Poland has a significant geographical advantage for potential investors. Situated in the heart of Europe, it not only has a domestic market of around 38 million people, but is also well placed to act as a springboard to markets across the European Union (EU), which has a combined population of around half a billion.
The sixth largest country in the EU by population and area, it is relatively stable politically and boasts the biggest economy in central Europe, with a current growth rate of 2.9%. In fact, Poland's economy is considered to be one of the more resilient of the post-Communist countries as well as one of the fastest-growing within the EU.
Thanks to its clear tax and legal regulations, the country is ranked 27th in the World Bank’s Ease of Doing Business 2018 report, while its economy is ranked as the 45th most free. Bloomberg also considers Poland the 21st most innovative country in the world out of a total of 50.
The country’s key exports include machinery, furniture, food products, clothing, shoes, and cosmetics. It has signed investment protection treaties with around 60 countries and its largest trading partner is Germany.
The government strives to make Poland as business-friendly as possible and promotes it as an attractive location for investment. The average foreign direct investment (FDI) inflow per year is more than €6.59 billion (US$7.59 billion) and the total FDI inflow last year was €176 billion (US$202.71 billion).
New business regulations have also been introduced as part of a ‘Constitution for Business’ to simplify procedures for people wanting to set up and run their own companies. The Constitution is a package of five laws, which includes one to enhance the business environment for foreign investors, plus more than 100 related initiatives. It came into force on 30 April 2018.
Starting a business
The most popular way of structuring business activity in Poland is through a Limited Liability Company (LLC), and there are five procedures involved in setting one up:
- Preparing Articles of Association in the form of a notarial deed;
- Executing a lease agreement, or acquiring property;
- Registering with the Polish Court Register;
- Opening a bank account and registering for VAT;
- Ensuring employees are registered with the Social security Agency, Zaklad Ubezpieczeń Spolecznych (ZUS).
Poland has made the process of dealing with construction permits simpler by streamlining what must be done to obtain a building permit. The government has also made electricity connection faster by eliminating the need to secure an excavation permit for external connection works.
Taxes
When it comes to accounting and tax compliance, Poland is ranked the 51st most complex country in the world. Corporate tax consists of seven payments a year that require 271 hours to complete in administrative terms. The tax rate amounts to 40.4% of profits, and the overall burden is equal to 32.1% of total domestic income.
There are nine direct taxes:
- Corporate income tax (CIT);
- Personal income tax (PIT);
- Tax on civil law transactions;
- Property tax;
- Tax on means of transport;
- Inheritance and donations tax;
- Agricultural tax;
- Forestry tax;
- Tax on dogs.
Indirect taxes include VAT, excise duty and a games tax.
Non-residents are taxed only on Polish-sourced income, while residents are taxed on their entire global income, although a foreign tax credit is available.
Capital gains are treated as regular income, while standard VAT currently stands at 23%.
The standard CIT rate is 19%, but the figure falls to 15% for companies in their first year of operations or with turnover of under €1.2 million (US$1.37) the previous year.
Poland has made resolving insolvency easier by introducing new restructuring mechanisms, changing voting procedures for restructuring plans and allowing creditors more participation in such proceedings. It has likewise established a central restructuring and bankruptcy register and released guidelines for renumerating those affected.
Intellectual property, meanwhile, is governed by strict regulations that are overseen by the Ministry of Culture and National Heritage as well as the Polish Patent Office. But due to rising concerns over the problem of online piracy, the government has now established a National Intellectual Property Rights Strategy
Labour
Poland is known for its skilled staff and well-qualified population. But for many years, it has faced a labour shortage, a situation that has to date been eased by cheap labour from the Ukraine and Belarus.
Due to the loosening up of the EU’s visa regime though, the Polish government fears that Ukrainian workers may prefer to go elsewhere. The country has tried to regulate its 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 employees to three.
Despite government efforts to ease bureaucracy and streamline compliance over recent years, it is also important to note that navigating HR and payroll regulations can still prove challenging.
Incentives
Fourteen areas defined as Special Economic Zones (SEZ) offer investment incentives for businesses to operate there. To do so, employers must obtain a permit from the Ministry of the Economy. SEZs provide CIT exemptions of up to 50% of any investment, plus access to land, necessary infrastructure and a series of possible grants.
TMF Group is a professional services firm helping clients to operate internationally by making sure they are properly set up to do business in any country, and compliant with local and international regulations.
