Foreigner opens a company
With Poland's accession to the European Union, new opportunities for economic activity have opened up not only for Polish entities but also for citizens from other countries of the Community in Poland. Not all of them are interested in establishing capital companies. Many of them would like to undertake business activity in the simplest possible form, e.g. without registering the activity in the court register, making contributions. Polish regulations give the foreigner the right to conduct independent business activity. This is because according to Article 13 (1) of the Act of July 2, 2004 on freedom of economic activity (Journal of Laws No. 173, item 1807), which came into force on August 21, 2004, foreign persons from European Union member states and member states of the European Free Trade Association (EFTA) - parties to the agreement on the European Economic Area - may undertake and carry out economic activity in Poland on the same terms as Polish entrepreneurs. Below will be presented the conditions for undertaking economic activity as well as the public and legal obligations related to it.
Business registration
Entry in the business register
A prerequisite for a foreigner to start a business activity in Poland is to obtain an entry in the business activity register at the competent municipality (city or district) office. The competent municipality (city) office where the application for entry in the business registry should be submitted is determined according to the foreigner's main planned place of business in Poland. This office is competent for foreigners who do not have a residence permit in Poland.
A foreigner stating, for registration purposes, a locality abroad as the place of business, will not obtain an entry in the business register. He should indicate the place of business in Poland, which, of course, involves the need to have the legal title to use the premises, such as under a lease agreement, where the business is to be conducted.
The application for entry in the business register is subject to a stamp duty of PLN 100. The application must be submitted on the form used by the relevant office. The foreigner is obliged to submit to the registration file a copy of his passport, certified as a true copy of the original by an authorized employee of the office.
Foreign persons doing business in Poland and holding a residence permit apply for an entry in the business activity register at the office competent for their place of residence. The office's certificate of entry in the business register is issued within a few to several days.
Registration for statistical purposes in the REGON system
The next step in establishing a business in Poland is to obtain the number of the National Official Register of National Economic Entities (REGON) at the appropriate (provincial) statistical office. An application for entry in the REGON register should be submitted on the official form RG-1. The application should be accompanied by a certificate of entry in the register of economic activity. If the application is submitted by a proxy, it should be accompanied by a power of attorney in the original. If the application is submitted directly to the statistical office, the certificate of REGON number is issued "on the spot".
Bank account
After obtaining a REGON number, it is necessary to establish a bank account in Poland for company settlements. Provision of such an account will be demanded by the tax office.
Tax Identification Number (NIP)
For tax purposes, every person doing business in Poland should use a tax identification number (TIN), which can be obtained from the tax office responsible for him.
In order to obtain a TIN, a TIN - 1 form must be submitted to the appropriate tax office, accompanied by copies of the following documents (some offices require that these be certified or authenticated copies):
Certificate of registration in the register of economic activity,
certificate of REGON number,
bank account agreement,
an agreement confirming the right to use the premises where the business is to be located,
An agreement with a tax consultant or accounting firm through which business books and tax returns are to be kept (unless the taxpayer will keep the books and returns himself).
If the application is submitted by an attorney, the original power of attorney must be attached to the application.
Persons intending to start a business in Poland are obliged to submit an identification declaration to the NIP no later than the deadline for filing the first return regarding advance personal income tax payments (PIT - 5 or PIT-5L).
Value Added Tax (VAT)
Registration and billing rules
As a general rule, any entity conducting independent economic activity (production, trade, provision of services) in Poland, registered in the register of economic activity, becomes, so to speak, automatically a VAT taxpayer.
This involves registering the business for VAT purposes. Only in certain cases specified by the VAT law may a taxpayer be entitled to a subject or object exemption. The taxpayer must register for VAT at the tax office with jurisdiction over the place where the activities subject to this tax are performed. For this purpose, a registration notification must be made on the official VAT - R form.
For planned intra-Community transactions, the VAT-R/EU form should be attached to the VAT- R.
When submitting a registration application to a municipality (city) office, a stamp duty (for confirmation of the application) of PLN 152 must be paid. The tax office issues a confirmation of the TIN for VAT purposes on the VAT - 5 form, and for intra-Community transactions on the VAT - 5UE form. The number for purposes of intra-Community transactions is NIP preceded by the prefix PL.
For the purposes of VAT settlements, a taxpayer is required to submit a VAT-7 return to the tax office on a monthly basis. The VAT-7 return is submitted for monthly periods by the 25th day of the month following each consecutive month.
A foreigner registered for VAT purposes in Poland becomes a taxpayer to whom all provisions of the Polish VAT Act apply. A taxpayer registered in Poland becomes a separate entity operating independently from an entity registered for VAT purposes abroad (e.g. in Austria).
Despite the fact that both "taxpayers" are de facto one and the same person (a foreigner doing business independently in Austria and Poland), they are two separate entities from the perspective of Polish VAT.
Movement of goods between Poland and abroad
In a situation where, for example, an Austrian VAT taxpayer, in the course of its business, makes inter-company transfers of its own goods (goods) from one EU country to another, such transfers of goods will be subject to Polish VAT.
This is stipulated in Article 11 paragraph 1 of the Law of March 11, 2004 on tax on goods and services. According to it, the movement of goods belonging to a taxpayer from the territory of another EU member state to Poland by a taxpayer from a given member state is also considered to be intra-Community acquisition of goods, for remuneration, if the goods were acquired in the territory of another member state and will be used for activities performed by him in Poland.
