Polish Subsidiary Entity Set Up

Polish Entity Set Up

Poland welcomes foreign investment into its continually developing free market economy. Poland ranked 23rd globally with nominal Gross Domestic Product (GDP) of 655.3 billion US dollars in 2021 and ranked ninth among European nations – a jump of two places since 2020.

Even so, expanding overseas is a major step, especially for companies considering opening a legal entity in their new territory. It is easy to stumble while chasing two objectives – advancing your company at home while crossing the world into a new territory, maybe thousands of miles overseas.

How to set up a Poland Subsidiary

Setting up a subsidiary in Poland? First, choose a company type. The typical – and most popular choice – for foreign companies is to establish a limited liability company known as a Spolka.z.o.o. or Sp.z.o.o. The subsidiary is a legal entity entirely independent of the parent company and is incorporated in Poland as a local company under the Poland Company Act. Various documents and procedures must be completed to set up the subsidiary. These include:

• The company name must be unique with the suffix Spolka.z.o.o. or Sp.z.o.o.
• Provide notarized Articles of Association. This process can be completed by assigning Power of Attorney to an authorized agent
• Register with the National Court Register (KRS) and the Central Register for Information on Business Activity (CEIDG)
• Register with the National Statistics Agency (GUS), through which companies can obtain the 13-digit REGON number necessary for opening a business bank account
• Obtain Tax Identification Number (NIP)
• Articles of Association should include the name and address of the subsidiary, the internal regulations, the objectives, the name of the shareholders and beneficiaries, their contribution to the capital and details regarding the shares and their attached rights
• The subsidiary can be established by a single shareholder or an entity, but not if the entity in question itself has only a single shareholder
• Note: Failure to name all beneficiaries in the Register can incur fines of up to PLN 1,000,000 (€220,313, US$251,512)
• Name at least one shareholder with no limit. If share capital exceeds PLN 500,000 (€110,156, US$125,756) or there are more than 25 shareholders, it may be necessary to form a supervisory board
• A Polish bank account must be opened to provide proof that minimum share capital of PLN 5,000 (€1,100, US$1,260) has been deposited
• Establish a board of directors chosen by the supervisory board or general meetings of the shareholders
• Composition of the management board must be lodged with the Court Register within six months

Benefits of setting up a Subsidiary in Poland

Specific advantages for a foreign company opening a limited liability subsidiary in Poland include that the subsidiary has independent legal identity under Poland’s Company Law. The subsidiary is responsible for its own debts and liabilities, but the shareholders are liable only to the limit of their own share contribution. Additionally, the parent company generally has no liability for debts or liabilities.

The subsidiary, as a resident local company, will be liable for tax on its worldwide taxable profits and must register for paying Corporate Income Tax (CIT) and Value Added Tax (VAT). The standard CIT rate is 19% on taxable profits. A rate of 9% applies to companies with revenue up to PLN 5,451,970 (€1,200,000, US$1,374,877). The lower rate can apply in some circumstances to start-ups launched since 2019. Companies must register for VAT if their sales in the tax year will exceed PLN 200,000 (€44,014, US$50,437).

Through its subsidiary, the parent company has the advantage of exploring the Polish market and further afield among other European Union member nations, into the Central Eastern European (CEE) economic bloc and even further east.

Other benefits for a subsidiary:

• Easier to obtain regulatory approvals, loans and finance and enter into contracts with other Polish and European Union companies
• More impact with clients and suppliers, as subsidiaries imply more permanency than branches
• Employees feel there is more stability and job security than from being with a branch

In the wider commercial sense, opening a subsidiary makes a statement of a company’s commitment to expanding into foreign markets, in this case the opportunities offered by the European economies.

However, there is a more straightforward option to the risks and costs of setting up a subsidiary in Poland.