Poland is becoming more and more prospective country for foreign entrepreneurs willing to start a business here.
The most important is to choosing the appropriate legal form for your company.
Other corporate entities:
This form is the easiest choice for small businesses, however the owner's liability for any kind of company's debts is unlimited.
According to Polish law this partnership is a civil contract concluded between at least two individuals or legal entities and has no legal personality. This form is not particularly liked by foreign entrepreneurs, it is most often used by small businesses.
Classification of companies by size:
As according to the art. 104 of the Act on freedom of economic activity, You are a micro-entrepreneur if you in at least one of the last two financial years fulfilled both the following conditions:
employing on average less than 10 employees,
achieving an annual net turnover from sale of goods, products and services as well as financial operations not exceeding the PLN equivalent of 2 000 000 EUR.
You are a small business entrepreneur if you in at least one of the last two financial years fulfilled both the following conditions:
employing on average less than 50 employees,
achieving an annual net turnover from sale of goods, products and services as well as financial operations not exceeding the PLN equivalent of 10 000 000 EUR.
You are a medium – sized business entrepreneur if you in at least one of the last two financial years has fulfilled both the following conditions:
employing on average fewer than 250 employees,
achieving an annual net turnover from sale of goods, products and services as well as financial operations not exceeding the PLN equivalent of 50 000 000 EUR.
LIMITED LIABILITY COMPANY
Foreign investors usually choose this legal form.
Such a company is treated as a separate legal entity from its shareholders or sole shareholder. And LLC's shareholders are not personally responsible for the debts of the company.
According to Polish law the LLC may be incorporated by one or more person or/and entity. And holding 100% of shares by one shareholder is not prohibited.
The obligatory minimal share capital of LLC is 5,000. A minimum nominal value of PLN 50.00 for each share and contributions must be paid in cash or in kind.
Management bodies of a limited liability company:
the management board,
the general meeting of the shareholders,
the supervisory board.
When a company has more than 25 shareholders and its share capital exceeds PLN 500,000, the LLC require the supervisory board.
The management board is appointed to represent the company before third parties and deal with its matters. It can consist of one or more members (regardless of whether they are Poles or foreigners). The management board may be appointed by shareholders or third parties.
The shareholders are members of the General Meeting of the Shareholders. The resolution of the general meeting of shareholders conscripts the supervisory board and it has to consist of at least three members. According to Polish law, the supervisory board exercises permanent control over every area of the company's operations. The shareholders are not responsible for the debts or liabilities of the company. They can lose only the cash or in-kind contribution invested in taking up shares in the share capital.
What are the advantages of the LLC:
The minimum capital is low, to establish a disregarded entity you need only 5000 PLN. The minimum value of the shares can not be lower than 50 PLN, and the shares do not have to be equal. Individual shareholders acquire shares at their discretion.
The court assigns NIP and REGON numbers within a few days of registering LLC in the national court.
There is a possibility of registration LLC over the Internet - online registration is possible only for companies with standard terms of the company agreement.
Shareholders are not liable for debts of the company with their personal assets. - shareholders risk only their contributions in case of any debts. And the partners do not really have to pay LLC's debts.
Limited economic risk - Profitable for entrepreneurs who want to expand their business and run it individually.
No load ZUS - with a minimum of one shareholder in respect of shares held you do not pay ZUS.
Full accounting – gives you detailed information about the billing. You can monitor all areas from customers, payments to suppliers, salaries and settlements with the authorities.
What are disadvantages of the LLC:
Long registration procedure - The write-off of a notary agreement of LLC contribution by the shareholders contributions to the share capital company setting up a bank account, setting up bodies of the company, registering in the register of entrepreneurs (KRS), registering the company in the tax office and ZUS. After all these steps the company is fully prepared to do business.
Notarial act is the form of company agreement – all the changes in the contract require a notarial deed. Contract company over the internet is an exception.
Limited liability company is the subject of double-taxation. The entrepreneur is obliged to pay income tax (CIT). And shareholders (if they are subject to an additional income tax on natural persons (PIT)) derive from the company's income in the form of dividends.
