The anti-crisis shield: can a branch office of a foreign enterprise apply for subsidies?

by Karol Jakubas, Jagna Kowalczyk-Fudali

23 April 2020

The anti-crisis shield introduced by the Polish government on 31 March 2020 does not specify in detail which entities are eligible for the aid provided for in the act. One of such groups are foreign enterprises pursuing business activity in Poland in the form of a branch office.

The act, commonly known as the anti-crisis shield, does not define the status of branch offices of foreign enterprises in the context of eligibility for the aid. Enterprises which fight to stay solvent are facing vague regulations and no official viewpoints of public administration authorities and agencies in charge of granting the aid, which makes strategic planning difficult for businesses at this time of crisis.

Is a foreign enterprise an “enterprise” in the meaning of the act?

Pursuant to Article 4(1) of the Enterprises Act, an enterprise is a natural person, legal entity or an organisational unit without legal personality but with legal capacity granted by virtue of separate regulations, pursuing a business activity. Partners in a civil law partnership are also treated as enterprises when it comes to their business activity.

What is the status of a branch office of a foreign enterprise? A branch office does not have a legal personality and no legislation grants it legal capacity. Therefore, it is not an enterprise. A branch office is an enterprise in terms of property (Article 551 of the Polish Civil Code) because its assets are separated and distinctly connected with the branch office’s business. However, in organisational terms, a branch office is only a part of the business activity of a foreign enterprise which has the legal personality. Nonetheless, by no means does the above conclusion allow a claim that the foreign enterprise itself is not an enterprise.

A question remains whether a foreign enterprise is also an enterprise in the meaning of the Enterprises Act. When reading Article 4(1) of that act, it is hard to find grounds for challenging that viewpoint as it makes no distinction into domestic and foreign enterprises. Such a distinction can, however, be found in other acts, e.g. in Article 3(7) of the of the Act of 6 March 2018 on the Participation of Foreign Enterprises and Foreign Persons in the Polish Economy which says that a foreign enterprise is a foreign person pursuing business activity abroad and a Polish citizen pursuing business activity abroad.

Therefore, it should be concluded that whenever a foreign enterprise has legal personality or legal capacity, it will fulfil the definition provided in the Enterprises Act. Also, the anti-crisis shield does not make the status of an enterprise dependent on the country of establishment so in this context a foreign company which operates in Poland through its branch office could also be an enterprise.

A branch office of a foreign enterprise is not an enterprise in itself, but it is a separate and organisationally independent part of the business activity pursued outside the enterprise’s head office (in line with the definition provided in the Act on the Participation of Foreign Enterprises and Foreign Persons in the Polish Economy).

Right to the aid

In our opinion, the problem is caused by the fact that the Enterprises Act defines neither a domestic, nor a foreign enterprise and, therefore, only by a complicated and rather wishful interpretation of laws can we arrive at a conclusion that the definition of an enterprise included in Article 4(1) of the Enterprises Act excludes foreign enterprises.

Summing up, in all the cases where the anti-crisis legislation makes a reference to Article 4(1) of the Enterprises Act, it should be expected that neither the registered branch office of a foreign enterprise, nor the foreign enterprise itself, will be granted support, e.g. in the form of subsidies on some of the costs of employees’ salaries (Article 15g and Article 15 zzb of the act). However, an employer who is registered in Poland as a payer of social insurance (ZUS) contributions should be treated differently and according to the wording of Article 31zo, he should be exempt from the payment of ZUS contributions in the scope defined in the act.
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