Starting a business in Poland

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General economic outlook

Poland is one of the biggest economies in Central and Eastern Europe. In terms of gross domestic product (GDP), Poland is the 9th biggest economy in the EU and the 23rd biggest economy in the world. Poland’s GDP increased by 4.8% per annum in FY 2017, according to OECD. According to forecasts prepared in winter 2018 by OECD, Polish GDP will grow by 3.6% in 2018. Poland was the only economy in the European Union to have escaped the recession in 2009, when it recorded growth of 1.6%. Growing fast, Poland is catching up, in terms of wealth, with Western EU countries. Taking under consideration all the above aspects we can confidently state that it is worth to consider opening a company in Poland.
 

Types of legal activities

The main forms in which you may start a business in Poland are:
 
  • A sole tradership (self-employment);
  • A civil-law partnership;
  • A general partnership (spółka jawna);
  • A professional partnership (spółka partnerska);
  • A limited partnership (spółka komandytowa; abbreviated to S.K.);
  • A partnership limited by shares (spółka komandytowo-akcyjna; abbreviated to S.K.A.);
  • A limited-liability company (spółka z ograniczona odpowiedzialnoscia; abbreviated to sp.z.o.o.);
  • A joint-stock company (spółka akcyjna; abbreviated to S.A.).
Persons (legal and natural) from the European Union and the European Economic Area have the same rights as Polish residents, so they may choose from all of these forms of organisation. The same rights apply to citizens of non-EEA countries who have obtained a permit to settle on the territory of the Republic of Poland, a permit for tolerated stay, refugee status granted by the Republic of Poland, or have received temporary asylum on the territory of Poland.

The sole tradership and the civil-law partnership are the simplest forms for carrying on a business. They do not require any initial capital and the registration fees are very small. However, the liability of the owners or partners is not limited and extends to their personal property also.

A professional partnership is restricted to members of the so-called ‘liberal professions’, i.e. lawyers, notaries, pharmacists, physicians, dentists, veterinary surgeons, nurses, accountants, architects, construction engineers, insurance brokers, tax advisers, midwives, patent attorneys, property valuation experts (‘chartered surveyors’) and sworn translators.

Commercial partnerships are also simple in form and do not require large capital investment. They differ from one another in the scope of a partner’s liability.
 

Setting up a limited liability company in Poland

Larger-scale business activities are best carried on via a company, especially limited liability company. Moreover, limited liability company is the most popular form of business model applied by the foreign entrepreneurs. It is due to the law capital requirement – at least 5.000 zł, limited liability of shareholders, transparency of internal regulation, application to EU directives and many others minor advantages.

The standard governing organs of an sp. z o.o. are:

  • The shareholders’ meeting;
  • The supervisory board (obligatory in case where is more then 25 shareholders, otherwise voluntary);
  • The management (executive) board.
The main taxes which the entrepreneurs who want to open a company in Poland may be involved in are:
 
  • Corporate income tax (podatek dochodowy od osób  prawnych);
  • Personal income tax (podatek dochodowy od osób  fizycznych);
  • Tax on civil-law transactions (podatek od czynności cywilnoprawnych);
  • Inheritance and gift tax (podatek od spadków i  darowizn);
  • VAT (podatek od towarów i usług);
  • Immovable property tax;
  • Excise duties.
Companies resident in Poland are taxable on their worldwide income, whereas non-resident companies are taxable on their Polish-source income only. Companies are resident in Poland if they have their legal seat or place of management in Poland. According to general principles, the object of taxation is income, regardless of the source of revenues from which the income was received. Taxable income is the surplus of the sum of revenues over costs incurred to generate income during the fiscal year, whereas if the allowable expenses exceed the sum of revenues, the difference is a tax loss. Taxable revenues consist not only of cash received but also other receipts of value, exchange-rate differences, the value of property, and rights or other benefits received free of charge.

Capital gains are normally included in taxable income. It should be noted that capital gains are calculated by reference to the net book value rather than the cost of acquisition of the asset concerned. Dividends received from another Polish-resident company are subject to withholding tax at the corporate rate of 19%, and are not further subject to corporate income tax. However, there is a participation exemption for significant shareholdings. A significant shareholding exists where the receiving company holds at least 10% of the share capital of the distributing company and has done so for an uninterrupted period of at least two years.

Both the distributing company and the recipient company must be fully taxable in Poland. Dividends received from foreign companies are fully taxable but it should be noted that taxpayers may exercise the right to deduction of the amount equal to the tax paid in a foreign state and the right to deduction of the amount of tax on the income which was the basis of the dividend (certain conditions shall be met i.e. the dividends are not subject to exemption within the meaning of the double taxation treaty; the Polish company holds directly no less than 75 per cent of shares in the capital of the distributing company). Dividends from companies resident in another EU or EEA member state are exempt under the Parent-Subsidiary Directive, where the receiving company holds at least 10% of the share capital of the distributing company and has done so for an uninterrupted period of at least two years. The same applies to dividends from a Swiss-resident company, but in that case, the minimum shareholding is 25%.

If you are thinking of setting up a company in Poland please contact us. We will provide you with all the information you need and help you effectively and in accordance in Polish law regulations start a business in Poland.