OTHER STORIES THAT MAY INTEREST YOU
Poland introduces new act to digitise HR and Payroll processes
Poland has a significant geographical advantage for potential investors. Situated in the heart of Europe, it not only has a domestic market of around 38 million people, but is also well placed to act as a springboard to markets across the European Union (EU), which has a combined population of around half a billion.
The sixth largest country in the EU by population and area, it is relatively stable politically and boasts the biggest economy in central Europe, with a current growth rate of 2.9%. In fact, Poland's economy is considered to be one of the more resilient of the post-Communist countries as well as one of the fastest-growing within the EU.
Thanks to its clear tax and legal regulations, the country is ranked 27th in the World Bank’s Ease of Doing Business 2018 report, while its economy is ranked as the 45th most free. Bloomberg also considers Poland the 21st most innovative country in the world out of a total of 50.
The country’s key exports include machinery, furniture, food products, clothing, shoes, and cosmetics. It has signed investment protection treaties with around 60 countries and its largest trading partner is Germany.
The government strives to make Poland as business-friendly as possible and promotes it as an attractive location for investment. The average foreign direct investment (FDI) inflow per year is more than €6.59 billion (US$7.59 billion) and the total FDI inflow last year was €176 billion (US$202.71 billion).
New business regulations have also been introduced as part of a ‘Constitution for Business’ to simplify procedures for people wanting to set up and run their own companies. The Constitution is a package of five laws, which includes one to enhance the business environment for foreign investors, plus more than 100 related initiatives. It came into force on 30 April 2018.
Starting a business
The most popular way of structuring business activity in Poland is through a Limited Liability Company (LLC), and there are five procedures involved in setting one up:
- Preparing Articles of Association in the form of a notarial deed;
- Executing a lease agreement, or acquiring property;
- Registering with the Polish Court Register;
- Opening a bank account and registering for VAT;
- Ensuring employees are registered with the Social security Agency, Zaklad Ubezpieczeń Spolecznych (ZUS).
Poland has made the process of dealing with construction permits simpler by streamlining what must be done to obtain a building permit. The government has also made electricity connection faster by eliminating the need to secure an excavation permit for external connection works.
Taxes
When it comes to accounting and tax compliance, Poland is ranked the 51st most complex country in the world. Corporate tax consists of seven payments a year that require 271 hours to complete in administrative terms. The tax rate amounts to 40.4% of profits, and the overall burden is equal to 32.1% of total domestic income.
There are nine direct taxes:
- Corporate income tax (CIT);
- Personal income tax (PIT);
- Tax on civil law transactions;
- Property tax;
- Tax on means of transport;
- Inheritance and donations tax;
- Agricultural tax;
- Forestry tax;
- Tax on dogs.
Indirect taxes include VAT, excise duty and a games tax.
Non-residents are taxed only on Polish-sourced income, while residents are taxed on their entire global income, although a foreign tax credit is available.
Capital gains are treated as regular income, while standard VAT currently stands at 23%.
The standard CIT rate is 19%, but the figure falls to 15% for companies in their first year of operations or with turnover of under €1.2 million (US$1.37) the previous year.
Poland has made resolving insolvency easier by introducing new restructuring mechanisms, changing voting procedures for restructuring plans and allowing creditors more participation in such proceedings. It has likewise established a central restructuring and bankruptcy register and released guidelines for renumerating those affected.
Intellectual property, meanwhile, is governed by strict regulations that are overseen by the Ministry of Culture and National Heritage as well as the Polish Patent Office. But due to rising concerns over the problem of online piracy, the government has now established a National Intellectual Property Rights Strategy
Labour
Poland is known for its skilled staff and well-qualified population. But for many years, it has faced a labour shortage, a situation that has to date been eased by cheap labour from the Ukraine and Belarus.
Due to the loosening up of the EU’s visa regime though, the Polish government fears that Ukrainian workers may prefer to go elsewhere. The country has tried to regulate its 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 employees to three.
Despite government efforts to ease bureaucracy and streamline compliance over recent years, it is also important to note that navigating HR and payroll regulations can still prove challenging.
Incentives
Fourteen areas defined as Special Economic Zones (SEZ) offer investment incentives for businesses to operate there. To do so, employers must obtain a permit from the Ministry of the Economy. SEZs provide CIT exemptions of up to 50% of any investment, plus access to land, necessary infrastructure and a series of possible grants.
TMF Group is a professional services firm helping clients to operate internationally by making sure they are properly set up to do business in any country, and compliant with local and international regulations.
OTHER STORIES THAT MAY INTEREST YOU
Poland introduces new act to digitise HR and Payroll processes
