How to set up a company in Poland

So you’ve decided to start doing business in Poland – great! But… what comes next?

Doing business in a foreign jurisdiction can be tricky. Although the fundamentals of corporate law may be similar across the globe, each country has its own twists which can really catch you off guard if you are not aware of them – Poland is no exception!

In this article, I will do my best to address the most common challenges people face when deciding to set up a business in Poland. The article focuses on companies – this means that I will not be going into details of registering as a sole proprietorship / freelancer (at least not outside the scope necessary to properly present the distinction between a sole proprietorship / freelancer and a company). I will, however, touch upon the following issues:

1. Why set up a company in Poland?
2. What types of companies are there in Poland?
3. The difference between a sole proprietorship / freelancer and a company
4. Can a foreigner set up a company in Poland?
5. What is the set up procedure?
6. What costs should be taken into consideration?
7. Post-set up responsibilities
8. Summary

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Let’s begin!

1. Why set up a company in Poland?

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First off – if you are a foreign company/entity who wants to do business in Poland, for example, by employing employees, renting a storage facility, office or warehouse, engaging a sales representative etc. then it may be more beneficial for you to set up a company than to risk falling into a tax establishment.

A tax establishment is a term used in international tax law. Simply put – if you are registered in country X but are conducting certain business operations in country Y, then the tax authorities of country Y can claim that your operations in this country constitute a tax establishment and that you should be paying taxes in country Y from all income associated with this part of your business. Tax establishments are always a big headache because you need to calculate how much of your income is attributable to your operations in country Y, register to the tax authorities as a foreign entity, find an accountant who will be willing to go through the inconveniences involved with servicing a foreign entity. 

Furthermore, if you are a non-EU entity then you cannot deduct VAT expenses until you register for VAT. However, in order to do so, you need to find a VAT representative who will guarantee your VAT payments to the tax office. As you can imagine, such a service is very expensive, as the representative is basically liable for your VAT arrears.

Risks aside, there are also plenty of benefits when setting up a company in Poland. 

Most importantly:

• setting up a Polish company makes it easier to conduct joint projects within Poland or to raise capital in Poland,

• if you are running an IT business, then you may be able to apply a favourable 5% tax rate on income made from the sale of IP, 

• If you are a non-EU entity, then setting up a Polish company will allow you to purchase real property which would otherwise be unavailable to non-EU individuals,

• if you are not eligible to register as a sole proprietorship / freelancer (for example due to insufficient residency status) then you can conduct your business through a company.

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2. What types of companies are there in Poland?

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There are two corporate companies you can set up in Poland:

1. limited liability companies (spółka z ograniczoną odpowiedzialnością),
2. joint stock companies (spółka akcyjna),
3. simple joint stock company (prosta spółka akcyjna), a new type of company dedicated to startups.

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There are also a number of partnerships, including:

1. Civil Law Partnership (spółka cywilna),
2. General Partnership (spółka jawna),
3. Freelance Partnership (spółka partnerska),
4. Limited Partnership (spółka komandytowa),
5. Limited joint-stock partnership (spółka komandytowo-akcyjna)

If you are considering setting up a company, then I would say around 95% of the time you will be advised to go for a limited liability company. As of the date of writing this article, limited liabilities are the easiest companies to establish and maintain and are a sort of jack-of-all trades. They are also more recognizable internationally and in most cases offer decent tax-optimisation solutions.

Joint stock companies on the other hand are intended for larger businesses or businesses that intend on raising capital through investors. The costs of establishing such a company are much higher (for example, a minimum of 100,000 PLN share capital) and its day-to-day maintenance is significantly more expensive.

In certain cases it may be worth looking into limited partnerships as these allow for certain special tax optimizations, however these are usually exceptional situations that should be recommended by your tax advisors.

Having the above in mind, I will be focusing on limited liability companies in the further parts of this article, as this is the form of business that will be applicable in the majority of cases.

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3. The difference between a sole proprietorship / freelancer and a company

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As a sole proprietorship / freelancer you, as an individual, are conducting your business. This means that on the one hand you personally are the owner of all the business’s assets, but on the other you are also liable for all the business’s debts and responsibilities. As a sole proprietor / freelancer you can run your business by yourself, but you can also engage employees, interns, B2B contractors etc. This is beyond doubt the simplest form of conducting business in Poland (for example there is no corporate filing involved, accounting is much simpler), however it comes with its limitations – most importantly, not all foreigners can register as sole proprietors / freelancers (only EU citizens and non-EU citizens holding specific residency cards/visas can register).

