How to enter Poland with your business
When considering how to enter Poland with your business, there are two facts to start with: One - Poland, as an emerging market, attracts investors from many different countries. Two - Poland is not known for its flexibility when it comes to business administration and dealing with public authorities. With this in mind, our goal here is to discuss some basics of operating in Poland, in terms of law and tax.
Legal options
To begin with, it should be underlined that investors from the EU, the European Economic Area (EEA) or even Switzerland have it much easier than investors from other areas. Not only can they enjoy Polish instruments without limits, but also - thanks to EU policy - the transfer of money, goods, services and even personnel is basically free of administrative constraints. Naturally, there are certain conditions that need to be met when it comes to, for example, real estate in Poland (the trade of which is restricted, especially for agricultural land) or work permits for foreign individuals working in Poland.
An EU-, EEA- or Switzerland-based investor can thus choose between a variety of legal modes when entering with their business into Poland. A foreign individual can simply register as an entrepreneur and from then on operate in Poland. A group of investors can consider forming a partnership, which include a standard partnership (spółka jawna), a limited partnership (spółka komandytowa) or a professional partnership (spółka partnerska). This last, however, requires the partners to be professionals (lawyers, tax advisors, doctors, etc) with a license allowing them to perform their profession in Poland.
If the investors choose to use a corporation, the Polish legal system recognizes a limited liability company (spółka z ograniczoną odpowiedzialnościa) and a joint-stock company (spółka akcyjna), the latter of which can potentially be listed on any EU stock market. There is also a limited joint-stock partnership available (spółka komandytowo akcyjna), a hybrid of a stock company and a limited partnership. For those investors who intend to limit their involvement in Poland, establishing a branch or a representative office of the foreign entity is also an option.
All of these options are also open to those investors whose home countries have signed agreements on mutual economic cooperation with the EU. For the remaining investors, only a limited liability company, a joint-stock company, a limited partnership or a limited joint-stock partnership are permitted.
In practice, the most common modes of launching operations in Poland are limited liability and joint-stock companies, limited partnerships and branch offices. The choice is usually made based on the scope of the investor's liability, the desired amount of flexibility regarding the ability to exit the Polish market and, naturally, the legal, bookkeeping and tax compliance costs of maintaining the mode.
The tax system
An equally important factor is the Polish tax system. Poland has taken part in the CEE race - along with Slovakia, Estonia, Bulgaria, Romania, Lithuania and others - to build a tax-friendly system. While these other countries have implemented flat-tax systems, however, Polish efforts have generally started and ended by lowering income tax rates.
The income tax rate for entrepreneurs generating profit in Poland is 19 percent (please note that individuals need to fulfill certain formal conditions to benefit from this rate). Individuals deriving their income from non-business related sources (such as an employment contract, a management contract or, for example, non-commercial lease of real estate) are subject to the progressive rates of 19, 30 or 40 percent, though from 2009 this will change to 18 or 32 percent. The basic VAT rate is 22 percent, but lowered rates of zero percent, three percent and seven percent are applicable to certain goods and services.
Due to the relatively low income tax rate (19 percent), the main concern for foreign investors is to make sure that profit transferred from Poland results in a minimal tax burden. This can be achieved through the application of EU tax directives and/or through double taxation treaties, of which Poland has signed approximately 80.
Getting started
Having selected its legal mode and navigated the tax systems of both Poland and the country of its tax residence, it is crucial for an investor to ascertain that all the formal requirements are fulfilled, such as registration for a statistical number (REGON), tax identification number (NIP), and VAT. A Poland-based entrepreneur is also obliged to have an account opened in a bank seated in Poland. For individuals, it is also important to keep social security (ZUS) obligations in mind.
Last but not least - how much time does it take to start operations? It depends, of course, on the legal mode chosen and the complexity of the operations, but one month should be treated as the minimum.
Anna Wąsowska, Trust Officer, Fortis Intertrust Polska Sp. z o.o.
