Doing business in Poland 2016
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1 Contents
Introduction ...... 3
– Country Profile...... 4
Legal overview ...... 5
Conducting business in Poland...... 9
Tax system ...... 11
Labour ...... 18
Audit ...... 24
Trade ...... 27
Finance ...... 29
Infrastructure ...... 31
This Guide has been prepared jointly by HSBC Bank Polska S.A. and Grant Thornton for the purposes of providing a high-level general overview of the business environment in Poland for the information of businesses who may be interested in transacting or investing in Poland. Any transaction or investment in Poland, however, should only be undertaken based on professional advice specific to such transaction or investment. 2 Introduction This guide will cover key aspects of doing business and investing in Poland. Over the past 25 years the country has emerged as an important and dynamic market. With over 38.5 million people, it is the largest market in Central and Eastern Europe and the eighth-largest economy in the European Union. Poland’s convenient location in the centre of Europe makes it the perfect investment destination between Eastern and Western markets.
After the political changes in • Large population with strong China, France, the UK, Italy, 1989, Poland transitioned to internal consumption Hungary, Ukraine and Spain. a market-oriented economy. • Strategic location in the centre of Since then, Poland has achieved Europe with access to both the Poland’s investment attractiveness significant economic success, eastern and western markets is augmented by a range of culminating in 2004 in becoming subsidies and tax incentives. There • Subsidies and tax a member of the European Union are 14 Special Economic Zones incentives for investors (EU). Poland’s strong economic (SEZs) in operation and companies foundations have been driven • EU structural and cohesion funds willing to invest there can avail a by extensive domestic demand, number of incentives, including: tax exports and foreign investment. This Poland is an attractive destination exemptions, employment benefits was clearly visible in 2009 when for foreign investors with its and well-prepared investment sites. Poland remained the only country well-educated workforce and SEZs will operate until 2026. in the EU that managed to maintain competitive labour costs. The labour positive GDP growth. During the costs in Poland, despite a visible Poland’s economic growth is in period of 2008-13, cumulative GDP upward trend, are still significantly part due to the sizable resources growth in Poland reached 20.1 per lower in comparison to Western received from the EU structural cent and the country now boasts European countries. Furthermore, and cohesion funds. Poland is the the sixth-largest economy in the EU. Polish workers have a strong work main beneficiary of these funds; ethic and are highly qualified; Poland the country will receive a total of Poland’s real GDP growth averaged has over 470 academic centres EUR82.5 billion across the years 3.4 per cent in 2014 and 3.5 per and public education is free. Polish 2014 – 2020. The second round cent in 2015. This growth rate engineers and scientists are highly of EU funding will continue to be is expected to remain stable acknowledged across the world. into 2016 and 2017, supported invested in transport infrastructure by solid investment and growth but the highest increase in Strong internal consumption is in consumption. This indicates expenditure will be in innovation one of the key economic drivers that Poland will continue to be a and support for enterprises. European growth leader in the contributing to economic stability. coming years. Consequently, The ratio of exports to domestic While this guide covers some of it is predicted that the central demand is around 50 per cent. the most common issues investors bank may begin to raise interest might encounter in Poland, certain rates from record low levels The country has a very favourable industries and areas of business towards the end of 2016. location in the centre of Europe activity are subject to special where major trans-European regulation and therefore companies Factors contributing to Poland’s transportation routes intersect. intending to invest in these areas rapid economic growth and Goods can be easily shipped should seek legal advice. attractive foreign investment from Poland to all European environment include: countries, reaching a market of The information in this publication more than 500 million consumers. is current at December 2015. • Well-educated, low-cost Poland’s major trade partners are, labour force among others, Germany, Russia,
3 Country profile
Capital City Warsaw
Area 312,679 sq. km
Population 38,478,602
Language Polish
Currency Zloty (PLN)
International dialling code + 48
National Holidays 2016 1 January – New Year 6 January – Epiphany 27 March – Easter Sunday 28 March – Easter Monday 1 May – Labour Day 3 May – Constitution Day 15 May – Pentecost 26 May – Corpus Christi 15 August – Polish Armed Forces Day, Assumption of Mary 1 November – All Saints’ Day 11 November – Independence Day 25 December – Christmas Day 26 December – Christmas (Second Day)
Business and Banking hours 08:00 to 17:00
Stock exchanges Warsaw Stock Exchange
Political structure Parliamentary Republic
Doing Business rank 2016 25
Ease of Doing Business
Topics 2016 rank 2015 rank Change in rank
Starting a business 85 80 -5
Licenses and Permits 52 49 -3
Getting Electricity 49 54 5
Registering property 41 39 -2
Financing 19 17 -2
Protecting Investors 49 46 -3
Paying Taxes 58 96 38
Trading Across Borders 1 1 No change
Enforcing Contracts 55 55 No change
Resolving Insolvency 32 31 -1
Source: World Bank Group (Doing Business)
4 Legal overview Political and legal system The country has three tiers of are also applicable to non-public The principles governing the regional administration, with entities carrying out public tasks and political and socio-economic system voivodeships (16), poviats (counties, non-public entities which process in Poland are laid down in the 380) and gminas (communes, 2478). personal data in connection with Constitution, as of 2 April 1997. The State administration is divided into their business or professional activity Constitution sets out that Poland government (central) administration, or the implementation of statutory is a parliamentary republic with a headed by the Council of objectives. These entities are democratically elected government. Ministers, and self-government referred to as data administrators. The system rests on the principle at local and regional levels. of the separation of powers. In accordance with the statutory The Polish legal system is based provisions, data processing on the continental (civil) legal The legislative power is executed by is only permitted if: the Sejm (the lower house) and the system, in which the legislative branch (the parliament) has Senate (the upper house) creating a • The data subject provides bicameral Parliament. The Sejm has exclusive law-making powers and laws are formulated into specific consent, unless that person’s 460 members, while 100 senators data is being deleted sit in the Senate. They are all elected pieces of legislation. These written laws form a hierarchy, • It is necessary for the purposes directly by the People for four-year meaning that lower-ranking laws of exercising a right or fulfilment terms of office. The Parliament not must comply with higher-ranking only makes law, but also exercises of a duty stipulated under law laws. Accordingly, starting with control over government and is • It is necessary for contract the highest rank, the sources of authorised to appoint members performance, where the data generally applicable law include: of the crucial Polish authorities. subject is a party to the contract the Constitution, international or where it is necessary to agreements ratified on the basis Poland has a multi-party system undertake certain actions prior of prior statutory acceptance, with two main political parties acts of parliament, ordinances to concluding the contract at that currently hold sway: Law and and local legislation. Additionally, the request of the data subject Justice (‘Prawo i Sprawiedliwosc) the sources of European Union • It is necessary in the performance and the opposite Civic Platform Law shall be applicable in of statutory tasks undertaken (‘Platforma Obywatelska’). accordance with the principles in the interest of the public settled by the European Treaties. Executive power is exercised by • It is necessary to fulfil legally justified objectives realised the President and the Council of Data protection by data administrators or data Ministers. The President is the Regulations on personal data recipients, and processing does head of state and represents protection in Poland comply not infringe upon the rights and the country in the international with European Union law. arena. The Council of Ministers freedoms of the data subject is formed of the Prime Minister, Pursuant to the Act of August 29, Deputy Prime Ministers and 1997 on the Protection of Personal Personal data protection is regulated other ministers. The Council of Data (consolidated text – Journal by the Inspector General for Ministers is responsible for both of Laws of 2014, item 1182, as Personal Data Protection (GIODO). domestic and foreign affairs. amended), the term “personal data” An infringement of personal data covers any information relating to: protection provisions is punishable Judiciary power is vested in by a fine, restriction of liberty or independent and impartial courts • An identified person imprisonment ranging from one and tribunals and executed by • An identifiable person year to three years – depending the Supreme Court, common on the severity of the offence. courts, administrative courts and Data protection provisions are military courts. Additionally, in binding upon national authorities Exchange controls particular cases the decision of and local authorities, as well as The foreign exchange law is Constitutional Tribunal and State state and municipal organisational enforced by the President of the Tribunal shall be required. units. Furthermore, the provisions National Bank of Poland (NBP).
5 There are no foreign exchange report considerable amounts of Failure to comply with the statutory restrictions between Poland national or foreign currency taken requirements carries a fine of and the Member States of the into and out of the country. up to PLN750,000, imposed by European Union or countries of the Inspector General by way of the European Economic Area Money laundering regulations decision. Individuals who, acting (EEA) and the Organisation Polish law imposes a duty on on behalf or in the interest of an for Economic Cooperation ‘obliged institutions’ (this includes: obliged institution, fail to comply and Development (OECD). financial institutions, investment with the statutory requirements funds, life insurers, notaries, entities may be subject to imprisonment Exchange operations with third providing accounting services and for up to three years. countries (non-EU, non-EEA and entrepreneurs accepting payments non-OECD) require exchange for goods in cash equivalent to Intellectual Property Rights control approvals. Currency EUR15,000 or more) to undertake Intellectual Property Rights restrictions apply to trading in security measures with respect to are protected in Poland under securities, acquisition of company all their customers – which include the Act on Industrial Property stock and trading in receivables. money laundering and terrorist Rights and the Act on Copyrights General exchange control approvals financing risk assessments. and related Rights. are granted by the Minister of Finance by way of ordinance. In an effort to counteract money The office responsible for examining Individual approvals are granted laundering, the Institution of the and registering applications by the president of the NBP. Inspector General for Financial in Poland is the Patent Office Information (GIIF) was appointed to of the Republic of Poland. International money transfers and receive information collected by the domestic transactions involving obliged institutions and co-operating Protection granted by the foreign currencies (in excess of units (central and local administration European Patent Office based EUR15,000) must take place bodies and other state organisational in Munich also extends to through authorised banks. It units, NBP, Polish Financial Poland. In turn, the protection is also mandatory to provide Supervision Authority and Supreme of trademarks and industrial information (at the request of the Audit Office) regarding suspicious designs in European countries is bank) on the currency transactions transactions and activities. granted by the European Union completed via the bank, and to Intellectual Property Office.
