Poland is a country in Central Europe with a population of over 38 million people and is the fifth-most populous member state of the European Union. Poland is the sixth-largest economy in the UE and the largest economy among the ex-communist members of the European Union. Almost 40 million consumers and more than 10 million entrepreneurs provide significant investment and sales opportunities.
At the same time, significant infrastructural investments and the ongoing development of the economy mean that there are many business areas to be developed. Foreign trade in goods turnover in January-June 2022 amounted to PLN 761.5 bn in exports and PLN 814.6 bn in imports at current prices. The negative balance stood at PLN 53.1 bn, while in the corresponding period of 2021, it was positive at PLN 18.6 bn. Compared with the corresponding period of 2021, exports increased by 20,8% and imports by 33,1%. Poland is a net exporter of food and manufactured goods.
Why Poland?
- Democratic rule of law country with a market economy based on, i.a. freedom of economic activity and private property
- stable banking system that provides financing
- strategic location – Sea access and central position between Western and Eastern Europe. At the crossroads of European trade and transport routes. The road infrastructure is constantly being developed and modernized
- a strong pool of skilled workers
- no need to engage Polish personnel in the management of a company held by a foreign investor in Poland, foreigners can be all the board members.
- no permits are needed for employees from the EU and many options regarding legal employment of citizens from outside the EU
- establishing a new company for investment in Poland should not take longer than four weeks, it is also possible to acquire already established SPVs to speed up the commencement of the business.
Main types of business activity in Poland
Polish law provides for free business activity for every entrepreneur, which means that everyone has an equal right to choose a relevant business activity that suits his/her business.
The most common types of business activity are commercial companies, in particular the limited liability company (about 80% of all entities) and general partnerships.
Forms of activity
- General partnership: two or more partners, unlimited liability of partners,
- Limited partnership: two categories of partners – a limited partner, responsible for liabilities up to the amount stated in the partnership agreement, and a general partner with unlimited liability,
- Partnership limited by shares: two categories of partners – a shareholder and a general partner (unlimited liability), share capital of at least PLN 50,000,
- Limited liability company: share capital of at least PLN 5,000,
- Joint-stock company: share capital of at least PLN 100,000,
- Simple Joint-stock company (PSA): one or more partners, the share capital of a PSA, which must be paid upon its incorporation, is at least 1 PLN. It may be covered by contributions monetary or non-monetary.
Forming a company
Company’s agreement →registration in the National Court Register (NCR) →Obtaining the statistical numer (REGON) →Obtaing the Tax Identification Number →Registering for VAT purposes
Fully electronic company registration procedure – the S24 system or through the Court Register Portal.
The most important tax rules
Corporate Income Tax (CIT)
- Taxable incomes (calculated separately for capital gains and other income) are determined as a difference between taxable revenues and tax–deductible costs for each source. Expenses are tax-deductible if they are related to earning (securing, sustaining) taxable revenues, exceptions to this rule apply (e.g. there are restrictions on deductibility of expenses paid to related parties for intangible services and use of trademarks).
- Tax rate – standard 19% and 9% for small taxpayers.
- Alternative taxation system: CIT due on income of capital entities, applied on a cash basis.
- Additional CIT taxation, creating factually an additional tax burden: (i) on retail activities, (ii) on revenue from real estate, (iii) minimum income taxation; (iv) on transferred profits.
Withholding Tax (WHT)
- Rates: 19% (dividends), 20% (interest, royalties, intangible services), but could be lowered even to 0% based on DTTs or implemented EU Directives (90 DTT’s concluded so far)
- Statutory obligation of due diligence has been imposed as of January 2019 on payers when collecting WHT and when analyzing the possibility of applying for statutory exemption or reduced WHT rate.
- "Pay the refund" procedure for more than PLN 2 million paid to a given taxpayer during the year – related parties, payments of interest/royalties/dividends (exclusion of intangible services), payments which without sound economic reasons do not qualify as receivables from the above.
Transfer Pricing (TP)
- The following thresholds obliging to the preparation of so-called local files apply: PLN 10 million for transactions concerning tangible assets or financing, and PLN 2 million concerning services or other transactions. However, in the case of transactions carried out with entities located in the so-called tax havens a lower threshold of PLN 0.5 million applies (PLN 2.5 million for financing).
- Exceptions to the obligation to prepare transfer pricing documentation are also introduced.
Innovative tax reliefs:
- R&D tax relief – up to 200% of additional deduction of eligible tax costs of R&D activity
- tax relief for innovative employees – the possibility for a taxpayer (who is a PIT tax remitter) to deduct a relevant part of R&D expenses from tax advances withheld from the income (earnings) of individuals active in R&D field
- IP Box – 5% taxation of income from qualified IPs. Possible combined use with R&D relief
- tax relief for prototype products – up to 30% (not more than 10% of income) of additional deduction of eligible tax costs of trial production and market launch
- tax relief for robotization products – up to 50% of additional deduction of eligible tax costs of purchase of new robots
- tax relief for an increase of sales – up to PLN 1 million of additional deduction of eligible tax costs of marketing and advertising
- consolidation relief – up to PLN 250,000 of additional deduction of eligible tax costs. It takes into account expenses for the acquisition of shares in a company that has a legal personality. Eligible acquisition expenses may include, among others: legal services, valuation, preparation of merger plans, audit, taxes.
- IPO (Initial Public Offering) tax relief – up to 150% or 50% of tax base reducted for expenses listed for joint stock companies.
Personal Income Tax (PIT)
- Generally, the income gained by individuals is subject to progressive scale, applicable rates are 12% (up to PLN 120,000) and 32%.
- Free amount from tax – PLN 30,000
- Whenever income is gained in the course of business activity (i.e. self-employment or participation in partnerships), application either of standard progressive rates, or of a 19% flat PIT rate, or alternatively PIT lump-sum may be opted for, by filing an application to the competent tax authority within a due deadline.
Value Added Tax (VAT)
- All entities that perform activities subject to VAT in Poland are obliged to register before they undertake their first taxable activity. Upon VAT registration they gain the status of active VAT payers.
- Taxpayers must notify the Polish tax authorities in advance if they intend to carry out intra-Community transactions. On the basis of this notification, the entity is registered as an EU VAT payer. Taxpayers whose net amount of taxable sales did not exceed PLN 200,000 in the previous year are exempt from VAT (with exception for some types of activity). Similarly, taxpayers that start to make taxable sales during the tax year are exempt from VAT if the expected net amount of their taxable sales in a corresponding fraction does not exceed PLN 200,000. Taxpayers can, however, opt for taxation provided they notify the relevant tax office of their intention.
Why Advicero Nexia?
Advicero Nexia is a consulting company providing comprehensive advice covering tax advisory, legal, accounting and payroll outsourcing services, VAT compliance and corporate services. Through cooperating entities we offer as well financial audit.
Our experience determines the scope of our advice, which covers in particular, but is not limited to:
- strategic tax advisory for real estate and construction, retail and FMCG, e-commerce, renewable energy,
- tax and accounting solutions for technology, innovation, manufacturing and trade sectors,
- tax advisory and compliance for investment and private equity funds,
- transactional advisory, due diligence, restructurings,
- management remuneration schemes, GMTS,
- transfer pricing studies, transfer pricing disputes,
- accounting and payroll outsourcing,
- excise duty in trade and production,
- disputes with authorities (VAT) and court proceedings.
We provide our services in Polish, English, German, and Italian.
Advicero Nexia is associated with Nexia International, a leading worldwide network of independent, high-quality accounting and consulting firms.
For more information, please contact Monika Szeremet (mszeremet@advicero.eu).