital to investors from member states. However, the situation differs significantly for investors from outside the EU, who face restrictions in certain economic sectors requiring appropriate approvals and permits. Understanding these regulations is essential for successful market entry and avoiding costly procedural mistakes.

Legal Framework

The Polish system of investment restrictions is based on several key legal acts. The Act of 24 March 1920 on the Acquisition of Real Estate by Foreigners remains the fundamental regulation governing the principles of acquiring land and real estate by foreign entities. The Act of 24 July 2015 on the Control of Certain Investments introduces a mechanism for protecting strategic companies and economic sectors, which was significantly strengthened in response to the COVID-19 pandemic. Additionally, sector-specific regulations govern access to particular industries such as media, energy, and financial services.

The distinction between investors from the EEA and Switzerland versus investors from third countries is of fundamental importance. The former generally benefit from national treatment, while investors from outside this area are subject to additional requirements and control procedures that can significantly impact transaction timelines and structures.

Real Estate Acquisition by Foreigners

Acquisition of real estate by a foreigner from outside the EEA generally requires a permit from the Minister of Internal Affairs and Administration. This obligation applies to natural persons without Polish or EEA citizenship, legal entities with registered offices abroad, and companies controlled by foreign entities.

A permit is required when acquiring real estate ownership rights, perpetual usufruct rights, and when acquiring shares in companies owning real estate if the company becomes controlled by a foreigner as a result of the transaction. The definition of control is broad and includes situations where a foreign entity gains the ability to exercise more than 50% of voting rights at the shareholders’ meeting.

Exemptions from the permit requirement apply in several important situations. These include the acquisition of a self-contained residential unit (apartment), acquisition by a foreigner who has been residing in Poland for at least five years since obtaining permanent residence or EU long-term resident permit, and acquisition by a foreigner who is a spouse of a Polish citizen where the property will become part of marital community property. Additionally, no permit is required for the acquisition of real estate not exceeding 0.4 hectares for business purposes.

The permit procedure requires submission of an application together with documents confirming the applicant’s ties to Poland, specification of the purpose and source of financing for the acquisition, and obtaining opinions from the relevant minister and the Minister of National Defence in the case of real estate located in the border zone. The permit is issued within up to two months, although this period may be extended in complex cases.

Control of Investments in Strategic Companies

The Act on the Control of Certain Investments establishes a mechanism for protecting entities of strategic importance to state security. This system was significantly expanded in 2020 in response to the COVID-19 pandemic and concerns about the acquisition of weakened Polish companies by capital from third countries.

Sectors subject to control include energy infrastructure encompassing generation, distribution, and trading of electricity, gas, and fuels. Telecommunications companies, including network operators and service providers, are also controlled. The defence industry is subject to particular oversight, as is the chemical industry covering the production of fertilizers, plastics, and industrial chemicals. Control also extends to food processing companies, pharmaceutical and medical device manufacturers, and IT companies providing services to public administration.

The obligation to obtain approval applies to the acquisition of significant shareholdings in protected companies. The thresholds triggering the notification obligation are the acquisition of 20%, 25%, and 33% of votes in a company. The notification obligation applies to investors from outside the EEA and OECD, as well as entities controlled by such investors. The competent authority for issuing decisions is the President of the Office of Competition and Consumer Protection (UOKiK), who may oppose a transaction threatening public order or state security.

The control procedure provides for a two-month period for reviewing the notification, with the possibility of extension in particularly complex cases. Completing a transaction without the required approval results in its invalidity and criminal sanctions for the persons responsible.

Sector-Specific Restrictions

Individual economic sectors are subject to additional regulations restricting access for foreign investors, each with its own specific requirements and limitations.

Broadcast media represent one of the most restricted sectors. The Act on Radio and Television Broadcasting requires that a licence for radio and television broadcasting may only be obtained by an entity with its registered office in an EEA member state. An investor from outside the EEA may hold a maximum of 49% of shares in a broadcasting company, making this one of the most restrictive limits in the Polish legal system.

The banking and financial sector requires approval from the Polish Financial Supervision Authority (KNF) for the acquisition of significant shareholdings in banks. The KNF assesses the suitability of the investor, their financial situation, and the impact of the transaction on the stability of the financial sector. Similar requirements apply to insurance companies, investment fund companies, and other financial institutions. The assessment process is thorough and may include requests for additional information about the investor’s group structure and business plans.

The aviation sector requires air carriers to meet ownership and control requirements set out in EU regulations. Entities from outside the EU may hold shares in Polish airlines; however, effective control must remain in the hands of citizens or entities from member states. This requirement is strictly monitored and verified during the licensing process.

