Publication date: December 11, 2024
Poland, according to current data, is one of the fastest growing economies in Central and Eastern Europe. For years, it has attracted the attention of investors from all over the world. Its strategic geographical location, as well as membership in the European Union and the dynamically developing internal market make it an attractive place to invest your capital. However, the success of the investment depends not only on macroeconomic factors, but also on the legal and tax framework, which is the foundation for conducting business activity.
The aim of this article is to analyse the attractiveness of investing in Poland from a legal and tax perspective. It will discuss key legal aspects, such as the stability of the legal system and investor protection, as well as the tax system, including income taxes and available reliefs and incentives. Particular attention is also paid to the role of Special Economic Zones (SEZ) and the advantages that Poland offers compared to other countries.
Stability of the legal system
The stability of the tax system and the legal framework that binds it is of key importance to potential investors. Transparent rules of operation are one of the determinants of how new companies perceive us on the international market.
However, the geopolitical situation, geographical conditions, demographics and the level of education of society are an indispensable element that is key for new companies investing their capital in Poland. Very often we also look at the Gross Domestic Product (GDP), i.e. the value of all goods and services produced in the country in a given period. Poland has recently had one of the largest increases compared to other European countries. Over the last two decades, we have developed more than 2/3 times faster than other countries.[1]
Another point concerning legal stability are the changes that the state is making in its scope. A good example would be the establishment of the National Revenue Administration in 2017. The reform of the National Revenue Administration was aimed at creating a more transparent and effective system of tax administration in Poland, which was supposed to improve the quality of taxpayer service and increase the effectiveness of tax and customs collection, as well as reduce the scale of tax fraud or reduce the costs of functioning of the administration by about 15%. Unfortunately, according to some, the reform was introduced too quickly, and the new bodies do not operate in a coherent and uniform manner.[2]
Investor protection is key to maintaining the stability and security of potential investments in new sectors, as well as to building entrepreneurs’ trust in the legal and economic environment. In Poland, investor protection regulations include both domestic and international regulations that guarantee equal treatment and protection of the interests of foreign entities.
In this aspect of the attractiveness of investments in Poland, it is worth considering the Act of 16 August 2023 amending certain acts in connection with ensuring the development of the financial market and the protection of investors on this market. This Act provides for the amendment of various areas of the operation of the financial market, including, for example, the Banking Law Act, the Payment Services Act, or the Bonds Act. Its amendment resulted from the obligation to align Polish law with the latest EU legislation, primarily Regulation (EU) 2022/858 of the European Parliament and of the Council of 30 May 2022 on a pilot system for market infrastructures based on distributed ledger technology (“DLT Pilot Regulation”).[3]
In this context, investor protection is ensured in several key areas, such as:
In order to increase investor protection, Poland has invested in the digitalization of the activities of the Polish Financial Supervision Authority (KNF). The introduction of digital deliveries has improved communication with supervised entities, which has allowed for more effective market monitoring and faster response to potential problems.
In the banking sector, regulations were introduced that allowed for the flexible use of outsourcing, in line with European standards. Thanks to this, banks were able to streamline their operational activities, and investors gained a greater sense of security regarding the transparency and stability of the sector.
It is also worth mentioning the Financial Education Fund, thanks to which potential investors can better understand the principles of market operation, and also allows them to make more informed decisions about capital investment. It was created on the basis of the Act of August 5, 2015 on the consideration of complaints by financial market entities, on the Financial Ombudsman and on the Financial Education Fund (Journal of Laws of 2022, item 187, as amended ).
In summary, Poland is taking broad action to protect investors by digitalizing supervision, streamlining regulations and adapting regulations to European standards. Initiatives such as the Financial Education Fund additionally strengthen the position of investors, allowing them to manage capital more effectively.
At this point, it is worth starting with the Corporate Income Tax Act of 15 February 1992. Article 1, section 1 of this Act states that “The Act regulates the taxation of income of legal persons and capital companies in organization with income tax”.
Corporate income tax (CIT) in Poland is charged at two rates: the standard 19% and the preferential 9%. The preferential 9% rate is available to small taxpayers and start-ups, provided that their revenues in the current tax year do not exceed EUR 2 million. It should be noted, however, that the 9% rate does not apply to capital gains revenues, which are always taxed at 19%. Additionally, entities created as a result of certain transformations, such as divisions or mergers, are excluded from the preferential rate, which is intended to prevent tax abuse.