6 COPYRIGHT
Copyright covers any manifestation of creative activity of an individual nature, established in any form, irrespective of its value, designation or manner of expression (work). In particular, original creative works may include: works expressed in words, mathematical symbols, graphic signs (literary, journalistic, scientific, cartographic and computer software), artistic works, photographic works, string musical instruments, industrial design works, architectural works, urban planning works, musical works, including any accompanying words, stage works, stage musical works, choreographic and miming works, audio-visual works (including cinematography).
Protection granted Copyright does not protect ideas for work; it is only when the work itself is fixed in a permanent form of expression that copyright automatically protects it. The work is covered by copyright once it is established, even though it may remain unfinished. The author shall enjoy copyright protection irrespective of compliance with any formalities. Copyright protection includes personal (moral) and property (economic) rights. Its scope is compliant with the Berne Convention.
Infringements An infringement of proprietary copyrights or related rights occurs when a work or artistic performance is used without the consent of its author, performer or their legal successors, and without remuneration. Actions constituting a copyright infringement include: recording works without consent, reproduction, sale, public performance or broadcasting via radio or television.
Duration Protection for property rights lasts for 70 years starting from: • The author’s death • The death of the last remaining co-author – for collaborative work • The first publication in the case of works whose author is not known • The publication of the work, and if that never took place – the date the work was established – in the case where the economic rights are owned by a person other than the author • The death of the last remaining of the following people: main director, screenwriter, author of dialogues, composer of the soundtrack accompanying audio-visual work The protection of the author’s moral rights is not limited in time.
PATENTS
Patents are granted, irrespective of the field of technology, for inventions which are new, involve an inventive step and lend themselves to industrial applications. They are awarded by the Polish Patent Office.
Protection granted The patent holder enjoys an exclusive right over the use of their invention for a given period.
Infringements An infringement may involve: • Production, use, offering, marketing or importing of the patented invention for these purposes
• Using the invented method, as well as using, offering, marketing or importing of the products made through the use of this method for these purposes
Duration Patent protection lasts for 20 years from the date of application to the Patent Office.
European Patent Obtaining protective rights in Poland does not provide protection in the rest of Europe. In order to protect an invention in more than 30 European countries, an application needs to be submitted with the European Patent Office which awards European patents.
Unitary Patent Poland (among other 25 EU countries) signed the Agreement for the Unitary Patent, a new single patent right covering the majority EU Member States. The Unitary Patent shall have the Unitary Effect; that is one single right which will be enforceable across through territory through one action in the Unified Patent Court (in contrast to the existing European Patent which operates as a bundle of national patents in each of its designated jurisdictions). However, for the time being, Poland (along with Croatia and Spain) has not signed the Unified Patent Court Agreement, therefore, is not covered by the Unitary Patent.
7 TRADE MARKS
Any sign which can be represented in graphic form can be a trade mark if it is capable of differentiating the goods of one business from those of another business. A trade mark may include a word, drawing, ornament, colour arrangement, spatial form, including the form of the product or its packaging, as well as a tune or other sound.
Protection granted Applications regarding trademarks are received and examined by the Patent Office of the Republic of Poland. By obtaining protective rights, the owner acquires an exclusive right to use the trademark for commercial or professional purposes across Poland. In order to obtain trademark protection across the European Union, an application must be made for the registration of a European Union Trade Mark, which may be done directly with the European Union Intellectual Property Office, or via the Polish Patent Office which is obliged to forward the application on to the European Union Intellectual Property Office.
Infringements A breach of trademark protection involves an unlawful use in commerce: • Of a sign identical to the registered trademark with regard to identical goods • Of a sign identical or similar to the registered trademark with regard to identical or similar goods if there is a risk of misleading customers, including but not limited to the risk of associating the sign with the registered trademark • Of a sign identical or similar to a well-known trademark, registered for any goods if such use takes unfair advantage of, or is detrimental to, the distinctive character or reputation of a prior registered mark
Duration 10 years (registration can be renewed for further periods of 10 years).
DESIGNS
An industrial design is a new, individualised appearance of a product or its part, resulting in particular from the features of its lines, contours, shape, colours, texture or materials used in the product or in its ornamentation. A product is any object manufactured or hand-crafted, including but not limited to packaging, graphic symbols and typefaces, excluding computer software.
Protection granted The legal protection of industrial designs takes effect following the filing of the application and depends on effective registration, confirmed by the protection certificate issued by the Patent Office. Industrial design protection grants the right of exclusive use of the design in a commercial or business activity. A registration certificate confers its holder the right to exclude third parties from: • Manufacturing • Exporting • Offering • Using the product featuring the design • Marketing • Storing said product for such purposes • Importing An industrial design may also be registered with the OHIM which grants protection across all EU Member States.
Infringements An infringement of an industrial design takes place when a competing design does not give a different overall impression to users. Consequently, users of the product may be confused as to its origin.
Duration Protection under the registration of a national industrial design runs for five years from the date of filing the application, and the holder may extend this period subject to a fee up to the maximum of 25 years from the application date. The protection of an unregistered Community design lasts for a period of three years after the design is first made available to the public.
8 Conducting business in Poland Business entities • Purchase of a ready-made its shareholders are indicated in the The forms of business allowed company/partnership (shelf company’s articles of association. in Poland are regulated mainly company) which has no These must be written in Polish. by the Commercial Companies operations or significant assets Code of September 2000. • Undertaking operations while The articles of association business registration is in must contain: As Poland is an EU member, the progress – this is possible in the same rules for setting up and case of limited liability companies • The company name and conducting business apply to and joint-stock companies in registered office Polish citizens as well as to every the process of formation • The object of the national of the European Union company’s activity (EU) and the European Free Trade • Establish the company through • The duration of the company Association (EFTA) belonging electronic filing, possible with to the European Economic Area limited liability companies, • The amount of share capital (EEA). The rules applicable to Polish registered partnerships and and whether a shareholder entities also apply to a strictly limited partnerships) is permitted to hold more defined group of non-EU and than one share non-EFTA entities whose residence Limited Liability Company • The number and nominal in Poland is duly regulated. – ‘Spółka z ograniczoną value of shares subscribed odpowiedzialnością’ (Sp. z o.o.) for by each shareholder The following legal forms The Sp. z o.o. is the most popular of business are available in legal form for newly established Management Poland to investors from the entities in Poland. It has its own The Sp. z o.o. is managed by EU, EFTA countries and other legal personality which is separate the shareholders meeting and persons whose residence in from its shareholders. Shareholders the management board. The Poland is duly regulated: are not liable for the debts or management board (or board obligations of the company. of directors) is appointed by • Sole proprietorship the shareholders for a one year • Civil partnership – used for joint Formation term and can comprise resident investment projects or consortia To set up the Sp. z o.o.in Poland, and non-resident individuals. one or more shareholders are • Registered partnership A supervisory board or audit required. However, it cannot committee are optional, unless • Limited partnership be incorporated by another the limited liability company • Professional partnership sole-shareholder company. has a share capital exceeding • Limited joint-stock partnership PLN500,000 and there are Following this, the Management • Limited liability company more than 25 shareholders. Board must be appointed and the • Joint-stock company company must register with the Filing requirements • European Company National Court Register (KRS). Every company registered in Poland • European Economic Once the company is registered, must maintain proper records Interest Group it becomes a legal entity. and files at the company’s office. These comprise the relevant Additionally, foreign entrepreneurs Capital requirement licenses, certificates, account may conduct business activities The minimum share capital required ledgers, financial statements in the form of a branch office or a is PLN5,000. Contributions in cash and information of the directors, representative office in Poland. or in kind are possible but these the company secretary and must be paid up before registration. shareholders. As a matter of The average time needed to principle, all entities having their establish any type of partnership or Company charter registered office or principal place company is one to two months. If a The rights powers, duties and of business in Poland must keep company is needed sooner, several obligations conferred to the accounting records and file financial alternatives may be considered: company, the board of directors and statements on an annual basis.
