Profit and Loss Account for Foreigners Living in Poland – Practical Comments and Methodology from an Accounting Perspective

Establishing companies in Poland by foreigners

Publication date: January 13, 2025

general information about the profit and loss statement

Establishing a company in Poland by foreigners is possible, but requires meeting certain conditions, which vary depending on the origin of the foreigner. EU and EEA citizens can establish a business on the same terms as Poles. US and Swiss citizens can conduct business on the basis of international agreements. Ukrainian citizens can establish companies on the basis of specific regulations regarding assistance to Ukrainian citizens.

For citizens from outside these countries, the condition for conducting business in Poland is to have an appropriate residence title. Foreigners can also establish branches of foreign companies, but the process of establishing a company may be more complicated compared to Polish citizens, especially if additional documents are required.

The choice of the form of business activity depends on individual preferences, and foreigners are advised to seek the assistance of legal specialists.

Establishing a business by a foreigner in Poland is possible, but depends on citizenship status and permits. Foreigners from EU and EEA countries can easily establish a sole proprietorship or a company. US and Swiss citizens have limited opportunities, but can establish a business and a company.

Citizens from outside these countries must meet one of the additional conditions, e.g. have a permanent residence permit, a long-term EU resident permit, a Polish Card, refugee status or be a family member of an EU citizen. However, if these conditions are not met, there are options to establish a limited partnership, joint-stock company, limited liability company or a branch of a foreign company.

However, some activities may require licenses or special permissions.

There is also a step-by-step guide explaining how a foreigner can set up a company in Poland, emphasizing that not only citizens of the EU, EEA, the USA and Switzerland can run a business. People from outside these countries must have an appropriate residence title to set up companies such as limited liability companies, limited partnerships or joint-stock companies. The most frequently chosen forms are a sole proprietorship (JDG) and a limited liability company. JDG, the first of the above options, is easier to set up, but the entrepreneur is responsible with their own assets – it is easier to start with it, but if such a business does not bode well, unfortunately the entrepreneur loses part or all of their financial contribution, so it is worth investing money in it carefully. A limited liability company protects the owner’s assets, but requires share capital and full accounting – and this may be more difficult and requires taking more necessary steps to set it up.

A foreigner must register a company in CEIDG or National Court Register, whereby a JDG can be established at an office or online, while a limited liability company can be established at a notary’s office or via the Internet. In the absence of a PESEL number, registration must take place traditionally. It is also important to have an appropriate residence title to legally conduct business.

In addition, a foreigner can use a virtual address to register a company and must select the appropriate PKD codes describing the business profile. Bookkeeping, especially for companies, requires full financial support, which often involves hiring an accounting office – here you need the one that best suits the needs of a given company.

Financial Statement

1. Who must prepare financial statements? Financial statements must be prepared by companies that keep accounting records in accordance with the Accounting Act (due to the amount of revenue or legal status). This applies to, among others: capital companies, partnerships, as well as individuals conducting business activities.
2. Exemption from the obligation to prepare financial statements: General partnerships or professional partnerships with revenues below EUR 2 million may submit a declaration of no obligation to prepare financial statements.
3. Responsibility for preparing the report: The heads of entities are responsible for preparing the report, e.g.: members of the management board, partners managing the company’s affairs, general partners, liquidators, trustees, administrators and members of management bodies.
4. What does a financial report contain? The report consists of a balance sheet, profit and loss account and additional information. Resolutions approving the aforementioned documents and auditors’ opinions, if an audit was required, should also be attached.
5. Reporting deadlines: Companies have three months from the balance sheet date to prepare the report (e.g.: by March 31, if the financial year is the same as the calendar year). Approval must take place no later than six months after the balance sheet date (by June 30).
6. E-financial reports: From 2020, financial statements must be prepared electronically in a structured form. From 2022, this also applies to issuers of securities admitted to trading.
7. Signing e-reports: The report must be signed electronically (e.g. with a qualified, trusted signature). Documents must comply with statutory requirements, and refusal to sign requires justification.
8. Sanctions for failure to submit a report: Failure to submit the report on time may result in penalties being imposed.
9. Obligation to apply IAS: Issuers of securities and banks are obliged to apply International Accounting Standards (IAS) instead of the Polish Accounting Act.
10. Who can submit an e-financial report?: The e-report is sent to the Head of the National Revenue Administration by the taxpayer or a person authorized by him.
    
