A Hungarian group preparing to enter the Polish market faces an immediate structural choice: register a branch or incorporate a subsidiary. The decision looks simple on paper. In practice, it shapes tax exposure, liability risk, and operational flexibility for years to come.

Polish law offers two primary vehicles for foreign companies: a branch (oddział) registered in the National Court Register (KRS) and a limited liability company (spółka z ograniczoną odpowiedzialnością, sp. z o.o.) incorporated as a separate legal entity. A branch is not a separate legal person – the Hungarian parent bears unlimited liability for its obligations. A subsidiary is an independent entity, and parental liability is generally capped at the value of shares held. Registration of either vehicle with the KRS is mandatory before commencing business activity in Poland.

This alert sets out the key distinctions, flags the compliance triggers that most often catch Hungarian groups off guard, and identifies the immediate steps your group should take before committing to either structure.

What are the structural differences that matter most for Hungarian groups?

The branch and the sp. z o.o. differ in three ways that directly affect a Hungarian group's risk profile. First, legal personality. Second, scope of permitted activity. Third, the parent's exposure to Polish creditors and tax authorities.

A branch may only conduct activities that fall within the scope of the Hungarian parent's own business. This is a hard statutory limit. If the Polish operation needs to pursue activities outside the parent's registered objects, a branch is legally insufficient. A sp. z o.o. can be incorporated with any lawful business purpose, independent of the parent's own objects.

On liability, the branch creates direct exposure for the Hungarian parent. Any judgment against the branch is enforceable against the parent's assets – including assets held outside Poland. The sp. z o.o. structure limits that exposure. The parent risks only its paid-in share capital (minimum PLN 5,000) unless it provides guarantees or acts in a manner that pierces the corporate veil under Polish corporate legislation.

The National Court Register (KRS), administered by the Ministry of Justice, handles registration of both vehicles. For a branch, the KRS filing must include certified copies of the parent's constitutional documents, translated into Polish by a sworn translator. For a sp. z o.o., the Kodeks spółek handlowych (Commercial Companies Code, KSH) permits online incorporation through the S24 portal in as little as one business day, provided standard articles of association are used.

How does the tax treatment differ between a branch and a subsidiary?

Tax treatment is where the structural choice becomes most consequential. A branch is treated as a permanent establishment (PE) of the Hungarian parent for Polish corporate income tax (CIT) purposes. The branch pays CIT at 19% on profits attributable to its Polish activities. Crucially, the branch cannot distribute dividends – profits flow directly to the parent, but the mechanics of that transfer attract scrutiny from the National Revenue Administration (Krajowa Administracja Skarbowa, KAS).

A sp. z o.o. pays CIT at 19% (or 9% if it qualifies as a small taxpayer with revenue below EUR 2m in the prior year). Profit extraction to the Hungarian parent takes the form of a dividend. Under the EU Parent-Subsidiary Directive, dividends paid by a Polish subsidiary to a Hungarian parent company holding at least 10% of shares for an uninterrupted period of two years are exempt from Polish withholding tax. That exemption is significant. Without it, the standard withholding rate is 19%.

Transfer pricing rules apply to both structures. However, a branch creates additional complexity because internal charges between the branch and the Hungarian head office must be documented as if they were arm's-length transactions. The KAS has intensified scrutiny of such internal allocations. For groups with annual Polish revenues exceeding PLN 10m, transfer pricing documentation is mandatory regardless of structure. For a practical overview of profit repatriation mechanics, see our guide on dividend distribution rules for Polish companies.

We secured a reversal of a CIT surcharge exceeding PLN 1.5m for a manufacturing client in the Mazowieckie region (autumn 2025), where the KAS had challenged internal cost allocations between a branch and its foreign head office. Proper documentation of the allocation methodology was decisive.

What immediate action should Hungarian groups take before registering?

The structural decision should be made before any commercial activity begins in Poland. Operating without KRS registration – even informally – constitutes an administrative offence and may trigger personal liability for the individuals conducting that activity. The Polish Financial Supervision Authority (Komisja Nadzoru Finansowego, KNF) also monitors regulated activities; a Hungarian group entering financial services must obtain separate authorisation regardless of corporate form.

Three factors should drive the immediate decision:

  • Liability exposure: if the Hungarian parent cannot absorb direct Polish creditor claims, choose the sp. z o.o.
  • Activity scope: if Polish operations will exceed the parent's registered objects, the branch is legally unavailable.
  • Exit planning: a branch is dissolved by deregistration; a subsidiary requires a formal liquidation process lasting at least six months or a share sale subject to the sp. z o.o. vs SA decision matrix considerations.

Due diligence on the Polish side should cover existing regulatory licences, real estate holdings, and any pending KAS proceedings. For groups with Hungarian insolvency proceedings in the background, Polish cross-border exposure requires separate analysis – see our note on cross-border insolvency involving Poland and Hungary.

Our team assisted a Hungarian IT group in establishing a sp. z o.o. in Małopolska (spring 2025), completing KRS registration within three business days via the S24 portal and structuring the shareholding to qualify for the withholding tax exemption from day one.

What to prepare before registration:

  • Certified and sworn-translated copy of the Hungarian parent's articles of association
  • Confirmation of the parent's registered business objects (for branch scope assessment)
  • Shareholders' resolution authorising Polish operations
  • Identification documents for all UBO (beneficial ownership) register filings
  • Draft articles of association or branch deed reviewed by Polish counsel

Specific circumstances require tailored analysis. Committing to a structure without that analysis forfeits the flexibility to restructure later without triggering additional tax costs or a six-month liquidation process.

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

Frequently asked questions

Q: Can a Hungarian group convert a branch into a sp. z o.o. later without tax consequences?

A: Conversion is possible but not straightforward. Polish corporate legislation does not provide a direct conversion mechanism – the branch must be deregistered and a new sp. z o.o. incorporated. Assets transferred from the branch to the new entity may trigger CIT and VAT events depending on their nature and value. Planning the structure correctly from the outset avoids these costs entirely.

Q: How long does KRS registration take for each vehicle?

A: A sp. z o.o. incorporated via the S24 portal can be registered within one to three business days. A branch registration typically takes seven to fourteen business days, as it requires submission of translated and certified foreign documents for court review. Both timelines assume complete documentation is submitted at the first filing.

Q: Is a branch cheaper to run than a sp. z o.o. on an ongoing basis?

A: A branch avoids the annual general meeting obligations and share capital requirements of a sp. z o.o. However, the branch's accounting obligations under Polish law are nearly identical to those of a subsidiary. The branch must maintain separate Polish books and file annual financial statements with the KRS. The cost saving is often smaller than Hungarian groups expect.

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, and market entry. 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.