9 Joint-stock company – ‘Spółka professions”, eg architects, civil The minimum contribution to akcyjna’ (S.A.) engineers, chartered accountants, the partnership is PLN50,000. The S.A. is a limited liability company insurance brokers, tax advisors, that has its own legal personality. auditors, doctors, etc. Only natural The deed of a limited joint-stock It can be founded by one or more persons entitled to exercise the company must be prepared by a members; however, a limited liability “free professions” defined by the public notary and the partnership company with one shareholder laws can be partners in the Sp. p. has to be registered with the cannot be the sole founding National Court Register. member of a joint-stock company. The Sp. p. has no legal personality and each partner is liable only for Branch and representative office The S.A. is formed as follows: obligations arising from activities Under the terms of the Act on conducted and for the actions of Freedom of Economic Activity, • The founding members people working for the partnership foreign investors may use the sign the company’s statute under his/her management. following forms of business entity: in a notarised form A professional partnership branch and representative office. • Make the payments for shares agreement must be concluded in accordance with the law in writing and the partnerships Branch office – ‘Oddział’ must then be registered with the • Appoint the management The branch office has no legal National Court Register. Each board and supervisory board personality and in legal terms is a partner is entitled to represent part of the foreign company. It may • Register the company with the the partnership independently, only conduct activities within the Register of Entrepreneurs (part unless stipulated otherwise in scope of business of the foreign of the National Court Register) the articles of association. investor. Branch offices must be registered with the Register The minimum share capital required Limited partnership – ‘Spółka of Entrepreneurs in the National is PLN100,000; contributions in komandytowa’ (Sp. k.) Court Register under the name cash or in kind are possible. The Sp. k. comprises two types of of the foreign company, with the partners: limited partners whose addition of “branch in Poland”. The management of the S.A. liability is limited to their respective comprises the shareholders contributions and general partners The branch office is obliged to meeting, the management board who have joint and several liability keep accounting books that should and the supervisory board. with the other general partners, include all the data necessary to and the partnership itself, for establish the taxable base. The Registered partnership – ‘Spółka the partnership’s debts up to foreign company pays corporate jawna’ (Sp. j.) the value of all their assets. The Sp.j. is a partnership with income tax at the standard rate of 19 per cent on the basis no legal personality whereby To form a limited partnership, each partner is personally the deed must be prepared by a of income attributable to the responsible for the partnership’s public notary and the partnership operations of the Polish branch. liabilities with all their assets, must then be registered with jointly and severally with other the Register of Entrepreneurs in Representative office – partners and the partnership. the National Court Register. ‘Przedstawicielstwo’ Foreign entrepreneurs may To form the Sp.j., the deed of a Limited joint-stock partnership also establish representative registered partnership does not – ‘Spółka komandytowo-akcyjna’ offices in Poland. need to be prepared by a public (S.K.A.) notary but it must be registered The S.K.A. is a hybrid of a joint stock The activities of representative with the Register of Entrepreneurs company and a limited partnership. offices are strictly limited to the in the National Court Register. Within the partnership there are advertisement and promotion two types of partners: a general of their foreign business. The Professional partnership – partner, whose liability for all the representative office must be ‘Spółka partnerska’ (Sp. p.) obligations of the partnership is registered in the register of A professional partnership is unlimited and a shareholder, who representative offices which is held established by partners for the is not liable for the obligations of by the Ministry of Economy. The purpose of performing a profession the partnership but is obliged to representative office may employ and thus it is available only to “free acquire and pay up the shares. Polish and foreign nationals.
10 Tax system Taxation in Poland is levied by Taxpayers having a registered both the federal and regional office or place of management governments. The major taxes that in Poland are subject to taxation affect foreign investors include: on all their worldwide income, irrespective of where it is earned • Corporate Income Tax (unlimited tax liability). Taxpayers, • Personal Income Tax whose registered office or place of management is outside • Value Added Tax Poland, are subject to taxation • Tax on Civil Law Transactions only in respect to income earned • Excise Duty in Poland (limited tax liability). • Real Estate Tax Taxable income • Bank levy Taxable income is defined as the difference between total revenue Corporate Income Tax (CIT) and deductible expenditures. Scope Income generally includes all CIT is governed by the Corporate revenue from sales, provision of Income Tax Act, hereinafter referred services and additional profits to as the CIT Act. The current rate acquired from business activities. of tax amounts to 19 per cent. Dividends, interest, royalties and rent are all included in taxable CIT is imposed on the income. Specific rules apply following taxpayers: to non-resident taxpayers. Taxpayers • Legal persons (in particular capital The Polish CIT Act does not include companies and capital companies a definition of revenues. Taxable having a in the organisation phase) revenues are generated from • Organisational units without various sources and include: registered office legal personality (other • Received money, monetary than partnerships) or place of values, including foreign • Other entities, such as: exchange differences, management –– Limited joint-stock partnerships revenues due from sales with their seat or management • Value of things or rights in Poland are located in Poland received free of charge or –– Partnerships without legal partially free of charge subject to personality, which have • Value of liabilities their registered office or redeemed or expired taxation on all management in another state, where, under the respective Taxable revenues of business their worldwide foreign tax regime, they are entities are usually recognised treated as legal persons and on an accrual basis, which income, are subject to taxation on their means that revenue shall be worldwide income in that state recognised as taxable on the irrespective day of releasing things, selling Partnerships (apart from property rights, performing the of where it limited joint-stock partnership) service in whole or in part. registered in Poland are not is earned subject to CIT. Income earned Taxpayers are allowed to deduct by a partnership is allocated from their taxable income such (unlimited tax to the partners and subject to reasonable and deductible business taxation at the partner level. expenses as provided under law. liability).
11 In general, business expenses tax depreciation rates often registered seat in Poland. A tax are deductible if the expenses differ from the depreciation rates capital group is a single consolidated actually arise from, and relate applied for accounting purposes. CIT taxpayer formed by separate to, the business income of the companies. These companies enterprise. Taxpayers must keep Taxpayers who started operating have to conclude an agreement, in documentation of all expenses. in a given tax year can recognise the form of a notarised deed, on one-time depreciation charges the establishment of a tax capital At the same time, the provisions on the whole initial value group for a period of at least three of the CIT Act identify various of tangible assets, up to an tax years. The agreement should types of expenses which are not amount not exceeding the be registered with the head of the tax-deductible, for instance: client equivalent of EUR50,000. tax office. A number of additional entertainment costs, donations, requirements have to be met to part of depreciation charges on Land and perpetual usufruct are establish a tax capital group. expensive cars, certain contractual not depreciated for tax purposes. and administrative penalties A tax capital group is represented by and duties. Donations to public Tax year one company which pays all income benefit organisations and religious In principle, the tax year is the tax and income tax prepayments. institutions are deductible from calendar year. However, taxpayers All the companies in the tax capital taxable income, up to ten per can choose a different period, group are jointly and severally cent of the annual tax base. provided that the tax year comprises liable for income tax liabilities due a period of 12 consecutive calendar for the period of the agreement. If the taxpayer’s business is partially months. The taxpayer must notify exempt from CIT or out of scope of the head of a competent tax Thin capitalisation rules CIT Act regulations, then appropriate office if selecting a tax year other Thin capitalisation limitations allocation of costs to the activity than the calendar year within 30 apply when loans are granted charged with CIT and exemptions days after commencing of the to a company by: may be necessary. In case of tax year. The tax year should expenditures which are linked with also be declared in the articles • A shareholder owning the general activity of the company, of association of the company. directly or indirectly at least partial deduction of tax deductible 25 per cent of shares in the expenses may be necessary. During the course of the year, capital of the company taxpayers are obliged to make • Several shareholders jointly Depreciation monthly tax prepayments. owning directly or indirectly at Tangible fixed assets (including Simplified tax prepayments are least 25 per cent of shares in machines, equipment, buildings possible based on prior year tax due. the capital of the company and structures) as well as intangible • Another company, in the case fixed assets (eg licences, copyrights, The annual CIT settlement (filing when the same entity owns rights to inventions and patents) of CIT declaration and payment directly or indirectly at least which are used by the taxpayer of tax due) must be completed 25 per cent of shares of the for the purposes of their business before the end of the third month lender and the borrower activity with anticipated useful life of the year following the tax year. exceeding one year are subject Interest on loans falling under to depreciation/amortisation. Groups the above thin capitalisation Tax capital groups can be created restrictions is not deductible on Since maximum tax depreciation only by joint-stock companies or the portion of the loan exceeding rates are fixed by the CIT Act, limited liability companies with their borrower’s equity (1:1 ratio).