    The National Court Register (KRS) is notified in the e-KRS system by: Head of unit (e.g. member of the management board; Professional representative (e.g. attorney, legal adviser); Procurator, trustee, administrator in restructuring proceedings or liquidator.
    
    In the case of a multi-person management board, the notification is made by a natural person entered in the National Court Register with a disclosed PESEL number.
11. How to report: The e-report submission must be signed with a qualified signature, Trusted Profile or personal signature.
12. Sanctions for failure to submit a report: The sanctions include: Fines from ten (10) to seven hundred and twenty (720) daily rates (within the following amounts: from PLN 1,433.30 – 10 daily rates x PLN 143.33; up to PLN 41,279,040 – 720 rates x maximum daily rate, i.e. PLN 57,332). Restriction of liberty from one month to two (2) years. Compulsory proceedings, dissolution of the company, deletion from the National Court Register or appointment of a curator.
    
    The National Court Register calls for the submission of a report within seven (7) days. Failure to submit reports for two (2) financial years results in the company being dissolved by the court.
    
    No exceptions for unforeseen circumstances (e.g. system failure).

Profit and loss statement

1. Definition and importance of Profit and Loss Account:
   • The income statement, also known as the profit and loss statement, is a key component of a financial statement that shows the revenues and expenses of business transactions over a specified period of time — usually twelve (12) months.
   • It shows the net financial result of an economic entity, which may be a profit or loss, after taking into account taxes and other charges.
2. Obligation to prepare:
   • This applies to commercial companies, legal persons (except for the State Treasury), as well as organizational units without legal personality whose revenues exceed EUR 1.2 million, and representative offices of foreign companies in Poland.
3. Methods of preparation:
   • In Poland, the profit and loss account can be prepared in two variants:
   • Calculated: fees are assigned to where they arise, and the basis is net revenues, selling costs and general and administrative costs.
   • Comparative: costs are divided by type, e.g. depreciation, consumption of materials, wages, external services, etc.
4. Basic rules:
   • Principle of matching: costs and revenues must be related to a specific period.
   • Accrual accounting principle: all economic transactions are recorded in the account, regardless of whether they are paid or not.
5. Benefits of analysis:
   • The profit and loss account allows you to assess the financial condition of a company, which makes it easier to make decisions about investments, pricing policy, or salary increases. It is considered one of the best measures of the efficiency of economic activity.

Profit and Loss Statement (P&L) – Key Information

The P&L statement, also known as the income statement, is an element of the financial report of a company that provides information about its financial condition. Its preparation is mandatory for selected entities, including: commercial companies, legal persons and organizational units without legal personality, meeting specific criteria.

Two variants of preparing the income statement:

1. Calculation variant: Classifies costs according to where they are generated. Included are, among others: production, management and sales costs. The sales result is obtained by comparing revenues with production costs.
2. Comparative variant: Classifies costs by type, e.g.: consumption of materials, wages, depreciation. The operating result is calculated by reclassifying costs and revenues and changing the stock of products.

Balance Sheet vs. Profit and Loss Statement: The balance sheet shows the state of assets and their sources of financing, while the P&L shows how a specific company generates revenues and incurs costs. Both documents are crucial for assessing the financial health of a company.

Benefits of the P&L: Financial result analysis supports the decision-making process and allows you to assess the effectiveness of the company’s business activities.

The Profit and Loss Account (P&L) is a key tool for entrepreneurs, enabling ongoing monitoring of the company’s financial situation and fulfilling certain legal obligations. The P&L is a part of the financial report, which also includes the balance sheet and additional information.

The P&L statement is a document that allows you to assess how a company generates revenues and what costs it incurs. It helps identify areas requiring intervention and is mandatory for commercial law companies, individuals conducting business activities and entities without legal personality if their revenues exceed EUR 1,200,000.

Key elements of the P&L:

• Financial income: from investing activities.
• General and administrative expenses: expenses related to the operation of a company.
• Cost of goods sold: related to production and sales.
• Operating and financial costs: all costs associated with a company’s operations.

