Poland

Key Corporate Features
General Information
Company Information
Compliance

Key Corporate Features

General information

With its 40 million consumers Poland is the largest economy in Central Europe. It is a market larger than those of the Czech Republic, Slovakia and Hungary combined. It has also recorded one of the most impressive growth rates in the world. For the last decade the Polish economy has been growing rapidly - the average GDP growth amounted to 4,5% within last ten years.

Poland is also one of the youngest countries on the continent - 35% of Poles are under 25 years of age. This means that about 14 million young and educated people will enter the labour market in the future. Average household income is still considerably low. The average income of 1 person in a household in 2001 was estimated at 150 €. Among others, 46,7% out of that figure came from legal work and 33,8% came from various social security funds.

The level of education of Polish workforce is considerably high in both skilled and unskilled sectors. More and more Poles are completing higher education. In 2001 there were over 1,7 million university students in Poland, and 4 times more graduates than a decade before.

Polish labour force is still very cheap. It costs just € 2,6 an hour (including social security contributions) to employ a skilled manufacturing worker in Poland. This is twice the rate paid to workers in the early 1990s but still much lower than the € 19 and € 22 paid to skilled workers in France and Germany respectively.

Company Information

The principal act governing business activity in Poland, namely, the Business Activity Law of 19 November 1999, gives to the Polish and foreign entities equal rights to take up and conduct business activities in Poland. Foreign entrepreneurs may, subject to the principles of reciprocity, take up and conduct business on the basis of the same principles as those applicable to entrepreneurs having permanent residency or a registered office in Poland, unless international agreements ratified by Poland provide otherwise. In case of lack of the principles of reciprocity, foreign entrepreneurs may conduct a business activity on the territory of the Republic of Poland only in the form of a limited partnership, limited liability company or a joint stock company. They can also join such partnerships or companies, and hold or purchase their shares.

There are several legal forms of conducting business in Poland: Below you can find most popular ones in Poland.

• Branch office
• Joint Stock Company
• Limited Liability Company
• Representative office

1. Branch office:

Foreign entrepreneurs may set up branch offices in the territory of Poland for the purpose of carrying out business activity on this territory. The rights of foreign entrepreneurs depend on whether Polish entrepreneurs abroad enjoy equivalent rights under international agreements (the principle of reciprocity), and whether any international agreements ratified by Poland do not provide otherwise.

In compliance with the standards of the European Agreement, Poland is making efforts to align its business laws with the legislation of the European Community, in order to facilitate the taking up of business activity on its territory by businesses and citizens of the European Community.

The business activity of a branch office must overlap with that of the foreign entrepreneur. However, its objects do not have to be as extensive as those of the foreign entrepreneur's business activity carried out abroad. In other words, the business pursued by a branch office may constitute only a part of the entire business operations of the foreign entrepreneur.

The obligations referred to above are the same as for Polish businesses.

2. Joint Stock Company:

This form of activity is usually established for the purpose of operating business on a large scale. Capital may be obtained through issuance of shares. The founders can be established by one or more legal or physical persons. However, it may not be established solely by a single-member limited liability company. The initial capital of the company must be not less than 500.000 PLN. The Company is liable for its debts and obligations with its whole property. Shareholders are not liable for the company's debts and obligations. There are no special requirements for foreign investors. Any joint stock company ( SA ) is a legal entity and must act under Corporate Income Tax regulations.

3. Limited Liability Company:

It is very similar to Joint Stock Company but there are no shareholders but Partners and the minimum initial capital must be not less than 50.000 PLN. It may be established by any foreign natural person or legal entity. It is a very popular way of conducting business in Poland among medium and large companies.

The Articles of Association or the Founding Deed (for a single- member company) must be executed in a notarized form before a notary in Poland. A notary charges a notarial fee, the tax on civil legal acts and the VAT.

(notarial fee is calculated as a percentage of the share capital, but may not exceed PLN 5.000; the tax on civil legal acts is also calculated as a percentage of the share capital, the actual VAT rate is 22% ).

The next steps are the making of contributions to the company's share capital and the appointment of the management board.