12 Taxpayers may choose an alternative • Dividends paid to a and similar agreements, transactions method for calculating the thin non-resident – 19 per cent between a Polish entity and its capitalisation limitation. The most • Royalties and selected foreign permanent establishment, important aspect of the alternative service fees paid to a should establish prices in line method is that it determines non-resident – 20 per cent with the arm’s length principle. Otherwise, tax authorities are the limits of tax deductibility on • Interest paid to a non-resident authorised to assess the income loans granted by related and – 20 per cent unrelated entities. The method based on arm’s length principle. is based on two thresholds: These rates may be subject to Upon request of the tax authorities, a reduction under applicable taxpayers are obliged to provide • Total tax-deductible interest double tax treaties. computed cannot exceed the transfer pricing documentation within seven days of the request. tax value of assets (with certain Furthermore, Poland has If the taxpayer does not present eliminations) multiplied by the implemented the provisions the transfer pricing documentation sum of the Polish central bank’s of the EU Directives on the and the arm’s length character reference interest rate increased common system of taxation of the transaction is successfully by 1.25 percentage points applicable in the case of parent challenged, tax authorities will have companies and subsidiaries of • Total interest deductible in a given the right to apply a 50 per cent different Member States. tax year may not exceed 50 per penalty tax rate on the increased cent of the profit from operating income or decreased tax loss. activities. There are exceptions Income tax exemption applies to dividends, interest and royalty from this limit for certain types The transfer pricing documentation and selected service payments of taxpayers, eg banks. Interest should include inter alia information paid by Polish companies to determined in line with first on the functions to be fulfilled other Polish companies or foreign threshold which could not be by the entities participating in companies with their registered deducted in a given tax year due the transactions, inherent risks, seats in the EU/EEA if: to these thresholds may as a assets employed, method rule be deducted in any of the and way of profit calculation, • Certain shareholding following five consecutive tax as well as the determination conditions are met years, subject to the limitations of the transaction price. • The dividend payment had a defined in the CIT Act “real and genuine character” and The obligation to prepare tax its only purpose is not obtaining In order to apply the alternative documentation applies to withholding tax exemption method, the taxpayer has to transactions of which the total notify the head of the tax office amount in the tax year exceeds: The basic document required to by the end of the first month of apply reductions or exemptions from the tax year. The method has to • EUR100,000 – if the value of the withholding tax is a certificate of tax be applied for a period of at least transaction does not exceed 20 residence of the recipient. Additional three consecutive tax years. per cent of the share capital documents (as statements of • EUR30,000 – with respect beneficiary of interest, royalties to services, sale or use Losses and dividends) may be required of intangible assets Losses can be offset against the depending on specific details taxable income of future years. Tax of a given transaction. • EUR50,000 – in all other losses are available to carry forward cases, including: consecutively for a maximum period Transfer pricing –– Entering into agreements of five tax years before they expire. Polish regulations on related of partnership without legal However, maximum deduction party transactions are based personality (EUR50,000 using tax loss carried forward on the OECD Guidelines for threshold relates to value of cannot exceed 50 per cent of this multinational enterprises and tax contribution of partners) tax loss in any single tax year. administrations. The key principle –– Joint undertaking and similar is that enterprises concluding agreements (EUR50,000 Withholding tax related party transactions, including threshold relates to the value Withholding tax is charged on agreements of a partnership without of undertaking/agreement the following types of income: legal personality, joint undertaking determined by relevant contract)
13 • EUR20,000 – in the case of • The foreign subsidiary has its States of the EU/EEA, but its payments made for the benefit registered seat in a “tax haven” income does not exceed 10 of entities located in countries (tax haven jurisdictions are per cent of revenues on actual treated by Polish law as “tax determined by the Minister business activity under the havens”, as well as in the case of Finance in decrees) condition that a legal basis (eg an of a conclusion agreement • The foreign subsidiary has its international agreement) exists of partnership without legal registered seat in a country allowing the obtainment of tax personality, joint undertaking and other than a “tax haven”, information from the country similar agreements when one of where the foreign subsidiary is the partners is an entity located but in a country with which in the “tax haven” jurisdiction Poland / EU has not concluded taxable on its worldwide income an international tax treaty Taxpayers have the right to which could be the basis for The basis for taxation constitutes conclude unilateral, bilateral exchange of tax information the part of income of the foreign or multilateral advance pricing • The foreign subsidiary meets controlled subsidiary generated in agreements which confirm the all of the following conditions: the period during which the Polish correct choice and application of shareholder kept at least a 25 per –– the Polish taxpayer has the transfer pricing methodology. cent shareholding, in the amount possessed directly or The decision on the agreement is indirectly at least 25 per cent reflecting the share in the profits issued by the Minister of Finance of equity, voting rights or of the subsidiary allocated to the and there is an administrative taxpayer after the deduction of: charge due. The decision is binding rights to participate in profits, for a period of up to five years. for an uninterrupted period no shorter than 30 days • Dividends received by the taxpayer from the foreign Additionally, capital groups in which: –– at least 50 per cent of revenues of the foreign subsidiary in controlled subsidiary • The dominant company the tax year is generated from • Revenues resulting from the is located in Poland and dividends, other incomes from sale of shares in the foreign consolidates financial statements the share in profits of legal controlled subsidiary of the group in line with persons, revenues from the Polish Accountancy Act disposal of shares, receivables, The taxpayer is entitled to a • Consolidated revenues interest and similar fees, proportional deduction of part of exceed EUR750,000,000 financial instruments, royalties the income tax paid abroad from • They have a permanent etc, and at least one of the the Polish tax due calculated establishment or subsidiary sources stipulated herein is according to CFC regulations. in another country taxable in the country of the subsidiary with a rate lower than Tax incentives are obliged to submit information 14.25 per cent (ie 25 per cent The Polish CIT Act includes on the profits and tax paid per less than standard Polish CIT provisions for tax incentives. tax jurisdictions where their rate of 19 per cent). Exceptions The most commonly used subsidiaries and permanent exist to the above general rule tax reliefs relate to: establishments operate (Country-by-Country Report). CFC regulations are not applicable if: Exemption relating to operations in a Special Economic Zone (SEZ) Controlled foreign companies • The foreign subsidiary is taxable (CFC) on its worldwide income in one Income from operations in SEZs As of 1 January 2015, Poland of the Member States of the is exempt from corporate tax introduced legislation relating to EU/EEA and performs factual provided that the conditions CFC. Polish taxpayers are obliged business activity in this state to charge corporate tax at 19 per stipulated by special permits • Annual revenues of the cent on income generated by their obtained by the taxpayer are controlled foreign companies. foreign subsidiary do not met. The amount of tax credit exceed EUR250,000 granted in relation to operations CFC restrictions are applicable • The foreign subsidiary conducts in a SEZ depends inter alia on if the following conditions are its actual business activity in the amount of money invested, met by a foreign subsidiary: a country other than Member location and size of the enterprise.
14 R&D Activities business income, investment income, rent income, capital The Amendments to Certain Acts Related gains, director’s fees, and other sources of income. to Supporting Innovation Act, which came into force on 1 January 2016, introduces a Employment income new tax relief for R&D activities. The tax Taxable employment income includes all wages, salaries, overtime relief allows taxpayers to deduct certain pay, bonuses, gratuities, benefits in kind, etc. Remuneration qualified expenditures incurred for R&D for work carried out in Poland is treated as Polish-sourced activities from the taxable base. Deductions income (irrespective of the employer’s location) unless a may be made up to certain limits, respective double tax treaty is applied. Employment income is depending on the type of activity/taxpayer: grouped together and taxed at the progressive tax rates.
• Employment costs (wages and Investment income employer’s social contributions): For individuals, investment income (dividends, interest) is up to 30 per cent generally subject to a special tax regime and taxed at a flat rate • Other qualified expenditures (as for of 19 per cent unless specifically exempt. According to most example: purchase of services and double tax treaties between Poland and other states, withholding materials directly linked with R&D tax (WHT) paid abroad may be credited against Polish tax. activity, expertise, advice, results of scientific research, lease of certain Capital gains science and research equipment, Generally, gains on the disposal of investment assets are subject to a depreciation): up to 20 per cent for SMEs special tax regime. They are filed on a separate tax return and taxed and up to 10 per cent for large enterprises at a special flat rate of 19 per cent unless specifically exempt.
Personal Income Tax (PIT) Tax deductibles PIT is regulated by the Personal Donations to public benefit organisations and religious institutions are Income Tax Act. deductible, up to six per cent of the annual tax base for a taxpayer. Tax relief is also available for parents bringing up children. Individuals liable to tax Taxation in Poland depends upon the Taxable income Taxable income Tax rate residence status of the individual; over (PLN) up to (PLN) non-residents pay tax only on Polish-sourced income, while residents 0 85,528.00 18 per cent less pay tax on their worldwide income. PLN556.02* 85,528.00 – 14,839.02 plus 32 per cent An individual is considered of excess over 85,528.0** resident in Poland if: * 1,440.0 according to the planned changes in the law that might apply retrospectively • He/she has his/her centre of personal from 1 January 2016 or business interests in Poland; or ** 13,955.04 according to the planned changes in the law that might apply retrospectively from 1 January 2016 • He/she stays in Poland for more than 183 days in a tax year Individual responsibilities in relation to Polish Personal This, however, may be different if a relevant Income Tax double tax treaty states otherwise. The tax year for individuals is the calendar year. As a general rule, individuals in Poland In specific cases, advance payments should be made during the year. are subject to income tax calculated Employers are obliged to: on the basis of a progressive tax rates (18 – 32 per cent). However, there are some exceptions to this rule. • Calculate, declare and remit advance payments at 18 per cent or 32 per cent tax rates Taxable income • Complete the annual tax return for employees who opt for it PIT is levied on a broad scope of • Prepare information about the income derived if the employee submits income that includes the following their own tax return categories of income: employment income, self-employment and
15 Employees receiving remuneration employer who has a place of are obliged to appoint a tax directly from abroad are obliged residence or seat outside Poland representative. The taxpayer and to pay Personal Income Tax • The remuneration cost tax representative are jointly and advances themselves, as well is not borne by the severally liable for tax liabilities as submit annual tax return and employer’s permanent that the tax representative settle their annual tax due. establishment in Poland settles for the taxpayer.