Methods of preparing income statement:

1. Calculation method – is based on determining the costs of manufacturing products.
2. Comparative method – focuses on types of costs.

For small and micro entrepreneurs, it is possible to use a simplified RZIS, which allows you to save time and protect business information.

The importance of the P&L: A properly prepared P&L allows the entrepreneur to diagnose financial problems earlier, which is crucial for implementing restructuring activities. In a situation of threat of insolvency, the P&L can help avoid bankruptcy and lead to effective restructuring.

Reflection: The purpose of the P&L is to precisely determine the economic situation of the company, which allows for taking appropriate corrective actions. It allows for monitoring the financial condition of the company and early detection of threats, which is crucial for its further functioning.

Profit and Loss Account – What is it and who prepares it?

Definition and meaning:

The Profit and Loss Account (P&L) is a key element of the financial report that allows for the assessment of the financial results of the company. It helps in the analysis of the company’s revenues, costs and profitability.

Basic information about the financial statements:

• A financial statement is a report of economic operations, including a balance sheet, profit and loss account, and additional information.
• Preparation of the report is mandatory for entities keeping accounting books and for other entities exceeding certain revenue thresholds.

Obligation to prepare a profit and loss account:

The obligation applies to, among others:

• Commercial companies,
• Local government units,
• Other legal entities with revenues exceeding EUR 2 million.

Accounting principles:

• Matching costs and revenues: Expenses must be recognized in the same period as the revenues they generate.
• Accrual principle: Recognizes income and expenses when they occur, rather than when they are paid.

Construction of a profit and loss account:

The P&L statement is divided into four segments:

1. Core business – revenues and costs from the sale of products.
2. Other operating activities – other operating income and expenses.
3. Financial activities – financial income and expenses.
4. Calculation of the financial result – based on the difference between revenues and costs.

Methods of preparing the income statement:

• Vertical layout is mandatory.
• You can choose the method:
  • Comparative – classification of costs according to their type.
  • Calculation – classification of costs according to their place of origin.

Income Statement Analysis:

The P&L analysis allows you to:

• Assessment of changes in revenues, costs and financial results.
• Study of the structure of revenues and costs.
• Establishing relationships between financial result categories (e.g. operational efficiency).

Importance for companies:

The P&L is not only a legal requirement, but also a key tool for assessing the financial situation of a company, which allows for making better business decisions. Conducting a preliminary analysis of the P&L provides valuable information about the financial condition and directions of the company’s development.

Definition and Meaning An income statement is a key financial statement that presents the revenues, costs, profits, and losses of a company over a specified period, usually annually or quarterly. It helps assess whether a company is making a profit or incurring a loss, and its financial performance. The main components are revenue, cost of goods sold, gross profit, operating costs, EBIT (earnings before interest and taxes), finance income and expenses, profit before tax, income tax, and net profit.

Profit and Loss Statement vs. Balance Sheet The income statement and balance sheet differ in content and purpose, but they are related. The balance sheet shows the assets of a company at a given point in time, while the income statement shows the financial results for a specific period. Net income affects the equity on the balance sheet, which is important for future financial decisions.

Entities required to prepare a profit and loss account must be prepared by entrepreneurs, including partnerships, companies and other legal entities, with the exception of the State Treasury. The report should be submitted within 3 months of the balance sheet date.

Preparation Methods There are two methods for preparing a profit and loss statement:

1. Calculation variant: Classification of costs by function in the enterprise. Allows understanding which areas are the most expensive.
2. Comparison variant: Classification of costs by type. Enables comparison of costs between periods and analysis of their impact on results.

Preparation rules The income statement should be in accordance with GAAP or IFRS, taking into account the going concern principle. In this situation, it must refer to a clearly defined period, and all transactions must be properly documented. It is worth using accounting methods consistently in subsequent years.

Profit and Loss Statement Analysis allows you to evaluate the financial performance of a company and understand how it generates revenue and controls costs. It focuses on sources of revenue, operating cost analysis, operating profit and net profit. These indicators are key to assessing the financial health of a company. In the case of an increase in profits, analysts try to identify the factors for their improvement, and in the case of declines – to determine the causes of problems.

