“Road map” for business prospects in Poland for Ukrainians
Editorial overview about the situation with bilateral trade cooperation between Ukraine and Poland. Prospects and conditions for the business.
By support of expert Mykhailo Mozol
General overview of foreign economic cooperation between Ukraine and Poland
At the current stage of social and economic development of Ukraine, Poland is one of the most important strategic partners of our country. Prior to the start of full-scale hostilities on the territory of Ukraine, foreign economic cooperation between Poland and our country demonstrated extremely positive dynamics. So, for example, the volume of total trade between our countries in the period from 2015 to 2021 increased by a record 236.9%.
The graph shows a steady upward trend, which reached its all-time high by the end of 2021 and crossed the $10 billion mark
Among the main commodity items of Ukrainian exports to Poland in 2021 were:
The commodity structure of Polish imports to Ukraine looks like this:
It should be noted that the product structure of foreign trade between Ukraine and Poland is quite diverse and has a wide range of product categories, including more than 100 key product items.
A similar trend is taking place in the sphere of trade in services between our states. Over the same period of the study, the total volume of trade in services increased by 262.3%, reaching its peak of 735.9 million dollars. USA at the end of 2021.
It should be noted that the product structure of foreign trade between Ukraine and Poland is quite diverse and has a wide range of product categories, including more than 100 key product items.
A similar trend is taking place in the sphere of trade in services between our states. Over the same period of the study, the total volume of trade in services increased by 262.3%, reaching its peak of 735.9 million dollars. USA at the end of 2021.
Among all services that Ukraine exports to Poland, the largest specific weight is occupied by services for the processing of material resources (41.5%), transport services (29.9%), business services (10.6%), services in the field of telecommunications, computers computer and information services (8.4%), services to private individuals, cultural and recreational services (4.8%).
From Poland, Ukraine imports transport services (54.4%), business services (15.8%), travel-related services (9.3%), telecommunication services, computer and information services (7, 1%), insurance services (3.6%), royalties and other services related to the use of intellectual property (3.6%).
The total volume of trade in goods and services between Ukraine and Poland in 2021 amounted to almost 11 billion dollars. USA.
Based on the above analysis, we can conclude that there is a very fruitful foreign trade between Ukraine and Poland, which developed very rapidly before the beginning of Russia’s military aggression against Ukraine. For obvious reasons, at the moment, the dynamics of foreign trade cooperation has slowed down, but most of the companies that were engaged in foreign economic activity have only suspended their activity and have not lost their capacities. Therefore, under certain circumstances and due to the assistance of foreign partners, the activities of these companies can be restored by transferring their capacities to EU countries, including Poland. This will allow, at least partially, to restore previously established chains of foreign economic cooperation of Ukrainian business with Polish counterparties and other strategic partners of our state.
In addition to close and dynamic cooperation in the field of foreign trade in goods and services between Ukraine and Poland, investment cooperation also grew rapidly. A particularly positive trend was observed in the field of inflow of direct investments to the real sector of the Ukrainian economy from Polish investors.
Over the previous 6 years, the volume of inflow of direct investments from Poland to Ukraine amounted to more than 900 million dollars. USA. The average annual growth of investments in the real sector of the Ukrainian economy by Polish businesses reached more than USD 150 million. USA. It should be noted that due to large-scale military actions on the territory of Ukraine, Polish investors are now forced to relocate their financial resources, and the most optimal and effective way to solve this issue is to transfer the capacities of companies with Polish investments to the territory of Poland, which in turn will not only reduce risks and preserve financial assets of Polish investors, but will also allow to preserve a large number of Polish-Ukrainian businesses.
Ukrainian business in Poland: general overview of the situation
Ukrainians make up the majority of foreigners who do business in Poland. According to the Central Statistical Office, as of the end of January 2022, 21,800 companies with Ukrainian capital were operating in Poland. According to the Polish Economic Institute (PEI), companies in which one of the shareholders is a Ukrainian company or an individual with Ukrainian citizenship make up 23% of companies with foreign capital operating in Poland. At the same time, 38% of Ukrainian companies are registered in the Masovian Voivodeship, most of them in Warsaw. Most often, these are young companies that have been operating for less than 5 years.
