POLAND

Poland is a democratic country located in Central Europe, since 2004 member of the European Union. The pace of economic growth puts Poland among the fastest developing countries in Europe. Poland exports mainly machinery, equipment and transport equipment (mainly buses), as well as industrial goods, e.g. furniture.

The most important trading partners in terms of exports are Germany, the United Kingdom and the Czech Republic. Increase of Poland's Gross Domestic Product (GDP) in 2016 amounted to 3.4 percent making it the third largest market in the EU. The location of Poland is undoubtedly an advantage in trade relations - transit through Western and Southern Europe and the countries of the eastern part of the continent.

Poland is also a member of NATO (North Atlantic Treaty Organization), WTO (World Trading Organization), OECD (Organization for Economic Co-operation and Development) and EEA (European Economic Area).

The constitution, which has been in force since 1997, provides for a legislative, executive and judicial tribunal. In Poland, the law is exclusively the governing body of the legislature, which is a bicameral parliament composed of the Sejm and Senate. Parliamentary elections take place every 4 years. Executive power in Poland is exercised by the president elected in the general election for a 5-year term and the Council of Ministers, commonly called the government.

Judicial power is exercised by courts and tribunals. The Constitution guarantees their distinctiveness and independence from other authorities


LEGAL FORMS OF BUSINESS ACTIVITY

Polish law provides various facilities for foreign investors, including tax exemptions. They can conduct business as a one-person business (subject to conditions) and in the form of companies.

Practically in each case, foreigners may run the business in the form of a limited partnership, limited partnership, joint stock, limited liability or joint stock company.

The most popular of them is a limited liability company whose establishment, according to Polish law, requires a minimum capital of PLN 5,000 (which is less then EU 1.200). They can be set up by one or more owners - there is no restrictions on their quantity.

Currently a limited liability company can be set up in two ways: either electronically using a contractual template available in the teleinformatic system or traditionally by drawing up a company contract at a Polish notary public.

A beneficial and often preferred solution for a foreigner wishing to operate in the form of a limited liability company in Poland is a purchase of a ready-made limited liability company. There are no obstacles for a foreigner to become a shareholder (even the sole shareholder) and / or the president of the limited liability company, even if he does not live in Poland.

For some non-EU or EFTA countries some additional requirements are provided.

 

TAXATION

The Polish tax system is harmonized with the EU directives.

Poland has signed with almost a hundred countries tax treaties on the avoidance of double taxation.

The tax system in Poland provides for several types of taxes. Most of them are direct taxes, e.g.:

  • personal income tax,
  • corporate income tax,
  • inheritance and donation tax,
  • real estate tax,

other are indirect taxes, such as:

  • goods and services tax (VAT),
  • excise duty.

Corporate tax

Taxpayers, if they have a seat or management in Poland, are subject to taxation on their entire income, regardless of where they are located. Taxpayers, if they do not have a domicile or management office in Poland, are subject to tax only on the income that they acquire in Poland.

The income is the surplus of the sum of revenues over the costs of obtaining them, achieved in the fiscal year.

The corporation tax rate is 19%, and for small taxpayers and startup taxpayers - 15%.

Taxation of dividends

When the recipient of the dividend is a natural person, the rules of  19% income tax on natural persons apply, and if the recipient is a corporate income taxpayer - the rules of the corporation tax law, which also provides 19%. However, if a dividend is paid to a non-resident, the provisions of the relevant double taxation agreement may apply.

Value Added Tax (VAT)

From January 1th 2011, a basic rate of 23% applies to most products and services.

The reduced VAT rate of 8% applies, for example, to the construction, renovation, modernization, reconstruction of buildings and a 5% VAT rate, for example for basic food products (e.g. bread, dairy products, meat products, cereal products: flour, cereal, pasta, juices), books. These rates are valid until 2017. Since 2018, Poland plans to change them.

Income tax from individuals

The personal income tax rate is 18%, but if the income earned during the year exceeds the amount of PLN 85,528 (about EU 20,000) then the tax rate is 32%.

In case of foreigners, their income is taxable in Poland if they live in Poland (e.g. when they stay in Poland for over 183 days a year). A person who does not live in Poland pays tax only on the income that he has earned in Poland, to the extent provided for in the double taxation agreement.

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