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 training programs for service sector employees
- Convenient location in the heart of Europe
When you start thinking about setting up a company in Poland, there is a range of questions and decisions to consider.
Decision no. 1 – company type
Investors can choose from among the following available business structures 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 its reserves and prepare and submit its accounts to the tax authority.
• 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 Register and Information on Economic Activity (CEIDG)
Decision no. 2 – taxation form
For tax compliance purposes, the Polish taxable period is the calendar year. However, companies can choose any other 12-month period as their fiscal year. When registering, investors need to specify the form of taxation and the method of paying their tax advances (monthly or quarterly). Investors will have to choose between the following taxes:
Personal income tax (PIT)
PIT is required if the investor registered the company with the CEIDG. Depending on the nature of business, 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
- tax card
Corporate income tax (CIT)
Companies and partnerships registered in the National Court Register are subject to CIT – the standard corporate income tax rate – at the rate of 19%.
A reduced CIT rate of 9% is applicable to small taxpayers (earning revenues of EUR 1.2m or less) and to those in the first tax year of their new business. The taxable person is required to keep the accounts.
Poland has an extensive tax incentive program, which includes:
- 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 on the Internet whether your chosen name is already in use.
Decision no. 4 – activity code
Before starting a company in Poland, investors must check the Polish Classification of Activities (PKD) for codes that best describe their company’s nature of business. This can be done online. The purpose of the PKD code is strictly statistical. However, certain obligations depend on the type of activity, such as a specific legal form, the type of taxation, using cash registers or VAT registration. The codes are available at the PKD code search engine.
The PKD codes can be changed (when the company’s business activity is modified or narrowed) or added (when the 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, investors must file documents, such as
- the Articles of Association,
- NIP-2 and VAT-R forms,
- an excerpt from the National Court Register, and
- your bank certificate.
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The process of setting up a company may seem overwhelming at first. On top of the legalities to follow, there is the language barrier, too. This article, together with the checklist to download, is meant as a basic guide. I hope it will help you to meander through the bureaucracy and administration involved. Contact me if you think you might require the assistance of a native speaker, whether as a document translator or as a meeting interpreter.