Successfully investing in Poland

Despite the forecast slowdown, the Polish economy grew by almost 5 per cent in 2022. This is quite a perfor­mance considering the economic and political situation in Europe. Analyses show that such a good result was the effect of higher inventories and consumer spending, particularly on essentials, owing to the influx of mi­gran­ts from Ukraine.

In Poland, like in Europe, high inflation, interest rates and relatively lower wage growth resulted in reduced in­vest­ment and consumption of durable goods. This, in turn, affected the condition of companies producing in­dus­tri­al goods and the construction sector. The average annual inflation rate in 2022 was over 14 per cent and most of that increase was caused, among other things, by the war in Ukraine and the resulting rise in gas prices.

Even so, Poland is again recovering from economic crises better than expected, and not for the first time. Nei­ther COVID-19 nor the war in Ukraine lead to a drastic collapse of the Polish economy. Of course, the energy transition resulting from the jump in gas and electricity prices will cost money. Still, a positive surprise was how well the labour market absorbed some of the refugees from Ukraine. This means that the Polish economy con­tin­ues to generate new jobs. Please also note the effects of the weakening Polish zloty – Polish companies be­come even more competitive abroad.

The main challenge for German companies is Polish tax law and the fact that it is constantly changing. Starting an investment project in Poland involves several key decisions that have to be made at the very beginning of the investment process and have profound consequences later on, such as which legal form is the most ap­pro­priate. This determines the future tax implications and the investor's liability – for example, the CIT Act imposes tax on limited partnerships, thus leading to double taxation of profits earned by the general partner and limited partners. Yet another cause of difficulties is the amendment to the Polish Tax Act which changed the compe­tent tax authorities for settling flat income tax (WHT) withheld from non-residents. 

Importantly, considerable incentives and facilities for companies have been introduced, such as preferential conditions for investment activities, i.e. the option to choose between two alternative taxation schemes (Esto­nian CIT or special investment fund).  

Since 2021 Poland has been successfully recovering from the havoc wreaked by the pandemic and lockdowns. There are also some changes associated with the conflict in Ukraine – an influx of new workers and the relo­cation of many businesses from the East to Poland. Also, the high level of support recently received by Poland from EU funds should greatly stimulate domestic reform, larger and smaller investments in the energy sector, in particular renewable energy, and attract broadly defined innovation by financing research and development activities. Renewable energy sources and other eco-friendly investments, e.g. in low-emission hydrogen pro­duc­tion, should gain much significance. Optimistic scenarios suggest significant intensification of economic activ­ity in some sectors, especially those favoured in the European Union, namely decarbonisation, power engi­neer­ing, research and development of high technologies, digitalisation, robotisation and cybersecurity.

The good news for the future of the Polish economy is that managers of large companies are paying more and more attention to the digital competencies of potential employees; here, Poland has a solid technical infra­struc­ture and a large pool of well-educated and talented engineers, IT specialists and technicians. The influx of Ukrainian citizens may also boost the supply of workers in Poland.

Beyond doubt, the major challenge for the government will be to bring inflation under control and stabilise inter­est rates so that the economic growth achieved in the past few years continues despite the temporary recession.