A German manufacturing group is expanding into Central Europe. Poland is the obvious next step – large market, skilled workforce, EU membership. The first internal question is always the same: do we open a branch or incorporate a subsidiary? The answer shapes tax exposure, liability, and operational flexibility for years.

German groups entering Poland must choose between registering a branch (oddział) of the German parent or incorporating a Polish limited liability company (spółka z ograniczoną odpowiedzialnością, sp. z o.o.) as a subsidiary. A branch keeps the German entity directly present in Poland – no separate legal personality, full parent liability. A subsidiary is an independent Polish company registered in the National Court Register (KRS), with liability ring-fenced to its own assets. The right choice depends on activity scope, tax treaty position, and the group's long-term plans for Poland.

This alert covers the structural differences that matter most for German groups, the tax and liability consequences of each option, and the immediate steps to take before committing to either path. Both routes are available today – but the decision is difficult to reverse once operations begin.

How do a branch and a subsidiary differ in Poland?

The core distinction is legal personality. A branch has none. It is an extension of the German parent, registered with the National Court Register (KRS) and the Polish Tax Authority (Urząd Skarbowy), but it acts in the parent's name. Every contract, every liability, every obligation flows back to Germany. A subsidiary – typically an sp. z o.o. – is a separate Polish legal entity. Its obligations are its own.

Registration timelines differ. Incorporating an sp. z o.o. through the online S24 system takes as little as 24 hours for a standard structure. A full notarial deed takes up to two weeks. Branch registration at the KRS typically requires four to six weeks, partly because the application must include certified translations of German corporate documents. Both structures require a Polish tax identification number (NIP) and registration for VAT purposes within 30 days of commencing taxable activity.

Operational differences follow quickly. A branch must appoint a representative authorised to act on the parent's behalf in Poland. An sp. z o.o. has its own management board. The branch cannot hold assets in its own name – the parent owns everything. The subsidiary owns its own assets, enters contracts independently, and can be sold or restructured without affecting the German parent's other operations.

  • Branch: no separate legal personality, parent bears all liability
  • Subsidiary (sp. z o.o.): independent entity, liability limited to share capital (minimum PLN 5,000)
  • Branch registration: four to six weeks, certified German documents required
  • Subsidiary via S24: as fast as 24 hours for standard structures
  • Both require VAT registration within 30 days of first taxable activity

We assisted a Bavarian engineering group in Mazowieckie region (autumn 2025) in converting an existing branch into an sp. z o.o. The process took eleven weeks and required careful coordination between German notarial records and the KRS filing. Starting with the right structure avoids that cost entirely.

What are the tax consequences for German groups?

Tax treatment is where the choice becomes financially significant. A branch is treated as a permanent establishment (PE) of the German parent under the double tax treaty between Poland and Germany. Polish corporate income tax (CIT) at 19% applies to profits attributable to the Polish PE. The German parent must maintain separate accounting for the branch to isolate those profits. Transfer pricing rules do not formally apply between a head office and its branch – but the profit attribution analysis is equally demanding in practice.

A subsidiary pays Polish CIT independently. The standard rate is 19%. Small taxpayers – those with annual revenue below EUR 2m – qualify for a reduced 9% CIT rate. Dividends paid by the Polish subsidiary to the German parent may qualify for withholding tax exemption under the EU Parent-Subsidiary Directive, provided the German parent holds at least 10% of the subsidiary's shares for an uninterrupted period of two years. The Poland-Germany double tax treaty provides an additional layer of protection; we have covered the key provisions in detail at our treaty analysis.

VAT treatment is identical for both structures. Both register as Polish VAT taxpayers and file JPK_V7 returns. The branch does not offer any VAT advantage over the subsidiary. Groups planning significant intra-group transactions should also consider that a subsidiary creates a distinct Polish counterparty, which simplifies documentation and reduces PE exposure for the German parent's other activities.