In the context of investment, it is also worth remembering that CIT does not apply only to Polish entrepreneurs, but also to foreign ones. Income is divided into two areas:
It is also worth mentioning the so-called Double Taxation Treaties, or double taxation agreements. These are international agreements concluded between countries to eliminate situations in which the same income is taxed in two different jurisdictions. Poland has signed such agreements with many countries around the world, which makes its tax system more predictable and attractive to foreign investors.
However, it is worth mentioning the Polish Investment Zone. The Polish Investment Zone (PSI) is a program that allows entrepreneurs to obtain income tax relief (CIT/PIT) for the implementation of new, not yet started investments within the company. This relief is a regional investment aid and allows for exemption from income tax for a period of 10 to 15 years.
The Act of 10 May 2018 on supporting new investments also supports investors in this field. Article 1, paragraph 1 states that: “The Act specifies the principles for granting support to entrepreneurs for the implementation of new investments, the body competent in matters of supporting new investments and its competences and mode of operation, as well as the tasks of managers of areas responsible for supporting new investments.”
This act is a significant step towards simplifying procedures and increasing the availability of tax relief for entrepreneurs. It introduces more flexible rules for granting support, making it dependent on qualitative and quantitative criteria, such as the number of jobs created, the level of investment or the impact on regional development.
An important element of the act is that support can be provided throughout the country, and not only in designated special economic zones, which significantly increases the availability of this instrument for entrepreneurs. Additionally, the act allows local governments to better adapt support to local needs, which makes it more effective in practice.
Special Economic Zones (SEZ)
It is also worth mentioning the so-called Special Economic Zones, which in Poland constitute an important element of investing not only local but also foreign capital. These zones are to operate until December 31, 2026. Companies operating in their areas can count on exemptions from PIT and CIT income tax.
These zones operate under the Act of 20 October 1994 on Special Economic Zones. The main purpose of their creation was to increase the value of less developed regions, as well as to increase employment in them due to the high unemployment rate and to help in the ongoing restructuring of these areas. In Poland, there are 14 SEZs in total, which are divided into subzones.
Taking all factors into account, Poland is a really interesting player in the international arena, which has been often chosen as a capital location in recent years. Our geographical location allows us to act primarily as a logistics hub. Combining it with an optimized supply chain gives us easy access to Western, Eastern and Southern Europe.
The main advantages are primarily:
A dynamic domestic market offering access to one of the largest markets in Central and Eastern Europe, characterized by stable GDP growth. Its strategic location in the heart of the European Union allows easy operation in other European markets.
A skilled workforce that is constantly improving its qualifications and skills in a competitive labor market. We have one of the most effective banking systems and a developed telecommunications and transportation network.
It is also worth mentioning the Polish stock exchange, which is no different from foreign markets. Investing on the Polish stock exchange has many advantages that make it attractive to both beginners and more experienced investors. Starting to invest on the WSE is easy, thanks to the easy availability of basic stock accounts in brokerage houses, which eliminates technical barriers to entry. An additional advantage is the low commissions for buying and selling stocks, which are much more advantageous compared to the costs on foreign markets.
Poland is one of the most dynamically developing countries in Central and Eastern Europe, which makes it an attractive place for investors. Its strategic geographical location, membership in the European Union and developing domestic market offer unique opportunities for capital investment. However, the stability of the legal and tax systems remains a challenge that requires further action to improve investor confidence in the Polish market.
In the area of investor protection, Poland is taking action to digitize supervision, simplify regulations and financial education, which supports safe and effective capital management. The reforms introduced, such as the Polish Investment Zone or the modernization of the CIT system, offer numerous tax incentives and tools supporting the development of entrepreneurship. Thanks to this, Poland is becoming more competitive on the international stage.
Poland’s key advantages include a skilled workforce, low operating costs, and a well-developed transport and telecommunications infrastructure. Special Economic Zones and the availability of tax breaks are additional incentives for entrepreneurs, especially those interested in innovation and modern technologies.
In conclusion, despite the existing challenges in terms of regulatory stability, Poland remains an attractive investment destination, offering a wide range of development opportunities for both local and foreign entrepreneurs. Further improvements in the legal and tax systems will certainly contribute to even greater capital inflows.
[1]Karol Badowski, 5 Countries in the Investors’ Target: Where to Invest in the Next Decade?
[2]The National Revenue Administration reform project
[3]Financial market development and investor protection – summary of key changes