As I mentioned in one of my previous article, Poland is a great place to consider for establishing a company. Some of the arguments in favour include:
- Availability of highly qualified workforce
- Relatively low labour costs
- Investor incentives, such as government grants, EU funds, real estate tax exemptions, special economic zones
- New programs to educate employees for the services sector
- Convenient location in the heart of Europe
When you start thinking about a company formation in Poland, there is a range of questions and decisions to consider.
Decision no. 1 – company type
Investors can choose among the following types of business structures available in Poland:
• Limited liability company (spółka z ograniczoną odpowiedzialnością, Sp. z o.o.): the most popular form of business structure. Registration requires one shareholder and a minimum share capital of PLN 5 000. The company must have at least one director who can be a foreigner residing abroad. The company must prepare and submit its accounts to the tax authority every year.
• Joint stock company (spółka jawna, SA): the company must be listed on a stock exchange. Registration requires one shareholder and a minimum share capital of PLN 100 000. Each year, the company must allocate at least 8% of its annual profits to the reserve of the company. It must prepare and submit its accounts to the tax authority every year.
• Partnership (spółka osobowa): there are several types of partnerships to choose from. Each type imposes a different degree of liability on the investor: from full liability to liability limited to the contribution amount.
• Sole trader (samozatrudnienie): the simplest form of business, intended for natural persons. No minimum amount of capital required. The entrepreneur has the sole right to represent the company and bears full liability.
• Investors can also open a branch or a representative office.
Important: All companies and partnerships must be registered in the National Court Register (KRS). Sole traders register in the Central Registration and Information Business (CEIDG)
Decision no. 2 – taxation form
For tax compliance purposes, the taxable period in Poland is the calendar year. However, companies can choose any other twelve-month period as their fiscal year. When registering, the investor will need to specify the form of taxation and the method of paying tax advances (monthly or quarterly). The investor will have to choose between the following taxes:
Personal income tax (PIT)
PIT is required if the investor registered the company with CEIDG. Depending on the type of activity, the costs incurred and the amount of income, there are four types of PIT to choose from:
general principles – tax scale 18 and 32%
general principles – 19% tax (so called flat rate tax)
lump-sum on registered income
Corporate income tax (CIT)
In the case of companies and partnerships registered in the National Court Register, no form of taxation is reported for them – they are subject to CIT. The standard corporate income tax rate is 19%.
A reduced CIT rate of 9% is applicable to small taxpayers (earning revenues of EUR 1.2m or less) and taxpayers starting a new business for their first tax year in operation. The taxable person is required to keep the accounts.
Poland has an extensive tax incentive program, including:
– exemptions under double taxation treaties,
– tax reliefs for R&D activities,
– preferential tax regimes for Special Economic Zones, and
– reduced tax rates for Innovation Box (income derived from IP rights).
Decision no. 3 – company name
Every activity must have its own name (company name). It should be simple and easy to remember. For the simplest activities, the name must include your first and last name. Before you register, you can check in the Internet whether someone is using the name of your choice.
Decision no. 4 – activity code
Before starting a company formation in Poland, the investor must check the Polish Classification of Activities (PKD) for codes that best describe the company area of activity. The purpose of PKD code is strictly statistical. However, certain obligations may depend on the type of activity, such as a specific legal form, type of taxation, obligation to use cash registers or VAT registration. The codes are available at the PKD code search engine.
The PKD codes can be changed (when the company activity is modified or narrowed) or added (when the company activity is expanded).
Decision no. 5 – VAT registration
VAT registration is not obligatory, unless the company engages in activities that are subject to VAT. In order to register for taxation purposes in Poland, the investor must file documents, such as
– the Articles of Association,
– NIP-2 and VAT-R forms,
– an excerpt from the National Court Register, and
– the bank certificate.
The process of company formation may seem overwhelming at first. On top of the legalities to follow, there are also linguistic obstacles. This article, together with the checklist to be downloaded, is meant as a basic guide. I hope it will help to meander through bureaucratic and administrative obligations. Contact me if you think you might require assistance of a native speaker, whether you need a document translator or a meeting interpreter.