Profit and loss statement

• Definition: An income statement is a statement that shows a company’s income, expenses, and profits for a specific period, usually a year. It helps assess the profitability and financial performance of a company.

Key elements of the P&L:

1. Operating income: Income from core activities, such as selling products or services.
2. Operating expenses: Costs associated with running a business, such as raw materials, salaries, marketing, etc.
3. Gross profit: The difference between revenues and operating expenses.
4. Finance costs: Debt servicing costs, such as interest on loans.
5. Income Tax: The amount of tax on income.
6. Net profit: The final financial result after all costs and taxes have been taken into account.

Methods of evaluating financial results:

• Gross profitability: Gross profit relative to operating income.
• Net profit margin: Net profit relative to operating income.
• Cost efficiency: Analysis of operating costs relative to revenues.
• Performance Trends: Analyzing changes in financial performance over an extended period of time to identify patterns and issues.
• Industry benchmarking: Analyzing financial results in the context of the competition.

Additional recommendations:

• Regularly monitoring financial results and adapting strategies to changing market conditions.
• Conducting cash flow analysis to understand the financial liquidity of the company.
• Using tools such as factoring to speed up payments and improve liquidity.

To summarize, the profit and loss account is a key tool for assessing financial results, but its analysis should be supplemented with additional indicators and methods to obtain a more complete picture of the company’s financial situation.

Financial Accounting Functions

Financial accounting evolves in response to changing needs of business practice. Its functions are not static and may change with economic transformations.

Basic functions of financial accounting:

1. Information function:
   • A key function that involves generating and delivering information about the enterprise. It enables data to be used by different user groups to make decisions.

2. Management function:
   • It provides information necessary for decision-making in the management process by management and external users such as investors and lenders.

3. Control function:
   • Related to data in documents, financial reports and accounting records. Includes internal control (organized by management) and external control, aimed at ensuring the orderly conduct of business and the protection of property.

4. Analytical function:
   • It involves the interpretation of numerical data and the preparation of financial statements. Financial analysis allows for the assessment of the assets, financial situation, profitability and cash flows in an entity.

5. Planning and statistical function:
   • It concerns the use of data from accounting books and financial statements to plan the development of a company and the provision of this data to statistical bodies, which analyse it in the context of entire groups rather than individual entities.

Conclusions

Financial accounting performs many important functions that support both internal and external management and control processes in the enterprise. These functions are interconnected and complement each other, which allows for a comprehensive analysis of financial results and supports decision-making.

Accounting through the human eye: Analytical vs. synthetic accounts

Accounting accounts are flexible tools that can be broken down to obtain more detailed information.

Division of accounts

1. Horizontal division:
   • It consists of separating from the main (synthetic) account debit and credit entries related to a specific group of operations. This allows for the creation of analytical accounts.
2. Synthetic accounts:
   • Called main accounts, they are used to record totals and may refer to balance sheet or profit and loss accounts. They are listed in the company’s chart of accounts.
3. Analytical accounts:
   • They supplement and detail the records of synthetic accounts. The record in the main account is duplicated in the analytical accounts, which allows for detailed analysis of the data.

Example of horizontal account splitting

The “Fixed assets” account can be divided into “Means of transport”, “Machinery” and “Buildings and premises”. This allows you to more precisely determine how much of the initial value consists of individual fixed assets.

Accounting rules

Analytical accounts are “connected” to main accounts. For example, the purchase of a fixed asset, such as a means of transport, is posted to the analytical account and automatically replicated to the main account “Fixed assets”.

Uses of analytical accounts

According to the Accounting Act, analytical accounts are created for:

• Fixed assets,
• Settlements with contractors,
• Settlements with employees,
• Sales and purchase operations,
• Costs and assets,
• Cash operations at the cash register.

Methods of maintaining analytical accounts

Analytical accounts can be run using different methods, the most popular of which is the value method, which reflects the values in both accounts (synthetic and analytical). Other methods include the quantitative-value method and the quantitative method.

The division of accounting accounts into synthetic and analytical is important for precise recording of economic transactions and enables better control and analysis of financial data, which is crucial for effective management of the enterprise.

