Poland gained accession to the European Union in 2004, and in the intervening years the country has become one of Europe’s recent success stories. The country has become an attractive investment proposition for many foreign investors, across a number of asset classes. Some of the key factors that make Polish agriculture and land an attractive investment proposition include:
The Polish economy is now the 6th largest in Europe, having seen 4% GDP growth in 2011, with forecasts of 2.5% GDP growth in 2012. It has been part of the European Union (EU) and European Economic Area (EEA) since joining on 1st May 2004. The national currency is Zloty (PLN).
Poland is a net exporter of processed fruit and vegetables, meat, and dairy products, mainly to Western European markets, and a significant producer of rapeseed, grains, pigs and cattle. As well as established trade with Western Europe, both local prosperity and access to the improving markets of the East give Poland the opportunity to further strengthen and grow their economy. There are also national programmes to encourage inward investment into the country.
For foreign investors, Poland offers a skilled and low-cost labour force. The unemployment rate (as at March 2012) stands at 13.8%.
Poland has a strong legal framework to protect property and trading, and since becoming part of the European Union, is now also subject to European laws that further protect both domestic and international investment. With regard to land ownership and occupation, as part of joining the EU, Poland agreed a derogation agreement over foreign ownership of land. By law, until 1st May 2016, land cannot be owned by a foreign individual and can only be owned through a Polish registered company. When setting up a new agricultural company to buy land, that company must also be 51% owned by a Polish national, and can only buy up to 500 hectares off the state.
The shares in an existing company that already owns land privately, however, can be purchased outright by foreign investors without the need for a 51% Polish shareholder. On 1st May 2016, this derogation is expected to fall away, which will then give individuals from any EU member state the right to buy land. We can advise on the most suitable ways to structure the ownership to protect investors with regard to land ownership prior to 2016. With regard to taxation, there is currently a favourable agricultural taxation regime in Poland. Taxation treaties are also in place with many other countries, both inside and outside the EU.
Poland is currently undergoing a programme of improving its infrastructure and technological development. Being close to Western Europe, the improving transport links will help to improve international trade, and the ports on the Baltic Coast allow for efficient export and import of goods to many parts of the globe. There are currently national programmes to encourage inward investment, together with the availability of grants and EU funding and support mechanisms for improvement of infrastructure both at local and at national level.
Poland is suitable for a wide variety of farming systems, and is a significant producer of conventional cereals, dairy, beef, pigs and poultry. It is also known for its production of field-scale vegetables and fruits, and high-value produce fruit and veg, owing to the light nature of much of the country’s soil. Poland is a net exporter of processed fruit and vegetables, meat and dairy products, and has good trade links with Western Europe, the improving markets of the East, as well as the increasingly prosperous local domestic markets.
The agricultural industry is estimated to have contributed 4.6% to GDP (est. 2009). Farmland prices currently average €6,000 per hectare, although this varies depending on location and soil quality. Land price convergence with Western Europe is anticipated over time. There is also a relatively low cost of land occupation, with rents averaging €100 per hectare. Poland also benefits from access to a skilled and low-cost labour force. The workforce population currently employed in the agricultural sector is estimated at 13%.
The Polish Agricultural Industry is developing quality certification schemes in line with much of Western Europe, and now benefits from the availability of grants and EU funding and support mechanisms both for agricultural infrastructure improvement, and grant aid under Single Farm Payment. This is likely to reach parity with the more established Western European EU member states after the review in 2015.
There are currently favourable agricultural taxation regimes in Poland, with EU taxation treaties and Inheritance tax benefits for private UK investors, which can be an important way of preserving and growing wealth.
Like many of the ex-communist states of Central and Eastern Europe, Poland has historically had an issue with corruption at both local and national government level. The economic and social development of the country over the last 10 years, and the increasing interaction with the recognised Western superpowers has, however, done much to eradicate such practices, and the Polish people are now becoming progressively intolerant and outraged by corruption.
In the 2011 Worldwide Corruption Perception Ranking, Transparency International, a non-governmental organisation that monitors and publicises corporate and political corruption in international development, ranked Poland as 41st out of 182 nations on the Corruption Perception Index, scoring 5.5, up from 4.0 since 2002 (0 being the most corrupt and 10 being the least).
The level of bureaucracy associated with agriculture and farmland investment in Poland is significant, and it is therefore important to have correct legal and professional support in both the pre-acquisition due diligence, and in the post-acquisition management of the farmland investment, not only to make sure that regulations and processes are adhered to, but also to identify where previous owners may potentially not have done so.