A company on the other hand is an entity which has its own legal status, independent of any physical persons. It itself is the owner of assets and liabilities and allows for the performance of business activities together with other people. It also makes it easier to raise capital, find investors, or sell the business through the sale of company shares. Furthermore, as the name itself suggests, limited liability companies limit the amount of debt to which its shareholders are responsible for. In case of company insolvency, the shareholders will only be liable to the amount of share capital that they hold (as mentioned, minimum share capital in a limited liability company is 5000 PLN). Companies can also benefit from various tax easements, which in turn may make it a more beneficial form of business than a sole proprietorship. 

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4. Can a foreigner set up a company in Poland?

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The short answer is yes, anyone can register a company in Poland (as long as you have not been deprived of your legal capacity or have not been convicted for certain financial crimes). In theory, your citizenship, residency status or country of origin do not have any meaning in this regard.

However, if your company has non-EU shareholders or board members, or if a substantial amount of the company capital will be coming in from outside the EU then you will be faced with some practical challenges/limitations:

1. depending on which non-EU country your shareholders/board members are from, it may be difficult to set up a bank account for the company, as banks will conduct extensive AML/KYC checks before they agree to open an account,
2. if the majority of your company capital is non-EU, then the company will not be eligible to take part in certain public procurements,
3. if the majority of your company capital is non-EU, then it may be more difficult to acquire loans or credits from financial institutions.

To minimize the inconveniences involved with having non-EU shareholders or board members (especially when it comes to dealing with financial institutions such as banks) it is advisable to have a Polish citizen/resident as a board member or shareholder in your company (this is not, however, a necessity and does not block you off from running your company). Banks look more favourably on entities which have a permanent management presence in Poland, as such entities are not considered high risk in terms of AML/KYC procedures.

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5. What is the set up procedure?

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There are two ways to set up a Company in Poland:

1. online,
2. traditionally.

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Online procedure

The easiest way to set up a company is through the S24 online system. This method allows you to incorporate the company without the need of going to a notary, which also makes this method cheaper than the traditional procedure. Furthermore, online registration applications are usually handled within a few days, which is much faster than the traditional method where the court can even take a few weeks to register your company.

The online procedure does have certain significant limitations:

1. the company articles are created on the basis of an online template, which does not allow for much customization,
2. it is not possible to use the online method in case of in-kind contributions,
3. the online method is only possible if the people engaged in the company during setup have qualified electronic signatures, allowing them to sign relevant documents.

The procedure itself is quite straightforward. Here’s what you will have to do:

1. you fill out the online application, including the company articles and supplementary documents,
2. you prepare and sign additional declarations… which for some reason are not provided in the online system (why this is the case is beyond me),
3. you file the online application along with the documents mentioned in point 2 and wait for the court to process the application.

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Traditional procedure

The traditional procedure involves:

1. preparation of tailored company articles according to the needs of the shareholders,
2. conclusion of the articles before a notary,
3. conclusion of supplementary documents,
4. filing of the registration application through the PRS system (not to be mistaken with the S24 mentioned above),
5. filing of originals with the court.

The traditional procedure takes significantly longer, especially due to the fact that the articles are tailor made and that the courts like to take their time with processing such applications. It should take around a month to set up a company using this method.

Nevertheless, having in mind the limitations involved with the S24 system (especially the need to hold a qualified electronic signature), in most cases it will be easier for foreign entities to set up their company using the “traditional method”.

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6. What costs should be taken into consideration?

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The exact costs depend on the type of company you are considering to incorporate and which registration method you are going to use. Assuming that you will be incorporating a limited liability company using the traditional method, the costs involved are as follows:

1. Legal fees for preparation of articles and additional documents + handling of the case, representing before the court etc. (the amount depends on the complexity of the company),
2. Notary fees (depends on the company capital),
3. Company capital – in case of a limited liability company, this is 5,000 PLN minimum,
4. Court/administrative fees – 667 PLN,
5. Translator fees – if you or one of your shareholders does not speak Polish, then it will be necessary to have a sworn translator present at the notary’s.

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7. Main post-set up responsibilities

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After registering the company, do not forget to file a CRBR (Central Register of Beneficial Owners) application within 14 days. This is a legal obligation imposed on all new companies. Until you file the application, you will find it very difficult to take care of certain day-to-day tasks, such as opening a bank account.

It is also highly recommended to engage with an accountant as soon as possible to make sure your bookkeeping is done correctly. The accountant should also help you register for VAT and the Social Security Office if necessary, as well as guide you on how to pay the 0.5% tax on civil law transactions for the registration of the company.

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SUMMARY

In conclusion, setting up a company in Poland can be a profitable and rewarding venture for entrepreneurs. The country’s growing economy, favourable business environment, and skilled workforce make it an attractive destination for businesses looking to expand their operations. However, the process of setting up a company in Poland can be complex and time-consuming, which is why it is essential to seek the guidance of experienced legal professionals who can help you navigate the process and ensure compliance with all legal requirements. So if you’re considering setting up a company in Poland, don’t hesitate to reach out to a reputable law firm today to get started on your journey towards success.

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