4. Representative office:

A foreign entrepreneur may set up representative offices in the territory of Poland. A representative office operates for and on behalf of the business of the foreign entrepreneur within the territory of Poland and is a part of the organizational and functional structure of his or her business. Therefore, the entrepreneur conducting the business activity is considered to be the foreign investor him- or herself.

In legal terms, a representative office set up by a foreign entrepreneur is a subordinated organisational entity functioning with the purpose of advertising and promoting the business of the foreign entrepreneur. Advertising and promotion are the constituent elements of the foreign entrepreneur's business activity.

In addition, a representative office is not a self-balancing unit. Any division of property by the entrepreneur, if effected, is of a purely technical and organisational nature.

A representative office must be entered in the Register of Representative Offices of Foreign Entrepreneurs, kept by the Minister of the Economy.

Compliance

1. Entry in the Court Register( registration fee amounts to PLN 1.000 )

The application for entry in the Court Register should be filed by the management board. The application must be signed by all members of the management board.

A joint stock company or a limited liability company are entered into the Register of Entrepreneurs in the National Court Register.

2. Registration with the Statistical Office

Entrepreneurs are required to hold the REGON statistical number. Steps that must be taken in order to obtain the REGON number. Registration with the Statistical Office should take place no later than 14 days following receipt of a certificate of entry in the Court Register.

The entrepreneurs who pursuant to the Business Activity Law are required to carry out transactions in a non-cash form, must open a bank account. A non cash transfer is necessary, where the other party to a transaction is another entrepreneur and the once- off value of receivables or payables exceeds the PLN equivalent of € 3.000 or, if total receivables or payables in the preceding month exceeded the PLN equivalent of € 10.000.

Money deposited on the company's account may accrue interest, although in some banks deposits are interest- free. The solvency of the bank should be taken into account when selecting a bank. A holder of bank account may obtain a credit or overdraft facilities under a separate agreement.

Taxpaying entrepreneurs are required to register with tax authorities, whereupon they obtain a Taxpayer's Identification Number (NIP). Taxpayers have to register within 14 days following registration of the company effected in compliance with the requirements of the law. A taxpayer registers only once regardless of the number and types of taxes paid, form of taxation or types and number of businesses run by a taxpayer.

• Corporate Income Tax (CIT)
• Personal Income Tax (PIT)
• Real Estate Tax
• Tax on Goods and Services (Value Added Tax - VAT)

Corporate Income Tax ( CIT )

Tax payable by: legal entities, including limited liability companies and joint stock companies, and tax capital groups. Taxpayers with their registered office or management board located in the territory of Poland will be subject to the taxation of all revenue, regardless of their origin. Taxpayers who do not have a registered office or the management board located in the territory of Poland are liable for payment of taxes only on the revenue obtained in Poland.

Tax year corresponds to a calendar year. There is a flat rate of 27%, but in many cases there are reductions of exemptions available. Please ask for details.

Tax payable by: persons who have permanent residency in the territory of Poland or whose temporary residency has exceeded 183 days in a given tax year. Such persons are liable to income tax on their total revenue, regardless of their origin (unlimited tax liability).

Foreigners who are temporarily residing in Poland as the employees of:
- foreign small manufacturing enterprises;
- companies with the participation of foreign capital;
- representation and branch offices of foreign enterprises and banks;

are liable to tax only on revenue gained from work performed in Poland under a contract of employment or service relationship, regardless of where their salary is paid, and on other revenue obtained in Poland (limited tax liability).

There is a tax-free allowance of 518.16 PLN (you are not obliged to pay tax if your yearly income has not exceeded 2727 PLN) and then there is a progressive scale from 19% to 40%.

Real Estate Tax

Tax on Goods and Services (Value Added Tax - VAT)

The basic tax rate is 22 percent. Turnover is the basis for taxation. Exported goods qualify for zero-rated VAT if a taxpayer has obtained, prior to submitting a tax return for a given month, a document confirming the export of goods outside the State borders of Poland.

5. Registration with the Social Security Office

Apart from registering with the Revenue Office, a taxpayer commencing business activity is required to register with the Social Security Office (Zaklad Ubezpieczen Spolecznych). All persons required to pay social security contributions register with the Social Security Institution Office within 7 days after hiring the first person.

Contact: info@personaloffice.com