Entering the Polish Market
Poland is rich in culture, heritage, and traditions where castles and palaces add a magical backdrop to what is nonetheless a vibrantly forward-looking nation and a growing economic power in the central and eastern European region. Poland ranked 23rd globally for nominal Gross Domestic Product (GDP) of 655.3 billion US dollars in 2021 and ranked ninth among European nations – a jump of two places since 2020.
North, south, east, and west are pulled together by Poland’s borders with Germany, the Czech Republic, Slovakia, Ukraine, Belarus, and Lithuania. This location creates the perfect launch pad for international companies’ international expansion.
A multi-lingual, well-educated, skilled, and cost-effective workforce add to the attractions. But incoming companies tempted to set up a subsidiary will find adjustments need to be made – and quickly.
Starting a Business in Poland
The most popular choice for foreign companies opening a subsidiary in Poland is to form a limited liability company, a Spólka z ograniczonq odpowiedzialnościq, which is abbreviated to Spolka.z.o.o. o or Sp.z.o.o. The subsidiary is a legal entity, entirely independent of the parent company and is incorporated under the regulations of the Poland Company Act and is registered with the National Court Register (KRS) and the Central Register for Information on Business Activity (CEIDG). Requirements and provisions include:
- The company name must be unique with the suffix Spolka.z.o.o. or Sp.z.o.o.
- Provide notarized Articles of Association. This process can be completed by assigning Power of Attorney to an authorized agent
- Obtain Tax Identification Number for the company (NIP)
- The subsidiary can be established by a single shareholder or an entity, but not if the entity in question itself has only a single shareholder
- Note: Failure to name all beneficiaries in the Register can incur fines of up to PLN 1,000,000 (€220,313, US$251,512)
- Name at least one shareholder with no upper limit on numbers. If share capital exceeds PLN 500,000 (€110,156, US$125,756) or there are more than 25 shareholders, it may be necessary to form a supervisory board
- A Polish bank account must be opened to provide proof that minimum share capital of PLN 5,000 (€1,100, US$1,260) has been deposited
- Establish a board of directors chosen by the supervisory board or general meetings of the shareholders
- Composition of the management board must be lodged with the National Court Register within six months
Expanding into Poland
Poland is a member of the European Union (EU), though not the Eurozone, and uses the zloty as its currency. It is also a key player in the Central Eastern Europe (CEE) economic bloc and is recognized as the strongest of the former ‘Eastern bloc’ nations, according to the International Monetary Fund.
Besides this, Poland is a member of the World Trade Organization (WTO) and the Organization for Economic Cooperation and Development (OECD). In addition to being perfectly placed for business with Western Europe and further east, Poland’s Baltic coastline gives access to Scandinavia and into the North Sea and Atlantic.
Opening a business in any overseas territory brings issues. Moving staff across the world means lengthy processes to obtain visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination, and severance?
Drawing up an expansion blueprint is not enough. Your business plan will have to answer all these questions.
Poland welcomes foreign investment. However, the employment market is complicated by its mix of regulations and collective agreements affecting employee benefits and entitlements. There are other questions too: where will you find distributors, manufacturers, and offices?
There is a simple alternative. By partnering a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in Poland
Poland Business Facts
- Capital – Warsaw
- Population – nearly 37.8 million in 2022
- Regions – There are 16 provinces (voivodships) of Poland. These are divided into counties (powiats) and further divided into communes or municipalities (gminas)
- Official language – Polish
- Economy and world ranking – GDP US$655.3 billion, ranked 23rd
- Leading sectors by GDP – Service 57.4%, industry 28.2%, and agriculture 2.4% end of 2020. Biggest growing industry is the business and finance sector. Also, largest industries include petrochemicals, polymers, automotive, ships and electronics
- Main exports include – Machinery and appliances e.g., computers, gas turbines, vehicles and parts, metals, food stuffs, pharmaceuticals
- Main imports include – Machinery e.g., broadcasting, office machines, cars and parts, mineral fuels, and oils
- Main trading partners – Germany, Italy, Netherlands, UK, Czech Republic
- Government – Democracy, republic, parliamentary republic
- Currency – Polish zloty (PLN)
Advantages and Challenges of the Polish Market
Advantages of expanding into Poland include:
- Location: Strategic geographical position for trade with central, eastern, and western Europe
- Links: Baltic coast gives access to Scandinavia, the North Sea and Atlantic
- Employment: Cost-effective labor
- Workforce: Well-qualified professionals, generally multi-lingual
- Buying Power: Growing consumer base contributing 60% to GDP, exceeding the European Union average
- Infrastructure: Developing program of construction and real estate projects
- Business: The World Bank ranked Poland 40th out of 190 nations for ease of doing business in its most recent report
Challenges of expanding into Poland include:
- Labor: Combination of low birth rate, emigration and low unemployment creates labor shortages in some sectors
- Red Tape: Complex processes for obtaining work permits and visas
- Trading: Regulations covering cross-border trading for imports and exports take around 17 days to deal with, above average for Organization for Economic Cooperation and Development (OECD) members
- Politics: Uncertainty over future relations with the European Union
Limited Company / Subsidiary or Branch in Poland?
The most popular choice for foreign companies opening a subsidiary in Poland is to form a limited liability company, a Spólka z ograniczonq odpowiedzialnościq, which is abbreviated to Spolka.z.o.o. o or Sp.z.o.o. The subsidiary is a legal entity, entirely independent of the parent company and is incorporated under the regulations of the Poland Company Act and is registered with the National Court Register (KRS) and the Central Register for Information on Business Activity (CEIDG). Another option is to open a branch.
Subsidiaries have independent legal status from the parent company, which is generally free from responsibility for any debts or liabilities. Subsidiaries can have a different name from the parent company, pursue different business activities and form their own contracts.
Branches in comparison, are an extension of the parent company and are not a separate legal entity. Subsidiaries and branches have differences in how they are registered and operate.