Tax returns If any of the above conditions Taxpayers are obliged to submit An individual should submit the are not met, the employee’s VAT returns on a monthly or annual tax return no later than 30 salary is taxed in Poland. quarterly basis. Returns may April of the year following a given tax be submitted electronically. year (or, for non-residents, before Value Added Tax (VAT) leaving Poland if it occurs earlier). Poland’s VAT regime complies with Taxpayers making intra-community the EU VAT regime. In principle, VAT transactions are obliged to Married couples may file a joint is levied on certain taxable activities submit EC Sales Lists reporting return if they are tax resident in (supply of goods, provision of intra-community supply of goods, Poland and they have been married services, exports of goods, imports intra-community acquisitions of the entire tax year and marital of goods and intra-community goods, triangular transactions community property regime was acquisition and supply of goods). as well as supply of services in force during the entire tax year to which the reverse charge (this scheme is also applicable for The following activities are mechanism is applicable. The non-residents from an EEA country not subject to VAT: EC Sales Lists are submitted that derive at least 75 per cent of as a general rule for monthly their global income in Poland). A joint periods, but if certain thresholds • Transactions involving the tax return may also apply to single are not exceeded they may be disposal of an enterprise or an parents with child dependants. The submitted on a quarterly basis. organised part of an enterprise joint tax return offers substantial tax savings if the other person • Activities which cannot Additionally, taxpayers (spouse or child dependant) be the subject to a legally may be obliged to draw up does not receive any taxable binding agreement INTRASTAT information income or if the income is low. for intra-community goods All entities carrying out business transactions, on a monthly basis. The Personal Income Tax Act activity as defined under the Polish does not apply to revenues VAT Act shall be deemed taxpayers. Applicable rates subject to the provisions on tax Taxpayers include legal persons, At present, the standard VAT on inheritance and donations, organisational units without legal rate is 23 per cent. Additionally, actions that cannot be subject personality and sole proprietors, there are reduced rates of eight of a legally binding agreement or irrespective of the purpose or per cent, five per cent and zero revenues subject to tonnage tax and effects of their activities. per cent and the exempt rate. selected other types of income. VAT administration The reduced eight per cent rate Special exemptions pursuant to Before engaging in any activity applies to supplies of certain foods double tax treaties (DTTs) subject to VAT, taxpayers are and beverages, medical accessories Under the DTTs based on the OECD obliged to apply for registration and equipment, supplies and Model Convention signed by Poland, to the head of a competent tax services related to residential if all of the following three conditions office. Taxpayers whose scope of building, accommodation services are met, the salary of an employee activity will cover intra-community and passenger transportation, as will not be taxed in Poland: transactions shall include this well as selected other services. intention in their application. • An employee does not stay in The reduced five per cent rate Poland for more than 183 days Taxpayers without a registered may be applied inter alia to in total during a twelve-month office, permanent place of unprocessed food and beverages, period starting or ending in a business or place of residence in books and specialist magazines. given tax year (rolling months) a member state of the European • The remuneration is paid by the Union, if required to register The zero per cent VAT rate is employer or on behalf of the as “active VAT taxpayers”, applicable, among others, to
16 exports of goods or on the tax base, and decisions of courts intra-community supply of goods. and settlements, if they have the same legal effect as a civil law VAT exempt services include transaction subject to taxation. financial services (with exceptions) and medical and The main tax rates are two per educational services. cent (eg sale of real estate, things), one per cent (sale of Deduction of VAT other property rights) and 0.5 per Input VAT on purchases of goods cent (increase of share capital). and services can be deducted from output VAT arising from sales In principle, the tax base equals invoices issued by the taxpayer the market value of an object during the reference period. or property right subject to The right to deduct input VAT is the civil law transaction. conditional on the use of goods and services purchased for the purposes There are a number of of activities subject to taxation. If exemptions from the tax on civil a taxpayer performs both taxable law transactions, for example a and tax-exempt activities, then it is contract of the sale of shares or obliged to assign the expenditures to stock in a joint-stock company the particular activities, and where it made through investment is not able to assign the expenditure, companies or foreign investment to apply a pro-rata VAT deduction. companies and on an organised market (stock exchange). Also, Refund of VAT most of transactions subject to VAT If input VAT for the reference period are outside the scope of this tax. exceeds the amount of output VAT, the taxpayer has the right to reduce Excise duty output VAT in subsequent periods Polish excise duty legislation to recover the amount, or to be is generally in line with the reimbursed into their bank account. provisions adopted in the European Union. Excise duty is The basic period for a refund of payable on excisable goods and the surplus input VAT is 60 days. passenger cars. Excisable goods are: energy products, electric Subject to certain requirements, energy, alcohol and alcoholic surplus VAT may be refunded within beverages and tobacco. Polish excise 25 days. Excise duty is charged on: duty legislation If a taxpayer didn’t perform any production of excisable goods, taxable activity during a reference entry of excisable goods to an is generally period, they can receive a refund excise warehouse, imports of input VAT within 180 days of excisable goods and in line with upon a justified request. intra-Community acquisition of excisable goods, as well as other the provisions Other Taxes events or factual states defined Tax on Civil Law Transactions by the law, including losses in adopted in the (Stamp Duty) excisable goods and certain cases This tax is levied on certain of use of excisable goods. European Union. civil law transactions (eg sales, loans, establishment of company Bank levy and increase of share capital), Banks and insurers must amendments to any civil law pay a rate of 0.44 per cent transactions if they increase the on their assets annually.
17 Labour The primary source of legislation regulating employment relations in Poland is the Labour Code. It is accompanied by secondary legislation which includes ordinances stipulating detailed rules of conduct in specific employment situations and a range of special regulations.
Key issues regulated by the Labour Code include:
• Types of employment contracts that may be concluded with employees (indefinite/ definite term, probation, replacement, time needed to perform a specific task) • General rules on the payment of remuneration • Rights and obligations of contracting parties, working hours, paid leave entitlements be signed no later than on the day • Entitlements related to parenthood the employee starts working. If An employment • Issues related to occupational no contract is signed, then the health and safety employee should be provided contract is • Employment of minors with written confirmation of • Anti-discrimination provisions the contract conditions on the concluded in day he starts work at the latest. Employment contract The contract must specify: writing and Employment contracts may take the form of a permanent contract • The parties to the contract should be or a fixed-term contract. • Employment contract execution date signed no later Both types of contract can be • The type of employment contract preceded by an employment than on the day • Work commencement date contract for a trial period of no more than three months. • Type of work the employee • Place of work Once a fourth subsequent • Wage starts working. fixed-term contract is signed, it is deemed to have become • Type of work time an indefinite term contract. Furthermore, planned changes Within seven days of the execution to employment regulations under of the employment contract, fixed term contracts will limit the employer must also provide such contracts to 33 months / the following information to the four consecutive agreements. employee: daily and weekly working hours, frequency An employment contract is of wage payments, holiday concluded in writing and should entitlement and notice period.
18 Any changes in employment minimum wage as a base. managers of the establishment) contract conditions should also be made in writing. The employer If, in any given month, a full-time Secondary legislation provides for should include additional written employee were to be paid less groups of employees to whom information about certain than the minimum wage, due to reduced working hours apply engagement terms to the the payment dates of certain pay (eg employees with disabilities employment contract. Labour Code components or distribution of or healthcare employees). provisions set out the regulations working hours, then the employer that should be included in the must increase the remuneration Holiday leave employment contract and in so that it is not lower than the All employees are entitled to an the additional written information. minimum wage in a given year. annual unbroken paid holiday leave. An employee who is just Minimum wage Apart from its main function, the starting his working life attains the The minimum wage rate is minimum wage is an important right, in the calendar year in which decided every year by the Trilateral parameter used to determine other the work starts, to holiday leave Commission for Socio-Economic employment benefits, such as: with every month that passes of Affairs. The prime minister 1/12 of the total vacation to which announces it by 15 September • Night work allowance employee is entitled after one year of work. An employee gains the of every year in Monitor Polski. • Severance pay due to right to the next holiday leave in collective redundancies The state policy on pay, especially each subsequent calendar year. • Minimum compensation due to the institution of the minimum the infringement of the equal wage, is there to ensure that one Vacation entitlement is as follows: treatment in employment principle of the key principles of labour law, ie fair pay, is implemented. From 1 • Compensation due to • 20 days – if the employee has been January 2016, the minimum monthly termination of employment working for less than 10 years wage in was fixed at PLN1,850. related to harassment • 26 days – if the employee has • Minimum standby pay been working for at least 10 years Pursuant to Art. 6 section 2 • Minimum benefits base Minimum Wage Act of 10 October Employee entitlements contained 2002 (Journal of Laws no 200, item If the minimum pay increases, in the generally applicable labour 1679 as amended), an employee’s so do the following: legislation are the minimum remuneration may only be lower entitlements. than the minimum wage in their • Amount exempt from deductions The employer may set a higher first year of employment and in • Labour costs this case may amount to 80 per minimum leave entitlement within • Social security contributions cent of the minimum wage. internal company labour law. paid by employers on preferential terms When calculating the In the case of a worker employed minimum wage, the following • Night work allowance in part-time employment or part components of remuneration • Minimum incapacity benefit of the year, his holiday entitlement are not taken into account: is calculated proportionally Working time and leave (respectively to the working time or period of employment with • Service anniversary award The statutory maximum the employer during the year). • Retirement allowance working hours in Poland are: • Overtime pay The working period on • Eight hours a day which vacation entitlement According to Art. 8.1 Minimum • 40 hours in a five-day working depends includes time spent Wage Act, if an employee works week, over a reference period in education, depending on the part-time, the minimum pay of no more than four months type of school finished, eg: applies proportionately to the • Including overtime, the working number of working hours to be hours in any adopted reference • Basic vocational school – completed by the employee in a period may not exceed 48 hours length of course but not more given month, using the statutory a week (this limit does not apply to than three years
19 • Secondary vocational school – length of course but not more than five years • Secondary school of general education – four years • Vocational college – six years • Higher education institution – eight years
The above periods cannot be added together.
Additional leave entitlements The employer is obliged to grant an employee a leave of absence in the following circumstances:
• Two days – on their marriage or birth of their child, or death and burial of the employee’s spouse or child, father, mother, stepfather or stepmother
• One day – on the marriage of the employee’s child or death and burial of the employee’s sister, brother, mother-in-law, father-in-law, grandmother, grandfather, as well as any other person who is the employee’s dependant or under their direct care • In other situations provided for under labour law
Parental leave On 2 January 2016, new legislation related to parental leave was enacted.