The transfer of goods is taxable in the buyer's country, which makes it necessary for the owner to register for VAT in the country of destination of the goods. This is due to the obligation to provide the recipient of the goods with his VAT identification number on the invoice, which must not be the same as that of the supplier. The owner of the goods he moves from one EU country to another should therefore have an EU identification number for the purposes of intra-Community transactions in both countries, i.e. in both the country of supply and the country of purchase.
The movement of goods in the country of export is treated as an intra-Community supply of goods, taxed at the rate of 0% (exemption with the right to deduct input tax), while in the country of acquisition it is treated as an intra-Community acquisition of goods, taxed at the appropriate rate applicable in that country (in Poland the rate is 22%).
To document the movement of goods from abroad (Austria) to Poland, the taxpayer should issue an internal VAT invoice in order to settle the tax associated with the intra-Community acquisition.
On the other hand, the condition for the application of the 0% rate in an intra-Community delivery from Poland abroad (to Austria) is that the supplier has proof that the goods were exported from Poland and delivered to Austria.
Personal income tax
According to Article 3, paragraph 2a of the Personal Income Tax Act of 26.07.1991 (updof), individuals who do not have a place of residence in Poland are subject to taxation only on income earned in Poland. The above general rule applies taking into account the provisions of double taxation treaties. The example of a German citizen who wants to establish a business in Poland can be used to explain the taxation rules.
In the case of a person with a place of residence in Germany conducting business in Poland, the provisions of the agreement of December 18, 1972 between the People's Republic of Poland and the Federal Republic of Germany on the prevention of double taxation with respect to taxes on income and property concerning the taxation of profits from enterprises will apply (a new agreement was signed on 14.05.2003, which will probably come into force on 01.01.2005).
According to Article 7 of the existing agreement, the profits of foreign entrepreneurs are not taxable in Poland unless such entrepreneurs conduct business activities through a permanent establishment located here. The question then arises whether the conduct of business in Poland by a German entrepreneur can be treated as a permanent establishment within the meaning of the above agreement. It should be considered that the conduct of business in Poland by an individual from Germany will be treated as a permanent establishment, and therefore the profits of the foreign entrepreneur may be taxed in Poland, but only to the extent that they can be attributed to the permanent establishment. It follows from the above that the profits earned by the German entrepreneur from operations in Germany will not be taxed in Poland. On the other hand, only income from business activities conducted here will be taxed in Poland in accordance with the rules of the Personal Income Tax Act. In determining the profits of a permanent establishment, it is possible to deduct the expenses incurred by the foreign company for the permanent establishment.
A German citizen may choose to be taxed on business income at 19% under the rules set forth in Article 30c of the updof. The condition for choosing this flat-rate form of taxation is to submit to the tax office a statement on the choice of this form of taxation no later than the day before the day of commencement of the activity, but no later than the day of obtaining the first income.
The taxpayer will be required to submit a monthly advance income tax return at the rate of 19% (PIT - 5L) to the tax office each month and pay an advance payment in the amount of 19% of earned income to the office's bank account. Advance payments should be made by the 20th of each month for the previous month. By the same date, a PIT- 5L return must be filed. By April 30 of the following year (after the tax year), it is incumbent on the taxpayer to file an annual return PIT - 36L, in which he should make a final tax settlement on the income earned in the tax year.
Bookkeeping
According to Article 2(1)(6) of the Accounting Act of September 29, 1994 (i.e., Journal of Laws of 2002, No. 76, item 694, as amended), foreign individuals conducting business in Poland in person, through an authorized person, with the assistance of employees - are required to keep full books of account - with respect to business conducted in Poland, regardless of the amount of revenue. Due to Poland's accession to the European Union, it seems (although this is not explicitly expressed in the law) that this provision applies to entrepreneurs from countries outside the European Community.
In turn, the provision of Article 13 of the Act of July 2, 2004 on freedom of economic activity applies to entrepreneurs from the European Union. According to it, foreign persons from the European Economic Area may undertake and carry out business activities in Poland on the same basis as Polish entrepreneurs, which may entitle the foreigner to keep records of business events by means of a much simpler tax income and expense ledger. Polish tax offices confirm this position, that a foreigner from the European Union doing business in Poland may keep a tax income and expense ledger.
There is a lack of precise legal provisions in the Accounting Law to clearly state that a foreigner from the European Union can keep a tax income and expense ledger. This lack may be due to an oversight by the legislator.
Social Security
The rules on the basis of which it is possible to determine where a self-employed person in two EU countries is subject to social security are governed by Council Regulation (EEC) No. 1408/71 of June 14, 1971 on the application of social security schemes to employed persons, self-employed persons and members of their families moving within the Community (Official Journal of the EC L 149 of 5.07.1971, pp. 2 et seq. with amendments).
According to Article 14a (2) of the Regulation, a person who carries out an economic activity in the territory of two Member States is subject to the legislation of the country in whose territory he resides if he carries out any part of his activity in the territory of that country.
If he does not carry out his activity in the territory of the Member State in which he resides, he is subject to the legislation of the Member State in whose territory he carries out his primary activity. For example, a person residing in France and conducting business activities both in France and Poland is subject to social insurance only in France. If, on the other hand, she conducted her activity exclusively in Poland, she would be subject to insurance only in Poland, despite her residence in France.
Determining whether it is necessary to report for social insurance in Poland in a particular case requires each separate check of the existing facts.
An entrepreneur subject to insurance in Poland should make a notification, on special forms, to the appropriate ZUS inspectorate within seven days from the date of commencement of operations. An entrepreneur who employs employees should report them as payers within the same time limits.