Legal and Regulatory Requirements for Polish Companies
Discover the essential legal requirements for launching a business in Poland, including business registration, taxation, and employment regulations, ensuring a smooth and compliant start to your entrepreneurial journey.
Embarking on a new business venture can be an exhilarating and fulfilling experience. But before diving headfirst into entrepreneurship, you must familiarize yourself with the legal obligations that accompany establishing a business in a specific country.
This article aims to give you a broad understanding of the legal requirements for starting a business in Poland, highlighting crucial areas such as business registration, taxation, and employment regulations.
Whether you’re a budding entrepreneur or an aspiring business owner looking to expand your operations to Poland, this article will serve as a helpful starting point for understanding the legal landscape of starting a business in this dynamic country.
In Poland, the most common way to organize a business is by setting up a Limited Liability Company (LLC). This involves five essential steps:
- Creating the Articles of Association as a legal document with a notary.
- Arranging a lease agreement or buying property.
- Registering the company with the Polish Court Register.
- Opening a bank account and registering for VAT.
- Making sure that employees are registered with the Social Security Agency, Zaklad Ubezpieczeń Spolecznych (ZUS).
Poland has streamlined the process of getting a building permit, which makes dealing with construction permits easier.
Capital & Ownership Shares
The share capital of corporate entities is divided into shares as follows:
|Minimum Share Capital
|Limited liability companies (LLCs)
|PLN 5,000 (minimum)
|Cash or non-monetary contributions
|PLN 50 (minimum value per share)
|Joint-stock companies (JSCs)
|PLN 100,000 (minimum)
|Cash or non-monetary contributions
|PLN 0.01 (minimum value per stock)
In the case of LLCs, shareholders are obligated to cover their share capital through contributions fully. However, the law does not specify the exact method of making these contributions. On the contrary, for JSCs, the Commercial Companies Code in Poland states that monetary contributions must be made to the company’s designated bank account during the incorporation process.
Stocks acquired through non-monetary contributions must be fully paid up within one year from the company’s registration. On the other hand, stocks obtained through cash contributions should be paid up to at least one-quarter of their nominal value before the company’s registration.
Moreover, stocks of joint-stock companies (referred to colloquially as public joint-stock companies or “publiczna spółka akcyjna”) may be listed and traded on the Stock Exchange.
A comprehensive understanding of the tax system is of utmost importance for anyone running a business. In Poland, enterprises must comply with various forms of taxes, including corporate income tax, value-added tax (VAT), and contributions to social security.
Corporate income tax is imposed on a company’s earnings and presently stands at a fixed rate of 19%. To fulfil tax obligations, it is crucial to maintain precise financial records and submit annual tax returns.
VAT is a consumption tax levied on the sale of goods and services. In Poland, the standard VAT rate is 23%, while reduced rates of 8% and 5% are applicable to specific goods and services. Businesses that meet specific criteria are required to register for VAT, collect it from customers, and have the ability to reclaim VAT paid on purchases.
Additionally, employers in Poland are responsible for making social security contributions on behalf of their employees. These contributions contribute to various social security benefits, including healthcare and pensions.
When aiming to hire employees, it is crucial to have a profound understanding of the employment regulations in Poland. The Labour Code, which governs the rights and obligations of employers and employees, encompasses crucial aspects such as working hours, holidays, wages, and termination procedures.
Employers are obligated to provide employees with a written employment contract, which should outline essential employment terms and conditions, including working hours, remuneration, and other pertinent details. Adhering to the government-set minimum wage requirements is essential.
Furthermore, employers must register employees with the Social Insurance Institution (ZUS) and deduct social security contributions from their salaries. Contributing to the national pension and healthcare systems is obligatory.
Employment standards in Poland follow EU regulations, ensuring that employees have statutory rights. These rights include minimum termination periods, protection against unjustified or unlawful dismissal, and protection against discrimination based on age, race, sex, disability, religion, belief, or sexual orientation. Employees are also entitled to annual leave, sickness leave, and statutory rights related to parenthood.
Regarding immigration, non-EU or EEA nationals seeking employment in Poland require a relevant visa or residency and a work permit.
Every company in Poland must submit annual financial reports to the Company Register (KRS). These reports include the following components:
- Balance sheet.
- Profit and loss account.
- Additional information.
These are the documents that need to be included with the yearly financial report:
- Report on activities
- Shareholders’ meeting approval: A resolution from the shareholders’ meeting is needed to approve both the financial report and activity report.
- Profit distribution or loss coverage
- Approval of management board members
- Auditor’s opinion on report
Format of Annual Financial Reports
Financial reports must be prepared electronically, following the structure and format (.xml) specified by the Ministry of Finance.
Deadlines for Annual Reporting
Polish companies must prepare their financial reports within three months after the end of the accounting year. If their financial year is the same as the calendar year, they have until March 31 to meet this deadline.
After preparing the reports, they must be approved by the ordinary shareholders’ meeting within six months from the end of the accounting year. For calendar year financials, this deadline is June 30.
Once the annual financial report is approved, it must be submitted to the Company Register (KRS) through the Minister of Justice’s online IT system within 15 days.
Submission of Financial Statements
Big companies need to send their financial report, activity report, and resolutions from the shareholders’ meeting within 15 days of approving the annual financial report to the Company Register (KRS) using the Minister of Justice’s online IT system.
These documents can be sent by the management board members, liquidator, or a proxy who is authorized by the management board (liquidator). According to Polish law, the application for submission must be signed using a qualified electronic signature or Trusted Profile (ePUAP).
Compulsory Annual Audit
A certified auditor must conduct a compulsory audit. The audit covers
- The annual consolidated financial reports of capital groups
- The annual financial reports of and joint-stock companies (jsc), banks, funds and credit unions.
Compulsory Audit of Companies in Poland
Limited Liability Companies (LLCs) may be required to undergo mandatory audits if, in the previous financial year, they met at least two of the following conditions:
- Employed an average of at least 50 full-time workers annually.
- Had total assets worth at least EUR 2,500,000 (or the equivalent in PLN) on their balance sheet by the end of the financial year.
- Generated net revenues from sales of goods, products, and financial operations of at least EUR 5,000,000 (or the equivalent in PLN) for the financial year.
Additionally, companies formed through mergers or acquisitions need to have their financial reports audited for the year the merger took place. The same applies to annual financial reports prepared by entities following International Accounting Standards.
The auditor’s opinions and reports must be signed using the qualified electronic signature of the auditor.
Permits and Licenses
Depending on the nature of your business, specific permits or licenses may be necessary for legal operation in Poland. Specific industries, such as food services, healthcare, transportation, or construction, may have additional regulatory requirements that must be fulfilled.
To obtain the required permits and licenses, thorough research into applicable regulations is crucial. Consulting with relevant authorities or specialized agencies is recommended. Failure to comply with the necessary permits and licenses can result in penalties or the potential closure of your business.
Intellectual Property Protection
Safeguarding your intellectual property is vital for the long-term success of your business. In Poland, legislation governs intellectual property rights, including patents, trademarks, and copyrights. These rights can be registered with the Polish Patent Office (UPRP).
Registering your intellectual property protects unauthorized use or infringement. It grants you exclusive rights and legal recourse, should enforcement be necessary.
To protect your trademarks, you can apply with the UPRP. Trademarks play a crucial role in distinguishing your products or services from competitors. Registering them ensures that others cannot use similar marks that may need to be clarified for consumers.