Profit and Loss Accounting – An Accounting Perspective

Annual preparation of profit and loss statements by companies: Methods and best practices

Every year, companies are required to prepare a profit and loss statement (P&L), which is a key financial document presenting the company’s revenues and costs in a given period. In Poland, companies must fulfill this obligation in accordance with the Accounting Act, which allows for two formats for preparing a profit and loss statement: the comparative method or the calculation (functional) method.

Two acceptable profit and loss statement formats

1. Comparative method: In this method, costs are classified by type (e.g. raw materials, salaries, external services). This is especially useful for companies that want to analyze costs in detail, because it provides information on the breakdown of costs by type. This method is helpful in controlling expenses and understanding where the company spends the most resources.
2. Functional method: Costs in this method are grouped according to their function in the company, e.g. production, sales and administrative costs. This is more suitable for complex companies that conduct production, as it allows for focusing on costs related to specific activities of the company.

Choosing the right method

The choice between these two methods depends on the nature and complexity of the company’s activities:

• The comparative method is usually chosen by service companies, trade companies and companies with simpler cost structures, where detailed information about the types of expenses is more useful.
• The calculation method is often preferred by manufacturing companies, where it is important to assign costs to specific activities, such as production and sales, which is crucial for internal management and decision-making.

Both methods have their advantages, but it is important to choose the one that best suits the specifics of the company’s business and its strategic goals. Importantly, once the method is chosen, it should be applied consistently from year to year to ensure comparability of financial statements.

Practical advice

• Cost allocation: This is where you need to make sure that costs are allocated accurately and consistently, especially when using the costing method, to avoid misrepresenting expenses across different company functions.
• Automation: In this case, it is necessary to use accounting software that supports both forms of profit and loss statements. This simplifies the process of preparing financial statements and minimizes the risk of errors.
• Compliance with regulations: You should regularly consult a certified accountant or financial advisor to ensure compliance with the Accounting Act and to make the best choice for your specific business (an individual approach is essential as it allows for a better consideration of the situation as the businesses you run may differ).

The Profit and Loss Statement (P&L) is one of the basic financial statements that provides information about the financial results of a company in a given period. From an accounting perspective, the purpose of the profit and loss statement is to:

1. Financial performance evaluation: Enables the analysis of revenues, costs and profits, which is crucial for assessing the effectiveness of a company’s operations.
2. Investment decisions: The information contained in the income statement is important to investors and lenders who make decisions based on financial results.
3. Profitability analysis: The P&L allows you to assess the profitability of various areas of your company’s operations, which is helpful in making decisions about resource allocation.

Profit and Loss Account Methodology

The profit and loss statement can be prepared according to two main methodologies:

1. Calculation method:
   • In this method, costs are grouped by type (e.g. material costs, wages, depreciation).
   • This enables a detailed analysis of costs in relation to the type of activity.
   • It is more detailed and allows for a deeper analysis of the cost structure.
2. Comparative method:
   • This method focuses on grouping costs according to their functions, such as selling costs, general and administrative costs, and operating costs.
   • This allows for faster comparison of financial results between different companies or periods.
   • Makes it easier to understand how different functions contribute to your overall financial performance.

Choosing a Method

The choice of method for preparing a profit and loss statement may depend on several factors:

• Type of business: Manufacturing companies may prefer the costing method to better track the costs of producing products, while service companies may focus more on the comparison method.
• Legal requirements: Some legal regulations may impose specific rules regarding the preparation of the income statement.
• Industry Practices: Many companies may use a particular method due to accepted practices in a given industry.

Conclusions

The income statement is a key tool in financial analysis, and choosing the right methodology can have a significant impact on the interpretation of a company’s financial results. Depending on the needs and characteristics of the business, companies should carefully select the method of preparing the income statement to obtain the most reliable and useful information.

Polish accounting law allows for the preparation of a profit and loss account in two forms: calculation and comparative. Both of these methods have their specific applications and principles, and also allow for the use of the particle method. Here is a detailed discussion of these concepts:

1. The particle method

The granular method, sometimes called the analytical method, involves a detailed analysis of revenues and costs. In practice, this means that for each type of revenue, the cost of the same type is subtracted. This allows for a precise illustration of how individual revenues affect the company’s profitability, by clearly comparing the costs associated with generating them.

Example:

If a company generates revenues from the sale of products A, B and C, then in the profit and loss account the revenues from the sale of each of these products will be compared with the costs of producing them, which will allow us to assess the profitability of each of them.

