Member Article

Outsourcing has for years been gaining popularity. Together with an increase in the number of businesses, their branches, subsidiaries as well as capital groups, increasing attention is drawn to the costs of their operations. Such activities as personal, payroll, procurement, IT, or back office in the case of financial institutions are unnecessarily duplicated in the case of companies in a capital group or generate greater costs than if carried out by an external specialized firm. For large companies in the financial sector the establishment of a single back office is an increasingly more optimal solution. Additionally, such centre can enjoy tax benefits if established in a special economic zone.

In recent years, Poland has become a very attractive country for outsourcing centres due to the availability of educated staff, ability to benefit from public aid, comparably low cost of centre establishment and operations, availability of class A office space as well as the quality of life in cities of most interest for such business as Warsaw, Krakow, Wroclaw, Poznan or Lodz.

Foreign companies deciding to establish such centres in Poland include foreign banks and financial institutions. Through operation in numerous countries they can process a large amount of data concerning their operations, in light of the specific nature of a back office, with regard to their financial services, also from an individual perspective for each client, at a single centre created for this purpose.

What legal steps should be taken to commence such activity in Poland and are there any particular regulatory issues involved?

Establishment of an outsourcing centre requires the creation or acquisition, most favourably, of a limited liability company with minimum share capital of PLN 5,000. An alternative solution, especially for an entity in the EU, is the creation of a branch in Poland, which requires registration as in the case of a company, but does not entail capital requirements. It should nevertheless be pointed out that a branch, as opposed to a company, cannot benefit from public aid. It may, however, be more beneficial from the standpoint of EU VAT regulations.  

The creation of an outsourcing centre in Poland for financial institutions whose activity is regulated and subject to particular supervision also requires determination of whether such activity is regulated in Poland. If so, consideration should be given to the time necessary to obtain a permit from the Financial Supervisory Commission. If, however, a centre does not plan to engage in regulated activity, Polish laws should nevertheless be thoroughly analysed, also from the standpoint of banking law as well as a brokerage and trust activity in the context of services planned at the centre. This is to exclude the risk that no aspect of such activity is classified as banking or brokerage, as defined in the banking law and Financial Instrument Trade Act. Centre activity should be described in detail such that there is no doubt that, for example, a fund transfer-type service is not deemed a monetary settlement and transfer of funds because such activities are in the banking category. 

It is also necessary to determine the extent to which an outsourcing centre will have access to individual client data. This is in order to appropriately secure personal  data from the standpoint of the Polish Personal Data Protection Act as well as domestic laws of the country from which such data is sent to the centre. If a Polish centre collects personal client data, a proper notification must be made to the Personal Data Protection Inspector and data should be secured in a manner ensuring its full protection. Proper protection should also be given to information classified as confidential or professional. Such provisions exist in the Polish legal system and the transmission of such data to an outsourcing centre must take place in a legal manner. A very important element that must be taken into consideration when selecting Poland as a base for an outsourcing centre is financial benefits, particularly in light of the centre location. An investor could seek to investigate the viability of the following incentives: Special Economic Zone (SEZ), refunding costs of equipment or refitting of work places, trainings cost refund and long-term direct subsidy.

Operating under a SEZ permit allows benefit from a Corporate Income Tax exemption. SEZ exemption is usually sought when the business located in Poland generated taxable income. Conversely, when the available tax deductible costs substantially limit the CIT exposure, entrepreneurs choose not to seek this exemption, even if they operate within the SEZ. Moreover, SEZ permits are not granted for most activities regulated by specific laws, including financial services.

Refunding costs of equipment or refitting of work places is available upon application of the employer to a local employment office and a corresponding agreement. Beneficiary is required to maintain the subsidized work place for a period of two years. It is only available upon hiring a registered unemployed person.

Trainings cost refund is available upon application of the future employer to the relevant local authority and a corresponding agreement. The available aid amounts up to 80% (usually up to 50%) of the trainings cost of but no more than three times the average salary in Poland.

Long-term direct subsidies are granted under long-term plans adopted individually for a particular project by the Council of Ministers, for either creation of employment or investment expenditures. Subsidies are granted upon negotiations, there are no specific schedules or deadlines. To substantiate the incentive character of the subsidies, any expenditures pertaining to the investment should be borne only after a green light letter is issued by the government. The green light letter basically states the support of the government for the investment and is the first step in the procedure to determine the final amount of the subsidy. The subsidy would be subject to notification to the European Commission.