poland business analysis

7/29/2019 Poland Business Analysis

1/115

Doing businessin Poland


2/115

Doing business

in Poland

A guide to doing business

in Poland


3/115

Information in this publication is intended to provide only a general outlineof the subjects covered and is believed to be correct at the date of printing.It should neither be regarded as comprehensive and sufficient for makingdecisions, nor be used in place of professional advice.

Neither Ernst & Young nor the co-authors accept any responsibility for lossesarising from any action taken or not taken by anyone using this publication.

Design by: Kotbury, WarsawPhotos by: Agnieszka Tazbir

Ernst & Young

All Rights Reserved.Ernst & Young is a registered trademark.


4/115

3Preface

Preface

The aim of this publication is to familiarisepotential investors with the basicsof the Polish business environment,and to facilitate informed decision-makingby providing pertinent information.Consequently, it is hoped that investorswill be better placed to assess investmentopportunities and weigh up potentialbenefits against potential risks.Each of the eight chapters in DoingBusiness in Poland offers an authoritativesummary of one key area of the businessenvironment.

These areas are: general businessclimate and investment incentives,company law, real estate, taxation,employment regulations, competitionlaw, capital markets, accounting andauditing. The present publication isintended as a guide for investors withlimited knowledge of the Polish economy.While the information it contains wasto the best of our knowledge correctat the time of writing, the rapid paceof change in Poland means that lawsand regulations are unlikely to remainstatic. We would therefore urge readers

to treat this publication as a generaloverview and to seek specific advicebefore any investment decisions aremade. Doing Business in Poland is writtenby professionals from Ernst & Youngin co-operation with professionals fromDomaski Zakrzewski Palinka in legalmatters. The authors are all leadingspecialists in their field, with a proventrack-record in providing expert adviceto domestic and foreign clients about allaspects of the Polish economy.


5/115

4 Doing Business in Poland

Preface........................................ 3

1. Business climate ............ 6

1.1. Market Overview and KeyDrivers .................................... 8

1.2. Foreign direct investment ......... 9

1.3. Investment incentivesin Poland ................................. 11

2. Establishing a businesspresence............................ 22

2.1. Overview ................................ 242.2. Companies .............................. 252.3. Commercial partnerships ......... 312.4. Branches and representative

offices..................................... 342.5. Commercial register ................ 34

3. Real Estate ....................... 36

3.1. Acquisition of real estateby foreigners ........................... 38

3.2. Perpetual usufruct................... 413.3. Leases .................................... 423.4. Real estate purchase

agreements ............................. 423.5. Land and mortgage register ..... 423.6. Reprivatisation ........................ 423.7. Investment process .................. 433.8. Acquisition of agricultural land .. 43

4. Taxation ............................. 44

4.1. Corporate Income Tax(CIT) ..... 464.2. Personal Income Tax(PIT) ....... 584.3. Value Added Tax (VAT) ........... 624.4. Customs and Excise ................ 66

5. Human capital................. 70

5.1. Residence of foreignersin Poland ................................. 72

5.2. The Polish Labour Code ........... 755.3. Legal basis of the employment

relationship ............................. 76

5.4. Employment contract .............. 765.5. Termination of an employment

contract .................................. 765.6. Remuneration for work ............ 785.7. Workplace rules ....................... 785.8. Working time ........................... 785.9. Overtime ................................ 785.10. Holiday entitlement ................. 795.11. Protection of women at work

and employment of minors ...... 795.12. Health and safety at work ........ 795.13. Group redundancies ................ 795.14. Trade unions ........................... 805.15. Company social fund................ 805.16. Foreigners ............................... 805.17. Temporary work ...................... 815.18. Works councils ........................ 81


