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Poland

Poland is in Central Europe and is bordered by Germany to the West, Czech Republic and Slovakia to the South, Ukraine and Belarus to the East, Lithuania and the Baltic Sea to the North, as well as Kaliningrad Oblast a Russian Exclave.

As you can imagine with this close proximity to so many neighbouring countries Poland’s history has been very colourful indeed.  At its greatest in 1569 when the Polish-Lithuanian Commonwealth was established it occupied approximately one million square kilometres in Central Europe and was a great European power and major cultural entity.  This ceased to exist in 1795 when Poland was partitioned.  The reason for this partition can be attributed to the Constitution of 3 May 1791, which is known as the first of its kind in Europe which aimed to introduce political equality between townspeople and nobility.  

The adoption of such a liberal constitution was seen as a threat by Prussia, Russian and Austria who formed an anti-Polish alliance and successfully partitioned and destroyed the Polish state.  There followed several failed attempts to recreate the Polish state, but it was not until the First World War when allies agreed on the reconstitution of Poland as a reward for the Polish troops gallant efforts did Poland regain its independence as the Second Polish Republic.  This again was to be short lived when at the start of World War Two Nazi Germany invaded Poland and this again was divided, this time into two zones, one occupied by Nazi Germany and one occupied by the Soviet Union.

During this time the population was decimated with more than six million Polish citizens losing their life, this was the highest percentage of all countries involved in the war, nearly one-fifth of Poland’s population.  After the War Poland’s territory was shifted upwards and a new Polish provisional and pro-Communist coalition government was established in Moscow angering most Poles, it was not until 1989 that Poland was to get its first partially free and democratic parliamentary election and not until 1990 that a Solidarity candidate was to win the Presidency resulting in the collapse of communist regimes and parties across Europe.

Education and tolerance have always been strong pursuits in Poland.  As early as the 12th century there are signs that Polish intellectuals had access to European literature.  After the end of communism Poland has returned to these values transforming into a market economy with strong ties in Europe.  Poland has become a member of the Vinegar Group, NATO, the EU, the Schengen Area, the UN, the World Trade Organisation, the EEA, the Council of Europe, G6 and The Council of the Baltic Seas States amongst others. This has allowed much greater movement in Europe.

The economy in Poland today is greatly improved in particular its agricultural prospects which are so promising as to be described as the ‘future bread basket of the European Union’.   Poland is one of the biggest research and development hubs in Central and Eastern Europe.  Poland is a high income economy and is considered to be one of the healthiest of the post-Communist countries and is one of the fastest growing within the EU.  Poland has a strong domestic market, little private debt, a flexible currency and is not dependant on a single export sector.  All this has contributed to Poland being the only European economy to have avoided the recession.  Poland is one of the leaders in Central Europe when it comes to Foreign Investment due to restructuring and privatisation of many of their sectors.  Poland is not yet a member of the Eurozone although some businesses do already accept payment in Euros.  

Poland was not generally considered a destination for international contractors, but that looks set to change.  Whilst wages remain relatively low there are many advantages to considering Poland, such as the cost of living is considerably cheaper, Poland has successfully avoid the recession, the pace of life is slower, Poland is renowned for its tolerance of other nationalities, violent crimes rates are much lower, beautiful architecture is in abundance and there are generally more holidays.  So if you are looking to work abroad you could choose a lot worse than what is described as a country on the verge of prosperity.

Residency/Registration

If you are staying in Poland for longer than three months you need to apply to the relevant voivodship in the district in Poland where you will be staying, or via a Polish Consulate if you have not yet entered Poland.  Once you have proved that your stay in Poland is justified you will receive a residence permit, these are valid for two years, but are renewable.

To apply for the residency permit you will need the following;
- Application
- Significant Circumstances
- Justification of Stay
- Four colour photographs 4,5cm x 3,5cm
- Administration fee payment
- Documents confirming source of income
- Health Insurance

The voivodship can further demand additional documentation, such as;
- Birth Certificate
- Marriage Certificate
- Certification showing that no commitments are held in relation to the Internal Revenue Office in your country of origin
- Confirmation of lack of Criminal Record from your country of origin

Once you have stayed in Poland for five years without break on a temporary residence permit you may apply to the relevant voivodship for a settlement permit.  To do so you must;
- Demonstrate permanent family or economic attachment
- Demonstrate ensured residence and living conditions
The overall aim is to prove that you are supported and will not require any social aid.

If you are not a citizen of an EU state you must obtain a work permit before engaging in employment in Poland.  This must be applied for by your employer and will only be granted if there are no counter candidates suitable for the position among Polish citizens.

Income Tax


If you are resident in Poland then you must pay tax on your worldwide income there.  However, if you stay in Poland for less than 183 consecutive days during the tax year then you will only be liable to pay tax on income earned in Poland.  If paying on your worldwide income it is important to consider the various double taxation agreements that Poland has entered into and Polish domestic tax regulations to ensure that you are not paying twice.
Income tax in Poland depends on your rate.
  • If you earn up to 3091 PLN then your income tax is 0%
  • If you earn between 3091 – 85,528 PLN then your income tax is 18%
  • If you earn over 85,528 PLN then your income tax is 32%

There are tax allowances and deductions for certain types of expenditure.  Under certain conditions you may choose to pay a flat rate of 19% on business income, but this will not permit any allowances.

