Poland has become an increasingly attractive destination for international entrepreneurs looking to establish limited liability companies (LLCs). The country’s strategic location in Europe, relatively low operating costs, and a business-friendly environment contribute to this growing trend. This post explores why entrepreneurs are drawn to Poland and the types of legal entities available, focusing on the benefits of the limited liability company structure, known locally as spółka z ograniczoną odpowiedzialnością (sp. z o.o.).
The legal types of companies in Poland
Poland offers several types of legal entities suitable for various business needs:
- Spółka z ograniczoną odpowiedzialnością (sp. z o.o.): This is the most popular type of company in Poland for both local and international entrepreneurs. It translates to a limited liability company (LLC). The primary advantage of an sp. z o.o. is that the liability of shareholders is limited to their contribution to the company’s capital, protecting personal assets from business liabilities. This structure requires a minimum share capital of PLN 5,000, making it accessible for small and medium-sized enterprises.
- Spółka akcyjna (S.A.): This is a joint-stock company, typically used for larger businesses that plan to be publicly traded. The minimum share capital for an S.A. is PLN 100,000, making it suitable for companies requiring substantial initial funding. It is less common for startups due to its complexity and higher regulatory requirements.
- Spółka komandytowa and spółka komandytowo-akcyjna: These are limited partnerships where the liability of some partners is limited to their capital contributions, while at least one partner has unlimited liability. These structures are beneficial for specific industries or scenarios, such as when a mix of active and passive investors is needed.
- Jednoosobowa działalność gospodarcza: This refers to a sole proprietorship and is commonly used by freelancers and small business owners due to its simplicity. However, the sole proprietor has unlimited liability, making it less attractive for those seeking personal asset protection.
Tax Regimes in Poland
One of the significant considerations for entrepreneurs is the tax regime applicable to their chosen company structure. In Poland, the corporate income tax (CIT) rate is generally 19%. However, Poland offers a reduced CIT rate of 9% for small taxpayers whose revenue does not exceed EUR 2 million. This makes Poland an appealing destination for startups and small businesses looking to optimize their tax obligations. Additionally, Poland adheres to numerous double taxation agreements, which helps international entrepreneurs avoid being taxed twice on the same income.
Value Added Tax (VAT) in Poland is standard at 23%, with reduced rates of 8%, 5%, and 0% for specific goods and services. Companies registered for VAT can reclaim input VAT, providing further tax efficiency.
Banking and financial infrastructure
One of the critical aspects of establishing a business in Poland is setting up a local bank account. Having a Polish bank account is necessary for managing financial transactions, paying taxes, and complying with local business regulations.
Damalion, the independent consulting corporation, assists international entrepreneurs with opening local bank accounts in Poland. Their expertise simplifies the often complex and time-consuming process of navigating the Polish banking system, ensuring that business operations can commence smoothly and efficiently. Damalion’s services extend to company registration, tax compliance, and ongoing business advisory, providing a comprehensive support system for international entrepreneurs.
Poland offers a favorable business environment for international entrepreneurs, particularly with its sp. z o.o. company structure that combines limited liability protection with relatively low capital requirements. The country’s attractive tax regime, along with the support services provided by firms like Damalion, makes establishing a business in Poland a strategic choice for entrepreneurs looking to expand into Europe. With its robust legal framework, strategic location, and supportive infrastructure, Poland continues to be a top choice for business formation among international entrepreneurs.
Damalion support international entrepreneurs wishing to setup their company in Poland to benefit from a business-friendly environment. Please contact your Damalion expert now.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