A very precise system of recording economic events - the obligation to keep a full accounting.
An accounting company is expensive - The price of accounting services on the market is high. And running a full accounting requires reliable knowledge and time.
The company account is subject to thorough verification - All receipts and transfers from a company account must be carefully documented and private expenses from the company account are not possible.
Submitting annual financial statements is obligatory - The financial statements and the report on the operations of the neglected unit must be submitted to the registered court and the IRS.
JOINT-STOCK COMPANY / PUBLIC LIMITED COMPANY (PLC)
If you take into account the responsibility of shareholders, management bodies and taxation is very similar to that with limited liability. However, its mandatory regulations are more formalistic. This form is most often used for business planning of IPO (initial public offer), searching for PE investors (private equity) / VC (Venture capital) or when this form is required by Polish law (eg Banks, pension funds and other financial institutions).
According to Polish law, the minimum capital of a joint-stock company is PLN 100,000 and the minimum value of the shares may not be less than PLN 0.01.
According to the law specified in the Code of Commercial Companies and the statute, the General Assembly is an organ created by shareholders. Items on the agenda are determined by law. An Annual General Assembly must be established within no more than 6 months from the company's financial year.
As in the case of a limited liability company, shareholders are not responsible for the debts of the company, the only thing that they can lose is the value of their investment in shares. (eg. Cash contribution or in-kind contribution invested in taking up shares in the company's share capital). The functions and duties of the supervisory board are also the same in the case of joint-stock companies as those with limited liability.
An association of at least two partners running the enterprise under its own name is a general partnership. The Partners are bound by a Partnership Agreement which defines their rights and obligations. All partners are responsible for the company's debts.
LIMITED PARTNERSHIP (LP)
In this type of company, there are two types of partners: general with unlimited liability and limited partners with limited liability to their permanent partner contributions.
LIMITED LIABILITY PARTNERSHIP (LLP)
This type of company is used to provide professional services. It brings together lawyers, tax advisors or doctors. The partner is not responsible for the partnership commitment incurred in connection with the professional activities of other partners.
PARTNERSHIP LIMITED BY SHARES
It is a relatively rare form of business. Partnership limited by shares must have at least one partner with unlimited liability (general partner) and at least one partner who is a shareholder.
HOW TO ESTABLISH AND REGISTER AN ENTITY
The most difficult task facing foreign investors wishing to operate in Poland is choosing the right legal form. A limited liability company or a joint-stock company is the most often chosen by them.
Therefore, we will focus mainly on these two forms.
Opening Procedure of the limited liability company or public limited company
1. NOTARIZE COMPANY AGREEMENT
The Polish notary must participate in the preparation and signing of the founding documents of LLC.
The notary fee for the partnership agreement may not exceed 10,000 PLN plus VAT and civil law transactions tax (0.5% of the initial capitalization of LLC). The notary also agrees to prepare a court application (form KRS-W3) required in procedure 3. The fee for a lawyer is from 5,000 to 25,000 PLN (taxes, social security, registered office and so on).
It is also possible to establish an LLC using standard affiliate articles available in the ICT system: https://ems.ms.gov.pl/. Thanks to this alternative method, a notarial deed of the company's agreement is not required. However, you must register online, which many entrepreneurs do not practice.
By means of a standard association agreement form available in the electronic system serviced by the Ministry of Justice and signed with a digital signature, a shareholder or shareholders can set up a company. The application should be considered within 24 hours, but in practice it takes several days.
Online registration is only useful for investors who want to set up standard companies, those who are looking for more complex solutions should do it in front of a notary.
2. DEPOSIT PAID-IN CAPITAL AT THE BANK
Establishing a company account is obligatory for all companies in Poland. Depending on the bank, various documents are required to open an account.
