Branch or subsidiary in Poland: what changes for a UK or US business entering the market?

A Polish branch and a Polish subsidiary can both support a local business operation, but they allocate liability, tax compliance and funding differently. A branch remains part of its foreign enterprise. A subsidiary is a separate company whose contracts, assets and liabilities must be managed in its own name. The useful comparison starts with the proposed activity, rather than the cost of obtaining a registration number.

Legal position as at 1 November 2026

Does an income tax treaty give you the right to register a branch?

The corporate-law entry route and the tax treaty answer different questions. Articles 14–20 of Poland’s Act on the Participation of Foreign Entrepreneurs regulate branches, including eligibility, the permitted scope of activity and registration. A business from outside the EU must establish its position under the applicable reciprocity and international-agreement rules. UK and US businesses should not assume that the same EU establishment route applies to them.

For a UK enterprise, the EU–UK Trade and Cooperation Agreement is relevant to the wider services and investment framework. For a US enterprise, the relevant Poland–US commercial and economic arrangements must be considered separately. These instruments do not replace the Polish registration requirements. Equally, an income tax treaty defining a permanent establishment does not itself register a legal branch or authorise a regulated activity.

A Polish sp. z o.o., by contrast, is a company formed under the Commercial Companies Code. Its minimum share capital is PLN 5,000 under Article 154 §1. That figure is a legal minimum, not a meaningful budget for a business expected to employ staff, hold stock and pay suppliers. The incorporation decision should include adequate working capital and a realistic funding plan.

Who signs the contracts and bears the risk?

A branch has no separate legal personality. Its obligations are obligations of the foreign enterprise. A commercial dispute involving the branch may therefore expose the assets and credit standing of that enterprise, subject to the applicable enforcement rules. A branch registration does not create a separate liability shield.

A subsidiary normally contracts and holds assets in its own name. Article 151 §4 of the Commercial Companies Code provides that shareholders are not liable for the company’s obligations. That protection must be distinguished from a parent guarantee, a shareholder’s own undertaking or the duties and possible liability of directors. A lender may ask the parent to guarantee the subsidiary’s debt, changing the commercial outcome even though the company-law structure remains the same.

Before choosing a structure, identify which entity the customer expects to stand behind the contract. Some customers want the established foreign enterprise to contract directly. Others require a local company, local security or a particular licence. Those requirements can outweigh a small difference in registration costs.

If the group is considering an existing Polish company, review the share deal, asset deal and due diligence checklist before comparing the available market-entry routes.

How are profits taxed in the branch model?

Polish domestic rules for non-residents appear in Article 3(2)–(3) and Article 4a(11) of the CIT Act. The relevant tax treaty then determines whether Poland may tax business profits and how those profits relate to a permanent establishment. For a UK enterprise, Articles 5 and 7 of the 2006 Poland–UK treaty must be read together with its applicable MLI modifications. For a US enterprise, the currently applicable treaty text must be identified independently; the IRS publishes the Poland treaty of 1974. A later signature is not evidence that a replacement treaty has entered into force.

The tax base is not simply “all sales invoiced from Poland”. Functions, assets, risks, personnel and dealings between the head office and the branch are relevant to the profit attributed to the Polish operation. The accounting design should support that attribution from the first transaction.

A transfer of branch cash to its own head office is also conceptually different from a dividend paid by a subsidiary to a shareholder. It should not automatically be run through a dividend withholding-tax calculation. This does not make the branch’s Polish business profit tax-free; it changes the legal character of the later movement of its funds.

What changes when a subsidiary distributes its profit?

A Polish subsidiary is ordinarily a Polish corporate taxpayer. A later dividend is a separate payment to the shareholder. Article 22 of the CIT Act, the applicable treaty, the shareholder’s legal and tax status and the required documentation must be considered before the payment. A corporate-tax charge at company level does not by itself discharge the withholding obligations on a distribution.

The Parent–Subsidiary Directive has a defined EU scope. A UK or US parent does not acquire the Directive’s treatment merely because its subsidiary is incorporated in Poland. Treaty relief and domestic provisions have to be tested on their own conditions. The recipient’s residence, qualifying ownership and the actual payment structure are therefore needed before a net-return comparison can be completed.

The parent’s own tax treatment may materially change the comparison. The Polish analysis should identify the amount and timing of Polish tax, while the UK or US treatment of the same income, including any credit or exemption, must be checked under that jurisdiction’s rules. Adding nominal rates from two countries is not a reliable model of the combined burden.

Does using a local company remove every permanent-establishment risk?

No. The parent’s own activities remain relevant. If the parent maintains personnel or premises in Poland, or the local company acts in a way that meets the treaty’s agency test, the group must examine whether the parent has a separate Polish taxable presence. A subsidiary’s existence neither establishes nor excludes that result by itself.

VAT adds another distinction. A fixed establishment for VAT follows Article 11 of Implementing Regulation 282/2011, not simply the income tax treaty. In Berlin Chemie, C-333/20, the Court of Justice rejected the proposition that a subsidiary’s presence and the contractual arrangements described in that case automatically supplied its foreign parent with a fixed establishment. The analysis concerned access to human and technical resources and their actual use. It was not a ruling that every parent–subsidiary service arrangement is free of local VAT obligations.

This matters when a business compares structures using one undefined word, “establishment”. The legal branch, the treaty permanent establishment and the VAT fixed establishment are separate tests. A project checklist should name each test and the facts used to answer it.

How should the cost comparison be prepared?

Illustrative model: Assume either structure produces PLN 500,000 of Polish taxable profit, and assume the standard 19% CIT rate applies with no relief or losses. The first-layer Polish CIT is PLN 95,000, leaving PLN 405,000 after that tax. This is not a complete parent-return comparison: the subsidiary’s dividend may create a further withholding question, while a branch’s profit attribution and head-office taxation need their own analysis.

The model excludes setup expenditure, payroll, VAT, foreign tax, foreign exchange and the possibility of a different applicable CIT regime. It demonstrates why “both pay 19%, so they cost the same” is an incomplete conclusion. The financing method, repatriation route and exposure to liabilities can be more important than the first-layer tax calculation.

A practical comparison should therefore show setup and annual compliance costs, working-capital needs, guarantees, the taxation of retained and distributed profit, and the cost of later changing or closing the structure. A branch may be commercially sensible for an integrated foreign operation; a subsidiary may better fit ring-fenced investment and local contracts. Neither conclusion follows from the name of the structure alone.

When does MDR enter the decision?

Since 1 October 2026, the Polish MDR provisions use the new Article 86a framework. The reporting analysis concerns a qualifying cross-border arrangement and statutory hallmarks. A straightforward decision to establish a branch or company does not, by that fact alone, determine reportability. A wider plan involving circular funding, tax attributes or a cross-border transfer of functions may require a separate assessment.

The board should approve a documented business model before instructing the registry filing: proposed activity, contracting party, liability allocation, funding, tax residence and intended profit withdrawals. This makes the structure a consequence of the business decision and gives the accounting and tax teams a common basis for implementation.