6/115

5Contents

6. Competition law ............. 82

6.1. Act on Combating UnfairCompetition (1993) ............... 84

6.2. Competition and ConsumerProtection Act (2007) ............ 85

7. Capital markets .............. 88

7.1. General ................................... 907.2. Regulatory environment ......... 90

8. Accountingand auditing..................... 92

8.1. Introduction to the accountingframework in Poland ................ 94

8.2. Major aspects of valuationof balance sheet items ............. 95

8.3. Financial statements ................ 988.4. Financial reporting and audit

requirements .......................... 988.5. Consolidation ..........................1008.6. Principal differences between

Polish and InternationalFinancial Reporting Standards ...101

Contacts .....................................104

About Ernst & Young.........................106About Domaski Zakrzewski Palinka .. 112

Contents


7/115


8/115

1. Business climate


9/115


1.1. Market Overviewand Key Drivers

Since the collapse of communism in 1989,Poland has made dramatic progress,moving from a centrally planned to

a market-oriented economy. Tradeliberalisation, economic restructuring,privatisation, capital inflows, andthe gradual adaptation of legal andadministrative standards to market-oriented practices have improved economicstructures dramatically. In the mid-to late-1990s the Polish economy grew rapidly.

After a slowdown, due mainly to thesituation in the global economy, Polandhas regained the pace of growth that itachieved in the second half of the 1990s.

On 1 May 2004, Poland joinedthe European Union and thus becamea member of the vast European singlemarket where goods, services, capital

and labour move as freely as within onecountry. Accession to the EU crownedyears of preparation and reform.It can now be seen that Poland has a verystable economy and offers investorsan attractive business environment.A fact to be remembered is that duringthe recent global economic downturnPoland has been the only country

in Europe to show growth in GDP.

GDP growth rate percentage change on previous year

* forecast

Source: Eurostat

+1.7

15

18*

13.7*

7.84.9

1.5

5

5

5

4

3.1

1.5

7.5*

4.8*

3.66.3

7.1

1.1

7.4

5.8*

5.8*

5.8*

5.9*

2*

2.9*

2.2*

3.6

9.8*

PolandPopulation: 38.1 mn peopleArea: 312.7 thousand sqmCapital: Warsaw


10/115

9Business climate

1.2. Foreign directinvestment

There are several reasons for Polandsoutstanding performance in the currentdifficult times, e.g.:

it remains an attractive location for newinvestments, both in the productionand services sectors (free access tothe Common Market of approx. 500million customers, a domestic marketof approx. 40 million customers,labour costs still lower than in WesternEuropean countries, and highly skilledworkforce)

the Polish authorities have beenfollowing a prudent macroeconomicpolicy to ensure a stable economy;also the Polish banking sector hasproven to be stable

EU membership guaranteed an inflowof significant additional funds (approx. 67bn for 2007-2013) encouraging

many new investments in both publicand private sectors.

Given the above, and also consideringthe fact that Poland is the co-organiserof EURO 2012, it is no wonder that ourcountry is continuing to attract ForeignDirect Investments, despite the globaleconomic crisis. According to initialestimates, the inflow of FDI in 2009 wasworth approx. 8.4mn (approx. 84%of FDI in 2008). The top 10 investingcountries are listed below.

In recent years, Poland has become oneof Europes favourite locations for BPO/SSC and R&D centres. The main reasonsbehind investors decisions to locatetheir outsourcing/offshoring businessin Poland are: young, highly qualified workforce

with extensive knowledge of foreignlanguages (thanks to the considerablenumber of academic institutionsthroughout the country)

system of incentives (both domesticand from EU sources) to encourageinvestments of this type

welcoming approach of the Polish

authorities towards investorsconsidering developing their BPO/SSCin Poland.

Some of the investors in SSC/BPO andR&D centres in Poland are shown on themap below.

FDI in Poland by country

1. Germany

2. The Netherlands

3. Luxembourg4. Sweden

5. France

6. Cyprus

7. Austria

8. Iceland

9. USA

10. United Kingdom

Source: Polish Information and ForeignInvestment Agency (Polska AgencjaInformacji i Inwestycji Zagranicznych),www.paiz.gov.pl


11/115


Tri-City(Gdask, Gdynia, Sopot)

Szczecin

Bydgoszcz

Pozna

Katowice

Krakw

Lublin

Warszawa

Wrocaw

Bydgoszcz:

JP MorganChase, Lucent Technologies, Atos Origin

Katowice:

Capgemini, Kroll, Bombardier, Rockwell Autom.

