Top 10 challenges of doing business in Poland

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Poland has weathered the economic downturn in Europe far better than most countries, but the business environment still remains a challenging one, and having local help is crucial in navigating tax laws and compliance issues.

The Polish market is attractive to overseas firms thanks to its scale and untapped potential. Its 38-million strong consumer market is one of the biggest in Europe and the country’s favourable location in the centre of the continent makes it possible to export goods to all European countries and thus reach over 500 million consumers. What’s more, the domestic economic environment is stable, posting solid levels of growth over the past two decades.

Thanks to its new open-market policies, Poland managed to attract €13.567 billion in 2011, representing a 30% increase over the previous year. The number of new investment projects is constantly growing, especially in the automotive, R&D, electronic and chemical sectors, supported by 14 Special Economic Zones (SEZ), which offer attractive tax exemptions, employment incentives and well-prepared investment lots.

Despite the business environment remaining quite a challenge, the country’s 2013 Doing Business rank - as tracked by the World Bank and International Finance Corporation (IFC) - was boosted by 19 places this year. Since the adoption of EU legislation, wide-ranging reforms in economic regulation have been implemented and there is now far less government intervention in the private sector. In order to get the most out of your Polish venture, having local help on board can help navigate the tax environment and manage regulatory burdens.

Starting a Business
Starting a business can be a rather long process in Poland, taking over a month to complete the six procedures involved. A company agreement must be notarised first before depositing capital into a bank account, filing at the National Court Register, and setting up VAT payments. Companies must also register at the National Sanitary Inspection and with the National Work Inspection.

Dealing with Construction Permits
There are 29 procedures to complete when dealing with construction permits and it takes 301 days as a result. The World Bank and International Finance Corporation (IFC) rank Poland in 161st place in the world for ease of dealing with construction permits, highlighting the rigorous nature of the process.

Getting Electricity
Getting electricity is a similarly laborious process, taking 186 days and involving six processes. It can also be a rather costly business, particularly in reference to electrical contractor costs when getting external connection.

Registering Property
Registering property is a heavily bureaucratic endeavour, and companies must obtain an extract from the Land Registry, Cadastre and the National Court Register before executing the sale or transfer agreement with the notary and applying for registration at the registry court.

Getting Credit
Access to credit is one of the areas in which Poland excels. However, there is no public registry office, which can cause difficulties.

Protecting Investors
Poland’s modern judicial system gives good support to investors, although the country scores poorly on the extent of director liability index.

Paying Taxes
Businesses operating in Poland are required to make 18 payments per year, taking 286 hours altogether. The corporate tax rate is relatively low, but companies are hit with a barrage of other levies. These include anything from social security contributions to the labour fund, national disabled fund or guaranteed employees' fund.

Trading Across Borders
It takes 17 days to export and 16 to import in Poland, which is significantly higher than the OECD average. This is largely down to the time it takes to submit and handle the required documents, although handling and inland transportation can also be time restrictive.

Enforcing Contracts and Resolving Insolvency
Enforcing contracts can take an average of 685 days and requires 33 procedures to complete. Resolving insolvency is a similarly lengthy procedure, taking three years in total compared to the OECD average of 1.7 years.

The Polish fight for independence and sovereignty has created a very strong population attached to their traditions and heritage, which can make it a little difficult to establish a business in the country. Having cross cultural awareness is therefore essential for companies looking to expand in Poland, as it will give an appreciation of the national pride and the customs and traditions that govern the business environment.

TMF Group
We have the local knowledge to help you navigate these minefields. Whether you want to set up in Poland or just want to streamline your Polish operations, talk to us.