A Polish Limited Liability Company (LLC), also known as “Spółka z ograniczoną odpowiedzialnością” (sp. z o.o.), is a legal business structure in Poland. And it is the most famous choice for conducting business and making investments in Poland.
Although there are other corporate forms available under Polish Company Law, investors in Poland commonly opt for LLCs (z.o.o.) as their preferred Special Purpose Vehicles (SPVs) for investment purposes. This is usually due to the following reasons.
Why Register an LLC in Poland?
- Limited Liability: one of the key advantages of registering a Limited Liability Company (LLC or z.o.o.) in Poland is the limited liability protection it offers to its shareholders. The personal assets of the shareholders are generally shielded from the company’s debts and obligations, minimizing individual financial risk.
- Separate Legal Entity: an LLC in Poland is recognized as an independent legal entity, separate from its shareholders. This provides the company with its own legal identity, allowing it to enter into contracts, own property, and conduct business in its name.
- Ease of Incorporation: the process of incorporating an LLC in Poland is relatively straightforward and streamlined.
- Flexible Ownership Structure: Polish LLC provide flexible options when it comes to structuring ownership. The company can be owned by one or more shareholders, and there is no minimum share capital requirement, making it accessible for startups and small businesses.
- Taxation Benefits: Polish LLCs enjoy certain taxation benefits. It has a low corporate income tax. Also, the Polish Corporate income tax system allows for 0% tax on profit retention, providing opportunities for reinvestment and growth.
Key facts about Polish LLCs
- Minimum of 1 shareholder is required.
- Incorporation can be done by signing Articles of Association at a Notary or online through a designated portal.
- The Polish LLC requires a minimum share capital of 5,000 zł, which can be paid in cash or in-kind. Additionally, each share within the LLC must hold a minimum value of 50 zł.
- Taxation options include 9% CIT for profits up to 2 million EUR, 19% for higher profits, or 0% Polish CIT.
- Shareholders can be foreigners without any restrictions.
- Foreigners can act as directors, but they must have a clean criminal record regarding corporate and business crimes.
- Auditing will be compulsory if at least two out of the following three conditions are satisfied: the company assets surpass 2.5 million EUR, the number of employees exceeds 50, or revenues surpass 5 million EUR.
- Annual reporting to the National Court Register (KRS) is obligatory.
- Shareholders have no liability for company debts.
- Directors have no liability for company debts if they promptly report insolvency to the court.
Key characters of Polish LLCs
- Foreign capital in Polish LLCs
EU nationals can freely establish and operate companies in Poland without restrictions. Non-EU nationals can also establish and operate Polish companies, but certain limitations may apply. For instance, a Polish LLC with over 50% non-EU capital may only purchase real estate in Poland after obtaining permission from the Ministry of Foreign Affairs (or the Ministry of Agriculture for agricultural properties).
- Share capital of Polish LLCs
The minimum share capital required for a Polish LLC is 5,000 PLN (approximately 1,250 EUR). Share capital can be contributed in cash or in kind. However, rendering services to the company cannot be considered as a contribution.
- Management of a Polish LLC
The responsibility for representing a Polish Limited Liability Company is assigned to the Board of Directors, which must include a minimum of one individual.
The number of Directors is not limited. The guidelines for representation can be freely established in the Company’s Articles of Association. Additionally, the company may choose to appoint a regular proxy (pełnomocnik) or a registered proxy (prokurent) to act on its behalf.
- Shareholders meeting and supervisory board
The highest authority in a Polish LLC is the Shareholder’s Meeting. But, the establishment of a Supervisory Board becomes obligatory when the share capital exceeds 500,000 zł and the number of shareholders surpasses 25.
Taxation of Polish LLCs
A Polish LLC, being an independent legal entity, is obligated to pay Corporate Income Tax (CIT). This tax is imposed on the entire income generated from various sources, with applicable deductions, at a rate of 9% for profits up to 2 million EUR, and 19% for profits exceeding that threshold. Starting from January 1, 2022, the Polish Tax Law introduced a 0% tax rate on profit retention, commonly referred to as Polish CIT.
Dividends distributed by the company are subject to separate taxation:
- When dividends are distributed to individual shareholders, they are typically subject to a withholding tax of 19%. However, dividends paid to foreign shareholders (tax residents of other countries) are taxed according to the applicable Double Taxation Treaty (DTT).
- Under certain circumstances, dividends paid to a parent company can be exempt from dividend tax. The exemption is applicable if the parent company has continuously held a minimum ownership stake of 15% in the subsidiary’s share capital for a duration of at least 2 years. Additionally, the parent company must be subject to unlimited income tax liability in Poland, another EU Member State, or a state within the European Economic Area.
Liability of Shareholders and Directors in a Polish LLC
The shareholders of a Polish Limited Liability Company bear no personal liability for the company’s obligations, as their liability is restricted to the value of their contributed shares. However, it is important to note that the Directors of the company can be held responsible for the company’s obligations if they neglect to initiate insolvency proceedings within the specified timeframe outlined by the Polish Insolvency Law, which is typically within 30 days of the company’s insolvency occurrence.
Steps Required for Setting up an Polish LLC
1. Gather the necessary documents and information regarding the LLC.
2. Sign the Articles of Association of the Limited Liability Company either at a Notary’s office or online through a designated portal.
3. Register the company with the Company Register (Krajowy Rejestr Sądowy – KRS).
Do you want to set up a company in Poland? – Please contact your Damalion expert now.