Before submitting documents to the court, the founding capital of the company must be paid in full by LLC and in the case of PLC at least in 25%
3. FILE FOR COMPANY REGISTRATION AT THE NATIONAL COURT REGISTER
The creation of a new business entity is possible through registration in the National Court Register and is related to other bodies, such as the Tax Office, the Statistical Office and the Social Insurance Institution (ZUS). Newly created companies automatically receive a tax identification number (NIP) and statistical number (REGON) within a few days of registration.
Own KRS number is given to the branch office.
The National Court Register offers online registration.
The cost of establishing an LLC is 500 PLN for registration and 100 PLN for publishing in an official gazette of the court.
4. REGISTER FOR TAXES AND VAT
Within 21 days from entering the entity in the National Court Register, the newly registered business entity will have to submit a new form (NIP-8) containing supplementary data for the head of the Tax Office.
Until the day on which the company performs for the first time a business subject to VAT, the company must register for VAT in the tax office. To do this you must provide VAT-R, confirmation of company registration in the National Court Register (KRS) and information about the address of its registered office.
If the entrepreneur intends to conduct future foreign trade activities in the European Union, he must register as an EU VAT taxpayer. Before starting commercial activities in the European Union, he must submit this application. However, it must be registered as a normal VAT taxpayer before.
VAT registration costs 170 PLN (if you want to get a VAT registration confirmation), there is no fee for registration of income tax.
If you want to have employees you must:
Register with the Social Insurance Institution (Zakład Ubezpieczeń Społecznych).
Register with the National Labour Inspectorate (Państwowa Inspekcja Pracy).
There is no fee for registration.
Procedure - Sole Proprietorship
If the purpose of establishing your business is to provide self-employment, registration in the relevant city or provincial office is relatively easy.
At the beginning, it is required to submit an application for entry in the trade register (entry in the business register). To register a company, you must also select one or more categories from the business classification. It is also required to provide a REGON number and a tax number (NIP). Without a REGON number you will be blocked because it is required in many other forms.
The second step is registration in ZUS (social security), and registration of the company as a VAT payer (VAT-R) in the tax office (only if you want to be a VAT taxpayer).
Business registration by natural persons takes place in the Central Business and Information Register (CEIGD), and the CEIGD-1 form is available on the Internet (here) or in the office.
On the day of submitting the application, we can start a business. We can also specify in the application a different (later) start date.
A GUIDE FOR EMPLOYERS
The most important thing in the case of hiring employees is the adoption of the appropriate form of contract, because the form of the contract describes the employer's obligations.
The Labor Code, the Civil Code, the Act on the Social Insurance System and the Income Tax Act regulate the rules for employers.
Issues related to working time, remuneration and annual leave are regulated by the Labor Code. The basic scope of issues related to health and safety at work is also regulated by this code.
The employer’s duties:
Within seven days from the date of the insurance commitment, ie. from the date of the employment relationship, the employer is obliged to register the employee for social security. The employer’s notification about the employee, provided as a filled-in ZUA form, includes:
social security insurance (includes retirement, pension, sickness and accident insurances),
Guaranteed Employee Benefits Fund.
Timely payment of wages, record keeping and accounting.
Monthly billing and discharge of tax on the income of employees.
The employer is obliged to provide the employee with an examination by the occupational medicine doctor at the company's expense. Work without a valid medical certificate confirming the lack of contraindications to work in a specific place of work is prohibited.
Obligatory health and safety training. Provide an initial (and optionally related to the position) health and safety training before starting work.
Safe and healthy working conditions have to be ensured.
Keeping records in matters relating to employment as well as the personal files of all employees.
Personal protective equipment, work clothing and footwear to be used during work have to be ensured free of charge.
Work organized to ensure full use of working time, as well as high productivity and quality of work thanks to the optimal use of talents and skills of employees.
Providing help for employees to improve their professional qualifications.
Prevention of abuse and discrimination among employees.
Respecting the dignity and other personal rights and freedoms of the employee.
