From structuring your business to dealing with taxes, labour and making the most of available incentives. Here's what you need to know about doing business in Poland.
Poland has a significant geographical advantage for potential investors. Situated at the heart of Europe, Poland not only offers easy access to its own domestic market of around 38 million people, but it also acts as a springboard to markets in other European countries, which have a combined population of around half a billion. It is the sixth largest country in the EU by population and area, and the largest economy in central Europe, with a sustained growth rate, currently at 2.9%.
With a relatively stable political environment, Poland's economy is seen as one of the more resilient of the post-Communist countries and one of the fastest-growing within the EU. Thanks to Poland's clear tax and legal rules, the country is ranked 27th in the Ease of Doing Business 2018 report by the World Bank, and its economy is ranked 45th free-est. Bloomberg ranked Poland 22nd amongst the 50 most innovative countries in the world. Key exports include machinery, furniture, food products, clothing, shoes, and cosmetics. Poland has signed investment protection treaties with around 60 countries and its largest trading partner is Germany.
The Government strives to make Poland business-friendly, and promotes it as an attractive location for investment. The average FDI inflow per year is over €6.59 billion and the total FDI inflow is €176 billion. New business regulations have been introduced in a 'Constitution for Business', to simplify procedures for people setting up and running their own businesses. The constitution is a package of five laws and over 100 initiatives. It came into force on 30 April 2018 and includes a law focusing on improving the business environment for foreign investors. Professional services support is recommended to maximise the potential of your business strategy in Poland.
Starting a business
The most popular form of structuring business activity in Poland is through a Limited Liability Company (LLC), and there are five procedures involved in set-up:
- preparation of Articles of Association in a form of notarial deed
- execution of the lease agreement or acquisition of real estate
- registration in the Polish Court Register
- opening a bank account and registration for VAT
- employees must be registered with the Social security Agency, Zaklad Ubezpieczeń Spolecznych (ZUS).
Poland has made dealing with construction permits simpler by streamlining the process of obtaining a building permit, and the government has made getting an electricity connection faster by eliminating the need to secure an excavation permit for external connection works.
When it comes to accounting and tax compliance, Poland is ranked 51st most complex globally. Corporate tax in Poland includes seven tax payments a year that require 271 hours in total for administrative formalities. The total proportion of taxes is 40.4% of profit, and the overall tax burden equals 32.1% of total domestic income.
There are nine direct taxes: corporate income tax (CIT), personal income tax (PIT), tax on civil law transactions, real estate tax, tax on means of transport, inheritance and donations tax, agricultural tax, forestry tax and tax on dogs. Indirect taxes include VAT, excise duty and games tax.
Non-residents are taxed only on Polish-sourced income while residents are taxed on global income with foreign tax credit available. Capital gains are treated as regular income and the standard CIT rate is 19%. The reduced CIT for companies in their first year of activity or with turnover under €1.2 million in the previous year is 15%. Standard VAT in Poland is currently 23%.
Poland has made resolving insolvency easier by introducing new restructuring mechanisms, changing voting procedures for restructuring plans and allowing creditors greater participation in insolvency proceedings. It also established a central restructuring and bankruptcy register and released guidelines for the remuneration of insolvency representatives.
Intellectual Property is governed by strict regulations, overseen by the Ministry of Culture and National Heritage, and the Polish Patent Office. There are concerns over the problem of online piracy. To combat what was perceived as a growing problem, the Polish government has established a National Intellectual Property Rights (IPR) Strategy to assess penalties.
Here's a rundown of HR and payroll requirements in Poland. The country is renowned for its skilled staff, with the qualified population attracting global business. However, Poland has faced a labour shortage for many years, a situation compensated by cheap labour from Ukraine and Belarus. But due to easing of the EU visa regime, the Polish government anticipates that many Ukrainians may prefer not to work in Poland in the future. Poland has tried to regulate the labour market by reducing the maximum duration of fixed term contracts to 33 months and limiting the total number of fixed term contracts between the same employer and employee, to three.
There are investment incentives for business activities carried out in 14 zones defined as Special Economic Zones (SEZ). To benefit, a permit from the Ministry of the Economy is required. SEZ offer a CIT exemption up to 50% of the investment expenditure, plus there is availability of land with all necessary infrastructure, and a series of possible grants.
Talk to us
For help navigating the best possible route to success in Poland for your business, it's best to work with in-county experts such as those at TMF Poland. We have been operating in Poland for more than 20 years. Our two offices in Warsaw and Katowice provide a full range of corporate services to help your business reduce risk, be compliant, control costs and simplify operations.
Get in touch with us today.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.