Branch of a Foreign Company in Poland

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.