Mining activities in the area of exploration and exploitation of hydrocarbon deposits require a licence granted by the Minister of Climate and Environment. When assessing applications, aspects of national energy security are taken into account, which may influence decisions regarding investors from certain third countries.

Procedures and Required Documentation

An investor planning to enter the Polish market in a regulated industry should begin with an analysis of the planned investment structure in terms of applicable restrictions. It is then necessary to identify the relevant administrative authorities and required procedures, as well as prepare complete documentation taking into account the specifics of the given sector.

Typical documentation includes:

  • corporate documents of the investor together with sworn translations and apostille
  • information on the ownership structure down to ultimate beneficial owners
  • business plan or description of the investment strategy
  • documents confirming sources of financing
  • criminal record certificates for management personnel

Indicative timelines for processing applications vary depending on the procedure. A permit for real estate acquisition is issued within up to two months. Approval for the acquisition of shares in a strategic company also requires approximately two months. Sector-specific licences may require three to six months depending on the industry and complexity of the application.

Penalties for Non-Compliance

Completing an investment without the required approval or permit carries serious consequences across multiple dimensions. On the civil law level, a legal transaction made without the required permit is invalid, which can unwind entire transaction structures. Administrative sanctions include financial penalties imposed by the relevant supervisory authorities. In the case of control of strategic investments, the Act also provides for criminal liability of persons who allowed the acquisition of shares without the required approval, with potential imprisonment of up to five years.

How We Support Foreign Investors

We specialise in comprehensive market entry services for foreign companies in Poland, combining legal advisory with expert tax knowledge. Our clients receive full support at every stage of the investment process.

Legal support encompasses detailed analysis of the planned investment for applicable restrictions and regulatory requirements. We help select the optimal legal form for conducting business in Poland, taking into account industry specifics and the investor’s business objectives. We prepare and submit applications for required permits, including real estate acquisition permits and notifications to UOKiK in the case of investments in strategic companies. We represent clients before Polish administrative authorities and oversee the proper conduct of registration procedures with the National Court Register.

Tax support covers investment structure planning in a tax-efficient manner, taking into account double taxation treaties. We advise on VAT registration, payer obligations, and ongoing tax settlements. We help clients take advantage of available investment incentives, including reliefs under the Polish Investment Zone and tax exemptions for certain types of activities. We also support clients in fulfilling reporting and documentation obligations, including transfer pricing requirements.

By combining legal and tax competencies, we ensure coherent and effective support that minimises regulatory risks and optimises fiscal burdens. Our experts are fluent in English and understand the specifics of working with foreign clients, enabling smooth communication and quick response to investor needs.

Contact us to discuss your planned investment and receive a tailored cooperation proposal.

Branch of a Foreign Company in Poland

Posted on by kancelaria

Expanding into the Polish market does not always require establishing a new company. For many foreign entrepreneurs, a much simpler and faster solution is to set up a branch – an organisationally separate part of the parent company’s business operations. This form of presence in Poland allows full business activity without the need to contribute share capital or appoint separate governing bodies.

What is a branch of a foreign entrepreneur

Under the Act on the Rules of Participation of Foreign Entrepreneurs and Other Foreign Persons in Economic Transactions in the Territory of the Republic of Poland, a branch constitutes an organisationally separate and independent part of business activity conducted by an entrepreneur outside their registered office or principal place of business. In practice, this means that a branch has no legal personality – all rights and obligations arising from its operations directly encumber the parent company.

A key principle that foreign investors must consider concerns the scope of activity. A branch may only conduct business within the scope of the foreign entrepreneur’s business activities. This means that the Polish unit cannot carry out projects or provide services beyond the parent company’s business profile registered in its country of domicile.

Who can establish a branch in Poland

The right to establish branches in Poland is granted to entrepreneurs from European Union Member States and Member States of the European Free Trade Association (EFTA), namely parties to the Agreement on the European Economic Area. Entrepreneurs from these countries enjoy full freedom of establishment guaranteed by EU regulations.

Entrepreneurs from outside the EU and EEA may establish branches in Poland on the basis of reciprocity, unless ratified international agreements provide otherwise. In practice, this requires verification of whether appropriate bilateral agreements guaranteeing such possibility exist between Poland and the country where the parent company is domiciled.

Branch registration procedure

The process of establishing a branch requires completing several formal stages. First, the parent company must adopt a resolution on establishing a branch in Poland, specifying its name, registered office, and scope of activity. Subsequently, a person authorised to represent the foreign entrepreneur in the branch must be appointed – this is an absolute requirement arising directly from the regulations.