Ukrainian companies in Poland are mainly construction and trading companies. According to PEI, the most active sectors are construction (23%) and trade (22%), provision of transport services (14%) and activities in the field of administration (13%). Experts also note a significant increase in the share of Ukrainians in the creative industry, especially in the field of IT, marketing and PR, as well as video production. Today, it is safe to say that companies with Ukrainian capital are an integral part of the Polish economy.
Polish analysts call the new wave of Ukrainian migration to Poland the most competent demographic injection in the history of the country, and perhaps of all of Europe. And they hope that this migration can become the flywheel that will allow the Polish economy to reach the level of Germany, Great Britain and France. Such assessments are primarily based on the readiness of the Polish political and business elite to provide Ukrainian migrants with the necessary conditions for business development in Poland.
Features of taxation in Poland
Tax system in Poland All business entities in Poland are VAT payers. The total VAT rate in Poland is 23%. From February 1, 2022, the Polish Parliament passed a decision and reduced the tax burden on fuel, heating, and natural gas to 8%, on electricity to 5%, and on food products and mineral fertilizers to 0%. Filing of tax and accounting reports and payment of VAT in Poland must be done monthly. Accounting services in Poland are very cheap and are charged based on the number of primary documents processed. VAT refund is not a problem here and takes place under the condition of correct accounting and tax records. Manipulations with the tax credit that take place in Ukraine do not work in Poland. As for the pension burden on entrepreneurs, the rate is floating and starts from 37%. In Poland, it is also possible to register a sole proprietorship, but here it is important to consider two options for taxation: the first is the income tax at the level of 17%, provided that the annual income does not exceed 120,000 zlotys (827,000 hryvnias). If the profit is higher, the tax rate will be 32% of the annual profit. There is also a linear income tax rate for FOP – it is 19% without any fixed income threshold. If you plan to attract investors and partners in the future, it will not be possible to do so in the status of a sole proprietorship. In Poland, sole proprietorships bear full property responsibility, so you should be very careful when choosing the organizational and legal form of the future enterprise.
Support of Ukrainian business in Poland
The Polish government and non-governmental organizations offer numerous initiatives aimed at supporting Ukrainian citizens and entrepreneurs who are ready to relocate their companies to Poland. “The Polish Investment and Trade Agency (PITA) will help Ukrainian entrepreneurs to transfer their companies to Poland,” Minister of Development and Technologies Petro Novak said. He added that the agency provides support to entrepreneurs in finding office and warehouse space, moving production lines.
PITA created a team to support Polish-Ukrainian business. The newly created group will coordinate the relocation of enterprises located in Ukraine and help in finding new sales markets for products that were previously exported mainly to the East. The purpose of the business support group is to monitor the situation in Ukraine. The group appointed by PITA will identify risks that may affect the functioning of Polish companies currently operating in Ukraine and will take measures to minimize the consequences of the war in Ukraine for business.
3 main areas of work of the business support group have been defined. The first includes the activities of enterprises operating locally in Ukraine. PITA will help move such enterprises to Poland. The agency will provide support, in particular, in the search for investment sites, warehouses or well-known places where companies with branches in threatened areas can relocate their activities. This offer is addressed to companies not only from Poland, but also from EU countries. The second important aspect is the support of exports, which have been shaken by Russia’s attack on Ukraine. PITA will support entrepreneurs in finding new markets for goods that have been ordered or already produced for the region. Within the framework of the Export Center and Foreign Trade Offices, the Polish Investment and Trade Agency has specific support options. The business support team will guide entrepreneurs to new markets and help find potential buyers. PITA will also support companies in industries affected by reduced supply of raw materials and components for production from war-torn areas. The agency will show entrepreneurs where raw materials are located and help establish direct contacts with subcontractors from these industries.
