When starting a business in Poland, foreign company owners have one of choices to register a branch office of their company or a separate legal entity. There are certain primary differences between them to consider.
Basically, opening a branch means making a new wing of the parental company located in another state. This is a perfect option for international companies willing to enter the Polish market and be in control of the company’s activities in the country.
✓A branch office must use the name identical to the parental firm’s name, it should perform the same scope of activities as the parental company. It may conduct its activities on the Polish territory only and can be registered anywhere in Poland depending on the Statute of the parental company.
✓A branch office does not have a legal personality; all documentation is connected with the documentation of the parental company. Therefore, taxation office of the parental company may request documents of the branch office and vice versa. In the case with Poland, it is rather complicated since all the papers should be submitted in Polish. Thus, a foreigner needs to take care of the translation which is expensive.
✓All financial documentation of a branch office is transparent and can be easily reviewed by representatives of the parental company and the branch office. It pays CIT only on those profits it makes on the Polish territory. It should register for VAT if necessary. The investor who has established the branch bears full liability.
✓A separate legal entity may have a separate tax reporting, can choose its name and scope of activities even if it has the same founder as the parental company. It is more of a personal connection which has nothing to do with branding and other issues.
✓A separate legal entity is subject to a different taxation scheme; it can borrow or lend money to the parental company (nothing like this is possible with a branch office). Therefore, there should be a specific strategy based on the company’s needs and goals.
✓Registration. To settle a branch office, the company needs to provide documents about the parental company, often apostilled (depends on the country of origin of the parental company). A separate legal entity will have to provide such documents only if the parental company is among its founders.
Other documents for branch office registration may be required as power of attorney for registration, resolution for opening a branch or subsidiary in another country.
Note that opening a branch should be done on the basis of reciprocity. This means that if, for example, a Korean company opens a branch in Poland, Polish citizens should be able to register their branch in Korea.