Branch vs Subsidiary in Poland: Which is Better?

Poland, with its thriving economy and strategic location in Europe, has become a magnet for foreign enterprises. But before setting up a business in Poland, one of the most critical decisions you’ll face is: Do I register a branch or a subsidiary in Poland?

Understanding the key differences between these two entities is crucial for choosing the path that best aligns with your business goals and risk tolerance. So, buckle up, entrepreneurs, as we delve into the intricacies of branches vs. subsidiaries in Poland.

Features of a Branch in Poland

• No legal personality: A branch office in Poland lacks a separate legal existence from its parent company. The parent corporation is completely accountable for all the branch’s liabilities and debts.
• Operational extension: A branch acts as an extension of the parent company’s operations in Poland. It is not allowed to be involved in activities beyond the parent company’s scope.
• Simpler registration: Setting up a branch involves less paperwork and administrative hurdles compared to a subsidiary.
• Flexibility in capital movement: There are no major tax ramifications when transferring money between the parent company and the branch.
• Limited autonomy: Usually, the parent business sets the branch’s management and decision-making power.

Advantages of a Branch in Poland

• Limited liability for the parent company: While the parent company is ultimately responsible, risks and losses incurred by the branch are confined to Polish operations.
• Faster setup time: Registration formalities are streamlined, which makes it quicker to enter the market..
• Simplified financial reporting: Consolidated financial statements for the entire group simplify accounting processes.
• Personnel flexibility: It is simple to move employees between the main firm and the branch.

Registration of a Branch in Poland

Obtain a Branch Registration Certificate

File an application with the National Court Register, providing details about the parent company and the branch’s activities.

Select a Branch Representative 

Choose an attorney who is permitted to represent the branch in Poland.

Register for Tax Purposes

Acquire a tax identification number by enrolling with the relevant tax authorities.

Create a Bank Account

Open a bank account for the Polish branch.

Features of a Subsidiary in Poland

• Independent legal entity: A subsidiary in Poland is a separate legal entity from its parent company, with its own assets, liabilities, and management.
• Limited liability: The liability of the parent business is capped at what it invested in the subsidiary.
• Greater autonomy: In terms of operations, strategic direction, and decision-making, subsidiaries are more independent.
• More complicated registration: Compared to opening a branch, establishing a subsidiary entails more stringent legal and financial procedures.
• Separate financial reporting: Subsidiaries maintain separate financial records and are subject to independent audits.

Advantages of a Subsidiary in Poland

• Increased market credibility: A subsidiary presents a more established image in the Polish market, potentially boosting customer trust and confidence.
• Flexibility in ownership and control: Through the shareholding structure, the parent business is able to determine how much control it has over the subsidiary.
• Potential tax benefits: Certain tax structures involving subsidiaries might offer tax advantages depending on specific circumstances.

Registration of a Subsidiary in Poland

Choose a Company Structure

Decide on the type of limited liability company (Sp. z o.o.) or other permitted business structures.

Prepare the Articles of Association 

Prepare the articles of association outlining the organization’s name, registered office, share capital, and management structure.

Make a Minimum Capital Deposit

Deposit the required minimum share capital into a designated bank account.

File for Registration

Submit the relevant documents and fees to the National Court Register for company registration.

Register for Tax Purposes

Register with the relevant tax authorities and acquire a tax identification number.

Set up a Bank Account: 

Set up a bank account for the subsidiary in Poland.

A Comparison Table for Branch vs. Subsidiary in Poland

Conclusion

Choosing between a branch and a subsidiary in Poland depends on various factors, including the level of control desired, liability considerations, and administrative preferences. Each structure has advantages of its own, and in the end, the choice is made based on the particular requirements and objectives of the growing company.

If you’re considering business expansion into Poland, our team of business experts at OnDemand International can provide comprehensive guidance on the establishment process, legal requirements, and tax implications. We understand the complexities of the Polish business landscape and can assist you in making informed decisions that align with your company’s objectives.