Maternity Leave Parental Leave One child More than one child One child More than one child 20 weeks 31-37 weeks 32 weeks 34 weeks A person who A person who has worked at least six months overall is also entitled to unpaid parental leave of 36 months, of which one month is dedicated to the other has worked at parent. The leave may also be used in up to five parts, until the end of the least six months calendar year when the child is six years old.
Social security overall is also The national social insurance system in Poland is comprised of several elements, including: entitled to unpaid
• Retirement insurance, which is used for old-age pensions and parental leave to cover insufficient funds to pay out capital pensions of 36 months, • Disability insurance, which is used towards: –– Disability allowance, training allowance, survivor’s pension, of which one supplements to survivor’s pensions for orphans, carer’s allowance –– Old-age pensions granted by official decision instead of disability allowance month is –– Funeral allowance –– Back-to-work schemes dedicated to the –– Benefits to be paid by the Social Insurance Institution (ZUS) which are subject to financing from the state budget other parent. • Sickness insurance, which is used towards: –– Sick pay –– Maternity pay –– Attendance allowance –– Compensation benefit –– Rehabilitation benefit
20 • Accident insurance, which is used towards: even if the employee enjoys special – Industrial injury pension and pension supplements protection against dismissal. This – One-off compensation includes pregnant women or employees on maternity leave, – Sick pay; due to incapacity for work caused by an industrial injury or workers close to retirement age, occupational disease etc. The sole condition is that the • Health insurance, which is used to pay for the costs of primary healthcare and parties agree about the timing hospital treatment and conditions of termination. • Labour fund, which is used towards mitigation measures of the effects of unemployment, ie: Notice of termination – a contract is –– Unemployment benefit terminated with notice when either –– Subsidised employment the employer or employee notifies –– Public works the other party that he intends to –– Training and retraining of the unemployed terminate the work relationship with –– Development of careers guidance notice. The employment contract –– Development of IT systems and labour market research is then terminated at the end of a
• Guaranteed employee benefits fund, whose objective is to protect specified period, ie at the end of employees against loss of remuneration due to employer insolvency. the notice period. An employment Used to satisfy claims related to job remuneration and other contractual contract can only be terminated remuneration components by the employer if the conditions set out in the Labour Code have Social insurance contributions are deducted from wages and amount to: been met. One of these is that the employer has to give specific, Type of Rate (%) Rate payable Rate payable genuine reasons for the termination. insurance by the by the employee (%) employer (%) Notice periods Retirement 19.52 9.76 9.76 The length of the notice period depends on the type of contract Disability 8.00 1.5 6.5 and the position held by the Sickness 2.45 2.45 – employee. During the notice Accident 0.67-3.80 – 0.67-3.80* period, the employee is entitled to receive his normal salary. Health 9 9 – Labour Fund 2.45 – 2.45 • Employment contract Guaranteed 0.10 – 0.10 for a trial period Employee –– Three working days, if the Benefits Fund contract is concluded for * The accident insurance rate varies for individual contribution payers (employers) and is not more than two weeks determined depending on the level of occupational risk and its potential consequences. –– One week, if the contract is concluded for more Probation than two weeks but less Probationary periods vary depending on the type of employment contract than three months concluded. However all contracts are subject to a maximum probationary period –– Two weeks, if the trial of three months. As from 22 February 2016, it will be possible to conclude period is three months more than one probationary contract if the type of work changes. For the same type of work it will be possible to repeat the probationary contract but only • Employment contract for after three years from termination or expiration of the previous employment. an indefinite term Dismissal –– Two weeks, if the employee Under Polish labour law, termination of employment can only take place in the has worked for the employer following situations: for not more than six months –– One month, if the employee Agreement between the parties – may be used to terminate any contract and has worked for the employer it makes no difference which party takes the initiative. This means that any for at least six months but contract of employment with any employee may be terminated in this way, less than three years
21 –– Three months, if the employee for cause, eg in disciplinary one month’s to six months’ pay has worked for the employer action) or for reasons beyond their • Severance pay for employees for at least three years control (eg long-term absence). laid off without cause (pursuant • Employment contract for a fixed to the Collective Redundancy term – two weeks, but on the A written declaration of will Act) – from one month to three condition that the contract to terminate the employment months’ pay depending on was concluded for at least six contract without notice does seniority with a given employer months and the parties stated not mean that the relationship of • Termination pay – amounting clearly in the contract that employment no longer applies. to one month’s pay in lieu it could be terminated with Instead, it takes effect as of the of each month of the notice notice – as from 22 February date the declaration is effectively period if it is shortened 2016, notice periods for all received by the addressee in unilaterally by the employer definite term contracts (including such a way as to enable them • Compensation for wrongful replacement/substitution) will to properly read its contents. be the same as for indefinite termination – paid out following a court decision in the amount term contracts (depending The employer may not terminate awarded by the court if the on employee’s duration of the contract for cause if a month termination of an employment service in the company) has passed since they became contract was unlawful aware of the circumstance (with or without notice) Notice of changes underlying the termination. Notice of changes to work Collective redundancy conditions or pay make it possible An employment contract may not Polish law provides for the special for the employer to change – under be terminated without notice for protection of employees where an rules specified in the Labour reasons beyond the employee’s employer with 20 employees or Code – engagement conditions control if the employee is absent more needs to lay off 10 people in the employment contract to due to providing child care. conditions less favourable to or more within 30 days. There is a statutory procedure in place which the employee. Employment Severance pay and contract notice provisions apply requires that the employment compensation to notices of changes to work office must be notified of collective Polish labour law provides conditions or pay. This means, redundancies so as to prepare for the following types of among other things, that the the labour market for the resulting severance pay and compensation employer should give reasons for increase in unemployment. paid out to employees upon the change. A notice of change Moreover, certain employee groups termination of employment: can also lead to the termination have been granted special protection of the employment contract rights due to their personal or • Severance pay upon retirement should the employee not accept occupational status, eg pregnant – paid out to employees who the proposed new conditions. women and those on maternity retire due to old age or disability. leave, union activists, members of It is a one-off benefit and Termination without notice councils and organisations existing in amounts to the equivalent of the An employment contract can the workplace whose main objective be terminated without notice, employee’s single month’s pay is the protection of workers’ rights. with immediate effect, by the • Bereavement allowance – paid These protection rights include a employer as well as the employee, out to eligible family members if total ban or restriction on contract in the presence of circumstances the contract expires due to the termination. The law also provides provided for in labour law. These employee’s death. The amount for obligatory severance pay for circumstances may be due to the depends on seniority with a given laid off employees, the amount of fault of the employee (termination employer and can range from which depends on the duration of
22 employment with the employer. work, as well as individuals with The statutory restrictions aimed refugee status or a settlement at employee protection are eased permit, tolerated stay permit, in extraordinary circumstances holders of temporary residence when the employer announces permits in cases provided for in the bankruptcy or overall liquidation. Foreign Nationals Act, students, certain academic employees and Employment of non-resident holders of Karta Polaka (Polish Card). employees The employment of a foreign The body authorised to issue work national in Poland is conditional permits is the ‘voivode’. According upon legalising their stay. Non-EU to the work permit procedure, the nationals may stay in Poland application needs to be submitted legally under a visa or another by the employer and a market document authorising their stay. test is conducted to verify that it EU nationals may stay in Poland is not possible to fill the vacancy legally for up to three months through the unemployment without having to report this fact register. An employer of foreign or obtain any permits. After this nationals is obliged to treat them in period, they may continue to compliance with Polish labour law. reside legally in Poland if they have The right found employment, undertaken Trade unions studies or if they meet other The right to organise trade unions to organise conditions stipulated in the Foreign is broadly guaranteed under the Nationals Act. Otherwise, they Polish Constitution. In turn, specific trade unions are required to legalise their stay. provisions governing the activities of individual unions and organisations is broadly In certain situations, employment are laid down in separate acts. in Poland may require the individual guaranteed to obtain a work permit. Among The right to establish and join others, this applies to non-EU under the Polish nationals. There is, however, a trade unions, as well as the category of non-EU foreign national principles of organisation and Constitution. which enjoys the privilege of being members’ rights are also laid able to work without a permit for down in the Trade Unions Act. a period of less than six months, provided that the employer makes The provisions of the Act stipulate an appropriate declaration to the special rights necessary to perform employment office. This privilege trade union duties, such as paid applies mainly to nationals of leave of absence, special protection neighbouring countries including against dismissal due to trade Ukraine, Belarus, the Russian union activism, and also obligations Federation, Georgia and Moldova. on the employer to enable union activists to carry out their duties. Work permits are not required for EU nationals, as well as residents of In Poland, trade unions focus on Switzerland, Norway, Iceland and protecting employees’ rights and Liechtenstein, long-term residents, representing workers in front people with permanent employment of state and local authorities, in one of the EU Member States as well as bodies such as seconded to Poland for temporary employers’ organisations.
23 Audit The primary source of law on financial accounting and reporting is the Accounting Act of 29 September 1994. The Accounting Act specifies the procedure for auditing financial statements by certified auditors and the principles governing the provision of bookkeeping services. The Act has been amended to bring its provisions closer to the standards as set out in IFRS. The main changes to the Act were introduced in 2001 and came into force on 1 January 2002.
