Exporting to Poland

Exporting to Poland

Forget the quips about cleaners and plumbers; Poland is a growing economic force in Europe. And as its buying power increases, so do the opportunities for British exporters.

Ever since it entered the expanded EU, Poland has been a magnet for businesses looking for a base to get products made cheaply and reliably. Like China, this part of Eastern Europe has become synonymous with outsourcing, especially with regards to manufactured goods.

The new wealth that this economic trend has generated, coupled with a growing middle class, a safe, democratic political background and one-off boosts (such as its presidency of the EU in 2011 and co-hosting of Euro 2012) means that Poland is turning into a country of affluent consumers. With a population of more than 38 million, this is a potentially vast market to tap into.

Poland joined NATO in 1999 and the EU in 2004, when the bloc expanded eastwards. Since the fall of Communism it has implemented a programme of economic liberalism, making it one of the success stories of the post-Soviet era. So much so that today it has the twenty-first largest economy in the world, ahead of fellow emerging nations such as Argentina, Egypt, South Africa and Pakistan; and while many European economies are stagnating, Poland’s output increased by 4.4 per cent in 2011.

It’s for reasons like this that the United Nations says the country is now the world’s sixth most attractive location in the world and the Organisation for Economic Co-operation and Development says Poland’s public finances are similar to über-stable countries like Germany and Sweden.

Hot sectors

With Poland’s economic clout on the rise, demand is growing for foreign goods and expertise that will benefit development projects and generally improve the quality of life. Sectors that are particularly in demand include transport and infrastructure, healthcare, computing and IT, as well as military equipment.

One of the major priorities for Poland’s government is security and crime reduction, with live tenders calling for anything from un-manned drone planes to CCTV systems. Spending on these is backed by EU Structural and Cohesion Programmes worth €67bn, which are due to end in 2013. Alongside security, Poland is also investing in a growing leisure industry, with plans in place to build one of Europe’s largest year-round amusement parks. UK Trade and Investment (UKTI) says this is throwing up opportunities for foreign designers and project management companies.

Meanwhile, an emerging consumer class is creating demand for luxuries such as high street fashion and electronic goods, as well as sporting equipment, and there’s a fast-expanding food and drink industry, which generates around three per cent of the country’s GDP and supports nearly 20,000 businesses.

Doing business in Poland

According to UKTI, the business climate in Poland is improving rapidly but there are still some problems surrounding red tape, tax transparency and the Polish judicial system, which sometimes works at a snail’s pace. As is the case in many emerging economies, businesses hoping to do business in Poland must appoint a local representative. It is a good idea to approach UKTI to help with this process; it has a list of the best and most trustworthy partners.

Once you’ve climbed through the administrative hoops, business success here isn’t a given. Despite Poland’s relative immaturity compared with some economies in the West, its markets are very competitive and launching a new business or exporting a new product will be hard work. It is important to invest in advertising and branding during the launch phase.

Depending on the nature of your business, you might also have issues as a result of Poland’s infrastructure. It is one of the weakest parts of the country’s economy, with standards of road and rail links below that of Western European democracies. However, investment from the EU, coupled with the jolt provided by the 2012 European Football Championship has helped Poland make big strides forward in this area.

Taxation and the law

The Polish legal system has been pulled into line with EU standards, but it remains complicated and frequent amendments mean corporate law can be hard for outsiders to understand. Because of this, consulting an international accountancy firm and corporate lawyer is a must. Thankfully, most of the big international players have a presence in the country. Intellectual property rights are comparable to the big European powers, and they meet EU standards. Poland is also a member of several international conventions protecting intellectual property rights.

In terms of taxes, Poland has a form of corporation tax that, at 19 per cent, is lower than in the UK, as well as VAT, which is higher than in the UK at 23 per cent. There are two bands of income tax: a lower rate of 18 per cent and a higher rate of 32 per cent.

Poland has a double taxation treaty with Britain with regard to dividends, interest payments, royalties and employment income received by residents of one country doing work in the other, so again it will pay to talk to an accountant before you start exporting. There is also an excise tax, which is in line with EU regulations. This is usually calculated as a percentage of the price of finished goods entering the country.

Business culture

Poland is a modern European country with a good crop of highly skilled and educated young people. The country now has an international outlook and most people in business are fluent in English, while business culture has adapted to suit EU norms.

There is little difference in the Polish business approach to meetings. According to UKTI, the only significant difference is a level of formality that goes beyond that which some British businesses are used to.

Describing how you should approach a meeting in Poland, UKTI recommends, “When meeting someone for the first time in a business environment you should introduce yourself using both first and last name. Shaking hands is followed by the exchange of business cards. When addressing senior management in writing in Polish companies, you should use ‘Dear Mr (last name)’ or ‘Dear Mr President’ rather than ‘Dear (first name)’. As your relationships with local contacts develop, you can take a less formal approach.”

In general, Poland’s impressive post-Communist era growth story, coupled with the legal and fiscal discipline – which it exemplifies under EU law – makes Poland an ideal place to sell your goods and services. As always, however, it’s important to seek the advice of local professionals before you jump in. 

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Where Next?

In Brief

  • Since Poland joined the EU, the country has gone from strength to strength and it now offers a tempting proposition for UK businesses looking to expand into the eastern European market.
  • A developing infrastructure and a growing sector of affluent consumers has created many business opportunities.
  • However, it’s not all plain sailing – there is a lot of competition for contracts, and there’s a fair amount of red tape to negotiate before a deal can be struck.
  • If you’re looking to Poland, make sure you talk to legal professionals specialising in business in the region, as well as local representatives.
  • Be aware of different business customs and set aside plenty of time for all the relevant processes to take place before you can begin exporting to the country.

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John Carroll - Helping businesses achieve International success. Head of Product Management & International Business, Santander UK