2. Calculation method

• Description: In the calculation method, revenues and costs are classified by function, which means that costs are assigned to specific activities (e.g. production, sales, management).
• Application: Often used by companies that run complex operations, especially manufacturing, where it is important to understand costs in relation to operational functions.

3. Comparative method

• Description: In the comparative method, costs are classified by type, which means that costs are grouped into, for example, wages, raw materials, external services.
• Application: Often chosen by trading and service companies that do not have a complicated cost structure.

Choosing a method

According to the Accounting Act, each business entity has the right to independently decide which method to use when preparing the profit and loss statement. The final choice depends on:

1. Nature of business: Manufacturing companies may prefer the calculation method, while trading and service companies may choose the comparative method.
2. Analytical needs: If a company needs a detailed analysis of costs by type, the comparative method will be better. However, if it is important to track costs by function, the calculation method will be more appropriate.
3. Accounting system capabilities: The complexity of the accounting system and available resources can also influence the decision to choose a method.

Summary

Both methods – calculation and comparison – have their advantages and limitations. The choice of method should be adapted to the specifics of the company’s activity, its information needs and analytical capabilities. The granular method, which is part of both of these forms, allows for detailed tracking of revenues and costs, which is crucial for effective financial management of the company.

What else is worth remembering?

When foreigners start a business, they may encounter differences in the calculation of reporting periods depending on the start date of the business. Below is a look at how the financial statements and profit and loss account look, in the context of the different dates of purchase of the business. Also explained are key elements such as: balance sheet, assets and liabilities.

Financial Statement

A financial report is a set of documents that present the financial situation of an enterprise. The most important parts of a financial report are:

1. Balance:
   • Definition: A balance sheet is a document that shows the assets, liabilities, and equity of a company as of a given date.
   • Structure:
     • Assets: All the resources that a business owns, such as cash, inventory, real estate, machinery, etc.
     • Liabilities: Obligations of a company towards creditors, e.g. credits, loans, trade payables.
     • Equity: The difference between assets and liabilities, representing the value that belongs to the owners of a company.
2. Profit and Loss Account (P&L):
   • Definition: The income statement presents the revenues, costs and financial result of an enterprise for a specific period (e.g. a year).
   • Elements:
     • Revenues: Profits derived from operating and other activities.
     • Costs: Costs related to production, sales and general administration.
     • Profit/Loss: The difference between revenues and expenses.

Business Purchase Scenarios – What Might Happen

Scenario 1: Starting a business in June

• Reporting period: If an entrepreneur starts a business in June, his or her first financial year will normally cover twelve (12) months, even if the business starts later.
• Calculation of the report: The entrepreneur will be required to prepare financial statements (balance sheet and income statement) for the entire year, covering all revenues and costs that occurred from June to the end of the year.
• Example: If the business was commenced on June fifteenth (15th), the financial statements for the first year will cover the period from June fifteenth (15th) to December thirty-first (31st).

Scenario 2: Starting a Business in August

• Reporting period: If an entrepreneur starts their business in August, their first financial report may be shorter and cover only a few months.
• Calculation of Statement: In this case, the financial statement for the first year may cover the period from August 1st (1) to December 31st (31) and the full financial year will be counted from January 1st (1) of the following year.
• Example: If the business was commenced on 1st (1) August, the report for that year will cover the period from 1st (1) August to 31st (31) December and the full report for 2025 will start on 1st (1) January 2025.

Legal Aspects

For foreigners starting a business, it is also important to understand the legal aspects of running a business:

1. Business registration: Foreigners must register their business with the relevant national authorities.
2. Tax obligations: After starting a business, entrepreneurs are required to pay taxes, such as income tax or VAT, according to the regulations in force in a given country – in Poland: Foreigners conducting business activities are subject to the same tax rules as Polish citizens. In practice, this means that they pay the same tax rates as Polish entrepreneurs. However, some issues may differ depending on the tax status, the country of residence of the taxpayer and the provisions of international agreements on the avoidance of double taxation. Below are the main taxes and rules in force in Poland:
   • Income tax (CIT and PIT):
     • Personal Income Tax (PIT): Individuals conducting business activity are subject to personal income tax (PIT). They can choose between different forms of taxation: general principles (17% and 32%) or flat income tax (19%).
     • Corporate Income Tax (CIT): If a foreigner establishes a company, such as a limited liability company or a joint-stock company, they are subject to corporate income tax (CIT). The CIT rate is standard 19%, but there is a preferential rate of 9% for small businesses (for revenues not exceeding EUR 2 million per year).
   • VAT (Value Added Tax):
     • The basic VAT rate in Poland is 23%. There is no difference in VAT rates between foreigners and Polish citizens. A foreigner conducting business in Poland will be subject to the same VAT obligations as Polish entrepreneurs if their turnover exceeds a certain threshold (currently PLN 200,000 per year).
     • VAT registration: Foreigners setting up a business in Poland must register for VAT if they plan to exceed this threshold or if they provide services or sell goods that always require VAT registration, e.g. intra-EU trade.
3. Withholding tax:
   • In the case of dividends, interest or royalties paid to foreign entities, a so-called withholding tax may apply. The standard rate is 20%, but it can be reduced or completely eliminated under double taxation treaties that Poland has concluded with other countries.
4. Double taxation treaties:
   • Poland has concluded double taxation treaties with many countries that regulate where and how foreigners will be taxed. Thanks to these treaties, foreigners can avoid paying tax on the same income both in Poland and in their country of residence.
   • For example, if a foreigner runs a business in Poland but is a tax resident in another country, the treaty may provide that part of the income will be taxed in the country of residence and not in Poland.
5. Special rules for certain foreigners:
   • In the case of citizens of the European Union and the European Economic Area (EEA), the same rules apply as for Polish citizens. This means that no additional barriers are introduced in terms of taxes or other obligations (e.g. social security).
   • Foreigners from outside the EU may be subject to additional formalities regarding business registration, but the same rules apply to them in terms of taxation.

Summary:

Foreigners starting a business in Poland pay the same taxes as Polish citizens, with the difference that they can benefit from double taxation treaties. Tax rates, such as PIT, CIT and VAT, are identical for all entrepreneurs operating in Poland. It is important to familiarize yourself with national regulations and international tax treaties that may affect tax burdens.

3. Records management : Businesses must maintain accurate financial records to meet financial reporting requirements and any audits.

Summary

When setting up a business, foreigners should understand the differences in calculating reporting periods depending on the start date of the business. It is also important to familiarize yourself with the elements of the financial statement, such as the balance sheet and the profit and loss account, as well as the legal aspects related to running a business in a new country.

Foreigners starting a business in Poland must register their company with several key bodies. Here are the most important ones:

1. Central Registration and Information on Economic Activity (CEIDG):
   • Description: This is the main register of entrepreneurs in Poland, where individuals conducting business activities register.
   • Procedure: The application can be submitted online or in person at the commune/city office.
2. National Court Register (KRS):
   • Description: Entrepreneurs who establish commercial law companies (e.g. limited liability companies, joint-stock companies) must register their company in the National Court Register.
   • Procedure: The application is filed with the appropriate district court, in the commercial division of the National Court Register.
3. Tax Office:
   • Description : After registering the business, the entrepreneur should register as a tax payer with the appropriate tax office.
   • Procedure: You must submit the CEIDG-1 form (when registering with CEIDG) or the appropriate forms in the case of companies registered in the National Court Register.
4. ZUS (Social Insurance Institution):
   • Description: Entrepreneurs are obliged to register with ZUS for health and social insurance purposes.
   • Procedure: Application forms such as ZUS ZUA (for insurance) and ZUS ZZA (for health insurance) must be submitted.
5. Competent statistical authority:
   • Description: Entrepreneurs must also register their business with the Central Statistical Office (GUS) in order to obtain a REGON number.
   • Procedure: This notification is usually made automatically during registration in CEIDG or KRS.
6. Depending on the specific activity:
   • Entrepreneurs may need additional permits or concessions, especially in regulated industries such as transport, catering or healthcare.

Conclusions

Registering a business in Poland requires several steps and formalities that must be completed in order to legally conduct business. It is important for foreigners to familiarize themselves thoroughly with the requirements and procedures related to registration with individual bodies.