POLAND: BUSINESS, TAXATION AND OFFSHORE

You can find summarised information on this page, or use these links to access our more detailed knowledgebase:

• Geography, Climate, Population and Culture
• Government and Legal Structure
• The Economy
• Company Forms
• Tax System
• Lowtax Opportunities
• Holding Companies
• Tax Treaties
• Internet and Telecommunications
• Banking System

Geography, Climate, Population and Culture

Poland as a nation began in the 10th century, under the Piast dynasty, and it has been divided up amongst its neighbours many times in its history. Poland regained its independence in 1918, only to lose it again in the Second World War, becoming a Soviet satellite state in the post-war period. The formation of the independent trade union, Solidarity led to a period of martial law and repression, but by 1990, Solidarity leader Lech Walesa was President. Poland joined NATO in 1999 and the European Union in 2004. Poland has a land area of 312, 685 sq km, and is located in Central Europe, to the east of Germany, with a northern coastline on the Baltic Sea. The climate is temperate but changeable. The population was estimated at approx 38.5 million in 2007. Almost all are of Polish origin and over 90% are Roman Catholics.

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Government and Legal Structure

The capital of the republic is Warsaw and the country is divided into 16 administrative provinces. The President is the head of state, and the Prime Minister is the head of government; there is also a Council of Ministers. The National Assembly has an upper house of 100 seats and lower house of 460. The major legal institutions include the Supreme Court, the Constitutional Tribunal and the State Tribunal. Rulings of the Constitutional Tribunal are final. Court decisions can be appealed to the European Court of Justice.

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The Economy

Poland has pursued a policy of economic liberalization since 1990, and this appears to be paying dividends, with GDP growing an estimated 4.8% in 2008. Per capita, it still lags the EU average, coming in at USD17,300, or PLN 50,377 (2008 est.) Unemployment is high, although falling, with the figures for 2008 showing a 3% drop from the 2007 level of 12.8%.

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Company Forms

The main legal forms of companies are the joint stock company (SA) and the limited liability company (Sp z o.o.). The minimum start-up capital for a joint stock company is PLN 500,000; 25% of this must be paid up prior to registration. A limited liability company has a minimum capital requirement of PLN 50,000. It may have a only a single shareholder.

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Tax System

Corporate income tax (CIT) is levied on corporate income at 19%. CIT is paid monthly, in advance. In Poland the VAT rates are 22% (standard rate), 7%, 3%, 0% and exemption. The reduced rates apply to pharmaceuticals, transport and agricultural products. Zero-rated activities include the export of goods to countries outside the EU. VAT-exempt supplies include, financial, insurance and educational services. Excise duties are levied on alcohol, cigarettes, petrol, passenger cars and electric power. Property tax rates are fixed by local municipalities. There is stamp duty on other civil law transactions.

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Lowtax Opportunities

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Holding Companies

Poland does not have a Controlled Foreign Company regime. Tax consolidation is permitted, subject to certain requirements, allowing the tax losses of tax group members to be set off against the taxable income of the group, but cross-border consolidation is not permitted.

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Tax Treaties

Dividends are generally subject to a 19% rate, which can be reduced under a DTA (of which Poland has more than 80), and is removed altogether when paid to companies in EU and EEA states, subject to the conditions of the Parent-Subsidiary Directive.Poland additionally benefits from a transitional period for removing the withholding tax on interest and royalty payments paid by Polish corporate residents to associated EU companies. From 1 July 2009, it is 5% (previously 10%). From 1 July 2013, the full exemption will be in place. Where there are no special rules in place, withholding taxes are imposed under the general provisions of the Corporate Income Tax Act, and the applicable Double Tax Treaty, if there is one in place.

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Internet and Telecommunications

Liberalisation of the telecoms market was completed in 2003. The value of the telecommunication market was PZL38.2bn in 2006, and it grew by 12.4% in 2007. According to international estimates, there were more than 10 million fixed lines in use in 2007. The domestic mobile-cellular service has been available since 1993, although there are just a few networks. There were in excess of 41 million mobile phones in 2007. Internet access in Poland is amongst the most expensive in Europe. There were 20 million Internet users (2008).

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Banking System

Narodowy Bank Polski (or the National Bank of Poland) is the Polish Central Bank. It is regulated under the 1997 Constitution, and the Banking Act, and has responsibility for currency and monetary policy matters. Commercial banks dominate the industry, holding around 95% of total banking sector assets (with co-operative banks holding the rest). The zloty (PLN) is fully convertible, although there are some reporting requirements.

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