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Successfully investing in Poland

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last updated on 19 May 2021 | reading time approx. 5 minutes

 

 

 

How do you assess the current economic situation in Poland?

The year 2020 was all about the Cov­id-19 pan­dem­ic, its im­pact on the world eco­nomy, and ways of cop­ing with its ef­fects and the om­ni­present crisis. However, the world­wide eco­nom­ic slump has not af­fected the Pol­ish eco­nomy so drastic­ally. Every­one can be pos­it­ively sur­prised how, com­pared with oth­er European coun­tries, the Pol­ish eco­nomy has fared well and re­mained stable des­pite the ra­ging pan­dem­ic, and ad­ap­ted re­l­at­ively quickly and eas­ily to the con­di­tions dic­tated by the coronavir­us. The re­ces­sion, which also af­fected the Pol­ish eco­nomy, was milder than the EU av­er­age. Ac­cord­ing to mar­ket re­search, the na­tion­al eco­nomy con­trac­ted by just over 3 per cent in 2020. A factor that un­doubtedly helped here was the di­versity and fa­vour­able struc­ture of the Pol­ish eco­nomy: In Po­land, tour­ism, which is a sec­tor that was hard­est hit by the crisis, has the smal­lest share in the eco­nomy among all OECD coun­tries, while the agri-food and mod­ern busi­ness ser­vices sec­tors, which play a sig­ni­fic­ant role in Po­land, were much less ex­posed to the con­sequences of the pan­dem­ic.


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

The in­vest­ment cli­mate in Po­land has not changed that much com­pared with the pre­vi­ous year and is still ro­bust. This time, however, the primary chal­lenge for com­pan­ies look­ing to in­vest in Po­land is to ad­apt to the cur­rent pan­dem­ic con­di­tions and the res­ult­ing re­stric­tions and pro­posed gov­ern­ment aid. The in­vest­ment cli­mate seems to con­tin­ue to be at­tract­ive and con­du­cive to a steady in­flow of new for­eign cap­it­al. Busi­ness op­por­tun­it­ies in new areas, such as en­ergy in­fra­struc­ture and pro­duc­tion of en­ergy from al­tern­at­ive en­ergy sources, tech­no­logy and cy­ber se­cur­ity, are emer­ging from year to year.

In the post-pan­dem­ic world, in­vestors will most likely want to re­place the hu­man factor with new tech­no­lo­gies as much as pos­sible. This is the area con­sidered to have the greatest po­ten­tial in the mar­ket. Di­git­al com­pet­it­ive­ness will be an im­port­ant factor in de­term­in­ing in­vest­ment de­cisions. There is still a no­tice­able trend to­ward in­vest­ments in coun­ter­ing cli­mate change, namely re­new­able en­ergy sources.

Spe­cial Eco­nom­ic Zones, which of­fer sig­ni­fic­ant tax re­liefs, are also gain­ing in im­port­ance. Cur­rently, com­pan­ies may ap­ply for state aid de­cisions to sup­port a new in­vest­ment project at any loc­a­tion. The ex­tent of the tax ex­emp­tion is cal­cu­lated by mul­tiply­ing total in­vest­ment ex­pendit­ure or two years' la­bour costs by the max­im­um state aid in­tens­ity rate. The state aid in­tens­ity rate de­pends, on the one hand, on the un­em­ploy­ment rate in the re­gion where the in­vest­ment will be made and, on the oth­er, on the size of the in­vestor's com­pany. As a res­ult, small and me­di­um-sized en­ter­prises are in a par­tic­u­larly priv­ileged situ­ation here. This form of sup­port is also in­creas­ingly used by com­pan­ies that open Shared Ser­vices Cen­ters in Po­land.

 

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

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 is de­cis­ive for sub­sequent tax con­sequences and de­term­ines the scope of the in­vestor's li­ab­il­ity – for ex­ample, fol­low­ing a re­cent amend­ment to CIT reg­u­la­tions, lim­ited part­ner­ships are now ob­lig­ated to pay CIT, which leads to double tax­a­tion of profits achieved by the gen­er­al and lim­ited part­ners. An­oth­er chal­lenge is the lim­ited tax-de­duct­ib­il­ity of cross-bor­der pay­ments. 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).


Poland is by far Germany's largest trading partner in Eastern European business and Germany's fifth largest trading partner worldwide. What opportunities does this present for Polish-German cooperation?

Enorm­ous. This is the first time the coun­try has been ranked so highly. It has over­taken even such large eco­nom­ies as Italy, which proves that the im­port­ance of Po­land for Ger­many's for­eign trade is grow­ing year by year. Pol­ish com­pan­ies already see an op­por­tun­ity for es­tab­lish­ing per­man­ent re­la­tions with the Ger­man SME (small and me­di­um-sized en­ter­prise) sec­tor. This cre­ates op­por­tun­it­ies for the de­vel­op­ment of many in­dus­tries such as di­git­al tech­no­logy, auto­mot­ive or phar­ma­ceut­ic­als.


In your opinion, how will Poland develop?

The year 2021 will be a peri­od of pa­tient re­con­struc­tion of the already strong po­s­i­tion of the Pol­ish eco­nomy. Un­for­tu­nately, everything de­pends on how the epi­dem­ic will de­vel­op and on the speed of vac­cine roll-outs and re­turn­ing to “nor­mal” life. However, fore­casts already show that over the next year Po­land will see an in­crease in GDP of around 5 per cent.

The Pol­ish eco­nomy is be­com­ing in­creas­ingly im­mune to the ef­fects of the pan­dem­ic, and we have a chance of emer­ging from the lock­down faster than the rest of Europe. Over the next few years large projects will be im­ple­men­ted, such as the trans­form­a­tion of the en­ergy in­dustry, i.e. the gradu­al phase-out of coal, or trans­form­a­tion of in­dustry sec­tors such as the pro­duc­tion of low-emis­sion hy­dro­gen, and this will be a slow pro­cess. Op­tim­ist­ic scen­ari­os as­sume that eco­nom­ic activ­ity will speed up in the post-pan­dem­ic world. 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

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