The Act is accompanied by regulations issued by the Polish Minister of Finance, with the most important including:
• Regulation on Accounting for Financial Instruments • Determination of the financial year IFRS • Methods of measuring assets Banks and public companies are • Regulation on the Preparation obliged to produce IFRS-compliant of Consolidated Financial and liabilities and determining the financial result consolidated financial statements. Statements of Capital Groups Their separate financial statements • The accounting system (chart may be prepared under IFRS. Moreover, the Minister of Finance of accounts, list of accounting books, description of the has published separate regulations Moreover, separate and data processing system) governing the accounting of banks, consolidated financial statements credit unions and investment funds. • Data protection system of entities that are part of a group in (of accounting books and which the parent (Polish or foreign, Accounting standards underlying documents) public or otherwise) prepares Business entities are obliged to IFRS-compliant consolidated comply with the adopted accounting Within the adopted accounting statements may be prepared principles in order to present a principles, businesses are allowed under IFRS. The decision is up to true and fair view of their assets, to apply simplifications, as long as the approving body (supervisory financial position and financial they do not have a negative impact board or general meeting of result. Events and transactions are on the true and fair presentation of shareholders) of such entities. recognised in accounting records assets, financial standing and the and disclosed in the financial financial result of the business. Financial statements of branches statements according to their of foreign enterprises may be economic substance. The adopted Management of the entity bear the IFRS-compliant if the foreign accounting principles should be responsibility for the fulfilment of the enterprise prepares financial applied in a consistent manner, with requirements of the Accounting Act. statements in compliance with IFRS. a uniform approach to grouping similar transactions in all periods and In matters not regulated by the If a company intends to go measuring assets and liabilities in Accounting Act, businesses may public, it may elect to prepare such a way that the data reported in apply Polish National Accounting its consolidated and separate all years presented are comparable. Standards issued by the Polish financial statements under IFRS. Accounting Standards Committee. The accounting principles Where there are no national Preparing financial statements should include: standards, IFRS may be applied. according to IFRS is otherwise
24 not allowed. The accounting foreign enterprises, too, are obliged Groups principles stipulated in the to prepare financial statements. Consolidated annual financial Accounting Act apply. statements of groups are prepared Financial statements include: by parent entities which have Accounting records and their registered office or principal financial statements • Balance sheet place of business in Poland. These As a matter of principle, all entities • Profit and loss statement statements include the data for the having their registered office or parent entity and its subsidiaries of • Statement of changes in equity principal place of business in Poland all levels put together in such a way must keep accounting records. • Cash flow statement as if the group was a single entity. This also applies to branches and • Notes representative offices of foreign The parent is not obliged to prepare enterprises, but does not apply to The Accounting Act specifies the consolidated financial statements partnerships whose total revenue applicable reporting templates if, in the year for which the financial and finance income does not as well as the minimum statements are prepared and in the exceed the equivalent of EUR1.2 content of the notes. preceding year, the combined data million. The latter may comply with of the parent and all its subsidiaries: the provisions of the Accounting Simplified financial statements Act if they choose to do so. The Accounting Act defines a 1 Before consolidation eliminations small entity and a micro-entity. – did not exceed at least two out The financial year is the calendar of the three following figures: year or any other period of Small entities are business entities 12 consecutive calendar months. which in the year for which the • Total assets of PLN38.4 million If the financial year is changed, financial statements are prepared at the end of the financial year the first year following the change and in the preceding year did • Revenues of PLN76.8 million shall be longer than 12 months. not exceed at least two out of for the financial year Businesses which start operations the three following figures: • Annual average employment in the second half of their adopted of 250 FTEs financial year may combine the • Total assets of PLN17 million at accounting books and financial the end of the financial year 2 After consolidation eliminations statements for that period with • Revenues of PLN34 million – did not exceed at least two out those of the following year. for the financial year of the three following figures: • Annual average employment Accounting books must be kept of 50 FTEs • Total assets of PLN32 million at in Polish and in Polish zloty. the end of the financial year Micro-entities are business entities • Revenues of PLN64 million As a matter of principle, accounting which in the year for which the for the financial year books should be kept by the financial statements are prepared entity, but the act provides for • Annual average employment and in the preceding year did subcontracting this duty to a of 250 FTEs not exceed at least two out of business authorised to provide the three following figures: bookkeeping services. A parent which is controlled by another entity does not • Total assets of PLN1.5 million Accounting books, as well as most have to prepare consolidated at the end of the financial year of the underlying documents, are to financial statements if: be stored for no less than five years. • Revenues of PLN3 million for the financial year • The immediate controlling entity holds 90 per cent or Financial statements are prepared • Annual average employment more shares of this parent at the date of closure of the books of 10 FTEs of accounts and at another balance and all the other shareholders of this parent consent sheet date, in line with the principles With regard to small and for measurement of assets and micro-entities, requirements as • The immediate controlling entity liabilities and determining the to the application of accounting will prepare consolidated financial financial result specified in the principles and preparing financial statements covering the parent Accounting Act. Polish branches of statements have been simplified. and all of its subsidiaries
25 The parent does not have to (unqualified or qualified) opinion Other entities are subject to produce consolidated financial about those statements and mandatory statutory audits if, in the statements either when all its after said statements have been year preceding the financial year subsidiaries are exempt from approved by the approving body. for which the financial statements consolidation (eg they were are prepared, at least two of the acquired exclusively with a view to Annual financial statements are to following criteria were met: subsequent disposal or there are be submitted to the court register restrictions in exercising control within 15 days of approval. • Annual average employment over them, or their financial data is of no less than 50 FTEs insignificant for the consolidated In the case of public companies: statements as a whole). • Total assets at the end of the financial year of no less than the • Separate and consolidated Most businesses are also obliged quarterly reports are submitted equivalent of EUR2.5 million to produce a report on activities, no later than 45 days after • Revenues and finance income which includes important quarter-end (and in the case of for the financial year amounted information on their assets and reports for the final quarter of a to no less than EUR5 million financial standing, evaluation of financial year – no later than within their performance and description 60 days of that quarter-end) Audits must be performed by a of threats and risk factors. • Separate and consolidated certified auditor and the certified semi-annual statements are auditor must express an opinion Financial statements and the submitted no later than two in writing on whether the financial report on activities are prepared months after half-year-end statements comply with the in Polish and in Polish zloty. (reports are only submitted for accounting principles adopted the first half of the financial year) by the entity and whether they The management and members provide a true and fair view of the of the supervisory board (or • Separate and consolidated another supervisory body) are annual statements are submitted audited entity’s assets, financial responsible for assuring that no later than four months standing and its financial result. the financial statements and after financial year-end the report on activities comply Appointing the auditor is a with the requirements stipulated Approved annual financial statements prerogative of the body approving in the Accounting Act. must be stored indefinitely. the entity’s financial statements, usually, the supervisory board or the Filing and submission of Audit requirements general meeting of shareholders. statutory financial statements Obligations for statutory audit The entity’s management board Financial statements are signed are set out in the Accounting must not choose the auditor. off by the person who prepared Act. The principles governing the them and by management. If the performance of audit are provided The contract for the audit management board is formed by for in the Certified Auditors Act. engagement may only be more than one person, all of its Moreover, certified auditors are terminated if there is a reasonable obliged to comply with National members must sign the financial cause. Differences of opinion Standards on Auditing, which are statements off. A refusal to sign regarding the application of soon to be replaced by International requires written justification accounting principles or auditing attached to the financial statements. Standards on Auditing. Audit standards between the entity and activities are supervised by the the auditor may not constitute Annual financial statements must Audit Oversight Commission. grounds for terminating the be duly approved by an approving contract. Every time a contract for body within six months of the Annual consolidated financial balance sheet date. If the entity statements are subject to a audit (or review) engagement is is subject to a statutory audit, its mandatory statutory audit. terminated, the Audit Oversight annual financial statements must Commission must be notified. be audited by a certified auditor The obligation to audit separate prior to approval. Entities which are annual financial statements applies If a given audit (or review) obliged to audit their annual financial to banks and insurance companies, of financial statements was statements may only distribute their credit unions, public companies, performed in violation of the net profit (cover their loss) after the investment funds, retirement independence principle, it is certified auditor has expressed an funds and joint-stock companies. invalid under the applicable law.