One structural point that German groups often miss: the subsidiary can access Poland's IP Box regime (5% CIT on qualifying IP income) and the R&D relief. A branch cannot access these reliefs independently – they flow through to the German parent's tax position, where German rules apply instead.

What should German groups do immediately?

The decision between a branch and a subsidiary is not purely legal – it requires input from both Polish and German tax advisers before any registration step. Once a branch is registered and begins trading, unwinding it into a subsidiary triggers a transfer of assets, potential CIT events, and VAT adjustments. That process rarely takes less than three months and often costs more than getting the structure right at the outset.

Due diligence on the Polish side should cover three areas. First, confirm whether the planned Polish activities constitute a PE under German tax law regardless of the chosen structure – some German groups are surprised to find that a subsidiary does not automatically eliminate PE risk if German staff are concluding contracts in Poland. Second, assess whether the small taxpayer CIT threshold (EUR 2m revenue) is realistic for the first two years – if yes, the subsidiary's 9% rate is a material advantage. Third, review the group's M&A plans: a subsidiary can be sold as a share deal; a branch cannot. For a broader comparison of Polish entity types, our sp. z o.o. vs S.A. decision matrix provides a useful reference point.

We supported a logistics group from North Rhine-Westphalia in Silesia (winter 2025) in completing a full structural analysis within three weeks, ahead of a planned January launch. The analysis identified a PE risk in the branch scenario that the group had not anticipated. The subsidiary route was selected, incorporated, and registered for VAT within the required window.

  • Obtain Polish and German tax opinions before filing any KRS application
  • Confirm PE exposure under German domestic rules, not only the treaty
  • Check eligibility for the 9% CIT rate if first-year revenue is below EUR 2m
  • Assess M&A exit scenarios – only a subsidiary can be sold as a share deal

For German groups already operating through a branch and reconsidering their structure, the window for a tax-neutral reorganisation is narrow. Polish corporate law allows a branch to be converted, but the process must be planned carefully to avoid triggering taxable events. Our corporate and M&A practice in Poland is described in full at our Poland corporate page.

Your specific situation – activity scope, revenue projections, group M&A plans – determines which structure is right. Choosing the wrong one at the outset forfeits the 9% CIT rate, creates unintended PE exposure, or precludes a clean exit later. These consequences are difficult to reverse.

To receive an expert assessment of your Polish market entry structure, contact info@kordeckipartners.com.

Frequently asked questions

Q: Can a German group register a branch in Poland without a local representative?

A: No. Polish commercial law requires every branch of a foreign company to appoint a representative authorised to act on behalf of the foreign entrepreneur in Poland. This person must be named in the KRS application. There is no minimum residency requirement, but the representative must be reachable for service of process in Poland.

Q: How long does it take to set up company Poland operations through a subsidiary, and what does it cost?

A: An sp. z o.o. incorporated via the S24 online system can be registered within 24 hours at a court fee of PLN 250. A notarial deed incorporation takes up to two weeks and involves notarial fees calculated on share capital. Minimum share capital is PLN 5,000. Post-registration steps – NIP, VAT, REGON – add another five to ten business days.

Q: Does a branch in Poland require separate financial statements?

A: Yes. Under Polish accounting law, a branch of a foreign company must maintain separate accounting records in Polish and prepare annual financial statements according to Polish accounting standards or IFRS. These statements are filed with the KRS. This obligation is a common misconception – many German groups assume the German parent's consolidated accounts are sufficient, but Polish law requires a standalone branch filing.

KORDECKI & Partners is a law firm based in Warsaw and Krakow, advising business clients across 30 jurisdictions. Our team combines expertise in Polish and international law with a practical approach to corporate structuring, M&A transactions, and market entry for German groups. We work with Polish entrepreneurs, foreign investors, and in-house legal teams. To discuss your situation, contact info@kordeckipartners.com.

Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. KORDECKI & Partners assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@kordeckipartners.com.