General Information

Poland is an ancient nation that was conceived near the middle of the 10th century. Its golden age occurred in the 16th century. During the following century, the strengthening of the gentry and internal disorders weakened the nation. In a series of agreements between 1772 and 1795, Russia, Prussia, and Austria partitioned Poland amongst themselves. Poland regained its independence in 1918 only to be overrun by Germany and the Soviet Union in World War II. It became a Soviet satellite state following the war, but its government was comparatively tolerant and progressive.

Labor turmoil in 1980 led to the formation of the independent trade union "Solidarity" that over time became a political force and by 1990 had swept parliamentary elections and the presidency. A "shock therapy" program during the early 1990s enabled the country to transform its economy into one of the most robust in Central Europe, but Poland still faces the lingering challenges of high unemployment, underdeveloped and dilapidated infrastructure, and a poor rural underclass. Solidarity suffered a major defeat in the 2001 parliamentary elections when it failed to elect a single deputy to the lower house of Parliament, and the new leaders of the Solidarity Trade Union subsequently pledged to reduce the Trade Union's political role. Poland joined NATO in 1999 and the European Union in 2004. With its transformation to a democratic, market-oriented country largely completed, Poland is an increasingly active member of Euro-Atlantic organizations.

Poland has steadfastly pursued a policy of economic liberalization since 1990 and today stands out as a success story among transition economies. In 2006, GDP grew 5.3%, based on rising private consumption, a 16.7% jump in investment, and burgeoning exports. Poland today has a thriving private sector which created more than 300,000 new jobs during 2006 alone. GDP per capita roughly equals that of the three Baltic states. Consumer price inflation - at 1.3% in 2006 - remains among the lowest in the EU.

Since 2004, EU membership and access to EU structural funds has provided a major boost to the economy. Inflows of direct foreign investment exceeded $10 billion in 2006 alone - and more than $100 billion since 1990 - with major investments being announced by foreign firms in computer, consumer electronics, and automobile component production. In early 2006, Poland reached agreement with its EU partners that will permit it to benefit from EU funds totaling nearly $80 billion during 2007-13. Since 2002, even though the zloty appreciated 30%, Poland's exports more than doubled. Despite Poland's successes, more remains to be done. Unemployment, which stood at 15% in December 2006, is still the highest in the EU.

An inefficient commercial court system, a rigid labor code, bureaucratic red tape, and persistent corruption keep the private sector from performing to its potential. Agriculture is handicapped by inefficient small farms and inadequate investment. Restructuring and privatization of the remaining state-owned industries, especially "sensitive sectors" such as coal, oil refining, railroads, and energy transmission and generation, have stalled due to concerns about loss of control over critical national assets and lay-offs. Reforms in health care, education, the pension system, and state administration have failed so far to reduce the government budget deficit, which was roughly 2.7 percent of GDP in 2006.

Further progress in public finance depends mainly on reducing losses in Polish state enterprises, restraining entitlements, and overhauling the tax code. The previous Socialist-led government introduced a package of social and administrative spending cuts to reduce public spending by about $17 billion through 2007, but full implementation of the plan was trumped by election-year politics in 2005. The right-wing Law and Justice party won parliamentary elections in September 2005, and Lech Kaczynski won the presidential election in October, running on a state-interventionist fiscal and monetary platform. The new government has proceeded cautiously on economic matters, however, retaining, for example, the corporate income tax cuts initiated by the previous administration and indicating its intention to reduce the top personal income tax rate.

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.

	Joint Stock Company (S.A.)
	Limited Liability Company (LLC/sp.zo.o.)
	Partnership

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.

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.

Partnership (spólka cywilna):

In a Partnership, the owners (two or more physical persons) act as a company. The company and the owners are one unit, however, as a Partnership, they receive a separate tax id number and statistical number. The names of the owners have to be present in the company's name.

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.

3. Opening of a bank account

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.

4. Registration with the Revenue Office

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.

Taxes

You need to be aware of 4 different types of taxes in Poland:

	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.

Personal Income Tax (PIT)

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 is payable by natural persons, legal entities and organizational entities without legal personality, who are owners or autonomous possessors of real estate or buildings not permanently attached to land. The tax rates are established by the commune councils (rada gminy), there are a lot of deductions and exemtions. Foreign compainies often qualify for a total exemption.

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.