Formalities with hiring employees:
documents for personal records (a completed personal questionnaire signed by the employee, work certificates from previous employers),
an employment contract signed between the employer and the employee,
PIT-2 (the statement made by an employee for the purposes of calculating monthly advances on income tax). IMPORTANT: starting from 2017, a new PIT-2 form is in use,
employee training in the field of health and safety - a signed statement confirming familiarization with work regulations as well as with the provisions and principles for safety and health at work,
a valid medical certificate confirming absence of contraindications for working at the given workplace - at the expense of the employer,
consent by the employee to the processing of personal data,
a signed proof of the employee’s familiarization with the information on equal treatment for men and women,
a signed confirmation of assigning the employee with company property (eg. a car or a laptop).
In addition, an employee who is a parent (mother or father) or guardian of the child should notify the employer in writing of the intention or decision not to use the privileges associated with childcare.
Within seven days from the date of the insurance commitment, i.e. From the date of employment for printing ZUA, the employer must notify the employee about social insurance.
The formalities in case of employee dismissal
In the event of termination of the contract by the employer, the employee is entitled to full vacations in the search for a job, respectively:
2 working days if the notice period is two weeks or a month,
3 working days if the notice period is three months.
The employer can not forget about the mutual settlement of the entrusted property.
Obligations of the employer by the dismissal of the employee:
immediate provision of the employee with a work certificates,
deregistration of the employee from ZUS using the ZWUA form,
payment of the equivalent for unused leave. If the contract is terminated by notice, the employee can use his holiday entitlement during the notice period. The employer may grant leave during the notice period without the consent of the employee.
Employing an employee as well as his dismissal obliges the employer to fulfill a number of formalities. It is also important to make a choice related to the nature of the contract under which the employee is employed. This decision should not depend solely on savings, which favors civil law agreements.
Employers should remember that providing employees with a sense of security influences on the employee's attitude to work and also promotes a greater sense of attachment to the company.
STAFF EMPLOYMENT COSTS
The employer is expected to cover a lot of expenses (apart from the gross salary paid to the employee).
In the case of an employer who wants to employ an employee on the basis of an employment contract, the employee's payment amount is only 60% of the costs.
The employer must deduct off the employee’s gross monthly salary:
income tax advance 17% (from 1.10.2019), until 30.09.2019 the rate of 18% was in force,
various insurance contributions.
An employee whose gross monthly salary is PLN 2 250 will receive their pay less:
sum of contributions for health insurance
National insurance contribution 308,48.
Contributions for health insurance 1 941,52 × 9% = 174,74 (this is calculated from the monthly gross salary [here PLN 2 250 - 308,48] less social insurance),
advance payment for income tax 18% (PIT4): 133 (this is calculated from the monthly gross salary [here PLN 2 250], tax deductible costs [here PLN 111,25], tax-free allowance [here PLN 556,02 for a year, divide into 12 months, i.e. PLN 46.33] and Contributions for health insurance [here 1 941,52 × 7,75 % = 150,47]
2 250 - 308,48 - 111,25 = 1830,27 rounded to PLN
(1 830 x 18 %) - 46,33 = 329,4 - 46,33 = 283,07
283,07 - 150,47 = 132,6 rounded to PLN, it is PLN 133
The total of contributions paid by the employee will amount to PLN 616,22.
Employee gets a salary in the amount PLN 1633,78.
The employer is obliged to cover other expenses not only the gross salary paid to the employee. 20.74% of employee's gross salary are the costs related to employment of a person under a contract of employment.
Other costs, apart from the monthly salary payments to the employee and Social Insurance Institution contributions, that the employer is obliged to cover:
employee’s medical examination conducted by the occupational health physician,
Occupational Health and Safety training,
provide safety measures and workwear (clothing and footwear),
equipping the employee’s workstation.
The increase in payroll administration costs is caused by employing each additional employee.
