Company In Poland - Advantages For Foreigners
Contributed by LF LEGAL
13 November, 2017
Although Poland is not typically associated neither with low tax opportunities nor a possibility to conduct business activity anonymously, Polish company law an tax law offer some solutions favourable to foreigners.
Company in Poland
Because of its central location in Europe, improving infrastructure base and highly skilled work force, Poland may be considered as an attractive jurisdiction for international trading companies and agents. Although tax rates in Poland are not the lowest in EU, they are still considerably lower than in most of well-developed EU countries, such as France, Germany, Spain, Scandinavian states. Corporate Income Tax rate in Poland is 15% for the first tax year of the company existence. In next years, 15% rate is applicable only to companies, which revenue from sales for last tax year does not exceed 1 200 000 EUR. For other companies, the tax rate is 19%. An adequate planning of international business with use of Polish company allows to reduce income taxation and to avoid necessity of applying for VAT refund in other countries.
Tax transparent entities in Poland.
Poland offers a possibility to conduct business in the form of partnerships which, as a rule, are tax transparent entities. The most popular Polish partnership is Limited Partnership. LP is not subject to Corporate Income Tax. The partnership income is taxed only on the level of partners. As far as foreign partners are concerned, income from partnership is taxed in Poland as permanent establishment of foreign entrepreneur – as a rule 15% or 19% for partners being CIT payers in their country, or 19% for partners being PIT payers. LP however can be VAT and VAT EU payer.
Any foreign person or company/partnership can be partner of Polish LP. It concerns also offshore companies registered in tax heavens. There are two types of partners – general partner, liable to the creditors for the obligations of the partnership without limitation, and limited partner which, under some conditions, is not liable for partnership obligations.
Special type of LP is Limited Liability Company Limited Partnership (LLCLP). This structure allows to achieve an effective tax rate in the amount of 19% on the level of beneficial owner and to avoid personal liability for company obligations at the same time.
Joint stock company with bearer shares
Polish company law allows joint stock companies to issue bearer shares. Share document may be issued in ordinary written form. Ownership of such shares may be transferred by transferring the physical possession of share document. The company is not obliged to register owners of bearer shares in any internal documents. If there are more than one shareholder, their data is not entered into commercial register. In such situation, there is no possible for the company to determine its beneficial owner.
Director's fees in Poland
Foreign residents – members of management board and supervisory board of a limited liability company and joint stock company in Poland receiving remuneration for holding position in the board are subject to 20% withholding tax in Poland. If such remuneration is granted under resolution of an appointing authority, exclusively for holding the position in the board, it is not subject to any other tax burdens in Poland (such as social security contributions). Moreover, such remuneration constitute a tax deductible cost for the company, which allows to avoid double taxation problem. In addition, if a double taxation treaty contains a tax exemption method, such remuneration, as director's fee, is taxed only in Poland as a country of income source.
As described above, Polish company law and tax law may offer some useful solutions for both tax planning and risk planning. For more information concerning Polish companies and taxation system in Poland, please see LF LEGAL knowledge base:
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