Annual tax returns must be filed by the 30 April.  However, if your salary is your only source of income your employer will have been deducting this and you will need only to submit a special form to your employer and then you will not be obliged to submit an annual tax return.

Other types of income tax will include capital gains if you are considered resident in Poland.  Capital gains are usually added onto the regular income and charged at the same rates as above.  However, if the gain is from the sale of a property that is being sold more than five years after it was then this will be exempt from tax.  If this is sold within five years of purchase the tax rate is 19%.  Gains on sale of shares and dividend and interest are also taxed at 19%.

Social Security 

Social security in Poland covers EU citizens on the same basis as Polish citizens and consists of;

- Old Age Pension
- Invalidity Pension
- Sickness and Maternity Insurance
- Insurance against accidents at work and occupational diseases
- Health Insurance
- Family benefits
- Social assistance
- Unemployment benefit

The Social Insurance Institute (Zaklad Ubezpieczen Spolecznych, ZUS) have regional services that are responsible for sickness, maternity, pensions, invalidity, employment injuries and occupational diseases.  ZUS will transfer a part of the pension insurance contribution to a pension fund of the insured individual’s choice.

Payments of benefits are usually subject to a percentage of the national average earnings as well as contributions so are somewhat variable.

The social security system works on a three pillar system, where the first and second pillar are obligatory and the third is not.  Contributions are split between the employer and the employee.  It is the employer that makes the actual payments to ZUS.

The following is an indication of how the contribution works;

Type of Insurance
Employer contribution
 Employee Contribution
Total
 Pension Fund
 9.76%
 9.76%
 19.52%
 Disability Fund
 6.50%
 1.50%
 8.00%
 Bridging Pension Fund 
 0 or 1.5%
   
 Illness Fund
 0%
 2.45%
   2.45%
 Accident Fund
 0.67% - 3.86%
   0%
 0.67% - 3.86%
 Employees Guaranteed
     
 Benefits Fund
 0.10%
 0%
 0.10%
 Labour Fund
 2.45%
 0%
 2.45%
 
 
   
 Total
 19.48 - 24.17%
  13.76%
     33.19 – 37.88%


In certain cases contributions may cease or change calculation if they have exceeded certain levels or by decision of social security authorities.

Employment Rules

The Polish Labour Code of 1974 sets out the rights and obligations of employers and employees.  In addition to this there are also the following acts;

- Minimum Pay Act
- Temporary Workers Act
- the Act on detailed rules of termination of employment relationships

The employment law is often also shaped by collective labour agreements between employers and trade unions.  There is a National Labour Inspectorate that governs adherence to the Labour Law.

Working Hours - these are not to exceed 8 hours a day or 48 hours a week.  Employees can receive additional remuneration or time off for overtime.

Annual Leave - full time employees are entitled to 20 days if employed for less than ten years and 26 days if employed for more than ten years.

Remuneration - Employees cannot renounce their right to remuneration or transfer this right to another person.

Minimum pay - for full time employees this is PLN 1,500 per month.

Termination - there are various forms of termination.  If this is given by notice then the notice period depends on the employment duration, which is 2 weeks if an employee has been employed for less than six months and 1 month if employed for more than six months.  Termination without notice can only be given if the employee or employer is at fault.

Any direct or indirect employment discrimination is unlawful regardless of the duration of the employment.

Banks

Poland is the only European country to escape the recession.  This has put its banks in a very strong position indeed, especially when it comes to foreign investment.

Despite being a member of the European Union Poland has yet to enter into the single currency and still retains its national currency which is the Zloty.  Preparations have been made for a number of years to enter into the single currency, but with recent troubles in the European market there are now some voices in Poland who are recommending that they should wait before entering the Euro Zone, at least until the current economic climate calms down.

Poland has come along quickly with electronic banking and now surpasses major economies such as the UK or US.  For instance many banks in Poland offer the option to open an account online by completing a simple form, also many residents in Poland use their mobile phones to make payments for items such as groceries.

Poland boasts numerous international banks to choose from as well as local ones.   

Umbrella Companies

Chesterfield have a number of different Umbrella companies to choose from depending on your own personal circumstances.  The umbrella company essentially acts as an employer.  There are various advantages to this.  The umbrella company provides payroll services by billing the agency on behalf of the contractor and then distributing the salary back to the contractor.

Corporate Structures

Chesterfield are also able to incorporate companies in a number of jurisdictions in order to suit your needs.  This is more expensive to set up and maintain than our umbrella or self-employed schemes, but can have its advantages.  Once the contract provider or agency has been invoiced for the work and this has been paid into the company bank account the contractor has a choice as to whether they would like to collect their money as dividends or as salary.  If they were to choose dividends then in Poland dividends are taxed at 19% withholding tax, which if you are in the higher tax bracket of 32% proves to be a very tantalising option indeed.

Chesterfield and contracting in Poland

Chesterfield has years of experience with contractors working in other countries and a variety of schemes and solutions in order to make life easier.  You will be given a dedicated member of staff who is responsible for all your administration and contact, allowing them to be more in tune with all your needs and assist you in every way possible.



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