Insides

When a foreign company considers expanding into Poland, one critical decision stands out: should they open a branch or establish a subsidiary? This choice has significant implications for legal responsibilities, tax obligations, and operational ease. Understanding these differences is crucial for making an informed, strategic decision.

Understanding the Branch

A branch is an extension of a foreign company, not a separate legal entity. This distinction has profound implications. For instance, the parent company bears full responsibility for the branch’s operations. This means, in terms of taxation, branches in Poland must maintain comprehensive accounting records and pay Corporate Income Tax (CIT), among other taxes, on behalf of their foreign parent company.

Challenges of Operating a Branch

Navigating the Complexities of a Branch in Poland

Managing a branch in Poland presents several practical challenges:

• Representation Issues: Branches must be represented by board members of the foreign company, requiring documentation from the foreign business registry, often necessitating sworn translations into Polish.
  Banking Hurdles: Opening a bank account in Poland can be troublesome for branches.
  Legal Representation: In court proceedings, branches cannot represent themselves and must be represented by directors of the foreign company.
  Accounting and Reporting Complexities: Branch operations are considered part of the foreign company’s business, making compliance with various reporting standards challenging.

Advantages of a Subsidiary

Why Choose a Subsidiary in Poland?

In contrast, a subsidiary in Poland operates as a separate legal entity, offering several advantages:

• Operational Independence: Unlike branches, subsidiaries have more freedom in their operations and decision-making.
  Simplified Legal and Banking Processes: Subsidiaries face fewer hurdles in legal representation and banking operations.
  Easier Accounting and Reporting: As independent entities, subsidiaries follow local accounting and reporting standards, streamlining these processes.

Making the Right Choice

Subsidiary or Branch: What’s Best for Your Business in Poland?

Choosing between a subsidiary and a branch depends on your business needs and long-term goals. While a branch might be easier to establish, the long-term benefits of a subsidiary, especially in terms of operational independence and compliance ease, often outweigh the initial simplicity of setting up a branch.

Conclusion

Deciding whether to open a branch or a subsidiary in Poland is a significant decision for any foreign company. Understanding the legal, tax, and operational implications of each option is crucial. Our firm specializes in guiding foreign companies through these complex decisions, ensuring a smooth and successful expansion into the Polish market.

Are you considering expanding your business to Poland and unsure which path to take? Contact us for expert advice tailored to your unique business needs. Let us help you make the right decision for your business’s future in Poland.

Jerzy Gaweł
Partner – Tax Advisor