Branch of a foreign taxpayer in Poland

A general definition describes a branch as a separate and organizationally independent part of business activity, performed by the entrepreneur outside the registered office of the entrepreneur or the main place of business.

A branch of a foreign company does not have legal personality. Although it is a separate organizational unit, it is still only a part of the foreign entrepreneur. This means that the foreign entrepreneur is responsible for the obligations of the branch. In principle, the branch also does not have judicial capacity, which means that it cannot be a party to court proceedings. However, this does not apply to employee matters. In the event of a court dispute between a branch of a foreign entrepreneur and its employee the branch of the foreign company will always be a party to the proceedings.

The term branch is strictly connected to the definition of a permanent establishment (PE) which is defined in Art. 5 bilateral double tax treaties based on the OECD Model Convention. This definition states that a permanent establishment is a fixed place of business through which the business of an enterprise is wholly or partly carried on. 

In the Commentary to the OECD Convention which identifies the conditions for the establishment of a tax establishment, it is indicated that a permanent establishment may arise when: 

    – there is a place where the company’s activity is carried out; 

   –  there is a permanent nature of such an establishment; 

Pursuant to the OECD Convention, the profits of an enterprise of a contracting state are taxable only in that state (state of residence), unless the enterprise conducts business activity in the other contracting state through a permanent establishment located there.

In the case of conducting business abroad through a permanent establishment located there, the profits attributable to such permanent establishment may also be taxed in the country in which the permanent establishment is located. Taxation of the income of a foreign permanent establishment will be possible only up to the amount in which it can be attributed to this permanent establishment.

The entrepreneur operating through the permanent establishment e.g. a branch will be obliged to allocate profits to the permanent establishment in the amount in which they should correspond to the profits that the permanent establishment could achieve if: it met the conditions of a separate and independent enterprise, completely independent of the enterprise of which it is a permanent establishment; engaged in the same or similar activity; functioned in the same or similar business conditions (e.g. functions, assets, risks).

A branch, the same as LLC, must keep the books in Poland in PL language according to PL tax law, pay monthly CIT advances and file annual Financial Statement.

If there are employees in Poland also salaries,  taxes and social security has to be paid for employees according to PL law.

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