Considering expansion into the Polish market? Recognizing the distinctions in creating an independent affiliate versus starting a representative office (“repoffice”) is vital. Both options entail distinct juridical and taxation considerations that may have a major effect on contemplated strategic plans and decisions.
Subsidiary
A subsidiary company (“subcompany”) operates completely independently, despite being entirely held by an overseas parent firm. A private limited company (spółka z ograniczoną odpowiedzialnością, Sp. z o.o.) is commonly formed for this purpose, and it is fully equipped to carry out a broad spectrum of corporate activities, enter into agreements, own assets, and participate in local as well as international trade.
A major benefit of an affiliate subcompany is the safeguards it provides to the holding firm. The major organization’s monetary risk is confined to the amount it has invested in the affiliate, thereby reducing its overall exposure. Thus, contained liability delivers a significant safeguard for the controlling company’s assets, allowing it to explore Polish commercial ventures without putting its broader financial stability at risk.
Setting up a Polish subcompany is simple, it can be finished in a few days. It involves enrolling with the National Court Register, designation of a director, and adherence to regional tax statutes and rules. A minimum capital contribution of 5,000 Polish zlotys (approximately 1,250 euros) is required.
Concerning taxation, Polish subsidiaries typically face a corporate levy of 19%. However, small enterprises having annual revenues below 2 million euros (or the corresponding amount in Polish zlotys) and start-ups may qualify for a reduced tax rate of 9%, although the cut rate excludes asset gains.
This arrangement is well-suited for enterprises aiming to initiate a significant, long-term foothold in Poland, as it facilitates full assimilation into the regional market. Affiliate subcompanies are regarded as domestic establishments, that often promote smoother interactions with other local companies and prospective clients.
Repoffice
Conversely, a reproffice functions without being a self-standing entity. Rather, it operates as a part of the principal firm, that bears all legal risks relating to the repoffice’s affairs. A repoffice’s role is restricted to non-commercial functions, such as merchandising, promotion, brand representation, etc. It is not permitted to participate either in for-profit dealings or trade nor any activities aimed at generating profit.
Thus, enterprises may assess the market, enhance brand visibility, and forge initial connections with prospective customers or partners.
Registering a repoffice in Poland is a straightforward process typically requiring about a month to complete, there is no requirement for share capital. The repoffice shall be entered with the appropriate register and shall have a domestic legal address, based on the ownership or lease rights for the office premise.
One crucial point to consider is that a repoffice is typically granted an initial operating period of two years, with the possibility of renewing for an additional two years. During the mentioned period, the major company shall maintain separate bookkeeping for the Polish repoffice, shall follow local financial reporting standards, and submit annual reports to the competent bodies.
For companies seeking to engage in active operations in Poland, establishing a subcompany is the most appropriate option. Conversely, if the objective is to maintain a non-profit presence for marketing purposes, establishing a repoffice might be the more appropriate option.
Selecting an appropriate vehicle is vital for achieving success. Seeking advice from the legal experts at our law firm may assist you in addressing the challenges of Polish regulations and we may verify that the selected framework matches your commercial aims and targets.
