Moving to Poland with Business

Hello,

I'm refreshing something hat has been touched upon a few times but my situation is a little unique.

Myself (UK), My wife (Polish) and our 2 children currently live in the UK. We have our own UK registered children's clothing business here in the UK. It is a Partnership business and we are therefore both self employed.

We would like to move to Poland and continue our business. Our business is ran from our home. We would sell our UK house and buy a house in Poland for which we would need a mortgage for. We have already viewed many houses in Poland and have at last found the perfect house. We are I. The process of talking to Mortgage lenders and the tax office in Poland.........It is all very confusing and we keep hearing conflicting information.

As I understand - In order to get a mortgage in Poland we need to keep our business as UK registered. This is because if we made the business a Polish business they would need 2 years of Polish accounts to lend the mortgage money. I.e we would have to rent somewhere for 2 years before we could get a mortgage for our own house. We do not want to do this. Also, we need to somehow show that we earn in PLN. So we keep the business UK registered and have to show we earn in PLN, how are we supposed to do this correctly? All of our items on our website are priced in British Pounds. We use PayPal to receive money so would a simple solution be to convert our PayPal statements to show PLN??

Also, I understand that we would of course have to pay some form of tax in Poland. As we would be self employed in the UK, how would this work when living in Poland and what would we have to pay? I heard 1000PLN per month per person (myself and my wife) is that payment the equivalent to our NI in the UK?

There are so many questions that have been raised. This is just a start. Any info would be great. I'd like to speak to a British national that has done something similar too if anyone knows of anybody.

Thanks

You cannot be self employed in the UK. You're no longer resident there for tax purposes, so you have to move the business to Poland. Yes, you have an obligatory social insurance contribution of around 1100PLN per person per month - you're obliged to pay not only for the owner of the business, but also close family members working there. Likewise, if you have a partnership, then you also need to pay the same amount.

As for the mortgage - you need to talk to specific banks and find out what they'll accept.

You can set up a UK limited company and then simply pay tax in Poland on your earnings from it. However, bear in mind that the tax thresholds are much lower in PL than in the UK.

In short, you're going to take a financial hit by moving here. Don't try and maintain a residence here while paying NI in the UK - the Polish Social Insurance Institution has access to the UK databases and will come after you for unpaid social insurance.

Thanks for the reply. So in your opinion, would the easiest/cheapest way be to set our UK company up as a limited company?

If we do this, do we still need to pay the social insurance of 1100PLN per person?

And by turning our company into a UK LTD company, we just have to pay Polish Income tax instead of any UK tax? I don't want to by liable to pay taxes in both countries.

Thanks

Not the cheapest, but probably the easiest from your point of view.


It's a bit of a grey area. You won't have to pay it, but you're always risking the social insurance institution coming after you and questioning why you aren't paying them. In practice, as long as you aren't paying NI in the UK, it should be ok.


Unfortunately, no. You'll pay UK corporation tax, then you'll pay Polish taxes (19%?) on the dividends. So effectively - 20/21% + 19% for an effective burden of 40%. If you go self employed in Poland, then (assuming you want a partnership) - 2200PLN/month in social insurance taxes + 18/32% tax (or flat rate 19% without any deductions).

You should probably have a chat with a Polish UK-based accountant. For instance - polishhouseltd.co.uk/index_en.php

Like I said above, you're going to take a huge hit financially by moving here. The tax free amount is miniscule compared to the UK, the social insurance taxes are regardless of income, etc etc.

Thanks, Would the cheapest way be to register as self employed in Poland then?

I have just received some advice from a person that works in a tax office in Poland.

As I now understand, our best route would be to transfer our UK partnership into a UK limited company. Then open up a Polish branch of the limited company. As the UK and PL are in the EU there would be double taxation relief meaning that we would only be taxed in the UK (corporation tax of 20%) and cannot be taxed again in PL. By doing it this way we would also avoid having to pay the Polish social security of 1100zl per month. The only downside of this is that currently as a partnership, myself and my wife get a large "tax free" allowance (approx £10,000 each) whereas if we go limited then the company will get just one £10,000 allowance rather than us as individuals.

I dont think you have been told correctly, only partially correct.
The double taxation does not mean you are only taxed in the UK and nowhere else. It means if you have paid tax in the UK you will not pay that amount of tax twice-but there may well be a balance to pay elsewhere (Poland).

Why not seek guidance from HMRC as well?

No, not quite. You're missing the vital dividends part. I'll try and explain :

Company makes a pre-tax profit of 50,000GBP
Minus UK corporation tax of 20% - leaves you 40,000GBP in profits
For the sake of argument, you pay yourself 40,000GBP in dividends.

--

Now, the money is transferred to Poland, so let's use the figure of 218596PLN.
You take off tax free amount (I'm using 6200PLN as the number as I don't know what the married allowance is nor the allowance for kids)

218596 - 6200 = 212396PLN

You then pay 40355PLN (19% of the dividends after the tax free amount to the Polish tax office, leaving you with 171056PLN or 31293GBP. It's an effective tax rate of around 37.5%.

In regards to double taxation - all it means is that the same income isn't taxed twice. If you pay (personally) 2000GBP cash to the British HMRC, then Poland will give you a credit for the 2000GBP cash paid.

I would get these numbers checked by a professional, but I think they're broadly correct. The thing I'm not sure about is how a Polish branch office affects things. I'm pretty sure you can lower the taxable amount by quite a bit, but you'd need specialist advice on how to handle it.

UPDATE - So on further investigation with our friend in the tax office over in Lublin, it appears the best way forward for us would be to close our company here in the UK and register it as a "self employed" business in Poland. We would fall under the 32% tax rate and also have to pay 445zl per month each for 2 years then it would jump to the higher rate.

This would be the cheapest way for us. We're taking a hit in paying more tax than here in the UK but the saving we gain from a Polish lifestyle more than makes up for that loss.

Our friend at the tax office has given us details to her friend that works for PKO bank and apparently they would be happy to give us a mortgage on the basis above. We just need to call her this week to organise. It looks like things are moving forward at last.

Onwards and upwards.