Branch registration takes place through entry in the National Court Register (KRS). The application is submitted on the official KRS-W10 form along with several attachments, including the KRS-WK form concerning the representative. The application must be accompanied by the founding act, agreement or articles of association of the parent company with a certified translation into Polish, an extract from the foreign register with translation, and a document confirming the authorisation of the person representing the branch.

Documents originating from abroad require appropriate authentication. For documents from states party to the 1961 Hague Convention, an apostille is sufficient, while documents from other countries must be legalised by the appropriate diplomatic mission.

Entry in the KRS is subject to a court fee of PLN 500 and a fee for announcement in the Court and Commercial Gazette of PLN 100. The registration court has 7 days to process a correctly submitted application.

Branch name and designation

A branch must use the original name of the foreign entrepreneur along with the legal form translated into Polish and the additional designation “oddział w Polsce” (branch in Poland). For example, if the parent company is named “TechSolutions GmbH”, its Polish branch will operate as “TechSolutions spółka z ograniczoną odpowiedzialnością oddział w Polsce”. This requirement ensures transparency in business transactions and clearly indicates to counterparties that they are dealing with an organisational unit of a foreign entity.

Branch representative – the person in the branch

A foreign entrepreneur is obliged to appoint a person authorised in the branch to represent it. This person does not need to be a Polish citizen or even a resident – it may be any natural person with full legal capacity. The scope of their authority is determined by the power of attorney granted by the parent company’s governing bodies.

It is worth emphasising that the branch representative is not equivalent to a member of the company’s management board. Their competences are limited to matters related to the branch’s operations and derive solely from the content of the power of attorney granted. In practice, the representative often handles day-to-day contacts with authorities, concludes commercial contracts on behalf of the parent company, and represents the branch before courts.

Reporting and accounting obligations

A branch of a foreign entrepreneur is subject to Polish accounting regulations regarding units operating in Poland. This means an obligation to maintain accounting books in accordance with the Accounting Act and to prepare annual financial statements. These statements must be submitted to the National Court Register within 15 days of approval, but no later than 12 months from the balance sheet date.

The foreign entrepreneur is also obliged to submit to the branch’s registration files the annual financial statements of the parent company, if required in its country of domicile. These documents require sworn translation into Polish.

Branch taxation

From a tax perspective, a branch of a foreign entrepreneur constitutes a permanent establishment within the meaning of double taxation treaties. This means that profits attributed to the branch are subject to corporate income tax in Poland at the standard rate of 19% or the preferential rate of 9% for small taxpayers and taxpayers commencing business activity, provided revenues do not exceed the equivalent of EUR 2 million.

A branch is also an independent VAT taxpayer in Poland. It is subject to registration as an active VAT taxpayer if it performs taxable activities and settles accounts with the Polish tax authorities on general principles. Transactions between the branch and the parent unit generally do not constitute activities subject to VAT, as they occur within the same legal entity, although there are exceptions to this rule arising from CJEU case law.

Branch versus subsidiary – comparison

The choice between a branch and a subsidiary depends on the investor’s strategic objectives and the specifics of the planned activity. A branch offers a simpler organisational structure, no capital requirements, and a faster registration procedure. On the other hand, the parent company is liable with all its assets for the branch’s obligations, which may constitute a significant risk in the case of higher-risk activities.

A subsidiary, although requiring more formalities and expenditure to establish, provides full limitation of liability to the amount of contributed capital. It also constitutes a separate legal entity, which may be important from the perspective of perception by counterparties and when applying for certain permits or licences.

Branch liquidation

Closure of a branch occurs by decision of the foreign entrepreneur or ex officio in specified cases, such as liquidation of the foreign entrepreneur or gross violation of Polish law. The liquidation process includes settling obligations to counterparties and employees, fulfilling tax obligations, and submitting an application for removal of the branch from the National Court Register.

The minister responsible for the economy may issue a decision prohibiting the branch from conducting business if the foreign entrepreneur grossly violates Polish law, has been declared bankrupt, or fails to fulfil the obligation to submit reports to the registration files.

Practical recommendations for investors

Before deciding to establish a branch, it is advisable to conduct a detailed analysis of the planned activity. A branch works best as a form of market entry for entrepreneurs who want to quickly commence operational activity, do not plan a complicated ownership structure, and accept full liability of the parent company.

It is recommended to use the services of a professional representative when registering a branch, particularly regarding document preparation and translation. Formal errors extend the procedure and generate additional costs. It is equally important to establish in advance with a tax specialist the optimal structure of settlements between the branch and the parent unit to avoid transfer pricing problems and correctly allocate revenues and costs.