Investing in Poland in 2023

Key Differences

Depreciation and amortization

Term

Tax-deductible expenses

The Operational Leasing

The Financial Leasing

Duty of the lessor. Duty of the lessee.

Longer than 40% of the depreciation and amortization time of the subject (real property - at least 10 years).

The lessee recognises the net instalments and the initial charge as the expenses.

VAT

Redemption/ repurchase

Added to the leasing instalments.

Depending on the depreciation and amortization rate and the redemption term.

Over 12 months.

The lessee recognises the interest part of the leasing instalments and the depreciation and amortization as expenses.

Paid in advance together with the first instalment.

After paying the last instalment the subject becomes the owner of the lessee.

The main advantages of financing any asset purchase via leasing when compared to involvement of own equity or utilization of bank loans:

• it is relatively easy access in Poland and the fact that even start-up companies can draw on leasing financing

• leasing companies do not require any corporate history when talking to new clients, which is not the case with banks which normally require a history of 2 years of existence of the applicant supported by two closed financial accounting years

• all incurred financing costs are tax-deductible whatever leasing option chosen.

The majority of contracts concluded on the Polish market are the operational lease contracts; reasoned by the fact that in case of the financial leasing VAT has to be paid in full in advance, which is a drain on company’s liquidity.

Choosing the operational leasing is also recommended in case the planned term of exploitation of the leasing subject stays short-term orientated. In such a case, the monthly lease instalments will be very high, reducing the taxable income and thus the tax base used for the monthly prepayments of corporate income tax to the Polish Inland Revenue Office.