The formalities in case of employee dismissal
In this case the total cost of employing a person is dependent on the employee’s position:
if the fee for the task contact is the only source of employee income, the cost of the employer is the same as in the case of employment of a person under a contract of employment (gross salary + social security contributions),
if the employee is employed under a contract of employment with another employer, but his salary is lower than the minimum wage (in 2017 it is PLN 2000 per month), then the employer is obliged to pay the gross salary of that person and all social security contributions,
if the employee is employed under a contract of employment with another employer and his / her salary is higher than the minimum wage, then the other employer (the one who wants to offer a payment contract for the task) is obliged to pay public contribution to health care,
if the person employed on the basis of a payment agreement is a student under 26 years of age, there is no requirement to register them in the Social Insurance Institution. The only cost for the employer is the employee's gross salary.
Contract for specific work
This is the type of contract in which the only cost to an employer is the employee's gross salary, the contract does not involve the obligation to pay ZUS contributions, with the exception of two cases below.
The obligation to pay an insurance premium arises when an employee is employed on the basis of an employment contract and the employer who is a party to the contract also becomes a party to the work contract, or alternatively when the recipient of a specific work (being the subject of the contract) is the employer.
POSSIBLE FORMS OF TAXATION
One of the most important aspects is the choice of the form of taxation because it affects the amount of tax that will have to be paid in the future.
The choice depends on both the nature of our business and revenues.
General terms, taxation either 17% (from 1.10.2019. Until 30.09.2019 the rate of 18% was in force) or 32%, possible when the company conducts a revenue and expense ledger (KPiR).
Most profitable if:
your income does not exceed 85.000 PLN per year,
you run a business that generates a lot of costs,
you want to take advantage of privileges such as tax-free allowance or the possibility of settling your taxes together with your spouse.
Flat tax rate, the method is possible for business owners who register their documents in the book of revenues and expenses, the tax is always 19%.
In this case, no tax breaks or tax settlements made jointly with the spouse are not possible.
Most profitable if:
your annual earnings exceed 85.000 PLN per year by a large amount.
A lump sum on recorded income - taxes calculated as a percentage of your revenue.
It is not possible to lower the tax base by the costs required to run a business. The exception may be revenues earned by members of the so-called Free professions. There is no requirement to keep a book of revenues and expenses.
Taxation depends on the type of services provided by the company and amounts to approximately 2% to 20%.
The 20% tax rate applies only to income earned by natural persons as part of professional services provided by members of the professions.
The 17% tax rate applies to revenues registered by entrepreneurs from the provision of, among others, services below:
counseling for children in terms of education and social assistance,
intermediary in wholesale,
related to matters of accommodation or real estate management on behalf of a third party,
related to consultancy in the field of computer hardware and data processing,
rental and leasing of cars,
work done by temporary employment agencies, related to the provision of personnel to a third party,
work done by Travel agencies,
photographic and telecoms services.
The 10% tax rate is used for matters of disposal of property rights or real estate.
The 8.5% tax rate covers, among others, income from the rental of.
The 5.5% tax rate is applied to income earned from production activities, construction works or freight by a car fleet with a capacity of more than 2 tonnes.
The 3% tax rate is applied to revenues below:
service activities in the field of trade,
provision of services related to animal production.
The 2% tax rate covers the sale of one’s own products.
Tax card - is a method of taxation based on a fixed amount of tax paid per month, as determined by the tax office. The factors that determine the tax value are the type and scope of activity, the number of employees and the number of inhabitants in the place where the activity is conducted.
One can change the form of taxation up until January 20th of each year.
CHOOSING THE BEST ACCOUNTANT FOR YOUR COMPANY
The need to monitor and account for the company's financial results is one of the most important aspects of running your own business. That's why choosing the right accountant is very important.
How can I choose which accountant is the best for my company?
The most important factor that an entrepreneur should pay particular attention to when deciding whether to choose or change an accountant is the level of his competence. An experienced accountant will provide us with a guarantee that is aware of all the nuances and less common aspects of accounting services. An idle accountant should, in addition to thorough knowledge of tax law, have the ability to handle taxes in practice, so as to maximize the benefits for their clients. However, even an accountant with whom you work, who is competent and provides its services in a reliable and fully correct way, does not have to use all the opportunities that your company can use. An in-depth knowledge of little-known aspects of tax law can give your company maximum profits. The best accountant should be able to provide the most complex and beneficial tax protection, not just the most common daily services.