26 Trade Foreign Direct Investment contractual provisions. Support may With its low inflation rates and be sought by companies planning sustainable economic growth, investments in sectors of prime Poland offers stable conditions importance for the Polish economy: for doing business. According to the National Bank of Poland data • Aviation FDI stock equalled EUR171.7 • Automotive billion at the end of 2014. In • Electronics and home appliances the World Investment Report, Poland was listed in the top 20 • Food processing FDI receivers globally. In recent • Biotechnology years, foreign investors’ interest • Research and development (R&D) has focused on industries such as • Modern services automotive, consumer electronics and home appliances, IT, as well Moreover, support may be offered as business support services. to companies planning investments Poland’s government is supportive in other business sectors if they of FDI and has implemented create 200 or more new jobs with a long-term strategy around a minimum investment outlay of supporting foreign businesses PLN750 million, or if they create through financial grants and the 500 or more new jobs with a creation of Special Economic minimum investment outlay of Zones. Furthermore, it founded PLN500 million. The amount of the the Polish Information and Foreign subsidy depends on such factors Investment Agency (PAlilZ) to as the number of jobs created, help improve conditions for FDI. location, business sector and the amount of investment outlay. Special In general, the same investment rules apply to domestic, European Investment incentives in Special Economic and other entities. However, there Economic Zones are a few industries subject to Special Economic Zones are Zones are investment restrictions. These designated geographic areas of include the mining sector, financial Poland where business can be designated services sector and energy sector. conducted under preferential conditions. The aim of Special geographic Government incentives Economic Zones is to promote Poland offers a range of investment growth in the least-developed areas of incentives to foreign investors. areas of the European Union by Key incentive measures include: supporting new investments and Poland where job creation. When launching a Government grants business in a Special Economic business can Grants are given based on a bilateral Zone, the entrepreneur may be agreement concluded between eligible for the following incentives: be conducted the investor and the Ministry of Economy in the form of a subsidy. • Income tax exemption under The agreement specifies the terms • Real estate tax exemption that the investor must comply preferential with for the subsidy to be paid out • Site prepared for investment in line with the principle that the purposes at a competitive price conditions. subsidy is paid out proportionately • Free support covering formal to the extent of compliance with aspects of the investment process
27 The maximum amount of Imports There is an external tariff for goods regional aid that may be provided The majority of imports are imported from outside the EU. While to the entrepreneur depends generated by trade with EU there are certain minor differences on the investment outlay, cost Member States, with major in interpretation and administration, of taking on new employees, partners including Germany, Italy, the tariff was supposed to be location of the investment the Netherlands, France and applied and interpreted uniformly. and size of the enterprise the Czech Republic. In turn, key applying for tax exemption. business partners from outside The Community Customs code of the European Union are Russia contains all the general rules and procedures applicable to European Union subsidies and China, together accounting for the trade of goods between EU subsidies are earmarked some 20 per cent of all imports. EU and non-EU countries. The as support measures for code is supplemented by a EU Member States economies. The European Union is a single detailed Customs Regulation Subsidies are available for trading area, this means that which is directly applicable new investments or innovative all goods (subject to narrow in all Members States. undertakings. The amount of exceptions), whether made in an aid depends on the business EU Member State or imported Import restrictions sector in which the investment from outside, can circulate As part of the EU, Poland enforces is planned, the amount of freely. Although Member States’ the following prohibition on investment outlay and the customs authorities have the right imports: pirate or counterfeit location. Specific eligibility to check goods at the border, items, certain chemical products, criteria and the funds available there is a unified customs law in genetically modified organisms and are announced in individual the EU which removes all fees restrictions on the importation of calls for proposals. and barriers within the Union. live animals and animal products.
28 Finance Capital markets The centre of Poland’s capital market is the Warsaw Stock Exchange, which is comprised of the regulated main market and the alternative stock market – NewConnect. In addition to the above, the capital market in Poland also includes a bond market – Catalyst.
The Warsaw Stock Exchange is the largest stock exchange in Central and Eastern Europe. It has a capitalisation of over one trillion zlotys. Alongside its capitalisation, the Warsaw Stock Exchange is also notable due to its high liquidity of shares and derivative instruments. The Warsaw Stock Exchange has also been a leading European exchange by the number of IPOs for several years.
The main market, designed for large caps, features more than 480 companies representing 23 business sectors, of which 50 are registered abroad. The listed companies make up indices which are defined on the basis of business size or business sector. The best known index is WIG20, which reflects the performance of the 20 top-listed companies. In turn, the NewConnect market is dedicated mainly to small caps. At present, there are 420 companies listed in this market, and its main index is NCIndex30.
The Catalyst bond market is used for trading in corporate, co-operative, municipal and Treasury debt instruments. As at December 2015, there were over 180 issuers with an issue value of PLN573.68 billion.
Banking system The Polish banking system is made up of commercial banks, co-operative banks, branches of foreign banks and credit unions
29 (SKOKs). These organisations Insurance industry investment funds in Poland are focus mainly on domestic business At present, there are 59 insurance debt, shares as well as cash and and, consequently, the recent providers operating in Poland. money market funds. They account financial crisis did not have a A large majority, ie 70 per cent for 90 per cent of all investment significant impact on the Polish of insurance companies, are funds, with the largest among banking system compared to those foreign-owned. Shareholders are them being debt securities funds. of other EU Member States. mainly from Austria, France and They hold a market share of 30 the Netherlands. The total assets per cent. Other funds include In recent years, increasing of insurance companies in 2013 securitisation funds, real estate concentration in the banking amounted to PLN168 billion, with funds and capital protection funds. sector has occurred. The five PLN102 billion in life insurance, and largest banks have increased their PLN66 billion in property insurance. The total amount of assets held market share up to nearly 50 per by investment funds in Poland cent in terms of assets, loans and The leader in the life insurance exceeds PLN224 billion, at the deposits. Most commercial banks market is PZU Życie SA, with end of October 2015. The largest (approximately 60 per cent) are gross premiums written last year investment funds in Poland are controlled by foreign investors, amounting to PLN8.8 billion, which PZU TFI and Pioneer Pekao TFI. notably from Italy, Germany, translates into a market share of Other important players in this the Netherlands and Spain. nearly 30 per cent. Following this, market include: Ipopema TFI, PKO OPEN LIFE TU ŻYCIE S.A., holds TFI, BZ WBK TFI, Skarbiec TFI and Alongside commercial banks, there a significant market share of eight ING TFI. All the above-mentioned are 570 registered co-operative per cent while TUnŻ Warta S.A., funds combined currently hold banks and their assets constitute ING TUnŻ S.A. and AMPLICO LIFE more than half of all the assets. nearly 10 per cent of the S.A. hold approximately seven entire Polish banking system. per cent of the market each. In recent years, the financial crisis Co-operative banks are organised has had a negative impact on the in two associations – ‘Spółdzielcza With regards to non-life insurance, investment fund industry. In 2007, Grupa Bankowa’ and ‘Bank the market leader is PZU SA, the fund industry reached a record Polskiej Spółdzielczości’. Within which reported gross written high in assets under management, the framework of the banking premiums totalling PLN8.2 billion, but in subsequent years, capital has system there are also nearly 1,900 which corresponds to more than declined. At present, investment credit unions (‘Spółdzielcza Kasa 30 per cent of all premiums. fund companies have 2 million Oszczędnościowo-Kredytowa’) clients, and the total funds held are in operation, with 2.6 million Investment management lower than before the crisis began. members. Moreover, the banking industry system includes 17 branches Currently, there are 59 investment of foreign banks and credit fund companies which manage institutions, which mainly deal almost 640 investment funds. with international corporations. The most common types of
30 Infrastructure The overall quality and reliability including approximately 500 km of Electricity of infrastructure is a critical factor motorways. Most of those projects While the electricity grid itself is for business across all sectors. are currently under development. quite well developed, business often struggle to connect to At the beginning of its economic Air transport it for bureaucratic reasons. transformation, Poland had Poland has also significantly According to the World Bank’s relatively poorly developed expanded its air transport network Doing Business survey, the time public infrastructure, especially in in recent years. At present, needed to obtain an electricity terms of transport, which posed there are 13 airports in operation connection to a warehouse in a serious obstacle to business nationwide, which handle over Poland takes an average of 133 development. In recent years, 27 million passengers a year in days. As a result, Poland ranks particularly since Poland joined total. The country’s busiest airport 49th in the world in this respect. the European Union and gained is Warsaw Chopin Airport. access to EU funds, the country has Telecommunications significantly caught up with Western Railway Due to large investment from the Europe. Since EU accession, the Rail transport continues to pose EU, Poland’s telecommunications Polish public finance sector has challenges to the government. services are undergoing rapid spent between PLN60 billion While the railway network density modernisation. Poland’s national and PLN80 billion, ie EUR14-19 is sufficient, the length of rail lines broadband plan targets are fully billion, a year on infrastructural exceeds 19 thousand kilometres harmonised with the targets set investment projects. Key parts of and there are over 1,600 railway by the European Commission’s Poland’s infrastructure include: stations, a considerable percentage Digital Agenda for Europe (DAE). Roads of railway lines require renovation. Poland’s national broadband Road infrastructure projects account Consequently, the maximum plan foresees that 100 per cent for the majority share of investment speed on many lines is low and of households and companies outlay in recent years. As of the end travel times are long. Accordingly, should have access to internet of October 2015, Poland had 3,049 the government is planning to connectivity of which at least km of roads for high-speed traffic, invest EUR10.5 billion from EU 30 Mbps by 2020 and 50 ie 1,553 km of motorways and funds on rail investments for per cent of households and 1,472 km of expressways, which the period 2014-20; one in eight companies have access to internet corresponds to a threefold increase euros that Poland receives will be connectivity of 100 Mbps by over a period of eight years. The earmarked for rail infrastructure. 2020. National broadband plans current multi-annual government In December 2014 new Alstom mainly focuses on promoting plan assumes that the road network Pendolino high-speed trains broadband investments and will increase in the coming years by were put into service between expansion through initiating an extra 4.2 thousand kilometres, Gdańsk, Warsaw and Kraków. regulatory measures.
31 This document is issued by HSBC Bank Polska S.A. (the Bank). This guide is a joint project with Grant Thornton. It is not intended as an offer or solicitation for business to anyone in any jurisdiction. It is not intended for distribution to anyone located in or resident in jurisdictions which restrict the distribution of this document. It shall not be copied, reproduced, transmitted or further distributed by any recipient. The information contained in this document is of a general nature only. It is not meant to be comprehensive and does not constitute financial, legal, tax or other professional advice. You should not act upon the information contained in this document without obtaining specific professional advice. Whilst every care has been taken in preparing this document, the Bank and Grant Thornton makes no guarantee, representation or warranty (express or implied) as to its accuracy or completeness, and under no circumstances will the Bank or Grant Thornton be liable for any loss caused by reliance on any opinion or statement made in this document. Except as specifically indicated, the expressions of opinion are those of the Bank and are subject to change without notice. The materials contained in this document were assembled in January 2016 and were based on the law enforceable and information available at that time.
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