What Are The Considerations For Starting A Business In Poland 2024?

Poland, with its strategic location and supportive government, offers promising opportunities for entrepreneurs. There are many reasons why people would want to start a business there, including its growing economy and skilled workforce.

However, setting up a business in Poland requires careful consideration of several factors. Firstly, understanding the economic state is crucial to gauge market potential. Secondly, being aware of legal and regulatory requirements ensures compliance and smooth operations. Additionally, navigating the taxation applicable to businesses and understanding labour laws are essential for sustainable growth.

By addressing these aspects methodically, entrepreneurs can lay a strong foundation for their ventures in Poland.

 

Economic Overview

 

Poland’s economy presents a picture of cautious optimism. Following a boom in 2022, the economic growth slowed considerably in 2023, primarily due to high inflation, which peaked at nearly 11%, impacting household spending. Despite these challenges, signs of recovery are emerging. The World Bank forecasts growth to rise to 3% in 2024 and 3.4% in 2025. This recovery is expected to be driven by several factors.

Firstly, inflation, while still high, is predicted to decrease to around 4.3% in 2024, easing the pressure on consumers. Additionally, a tight labour market is pushing wages up, potentially boosting consumer spending. Government measures, such as increased social spending and a higher minimum wage, aim to support household incomes further. Moreover, the recent release of previously frozen EU funds is anticipated to stimulate investment.

However, Poland faces significant challenges. Geopolitical tensions, particularly the ongoing war in Ukraine, continue to disrupt supply chains and increase energy costs. Furthermore, increased government spending is likely to widen the fiscal deficit, raising concerns about long-term debt sustainability. Overall, while the economic outlook for Poland is hopeful, the balance between stimulating growth and maintaining fiscal responsibility will be crucial.

 

Legal And Regulatory Framework

 

Poland has become an attractive destination for entrepreneurs due to its strategic location, supportive environment, and a government eager to attract foreign investment. However, understanding the legal and regulatory framework is essential before starting a business.

Poland offers a relatively streamlined registration process, often described as a one-stop shop. Through the Biznes.gov.pl portal, entrepreneurs can complete most formalities online, including registering with the National Court Register (KRS) or the Central Registration and Information on Business (CEIDG), depending on the chosen legal structure. This simplifies navigation through various government agencies.

For foreign investors, the Limited Liability Company is the most common business structure. It provides limited liability protection and requires a minimum share capital of PLN 5,000 (around €1,100).

To establish your business, you’ll need documents such as the Articles of Association, identification for founders, and proof of registration fees. While the fees are relatively low, they can vary depending on the business structure.

 

 

Taxation And Financial Management

 

The standard rate for corporate income tax is 19% on taxable profits. However, startups benefit from a reduced rate of 15% if their annual revenue is below €1.2 million in their first year of operation. Additionally, there is the Estonian CIT regime, where profits reinvested into the company are not taxed until dividends are distributed, which are then taxed at 19%. This regime can be particularly advantageous for growth-oriented startups.

The standard VAT rate in Poland is 23%, applicable to most goods and services. There are also reduced rates of 8% and 5% for essential items such as food, medicine, and books. VAT registration is mandatory if your annual turnover exceeds PLN 200,000 (approximately €45,000).

Social security contributions are required from both employers and employees, with rates varying by income level. Additionally, withholding tax applies to certain payments made abroad, such as royalties or dividends.

Given the complexity of taxation, consulting a Polish tax advisor is recommended to ensure compliance and to identify potential tax optimisation strategies.

 

Hiring And Managing Employees

 

Polish law requires written employment contracts detailing job duties, compensation, benefits, working hours, and termination clauses. There are two main types of contracts: fixed-term and open-ended.

The standard workweek in Poland is 40 hours, with a maximum of 8 hours per day. Overtime is regulated and requires additional pay or compensatory time off.

Poland has a national minimum wage, which is adjusted twice a year. Employers must contribute to social security, covering healthcare, pensions, and other benefits. Employees are also entitled to additional benefits like paid vacation, sick leave, and parental leave.

Polish labour laws prioritise employee rights. Termination procedures are strict, requiring justification and potential severance pay. Trade unions are common and play a significant role in collective bargaining. Regular inspections by the National Labour Inspectorate ensure compliance with labour laws, and penalties for non-compliance can be severe.

Poland offers enticing prospects for entrepreneurs, given its strategic advantages and supportive environment. However, thorough research is vital before venturing into business there. Understanding the economic state, legal requirements, taxation, and labour laws is essential for laying a strong foundation. By addressing these factors diligently, entrepreneurs can navigate the complexities and seize the promising opportunities that Poland has to offer.