Tax settlement got done – what’s next?
An accounting institution is often perceived in a simple, schematic way. High quality tax services are first and foremost excellent support for the company's operations. A good accountant should approach each client individually, taking into account the characteristics of the market on which the supported company operates, and adapt to the needs of the business partner. Such services can be provided only by a tax company that has excellent facilities and highly qualified staff. A professional accounting company is your business partner and as a support that brings mutual benefits. However, the activities of many entities have nothing to do with professional tax care, they are limited to the implementation of the most basic tasks assigned to them by the client.
Trust and quality come first
Trust is the most important aspect of cooperation between an entrepreneur and an accountant. The tasks faced by the accounting firm require the entrepreneur's total loyalty to the integrity and appropriate qualifications of his accountants. Accountants need to guarantee the quality of services, because the consequences of their mistakes can be very serious. Therefore, as an entrepreneur, you should bet on a reputable company that will provide you with an individual approach and will save time to track the rapid changes in tax regulations. A good accountant will also ensure the order and transparency of accounting entries and enable optimal development of the business. A professional accountant and a competent accountant is unfortunately not the same. Correct completion of the tax settlement is only a fraction of the benefits that can be achieved by working with a high-class accounting firm.
SUSPENSION OF A BUSINESS IN POLAND
The risk of losing financial liquidity is related to running a business. It may happen that your company may be in a period of low income.
Thanks to Polish legislation, you can count on certain facilities in such a situation. Instead of closing the business, you can decide to temporarily suspend operations. You have the option of discontinuing operations due to the seasonality of your business and the lack of orders that may generate sufficient profit, and therefore the lack of funds to cover fixed costs, fees and taxes. It can also be a disease, travel abroad or accidental incidents.
Who can suspend the activity?
An entrepreneur who runs a one-man business.
A civil partnership may be suspended or suspended by one of the partners only if it is also carried out by other shareholders.
For how long you can stay in business?
The suspension must last at least one month and a maximum of 24 months. From the date indicated in the application, the period of suspension of activity begins, but not earlier than from the date of submitting the application, and lasts until the moment of requesting the business renewal.
Where and how to make the suspension of activity?
An application must be submitted to the Central Registration and Information on Economic Activity (CEIDG). CEIDG Printing-1 is also an application for entry into the register, but it involved suspension, check X in box 01.3.
Detailed information at the following link: https://prod.ceidg.gov.pl (also available in English).
What the law prohibits the suspension of activities?
Running a business and obtaining income from this source by an entrepreneur is prohibited. It also can not amortise fixed assets. Cessation of deductions made from the month following the month in which the operations were suspended. The entrepreneur, however, has the right to perform under the contract for the provision of services or work the same services that fall within the scope of services provided as part of the suspended business.
What steps an entrepreneur can take place during the suspension of activity?
Pursuant to the Act on the freedom of economic activity during the suspension of economic activity, an entrepreneur has the option of:
perform all actions necessary to maintain or secure sources of income, eg. Payment for rent, utilities,
taking receivables or payment of liabilities arising before the date of suspension of their business,
dispose of its own assets and equipment (then submits to the office of a declaration of VAT),
to participate in court proceedings, tax proceedings and administrative procedures related to the economic activities carried out prior to the suspension,
perform all duties prescribed by law, for example. Submission of annual tax return (even if the income of the company for the entire fiscal year is 0),
achieving financial revenues, including the activities carried out before the suspension of their business,
subject to fiscal control on the terms provided for entrepreneurs doing business.
How to hang up activity?
To end the suspension period, an application for withdrawal from the CEIDG-1 application should be submitted. Failure to submit an application for resumption of business activity within 24 months will result in the entrepreneur being removed from the business register.
Is it possible to extend the suspension of operations?
According to Polish law, there is no possibility to extend the suspension of economic activity. However, the entrepreneur has the possibility to resume the operation and then to suspend again for the CEIDG-1 application described above.
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