Doing Business In: Poland

Kochanski & Partners

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Business environment

Poland is an increasingly attractive market, having achieved a very stable economic growth and managing to quickly mitigate the impact of the COVID-19 pandemic. Moreover, the decline in FDI projects in Poland was one of the lowest. In comparison to other European countries, the COVID-19 pandemic influenced Polish GDP growth to a lesser extent than other European members, which led to the Polish economy recovering swiftly.

Despite the war in Ukraine, Poland remains a stable investment location, being a member of the most strategic alliances, such as NATO, and economic– such as the UE. Its attractiveness in investors’ eyes is also influenced by the reliable banking sector and mature financial sector, well-developed infrastructure and the increasing value of foreign direct investments (FDI).

Poland has an excellent central position, straddling Western and Eastern Europe. The key advantages of Poland as a business location is coastal access, allowing to become being the second most popular destination for offshore FDI projects. The central position also provides a crossroads for European trade and transport routes. In recent years, an additional advantage for the global trade come from significant numbers of well-developed logistic centres.

There are many ways foreign investors may set up business, mainly depending on country of origin. The biggest advantage is granted to persons from Member States of the UE and the European Free Trade Association, who may start economic activity in the Polish territory under the same conditions as Poles.

A popular form of conducting business by those from abroad is via establishing a branch of the company, which allows expanding its business activity and conducting it without establishing a separate legal entity under Polish law. For investors interested in becoming more closely associated with Poland, operating on a larger scale and conducting business in a more structured and formalized way, there are various forms of possible commercial companies. All types are available under the Commercial Companies Code and provide different options suitable for a wide range of business activity. These types of commercial companies are partnerships and corporations, which differ on personal and capital issues, such as responsibility.

Economy

Despite Poland being a stable investment location, the war in Ukraine, has brought many challenges for both the Polish economy and economies of countries worldwide. The ultimate results of the war are hard to currently predict, but regardless of the geopolitical and economic challenges (which have not significantly impacted the general investment situation) Poland remains a safe and stable place to do business.

Poland is the fifth most populated country in the EU, the largest country in CEE, and the sixth largest economy in the EU. The economic growth is visible also by the increasing number of cities with more than 200k of residents, which is already at 14.

The key financial stability agencies continue to rate Poland highly, with no changes compared to previous years, providing a stable outlook for the future.

Poland is currently investing in numerous strategic projects, including energy and infrastructure. It is also the largest beneficiary of EU cohesion and funding for regional development. A crucial part of this funding is targeted towards R&D enterprises, innovation and environmental projects. One attractive form is a CIT exemption for investors under Polish Investment Zones and numerous government grants. There is a wide range of tax preferences provided for investors, such as relief for automation.

Current opportunities & future prospects

Poland is a very attractive investment location from the perspective of the demographics of society and the labor market, which continues to offer competitive labor costs, connected with the highly educated affordable skilled work force. Poland is the largest academic hub in the CEE region with more than 300 institutes of higher learning. Impressive are also numbers describing the volume of students: more than 1.2 mln in total and about 350 thousand graduates each year. 20% of these are graduates of engineering or technical faculties.

At the same time, Poland is a very attractive place to live and work for skilled employes – the unemployment rate is about two times smaller than the average in the EU. Moreover, Polish people as a society are relatively young in comparison to other European countries. The structure of society and a high level of education makes Poles very open to using new technologies. One more important note regarding a relatively young society is an increasing awareness of the importance of subscribing to an meeting ESG standards.

Among the most promising industries are: information and communications technology, electronics and business services. As an example, over the past 4 years the number of FinTechs in Poland has nearly doubled – rising to almost 300 in 2022. The following factors account for the successful growth in this area: the overall macroeconomic situation, the number of technical university graduates and highly-skilled experts, as well as high demand for technology-enabled financial services and, following the COVID-19 pandemic, the change of customer behaviors. Other prospective sectors are: aerospace, business services, home appliances, pharmaceutical and medical.

Legal system

The Polish legal system is based on both domestic regulations and EU law. Direct implementation of European law is broadly based, meaning that harmonization of Polish law with the EU legislation is a fact in many areas.

The Polish legal system is not based on case law in contrast to the UK or the US legal system. However court judgments and decisions of judges adopted in previous cases have impact on dispute resolution, being an important component of the Polish legal system.

What is also important is that the Polish legal system is quite stable, but is subject to change and development. The same concerns taxation in Poland.

Due to the plethora of regulations, foreign investors should take care when choosing legal forms and structures for doing business in Poland, to ensure they select the one which is the most efficient and appropriate for them.

Foreign investment restrictions

The Polish business ecosystem is open for foreign investment, both in terms of the market availability as well as in terms of legal regulations. Nevertheless some restrictions must be taken into consideration by foreign investors, in particular related to the acquisition of real estate and certain other investments in specific areas under the regulation dated 24 July 2015 on control of investment. These restrictions concern in particular the following sectors:

  1. electricity generation;
  2. production of petrol or diesel oil;
  3. pipeline transport of crude oil, petrol or diesel oil;
  4. warehousing and storage of petrol, diesel, natural gas;
  5. underground storage of crude oil or natural gas;
  6. production of chemicals, fertilizers and chemical products;
  7. production and trade in explosives, weapons and ammunition as well as products and technology for military or police purposes;
  8. regasification or liquefaction of natural gas;
  9. reloading of crude oil and its products in seaports;
  10. distribution of natural gas or electricity;
  11. telecommunications activity;
  12. transmission of gaseous fuels;
  13. extraction and processing of metal ores used for the production of explosives, weapons and ammunition as well as products and technologies for military or police purposes;
  14. production of devices, instruments and medical devices;
  15. production of drugs and other pharmaceutical products;
  16. trade in gaseous fuels and gas with foreign countries;
  17. generation or transmission or distribution of heat;
  18. reloading in inland ports;
  19. processing of meat, milk, cereals, fruit and vegetables.

Foreign investors contemplating acquisition of shares in companies conducting business activity in the above sectors, or acquisition of enterprises or organized parts of enterprises of such companies, are required to notify the Polish Antimonopoly Authority (UOKiK) on the investment. In some specific cases the UOKiK may block such transactions. Obtainment of UOKiK clearance is also required with respect to transactions exceeding certain value thresholds.

Top tips to takeaway “What to know before Investing”

Poland is an attractive market for foreign investments, and not only for macroeconomic reasons, but also the straightforward legal system which is harmonized with EU legislation in many areas.

One of the greatest strengths of the Polish business landscape is its stock exchange and capital markets. The Warsaw Stock Exchange may be the primary or the secondary stock exchange market for foreign investors looking for growth of their capital.

Planning business in Poland requires mapping of the Polish regulations with the specifics of Polish ecosystem. Due to the complexity of the domestic regulations, foreign investors are advised to hire professional legal and tax advisors who may assist them in optimum structuring of their expansion on the Polish market.

 

Authors: Paweł Mardas and Anna Szepietowska