Branch of a foreign entrepreneur.

A branch is a separate and organisationally autonomous part of business activity performed by an entrepreneur outside the entrepreneur’s seat or main place of business activity.

The institution of a branch was introduced and regulated within the framework of the Act of 6 March 2018 on the principles of participation of foreign entrepreneurs and other foreign persons in economic turnover on the territory of the Republic of Poland.

Who can establish branches of a foreign entrepreneur?

One of the most important rules, important from the perspective of a branch, is that under the current legislation foreign persons from Member Countries may undertake and carry out business activities in the territory of the Republic of Poland on the same principles as Polish citizens.

It is also possible for companies from outside the circle of member countries to set up branches on the basis of the principle of mutuality. By this it should be understood that the establishment of a branch depends on whether international agreements provide Polish entrepreneurs with similar rights abroad. Such a possibility is given, for example, in the case of Korean companies by the Agreement between the Government of the Republic of Poland and the Government of the Republic of Korea on economic cooperation drawn up in Warsaw on 3 December 2004.

It should be remembered, however, that to conduct business activities in Poland on the same basis as Polish citizens, foreign persons may, if they have in the Republic of Poland, inter alia:

• permanent residence permit,
• residence permit for a long-term EU resident,
• refugee status,
• a residence permits for humanitarian reasons or a permit for tolerated stay,
• temporary residence permit and are married to a Polish citizen residing in the territory of the Republic of Poland.

What is to be understood by a branch of a foreign entrepreneur?

In light of this definition of a branch, it is important to note that a branch is not an independent entrepreneur or organisational unit, nor even a part of an enterprise. It is only a part of the foreign entrepreneur’s activity.

Having the aforementioned in mind, it should be concluded that a branch of a foreign entrepreneur has no legal entity or legal personality. Consequently, the branch is inextricably linked to the foreign entrepreneur and does not exist without it, in isolation from it or independently of it.

This construction of the branch, indicating its dependence, is also confirmed by the fact that the foreign entrepreneur, within the branch, may only carry out business activities to the extent that it operates abroad.

Consequently, the branch cannot function at all without the foreign entrepreneur, while the foreign entrepreneur can function without the branch.

How to establish a branch of a foreign entrepreneur?

The commencement of business activity by a foreign entrepreneur through a branch may take place only after the branch is entered in the register of entrepreneurs of the National Court Register. Here, it should be pointed out that this is not an entity-forming entry, but it is nevertheless an obligatory, constitutive entry. The constitutive nature of an entry in the National Court Register, on the other hand, refers to the acquisition by the foreign entrepreneur of the possibility to undertake business activity within the branch.

Branches entered in the National Court Register must use the name of the foreign entrepreneur plus the phrase ‘Oddział w Polsce’.

When a branch of a foreign entrepreneur is entered, a REGON number is assigned to it, while a NIP number must be obtained for it by submitting a NIP-8 form to the tax office. On the other hand, the application for NIP (NIP-2) and VAT (VAT-R) of the foreign entrepreneur itself must be submitted separately to the tax office.

It should also not be forgotten that a branch of a foreign entrepreneur in Poland must keep separate accounting records in accordance with Polish regulations.

Can a branch be an employer?

Importantly, despite the previously indicated subsidiary nature of the foreign entrepreneur’s branch, it may be the employer. Therefore, it is permissible to indicate in the employment contract, as a party, both the branch of the foreign entrepreneur as well as the foreign entrepreneur itself operating in the territory of the Republic of Poland through the agency of the branch.

It is precisely for employment purposes, among others, that a branch of a foreign entrepreneur needs a NIP.

We encourage you to familiarise yourself with our offer. Our team helps, among other things, to establish as well as to comprehensively service branches of foreign entrepreneurs. At the same time, we offer a thorough accounting service provided by SPS Finance.