Foreword by Andrew Chilvers
Despite these uncertain times, expanding overseas can be a key driver for future growth for an ambitious business. International expansion can breathe new life into a company, drive huge value and set it on a path of continued success.
Expanding a business overseas is a strategic opportunity that will help diversify revenue streams, revitalise product development and give high returns on investment. But expanding a business into different jurisdictions takes time – this is a long distance run, not a sudden sprint to the finish line. Furthermore, expanding operations into a new jurisdiction can be fraught with challenges and risks that need to be addressed long before the first boots are on the ground.
For any company turning up in a foreign country, a multitude of tax and legal issues need to be addressed. This can be a labyrinthine experience and not for the faint hearted – but then faint hearted businesspeople seldom set their sights on overseas expansion.
Tax and compliance have to be at the top of any board’s agenda, ensuring the correct steps are taken the moment the company representatives land in-country. It’s pivotal to learn these issues to avoid any costly mistakes from the start.
What are the main government incentives available in your jurisdiction to attract multi-nationals and FDI investment?
Legal regulations in Poland, particularly in the sector of corporate law, are based in general on the principal of reciprocity, which refers to mutual exchange of privileges between states, businesses or individuals.
For instance, a foreign entity may establish its business in a form of organization within Poland if this form of business would also be permitted for a Polish entity seeking to open its businesses in a foreign country. Poland is committed to this principal and keeps its doors open to any FDI investment, unless imposing limitations required by law or, in certain cases, by International Treaties.
Polish law limits foreign ownership of companies in selected strategic sectors, and restricts acquisition of real estate, especially agricultural and forest land. In addition, Poland, as a member of the European Union, adheres to the principal of free movement of capital, labour and investment within the European Union. However, on 25 March 2020, the European Commission issued a guidance to all EU Member States subject to foreign direct investment and free movement of capital from third countries and the protection of Europe’s strategic assets. The key message of the guidance was to ensure that any FDI investment does not have a harmful impact on EU assets. The Member States should use all tools available, both on the EU and national level, to avoid loss of crucial assets and technology, to protect public safety, order and health.
The guidance reflects the Regulation (EU) 2019/452 establishing a framework for the screening of FDI within the European Union. In light of the aforementioned EU-measures, the Polish legislature introduced a new Polish FDI law that became effective as of 23 July 2020.
What industries do you feel there are opportunities in for international investors / businesses in your jurisdiction? What factors do you think contribute to inward investment?
Poland, despite the outbreak of the Covid-19 Pandemic, remains one of the most attractive investment countries in Europe, especially within Eastern Europe. FDI inflows to Poland remained stable in 2019, reaching $13.2 billion, slightly up from $13.9 billion. The total stocks of investments in the country stood at $236.5 billion in 2019, an increase of 26% when compared to the 2010 level.
Poland is the largest recipient of inward investment in Central Europe. Poland’s main assets are its strategic position, a large population, its European Union membership, economic and legal stability, cheap and skilled labour costs and a fiscal system attractive to businesses. Furthermore, Poland has a number of dynamic Special Economic Zones, in which foreign investors might be exempt from paying taxes and the government has founded the Polish Investment and Trade Agency (PAIZ) to improve conditions for FDI. Overall, the Polish business climate is good and is attracting considerable FDI Investments and it is a hope that this development remains in the future. The most attractive industries in Poland include manufacturing, financial and securities activities, retail trade including e-commerce , real estate, technical and scientific services. The Polish Government has also encouraged foreign investors to participate in most of the major privatisation programmes and this especially applies to the banking sector, where foreign-controlled banks hold over 70% of assets. Major privatisations have been completed and the current focus is on consolidation and improvement of efficiency in entities still being under state control.
Why is it important to hire a local firm to support international expansion? How can you help smooth the process for your clients and overcome common pitfalls?
When it comes to making an FDI investment in Poland, it is vital to hire a local firm which can provide extensive and comprehensive legal and tax support to the foreign investor. A business attorney will assist in almost every aspect of FDI business, from basic zoning compliance and copyright and trademark advice to formal business incorporation and lawsuits and liability. The accountant will take care of all financial documentation including bank accounts statements and prepare all of necessary tax declaration and returns. To avoid any pitfalls it is necessary that the local firm understands the nature of FDI investments and tailors this investment to the appropriate legal regulations and requirements.