Starting a business in Poland made easier for the British entrepreneur

Why start a business in Poland

Many would-be investors from the UK consider Poland as being part of Eastern Europe; due to this misconception they are perhaps fearful of forming any business relationship with this vibrant market (the only EU economy to keep growing in 2009). Yet Poland actually belongs to that cluster of countries and ancient kingdoms known as Central Europe. Poland’s history and heritage is far less alien than many Brits may fear!

Poland has been since May 2004 a full Member State of European Union and since December 2007, a member of the Schengen Group of countries, which allows people and goods to move across Poland’s intra-EU borders without even having to stop at the frontier. Since joining the EU, Poland has seen a considerable increase in every sector of the economy; foreign direct investment has risen spectacularly.

Unemployment in Poland has decreased rapidly after EU Accession, helping to keep inflation low (currently just above 3%) and ensuring consumer confidence remains high. Stability and the strength of the Polish currency is also a major factor that continually encourages foreign investors to commence business in the Polish market and of course one should emphasize that Poland offers a market of over 38 million people, potential customers. Unlike its neighbours, Poland is not a one-city economy.

Yet the UK, which is the world’s second biggest foreign investor after the USA, only ranks eighth in Poland in terms of its investments here. The main reason why the UK punches below its weight in this high-opportunity, low-risk economy, is because there are so few British SME investors present in Poland. Compared to foreign investment from other EU countries such as Germany or Italy. The German mittelstand has been using Poland as its manufacturing backyard for the last 15-20 years. Small Italian family firms outsource much of their production to Poland. Yet the smaller and medium-sized British investors are singularly lacking. One reason is that with its code-based continental legal system, the formalities of doing business in Poland seem unnecessarily onerous to the British owner-manager.

Often, British entrepreneurs taking a first look at the Polish market are bewildered by the seeming complexity and high costs of getting a business established here. In truth, it’s not that difficult – as long as you take a step-by-step approach, not getting yourself involved in unnecessarily complex forms of business entity at too early a stage.

How to start a business in Poland

Many British investors, especially small or medium businesses, are afraid to open operations in Poland because of their expectation of complicated and bureaucratic systems and the high cost of business maintenance.

Careful consideration is needed when starting a business. You need to identify the method of operating which best suits your idea. Initially I would like to suggest a brief study of the Polish market. You can collect some information from the PAIiIZ website, and indeed from browing other pages on this portal.

These positive changes are all very encouraging, but careful consideration is needed when starting a business. First you need to identify the method of operation which best suits your idea.

If you need to trial the market or conduct more detailed research, perhaps dip your toe in the water, you will need to find the simplest and cheapest form of starting your practice. There are several following methods (in short):

Method 1 – Contract for temporary services in Poland (not liable to VAT)

British entrepreneurs as EU citizens can temporarily pursue their activity in Poland whereby their services can be provided by themselves or temporary staff (cross-border services). Temporary in this instance refers to being ‘non-resident’ i.e. not being physically present in Poland for more than 183 days during each calendar year.

This type of activity is not connected with any registration costs or formalities, but a specific contract is required, which is executed in Poland.

Some remarks:

• some business activities in Poland require a licence, but if necessary this should be the responsibility of your contractor (e.g. sectors such as transport, banking and insurance etc. have special requirements),
• if you carry out any building or office reconstruction/installation for a period exceeding 20 months your activity could be considered as being permanent from tax viewpoint,
• if any of your own employees stay in Poland for more than 183 days of the calendar year, they will be liable for taxation in Poland for that year.
• if you need to make purchases in Poland in order to perform a contract, it is more cost effective to ask  your Polish partner, being a Polish VAT taxpayer to do so, and then to re-invoice you for zero-rated cross-border export of services. This way, your Polish partner can reclaim the VAT paid) 

Method 2 – Representative Office

Foreign entrepreneurs, who already run their business, may establish their own representative office in Poland solely to advertise and promote their company, and/or its products or services, in Poland.

This method is ideal especially for UK-registered companies manufacturing or providing services outside of Poland and/or for those entrepreneurs who are considering moving production or services to Poland.

There is no need to appoint new management or commit to any capital investment, however minimum maintenance costs connected with an office lease and an accountancy service would be essential.

Setting up a representative office is quite simple and requires registration in the Register of Representative Offices of Foreign Business Entities maintained by the Minister of Economy. The total cost of registration (the fee itself) is about PLN 7,000 (£1,540).

The foreign entrepreneur or business that establishes and registers its representative office in Poland obtains a registration number. It must use the original name of the parent company along with the name of its legal form translated into Polish, followed by the words "przedstawicielstwo w Polsce" (representative office in Poland).

Method 3 – Branch Office

Foreign entrepreneurs who are already run businesses may also set up a branch office in Poland to conduct business activities within the scope of their existing business operation. This method is meant for companies who have already decided to commence production or permanent services in Poland.

The foreign individual or business which takes this route must appoint a person authorised to represent them in Poland. Again, there is no need to appoint new management, or to invest in capital, however this operation will also attract a minimal maintenance cost connected with an office lease and perhaps more comprehensive accountancy service.

Establishment of branch office requires registration in the Register of Entrepreneurs of the National Court Register maintained by the district courts.

The total cost of registration (court fee only) is around 1,500 PLN (£330).

The business with a branch office in Poland needs to obtains a registration number and must use the original name of the parent company along with the name of its legal form translated into Polish and followed by the words "oddział w Polsce" (branch office in Poland).

Other methods

There are a number of other ways in which to operate businesses in Poland. You can consider opening a more independent structure – a ‘stand alone’ operation which can take the form of sole proprietor (self-employment - jednoosobowa działalność gospodarcza) or more advanced forms of a company (e.g. general partnership, limited partnership, limited liability company, co-operative etc.) all of which are useful for running more specific businesses.

The choice of the most suitable legal form for your business activity is very important and naturally depends upon many factors but be assured there is always someone available to ease the stress and to help you take those first steps.

It is important not to get involved in unnecessarily complex form of business entity which is not justified (in terms of management time needed to service it) unless your turnover in Poland is high enough to justify it.

For more information, please do not hesitate