Common mistakes foreign companies make when starting a business in Poland

The most common mistakes when starting a business in Poland result from legal, tax, accounting and operational decisions being made in the wrong order. Foreign investors should assess the business structure and available investment support before committing to a project, prepare KSeF and JPK systems before the first sale, and define transfer pricing, withholding tax and employment arrangements before significant transactions begin.

Which business structure should a foreign investor choose?

When starting a business in Poland, the legal structure should follow the operating model.

A limited liability company (sp. z o.o.) is a separate legal entity and generally answers for liabilities with its own assets. A branch remains part of the foreign enterprise, which is responsible for its obligations.

The choice also affects management, accounting and settlements with the foreign head office. Investors should determine how operations will be financed, who will enter into customer contracts and whether the model could create a permanent establishment in Poland.

When should investment incentives be assessed?

Available support should be reviewed before the investment starts or binding commitments are made.

Relevant instruments may include:

• the Polish Investment Zone,
• R&D tax relief,
• IP Box,
• selected grant programmes.

Under some programmes, beginning the project or signing binding agreements too early may restrict or exclude access to support.

What must be ready before the first sale?

Financial systems should support KSeF, JPK_VAT and the applicable JPK_PD structures, including JPK_KR_PD for taxpayers maintaining accounting books.

A central ERP system used by an international group must therefore be adapted to Polish requirements. Companies also need clear document workflows, responsibility for data and rules for reconciling Polish accounting records with group reporting.

What are the risks of intra-group settlements?

Transfer pricing should be considered when the Polish operating model is designed, rather than only when annual documentation is prepared.

As a rule, documentation thresholds for homogeneous controlled transactions are:

• PLN 10 million for goods and financial transactions,
• PLN 2 million for services and other transactions.

Even below these thresholds, related-party transactions should comply with the arm’s length principle.

For certain related-party payments subject to Polish withholding tax, exceeding PLN 2 million per tax year to the same taxpayer may trigger the pay-and-refund mechanism.

What employment costs should investors include?

An investment budget should cover more than gross salaries. Employer social insurance contributions, payroll administration and possible employee relocation costs also need to be considered.

Foreign employees may additionally require residence or employment formalities. Employees generally must be registered with ZUS within seven days of the insurance obligation arising.

How can investors reduce Polish market entry risks?

Key preparations should follow the sequence of the investment:

• Before investment: structure, financing and available incentives.
• Before the first invoice: accounting, KSeF and JPK.
• Before intra-group payments: transfer pricing and WHT.
• Before recruitment: full employment costs and formalities.
• Before the first close: reporting procedures and management responsibilities.

Problems often arise when legal, tax, finance, HR and IT teams work to separate schedules. Foreign investment in Poland should therefore be treated as a dedicated implementation process, even where the investor already operates in several other countries.

Read the full article here: Common mistakes foreign companies make when starting a business in Poland