The agency has already launched a special hotline for companies that need help in moving their business to Poland from the territory of Ukraine, consultants are waiting for applications.
Peculiarities of investing in Poland
Today, the Polish economy is one of the most dynamic in Europe. During the last 10 years, annual growth has been fixed at the level of 5%. Accordingly, many foreign businessmen are interested in investing in Polish business. In turn, the Polish market opens up a wide range of prospects for investors, providing opportunities to invest in securities, real estate, precious metals and business projects.
According to experts, the key advantages of investing in Polish business are:
– advantageous geographical position;
– membership in the EU, which guarantees political and economic stability;
– relatively low wages compared to other EU countries;
– low level of corruption of officials both at the regional and national level;
– financial support from the state under the condition of creating jobs, preserving the environment and introducing the latest technologies;
– tax benefits in 14 Special Economic Zones;
– absence of additional requirements for foreign investors compared to national ones.
Investment requirements for foreign businessmen
Polish legislation does not contain any special requirements that must be met by a foreign investor. At the same time, it is assumed that the investor can either be a one hundred percent owner of the investment object or own only a share in it. To get the opportunity to invest in the Polish economy, it is enough to:
– reach the age of 18;
– have an up-to-date foreign passport;
– have business experience.
Peculiarities of investing in real estate
Real estate construction is one of the most popular investment areas for foreigners in Poland. As a rule, foreigners invest in the construction of residential complexes, as well as commercial real estate, in particular, shopping and business centers.
The key advantages of investing in real estate are:
– stable income in the form of rental payments;
– security of investment contributions;
– the possibility of insuring real estate against damages in case of damage, fire, or sudden termination of the lease agreement;
– simplicity of legal procedures, in contrast to, for example, the market of bonds and shares;
– availability of tax benefits.
Experts note that the purchase of real estate in Poland at an average price and its subsequent rental will provide the investor with a return of approximately 8.5%. The payback period of real estate investments in Poland is 10-12 years on average.
It is noted that on the commercial real estate market, which are ready for rent with a planned profitability above this indicator.
Peculiarities of investing in precious materials
Precious metals in Poland today are considered as a form of capital investment. With this in mind, the Polish Mint offers gold bars of both Polish and foreign production.
Experts note that when investing in gold on the Polish market, it is necessary to remember that its price depends on two equally important factors. The first is the price of gold in London, which is announced twice each business day. The second is the exchange rate of the US dollar to the Polish zloty.
As for the advantages of investing in precious metals, in particular, in gold, they are considered to be the following:
– investment gold is exempt from VAT, so it can be considered as a currency and not a raw material;
– precious metals, unlike banknotes, cannot be printed on demand, which increases their price;
– in times of uncertainty in the financial markets, many central banks increase their gold and foreign exchange reserves, which increases the price of gold;
– investment gold bars must contain at least 99.5% pure gold, while coins contain at least 90%;
– global resources of metals are limited, and the costs of exploiting deposits are constantly growing.
Peculiarities of investing in securities
Foreign investors can buy shares and other securities of Polish companies. This can be done by participating in open auctions on the Stock Exchange, or by concluding an agreement with their owner.
The main advantages of investing in Polish securities are:
– the possibility of receiving significant income from shares;
– the right to participate in the adoption of important decisions concerning the company’s activities;
– partial right to manage the company;
– the possibility to determine the profit in advance in the case of buying bonds;
– possibility to repay the bonds early.
Features of investing in business
In Poland, it is allowed to open enterprises with 100 percent participation of a foreign investor. Importantly, there are no restrictions for foreign investors regarding the types of economic activity in which they wish to invest. At the same time, in order to register a business in such fields as the extraction of natural minerals, the sale of weapons or explosives, as well as air transport, it is necessary to obtain a special permit (license) for the term prescribed by law (usually from 2 to 50 years).
The key advantages of investing in a business in Poland are that:
– the investor has the right to fully transfer income abroad (after tax payments);
– the investor can hire foreign workers who must have an official work permit;
– the investor can independently determine the amount of the salary (provided compliance with the laws on the minimum salary in Poland).
