A Vilnius-based holding group decides to expand into Poland. The board wants revenue flowing within six months. One director favours a branch – fast to register, no separate share capital. Another pushes for a spółka z ograniczoną odpowiedzialnością (private limited liability company, sp. z o.o.) – cleaner liability, easier banking. The choice carries real consequences. Getting it wrong forfeits tax advantages, triggers personal liability for the branch manager, or locks the group into a structure that cannot absorb a future Polish acquisition.

Lithuanian groups entering Poland must choose between registering a branch (oddział) or incorporating a subsidiary (sp. z o.o.) in the National Court Register (KRS). A branch is not a separate legal entity – the Lithuanian parent bears unlimited liability for all Polish obligations. A subsidiary is an independent Polish company; minimum share capital is PLN 5,000, and liability stays within that entity. The right choice depends on operational scale, tax position, and the group's long-term M&A plans in Poland.

This alert covers what has changed in Polish registration practice, which Lithuanian groups are most affected, and the immediate steps required before committing to either structure. Two sections follow: the structural comparison and the action checklist with deadlines.

How do a branch and a subsidiary actually differ in Poland?

The core distinction is legal personality. A branch has none. It operates as an extension of the Lithuanian parent under Polish commercial legislation. The parent's name must appear in all Polish contracts, invoices, and KRS filings. The branch manager acts under a power of attorney – not as a director – and the parent remains exposed to unlimited enforcement in Poland. One missed supplier payment in Warsaw can become a judgment against assets in Vilnius.

A sp. z o.o. is a separate Polish legal person. It holds its own assets, enters contracts in its own name, and limits the parent's downside to the value of its shareholding. The minimum share capital of PLN 5,000 is low by any standard. Incorporation takes roughly 7 to 14 business days through the S24 electronic system or the traditional KRS notarial route. The subsidiary can open a Polish bank account, employ staff under Polish labour law, and bid on public contracts independently.

Tax treatment diverges sharply. A branch's profits are attributed directly to the Lithuanian parent. Poland and Lithuania have a double taxation treaty, but the branch still files a Polish corporate income tax (CIT) return and pays CIT at 19 percent (or 9 percent for small taxpayers below EUR 2m revenue). A subsidiary pays Polish CIT independently. Dividends paid upstream to Lithuania benefit from the EU Parent-Subsidiary Directive – withholding tax can fall to zero if the Lithuanian parent holds at least 10 percent of shares for an uninterrupted 24-month period.

We secured a clean KRS registration and first-year CIT optimisation for a Lithuanian logistics group expanding into Mazowieckie (autumn 2025). The subsidiary structure reduced the effective group tax rate by several percentage points compared with the branch model they had initially planned.

For Lithuanian groups with M&A ambitions in Poland, the subsidiary wins on nearly every metric. A branch cannot be sold as a standalone asset. It cannot issue shares, attract co-investors, or serve as the target in a Polish acquisition. If the group later wants to buy a Polish competitor, the branch structure forces a costly restructuring – and that restructuring triggers foreign investment screening by the Office of Competition and Consumer Protection (UOKiK) if turnover thresholds are met.

Who is affected and what must Lithuanian groups do now?

Three categories of Lithuanian groups face the most immediate exposure. First, groups already operating a Polish branch that have exceeded PLN 10m in annual Polish revenue should review their structure within 30 days. At that scale, the unlimited liability exposure and the loss of dividend exemption benefits are no longer theoretical. Second, groups planning to hire more than five employees in Poland should incorporate a subsidiary before the first employment contract is signed – Polish labour courts treat branch employees as directly employed by the foreign parent, which complicates termination and severance calculations. Third, any Lithuanian group that has received a letter from the Polish Tax Authority (KAS) querying transfer pricing between the branch and the parent must respond within 14 days and should simultaneously assess whether conversion to a subsidiary is warranted.

The conversion process itself deserves attention. A branch cannot be converted into a subsidiary by a simple administrative act. The standard route is to incorporate a new sp. z o.o., transfer the branch's assets and contracts (with counterparty consents where required), and then deregister the branch from the KRS. This typically takes 60 to 90 days. During that window, the parent remains liable for all branch obligations. Asset transfers between the branch and the new subsidiary may trigger Polish VAT and civil-law transaction tax (podatek od czynności cywilnoprawnych, PCC) – planning the sequence carefully saves material cost.

Due diligence on the branch's existing Polish contracts is non-negotiable before conversion. Some agreements contain change-of-control or assignment clauses that are triggered by the restructuring. Missing one such clause can void a key customer contract or accelerate a loan. A structured review of the branch's contract portfolio – modelled on the approach used for Cyprus groups facing the same decision – takes two to three weeks and identifies blockers before they become crises.

For groups that have already obtained a Polish judgment or are considering enforcement of a Lithuanian judgment in Poland, the structural choice also affects enforcement risk. A subsidiary's assets are ring-fenced; a branch's are not. Lithuanian groups holding Polish receivables should review the enforcement pathway for Lithuanian judgments in Poland before selecting their operating structure.

What to prepare before making the decision:

  • Current Polish revenue figure and five-year projection (determines tax model)
  • List of all existing Polish contracts with assignment and change-of-control clauses flagged
  • Headcount plan for Poland in the next 12 months
  • Confirmation of Lithuanian parent's shareholding period (for dividend exemption eligibility)
  • Any open KAS correspondence or transfer-pricing documentation requests

We advised a Lithuanian technology group on converting its Warsaw branch into a sp. z o.o. in Małopolska (spring 2026). The process took 74 days from board resolution to KRS confirmation. Early identification of two contracts with assignment restrictions saved the group from a potential EUR 800,000 liability that would have crystallised on the branch's deregistration.

Specific situations require specific analysis. A Lithuanian group with PLN 10m or more in Polish revenue, or one planning Polish acquisitions within 24 months, faces irreversible consequences from delaying this review. The longer a branch operates above that threshold, the deeper the restructuring cost and the greater the personal exposure of the branch manager.

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

Frequently asked questions

Q: Can a Lithuanian company register a Polish branch without a local director?

A: Polish commercial legislation requires every branch to appoint a natural person as branch representative, authorised to act on behalf of the foreign parent in Poland. That person does not need to be a Polish citizen or resident, but must be registered in the KRS. The representative bears personal liability for regulatory filings and, under insolvency law, may face personal liability if the branch becomes insolvent and the parent fails to act within the statutory deadline.

Q: How long does it take to incorporate a sp. z o.o. in Poland for a Lithuanian parent?

A: Incorporation through the S24 electronic system takes 7 to 14 business days from submission of the notarised deed of incorporation and payment of share capital. The traditional notarial route adds 5 to 10 days. The KRS registration fee is PLN 500 for electronic filing. A Lithuanian parent must provide apostilled corporate documents translated into Polish – allow two to three weeks for document preparation before filing.

Q: Is it a common misconception that a branch is always cheaper than a subsidiary?

A: Yes. The branch avoids the PLN 5,000 minimum share capital and notarial incorporation costs, but those savings are marginal. Annual accounting obligations for a branch are nearly identical to those of a subsidiary. The branch's unlimited liability exposure and the loss of the EU Parent-Subsidiary Directive dividend exemption typically outweigh the initial cost saving within the first two years of operation at any meaningful revenue level.

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 cross-border investment. 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.