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If you run a business in your home country and are considering expansion into the Polish market, you will typically face a choice: establish a Polish limited liability company (a subsidiary) or register a branch of a foreign entrepreneur. Both routes are available to EU and EFTA entities on the same terms as for Polish nationals.
1) Side-by-side comparison—when one form outperforms the other
| Criterion |
Limited Liability Company (spółka z ograniczoną odpowiedzialnością / “sp. z o.o.”) |
Branch of a Foreign Entrepreneur |
| Legal personality |
Yes — a separate capital company |
No — a part of the foreign company (no separate legal personality) |
| Scope of activities in Poland |
Any lawful scope (subject to the Commercial Companies Code – KSH and PKD business classification classifications) |
Limited to the scope of activities carried out by the parent company abroad |
| Name |
“XYZ spółka z ograniczoną odpowiedzialnością” / “XYZ sp. z o.o.” |
Original corporate name + translated legal form + “branch in Poland” (e.g., “Nordic AB joint-stock company – branch in Poland”) |
| Representation |
Management board of the Polish LLC (may consist of non-Polish residents) |
Mandatory appointment of a person authorised to represent the entrepreneur within the branch |
| Accounting |
Full statutory books kept in Poland (in Polish and in PLN) |
Separate books for the branch, kept in Polish and in PLN |
| Liability |
Limited to the assets of the Polish LLC |
Full liability of the foreign parent for the branch’s obligations in Poland |
| Local shareholders/investors |
Easy to onboard Polish investors (shareholdings) |
Not available — same legal person as the foreign entity |
| Market perception |
“Local” vehicle — often facilitates contracting, tenders, leasing, etc. |
Sometimes perceived as an “extension” of the foreign entity |
2) Registration and formalities
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Spółka z o.o. — details on the methods and formalities are covered in this article: How to start company in Poland?
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Branch — the specifics of establishing and operating a branch are discussed here: Branch of a Foreign Limited Liability Company in Poland
3) Tax in practice
(More on the taxation of a Polish LLC: Taxation of a Polish Limited Liability Company)
CIT — rates and thresholds
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Poland’s standard corporate income tax (CIT) rate is 19%. For “small taxpayers” and newly formed entities, the rate is 9%
LLC and the “Estonian CIT”
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Possible election of the lump-sum tax on company income (the so-called Estonian CIT) — no CIT is due until profit distribution (subject to detailed conditions described here: Estonian CIT). This regime is not available to a branch (a branch is not a Polish corporate taxpayer).
Branch = permanent establishment (PE)
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As a rule, a branch constitutes a permanent establishment (PE) for Polish tax purposes. Income attributable to the PE in Poland is taxable in Poland.
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There is no withholding tax (WHT) on a “profit transfer” from the branch to the head office, as both are the same legal person. By contrast, dividend WHT applies to distributions made by a Polish LLC to its shareholder(s).
WHT on dividends
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As a rule, dividends paid by a Polish LLC to a non-resident are subject to 19% WHT, unless an exemption or treaty reduction applies under the relevant double tax treaty.
4) When to choose an LLC and when a branch?
Choose an LLC if you:
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want to ring-fence group liability at the level of the Polish company,
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plan to admit Polish investors,
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are targeting the Estonian CIT or more favourable dividend taxation within an EU chain,
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need a “local” vehicle for tenders, leasing, etc.
Consider a branch if you:
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are testing the market and do not wish to set up a full company immediately,
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will conduct in Poland the same line of business as the head office (sales/service of the same products),
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prefer straightforward cash flows (no dividends, no WHT on “profit transfers”)
5) Summary
A sp. z o.o. offers limited liability and shareholder flexibility, but typically involves “two-level” taxation upon dividends (unless exemptions/treaty relief apply).
A branch enables quicker market entry and simpler repatriation of funds (no dividend), but entails full parent-company liability and a fixed scope of activities aligned with the head office.
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▬ contact ▬
biuro@kancelariakubiak.pl
Legal Advisor's Office
Michał Kubiak
Do Studzienki Street 63/4
80-227 Gdańsk
NIP: 8792619209
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