Peculiarities of economic activity and investment in Special Economic Zones of Poland
Foreign investors in Poland are particularly interested in Special Economic Zones – territories allocated by the Polish government, where investors are given tax benefits – primarily, we are talking about exemption from income tax or real estate tax; as well as financial support from the state.
In a general sense, a Special Economic Zone in Poland (SEZ) is a delineated, isolated territory where the production or sale of goods (economic activity) by Polish and foreign entrepreneurs is carried out on preferential terms.
The main purpose of the functioning of the SEZ in Poland is the activation of economic life in certain regions of the country, which are characterized by a high level of unemployment.
The main advantages of organizing a business in the territory of the SEZ are:
– exemption of the investor from income tax (SIT) received from economic activity in the territory of the SEZ in the amount of 15-70% of the established investment;
– availability of land and/or commercial premises with all necessary infrastructure for business organization.
At the same time, the Polish legislator also establishes certain requirements for receiving benefits within the SEZ, including:
– the volume of investments, which must be at least 100,000 euros, while the share of the investor’s own capital is at least 25%;
– investment funds must be mastered within five years or more, from the date of completion of the investment project in the SEZ (three years for small and medium-sized enterprises);
– workplaces at newly created business facilities must be maintained and maintained for at least five years from the date of employment (three years for small and medium-sized enterprises).
As of today, there are 14 SEZs in Poland, which are located in almost all voivodships of the country, namely:
- Kamiennogórska Specjalna Strefa Ekonomiczna
- Katowicka Specjalna Strefa Ekonomiczna
- Kostrzyńsko-Słubicka Specjalna Strefa Ekonomiczna
- Krakowska Specjalna Strefa Ekonomiczna
- Legnicka Specjalna Strefa Ekonomiczna
- Lodzka Specjalna Strefa Ekonomiczna
- Specjalna Strefa Ekonomiczna EURO-PARK MIELEC
- Pomorska Specjalna Strefa Ekonomiczna
- Slupska Specjalna Strefa Ekonomiczna
- Specjalna Strefa Ekonomiczna «Starachowice»
- Suwalska Specjalna Strefa Ekonomiczna
- Tarnobrzeska Specjalna Strefa Ekonomiczna “EURO-PARK WISŁOSAN”
- Wałbrzyska Specjalna Strefa Ekonomiczna
- Warmińsko – Mazurska Specjalna Strefa Ekonomiczna.
According to the legislation of the Republic of Poland, SEZs function as separate state-owned enterprises that organize and control the process of creating production facilities within the territory designated for this purpose.
Each SEZ develops and publishes its commercial proposals for a potential investor, depending on the characteristics of the territory in which it operates and the existing development plan.
For the most part, these proposals consist in preparation for the sale of land plots and/or other commercial real estate objects to the investor for the purpose of organizing a business there.
If a potential investor is ready to invest in real estate on the territory of the SEZ and wants to take advantage of the tax benefits provided for, he should first obtain the appropriate permission from the Ministry of Economy of Poland.
To do this, it is necessary to prepare and submit to the Ministry a package of documents with a detailed description of the features of the planned economic activity in the SEZ and the further development of your business in this territory.
Thus, if you are interested in SEZ opportunities in Poland, in our opinion, the most optimal algorithm of actions is:
– creation of an enterprise in Polish jurisdiction;
– location selection and selection of the optimal SEZ for business organization;
– selection of a specific object for investment within the SEZ (land plot/premises);
– preparation and submission of documents to the Ministry of Economy of Poland for obtaining a permit for investment within SEZ;
– obtaining the above-mentioned permission and actual establishment of investments;
– establishment of activities in accordance with the documents previously submitted to the Ministry and the permission received.
The very process of choosing the optimal SEZ for a certain investor in Poland is complex and multifaceted, so in this case it is advisable to use the help of professional consultants.
Security guarantees for Ukraine were discussed in Karpach