Successfully investing in Poland

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last updated on 27 May 2020 | reading time approx. 5 minutes

 

 

 

How do you assess the current economic situation in Poland?

Poland is the largest and strongest economy in Central and Eastern Europe. Its GDP has been continuously growing since 1991. According to the preliminary GDP figures, the Polish GDP increased in 2019 by 4 per cent compared to 2018, with domestic demand being the main factor driving the economic growth.

 

Even though Poland is not a member of the eurozone, it implements efficient forms of support for enterprises – 2019 was marked by new investment activities in Poland as the recent incentive in the form of income tax exemption of new investment projects resulted in a substantial growth of capital expenditures on tangible assets.

 

This shows that the Polish economy has strong potential to expand, which bodes well for the country given the warning signs of impending slowdown of the European and global economy in the upcoming years. The forecasts are optimistic, though. Poland’s GDP should remain higher than that of other European countries.

 

Poland is one of the most attractive countries for new investment in Central and Eastern Europe. A study conducted by the Polish Investment and Trade Agency in 2019 shows that as much as 94 per cent of foreign investors would invest in Poland again. The reasons in favour of re-investing in Poland include the size of the investment market and economic stability. Investors also appreciate access to qualified personnel and the high quality of purchased investment land.

 

Poland's excellent location in terms of investment is also confirmed by the fact that the liabilities on account of foreign direct investment (FDI) amounted to 199.79 billion Euro at the end of 2018 and reinvested profits made up a major part of net FDI inflows.


How would you describe the investment climate in Poland? Which sectors offer the largest potential?

Poland has succeeded in creating a relatively attractive system offering diverse incentives. This is particularly noticeable at the state level. At the same time, the local government authorities are becoming more and more actively involved. The determination to attract foreign investment to Poland is on the rise and this is reflected in the reduction in administrative hurdles, in the willingness to cooperate, and in the increasing flexibility of the local authorities. The Special Economic Zones (SEZs), which are a very attractive location to invest in Poland due to the vast number of tax reliefs offered to companies operating in SEZs, will only exist until the end of 2026.

 
At the same time, to ensure that Poland remains an attractive investment location, the legislator has introduced a new support instrument, the New Investment Support Act effective since 30 June 2018, which enables enterprises to enjoy income tax exemption throughout Poland. The new form of support aroused strong enthusiasm among investors – from September 2018 till the end of March 2019 171 decisions granting the support were issued for 9.09 billion Złoty worth of investments. It is estimated that the number of undertakings in the Polish Investment Zone may grow in 2020 by as much as 10 per cent compared to the previous year.

 

Due to the development of the domestic market and the steady increase in the Gross Domestic Product and in consumption, Poland has become an attractive destination not only to exporters but also for investments oriented at domestic sales. The investment activity of German companies confirms Poland's favourable investment climate. Germany continues to be Poland's most important trading partner and the most active foreign investor in the SMEs sector.

Besides Germany, Poland’s key foreign partners include South Korea, Japan and the United States.

 

Factors that attract foreign investors include, among others, the high level of innovation, a qualified workforce, the high quality of provided services, and economic competitiveness. Also the cosmetics industry has reported an increase in production and sales. In recent years, many laboratories, research companies, chemical and biotechnology companies, and packaging manufacturers have been established in Poland. This has enabled cosmetics companies to handle the entire manufacturing process in Poland. Other important branches of industry include household appliances, furniture and export services.

 

As results from the report „Poland Land of Opportunities” prepared by the Polish Investment and Trade Agency for potential investors, the investment projects planned in the automotive and electromobility, IT and transport industry appear promising.

 

What challenges do German companies face during their business ventures into Poland?

The biggest challenges for a German entrepreneur in Poland continue to include the rather inefficient judicial system and the complicated and often changing tax system.

 
The provisions aimed to tighten up the Polish tax law system – although much needed – are only vague and raise many concerns among tax advisers. The frequently passed amending acts pose challenges also to tax authorities who, as a result, more and more often refuse to issue advance tax rulings which are to protect the taxpayers. Unfortunately, the situation is getting no better as it takes a long time for the – often taxpayer-favourable – case law to emerge.


