Register company in Poland – Differences in taxation of foreign company branches and representative offices
Registering a company in Poland is an attractive option for foreign entrepreneurs due to its stable economy and favourable investment conditions. However, before starting operations, it is crucial to determine the legal form of the business, as this impacts both tax obligations and operational aspects. Foreign companies often face a dilemma: should they open a representative office or a branch? To make an informed decision, it is essential to understand what these entities are and the differences between them, particularly in terms of taxation.
What is a branch in Poland?
A branch is a formally separate part of a foreign enterprise that can operate in Poland in the same way as in its home country. Unlike a representative office, a branch is allowed to conduct business activities, sign commercial contracts, sell goods, and provide services.
Example: A technology company providing software development services in Germany can open a branch in Poland to offer the same services to Polish clients.
Establishing a branch requires registration with the National Court Register (KRS). The branch must maintain separate accounting records in compliance with Polish regulations, and the foreign company must appoint a representative responsible for its activities.
What is a representative office in Poland?
A representative office is a type of entity limited to promotional and marketing activities on behalf of a foreign company or the country it originates from. It is not permitted to engage in business activities such as selling goods, providing services, or entering commercial transactions.
Example: A company manufacturing medical devices can set up a representative office in Poland to organise conferences, participate in trade fairs, and promote its products. However, it cannot directly sell devices or provide technical services.
A representative office must be registered in the Register of Representative Offices, maintained by the Minister of Economic Development. The registration is granted for two years, with the possibility of extension.
Key operational differences between a representative office and a branch
1. Scope of activities
Representative office: Limited to promotional and advertising activities. It cannot sell products or provide services to Polish customers.
Branch: Fully entitled to conduct business activities in Poland, in line with the operations of the parent company.
2. Registration and formal requirements
Representative office: Must be registered in the Register of Foreign Representative Offices managed by the Minister of Economic Development.
Branch: Requires registration in the National Court Register (KRS), which also involves maintaining full accounting records in accordance with Polish accounting regulations.
3. Liability
Representative office: Does not bear financial liability in Poland, as it cannot sign contracts or generate revenue.
Branch: Operates as an extension of the parent company, meaning that any liabilities incurred in Poland are directly linked to the main company.
The following section will analyse the taxation differences between the two business structures and the tax obligations for foreign entrepreneurs based on their chosen structure.
Taxation of a foreign company branch in Poland
Corporate Income Tax (CIT)
A branch of a foreign company in Poland is considered “active” if it conducts business operations within the country. In such cases, the foreign parent company is subject to Corporate Income Tax (CIT) on income earned in Poland.
A critical factor is determining whether the branch qualifies as a permanent establishment, as defined in the CIT Act, which includes:
- A fixed place through which the foreign company conducts business in Poland (e.g., an office or production plant).
- A construction, assembly, or installation project lasting beyond a specific period.
- A representative authorised to enter contracts on behalf of the foreign entity.
If the branch meets the definition of a permanent establishment, the foreign company must maintain accounting records in Poland and pay CIT advances. The tax rate is 19%, or 9% for small taxpayers. The taxation rules are similar to those applicable to Polish companies.
Value Added Tax (VAT)
A branch that sells goods or services in Poland is also required to register for VAT. The registration must take place before conducting any taxable transactions, such as selling products or providing services.
Foreign companies with a branch in Poland may be exempt from VAT registration under specific conditions outlined in EU and Polish tax regulations. A key factor is whether the branch constitutes a fixed establishment for VAT purposes, which depends on having the necessary organisational structure and resources.
Taxation of a foreign company’s representative office in Poland
Corporate Income Tax (CIT)
Since a representative office is limited to promotional and marketing activities, it is not subject to CIT because it does not generate taxable income.
However, if the representative office employs staff in Poland, the foreign company must pay:
- Personal Income Tax (PIT) on employees’ salaries.
- Social security and health insurance contributions.
Value Added Tax (VAT)
A representative office is not engaged in business activities, so it is not required to register for VAT. All operational costs, such as office rent and marketing services, are covered by the foreign parent company. In some cases, the parent company may apply for a VAT refund under regulations for foreign entrepreneurs.
| Criteria | Foreign company branch | Foreign company representative office |
|---|---|---|
| CIT taxation | Yes, on income generated in Poland | No |
| VAT registration | Yes, if providing goods or services | No |
| PIT & social security contributions for employees | Yes | Yes |
Registering a company in Poland – representative office or branch?
The choice between a representative office and a branch depends on the company’s strategy. If a foreign company aims only to promote its business in Poland, a representative office is a sufficient solution. However, for companies planning to sell products or services and generate revenue in Poland, establishing a branch and meeting the related tax obligations is essential.
Company registration in Poland in the form of a branch or representative office requires careful planning. Understanding the tax implications and keeping up to date with changes in regulations are crucial for successful business operations.
To avoid registration and tax-related issues, it is advisable to seek professional tax services in Poland. At getsix®, we provide comprehensive support for foreign entrepreneurs looking to start a business in Poland. Our services include branch and representative office registration, full accounting and tax services, as well as legal and payroll consulting. Contact us to find out how we can support your company in the Polish market!
If you have any questions regarding this topic or if you are in need for any additional information – please do not hesitate to contact us:
CUSTOMER RELATIONSHIPS DEPARTMENT
ELŻBIETA NARON
Head of Customer Relationships
Department / Senior Manager
getsix® Group
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