Poland is one of the strongest and most reliable economies in the European Union (EU), having experienced average growth in gross domestic product (GDP) terms of 4% each year since it joined the trade bloc in 2004. The country has also established itself as the top investment destination in the Central and Eastern Europe (CEE) region due to comparatively low labour and rental costs, a strong education system and a large domestic market.
The number of new investment projects in Poland is growing rapidly, supported by the country’s 14 Special Economic Zones (SEZ), which offer companies tax exemptions and employment incentives.
Figures released by the Polish Parliament revealed the total amount of investment made by firms operating in the SEZs had hit €26.7 billion (US$31.36 billion) by the end of 2016. The Ministry of Development estimated that in 2017 alone, the Zones attracted €5 billion (US$5.87 billion) investment-wise and created 16,000 jobs – although there is talk that the tax privileges offered there may soon be extended across Poland.
Whatever the truth of it, the Organisation for Economic Co-operation and Development (OECD) estimated that Polish GDP grew once again by over 4% during 2017, although it is projected to slow during 2018-19. But this scenario does not detract from the fact that the country remains a good location to start a business venture.
Fitch has given it an A- rating for 2018 based on a strong macro-economic performance and sound monetary policy. Meanwhile, the World Bank’s Doing Business 2018 report ranks Poland 27th globally in terms of ease of doing business.
That said, there are a number of trends that businesses operating in Poland should take into consideration:
- Demographic pressures
The proportion of workers in the overall Polish population is expected to shrink over the coming years as they age but continue to live longer and the birth rate continues to decrease. The number of people aged between 15 and 59 is expected to decline by 2.7 million by 2025.
The OECD has recommended that the country should focus its policies on increasing labour force participation and making the country more attractive for workers of both Polish and foreign origin. Employers are also becoming more amenable to flexible working hours and part-time contracts to help them secure the right talent.
- New labour laws
Poland’s labour laws are currently undergoing some significant shifts. This includes providing parents with wider protections and making it easier to claim compensation for any workplace incidents.
- An updated tax environment
Major changes have been made to the tax system in recent years. These include requiring micro-entrepreneurs to submit their value-added tax records using a JPK_VAT file format in order to minimise possible profit transfers to third party countries. Other new regulations are intended to counteract tax optimisation and the introduction of so-called ‘split payments’. In the case of split payments, entrepreneurs create a separate account so as to split their net income from VAT.
- Data privacy
Important changes in data protection provisions came into force across the EU at the end of May 2018. The General Data Protection Regulation (GDPR) aims to ensure more effective compliance with data protection rules, and Poland has introduced a number of changes to its privacy legislation in order to bring it in line with the rest of the EU.
- A changing banking system
The Polish government now controls almost 40% of the country’s banking assets following the nationalisation of Pekao SA, the country’s second-largest bank in 2016. The move has pushed Poland further away from free market principles towards state capitalism.
But overall bank profitability has declined due to depressed interest margins as well as tax and regulatory changes. The fact that banks also now need to be in a position to pay out potential compensation to people with foreign currency-denominated mortgages could also further reduce profits. However, a swift implementation of the Financial Stability Committee’s recommendations may succeed in alleviating further regulatory uncertainty.
Mikolaj Plucinski is managing director of TMF Poland. He joined the company in 2000, after working as a consultant for Unilever and Ernst & Young. In 2018, Mikolaj was made honorary consul of the Grand Duchy of Luxembourg in Katowice.
Poland is one of the strongest and most reliable economies in the European Union (EU), having experienced average growth in gross domestic product (GDP) terms of 4% each year since it joined the trade bloc in 2004. The country has also established itself as the top investment destination in the Central and Eastern Europe (CEE) region due to comparatively low labour and rental costs, a strong education system and a large domestic market.
The number of new investment projects in Poland is growing rapidly, supported by the country’s 14 Special Economic Zones (SEZ), which offer companies tax exemptions and employment incentives.
Figures released by the Polish Parliament revealed the total amount of investment made by firms operating in the SEZs had hit €26.7 billion (US$31.36 billion) by the end of 2016. The Ministry of Development estimated that in 2017 alone, the Zones attracted €5 billion (US$5.87 billion) investment-wise and created 16,000 jobs – although there is talk that the tax privileges offered there may soon be extended across Poland.
Whatever the truth of it, the Organisation for Economic Co-operation and Development (OECD) estimated that Polish GDP grew once again by over 4% during 2017, although it is projected to slow during 2018-19. But this scenario does not detract from the fact that the country remains a good location to start a business venture.
Fitch has given it an A- rating for 2018 based on a strong macro-economic performance and sound monetary policy. Meanwhile, the World Bank’s Doing Business 2018 report ranks Poland 27th globally in terms of ease of doing business.
That said, there are a number of trends that businesses operating in Poland should take into consideration:
- Demographic pressures
The proportion of workers in the overall Polish population is expected to shrink over the coming years as they age but continue to live longer and the birth rate continues to decrease. The number of people aged between 15 and 59 is expected to decline by 2.7 million by 2025.
The OECD has recommended that the country should focus its policies on increasing labour force participation and making the country more attractive for workers of both Polish and foreign origin. Employers are also becoming more amenable to flexible working hours and part-time contracts to help them secure the right talent.
- New labour laws
Poland’s labour laws are currently undergoing some significant shifts. This includes providing parents with wider protections and making it easier to claim compensation for any workplace incidents.
- An updated tax environment
Major changes have been made to the tax system in recent years. These include requiring micro-entrepreneurs to submit their value-added tax records using a JPK_VAT file format in order to minimise possible profit transfers to third party countries. Other new regulations are intended to counteract tax optimisation and the introduction of so-called ‘split payments’. In the case of split payments, entrepreneurs create a separate account so as to split their net income from VAT.
- Data privacy
Important changes in data protection provisions came into force across the EU at the end of May 2018. The General Data Protection Regulation (GDPR) aims to ensure more effective compliance with data protection rules, and Poland has introduced a number of changes to its privacy legislation in order to bring it in line with the rest of the EU.
- A changing banking system
The Polish government now controls almost 40% of the country’s banking assets following the nationalisation of Pekao SA, the country’s second-largest bank in 2016. The move has pushed Poland further away from free market principles towards state capitalism.
But overall bank profitability has declined due to depressed interest margins as well as tax and regulatory changes. The fact that banks also now need to be in a position to pay out potential compensation to people with foreign currency-denominated mortgages could also further reduce profits. However, a swift implementation of the Financial Stability Committee’s recommendations may succeed in alleviating further regulatory uncertainty.
Mikolaj Plucinski is managing director of TMF Poland. He joined the company in 2000, after working as a consultant for Unilever and Ernst & Young. In 2018, Mikolaj was made honorary consul of the Grand Duchy of Luxembourg in Katowice.