What particular incentives does Poland offer to foreign investors?

The Polish lawmakers have provided for special forms of support for new investment projects. Currently, enterprises may operate in Poland while, at the same time, enjoying income tax exemption throughout Poland, irrespective of whether they are operating in a Special Economic Zone or not.

 

At the same time, minimum capital expenditure have been set which enterprises must declare under the new investment project. The expenditure amount is determined for every district on the basis of a current report on the unemployment rate (the minimum capital expenditure for large enterprises amount from 10 million Złoty to as much as 100 million Złoty).

 

Apart from declaring the minimum capital expenditure, enterprises who want to enjoy the income tax exemption due to operations based on the decision granting support must also declare to meet quality criteria. The criteria refer to sustainable economic and social development and include, for example, maintaining a certain export level or collaboration with trade and vocational schools.

 

What is noteworthy is that a large number of municipalities introduced also real property tax exemption for new investments which, combined with the income tax exemption, is very favourable to investors.

Special support covers also innovation activities of enterprises. Research & Development-reliefs, tax-deductibility of 50 per cent of remuneration costs or preferential tax treatment of Innovation Box are just some of the preferences introduced by the Polish legislator. The aforesaid investment incentives make Poland one of the most attractive business destinations for foreign investors.

 

The largest amount of aid is earmarked for projects supporting sectors in line with the country's current development policy, e.g.

  • high-quality food products;
  • means of transport;    
  • professional electric and electronic equipment;
  • machinery.  

So far, Poland has been known for its high share of coal in electricity production. Nevertheless, the use of renewable energies is becoming increasingly important. What impact does this transition have on the economy?

The renewable energy sources sector (RES sector) is constantly growing – RES is the main source of energy worldwide and slowly in Poland as well. More and more enterprises willingly reach for renewable energy sources instead of the conventional ones. This is the result of the increasing awareness in the area of environmental protection and of the impact of only coal-fired production of electricity. Every year the green energy sector in Poland is developing dynamically. This is caused not only by the necessity to meet the EU renewable energy goals and by constantly growing demand for electricity while, at the same time, looking for ways to reduce the costs of its purchase, but also by social awareness of environmental protection and the popularity of eco-friendly lifestyle. The use of energy from renewable sources brings benefits in the employment sector by creating new jobs and contributes to the development of technology.
The Polish legislator has noticed a need to amend provisions on renewable energy sources – it is exactly the unclear regulations that are often the biggest barrier for investment in this sector of economy. Enterprises operating in the RES sector give priority to the need for amendments – the regulations should be transparent and predictable. Some experts forecast that simplified regulations will not only influence Poland’s energy policy but also its whole economic policy.
Despite the increasing significance of renewable energy sources, coal will still play the leading role in the production of electricity because Poland has coal reserves, which guarantees a kind of energy independence to it.

In your opinion, how will Poland develop?

The International Monetary Fund forecasts show that Poland’s GDP growth is about to gradually slow down to reach 2.8 per cent in the period from 2021 to 2023. Other experts’ projections for Poland's GDP growth are more optimistic – they see it at 4.0 per cent. Poland comes out well in comparison with the eurozone in which the GDP in 2019 and 2020 is expected at 1.6 per cent and 1.7 per cent, respectively.

 
Foreign investors also see Poland as an excellent investment location. Among the features of Polish economy that they appreciate are: staff quality, availability of suppliers, and constantly improving infrastructure. Furthermore, the investors greatly appreciate the fact that Poland is an EU Member State. However, despite their overall positive assessment of Poland’s investment potential, they see the rising problem of decreasing availability of qualified staff.


In the years ahead, it is highly probable that the Polish economy will be marked by stable growth and increasing competitiveness in the global market. Due to the increasing level of innovation, Poland is a perfect destination for investments, especially in the high-tech sectors.


It can be also expected that the disparities between western and eastern Poland will be systematically reduced. The EU funds have already added impetus to the development of eastern Poland, which has become significantly more attractive to investors. Also the planned regulations on state aid will contribute to the further boom in the east of Poland.

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