Krakw:

Ahold, Bayer, Capgemini, ComArch, Electrolux,Fortis Bank, Google, Hitachi, HSBC, IBM, Indesit,

International Paper, Lufthansa, Philip Morris, RR,Donneley, Shell, Tesco, ABB, Delphi, Motorola,UBS, Pliva, Sabre

Lublin:

Genpact, Intelligo, Telekomunikacja Polska SA,France Telecom

d:

ABB, Accenture, Central Wings, Citi Group, Fujitsu,GE, IBM, Bosch-Siemens, Microsoft, Indesit,Infosys, SAP

Pozna:

Carlsberg, Franklin Tempelton, GlaxoSmithKline,Intelligence, Lorenz, MAN, Microsoft Innovation,Open Text, Roche, Unilever

Szczecin:

UniCredit

Tri-City:

IBM, Lufthansa, First Data Corporation

Warszawa:

ABN Amro, Accenture, AVON, Citi Group,3M, Faurecia, GE, Microsoft, Oracle, SamsungElectronics, Hewlett-Packard, IBM, SAP, Tchibo

Wrocaw:

ACP, Credit Suisse, Google, Hewlett Packard,QAD, UPS, Volvo, Alstom, Capgemini, Irvena,Nokia-Siemens, Opera Software, Siemens, Wabco,Whirlpool

Selected SSC/BPO and R&D centres in Poland

Source: Polish Information and Foreign Investment Agency

d


12/115

11Business climate

1.3. Investmentincentivesin Poland

There are many opportunities for

companies to obtain financial support forprojects in Poland from both EuropeanUnion Funds and domestic sources.In this publication we focus on the mostpopular of the aid schemes availablefor companies but it is worth noting thatthere are many more that can be utilised.Therefore, when considering a newinvestment in Poland, it is important for

each case to be analysed individually various sources and types of supportmay be available, depending on the scopeof the project.

Regardless of the form of support,the incentive system as a whole complieswith EU requirements and includes: regional aid horizontal aid sectoral aid.

General provisions on the admissibilityof state aid are set out in the Treaty onEuropean Union1, the relevant EuropeanCommission regulations, e.g. CommissionRegulation (EC) 800/2008 of 6 August2008 declaring certain categories of aidcompatible with the common market

in application of Articles 87 and 88of the Treaty (General block exemptionRegulation)2 and the Act of 30 April 2004on Proceedings in State Aid Cases3.

Regional aidfor new investments

Regional aid is the most popular type of aidfor companies carrying out investmentprojects in Poland. It is granted for initialor new investments, which are generallydefined as investments related to: setting up a new enterprise extending an existing enterprise diversifying output into new, additional

products

a fundamental change in the overallproduction process of an existingenterprise.

How do I calculate the maximum levelof support available for my investmentin Poland?

The maximum level of aid a projectcan receive depends on the size of thecompany4 and where in Poland the projectis to be located, and is calculated as

a percentage of the higher amount of: eligible investment costs, and two-year employment costs of newly

created jobs.

Levels of aid intensity, i.e. the maximumlevels of aid a project can receive based oninvestment or employment-related costs,are as follows (see also map below forreference): 30% of eligible costs Warsaw

(the city), mazowieckie voivodshipfrom 1 January 2011

40% of eligible costs mazowieckievoivodship until 31 December 2010,pomorskie, zachodniopomorskie,dolnolskie, wielkopolskie, lskie

voivodships 50% of eligible costs the rest of thecountry, i.e. warmisko-mazurskie,podlaskie, kujawsko-pomorskie,lubuskie, dzkie, lubelskie,witokrzyskie, podkarpackie,maopolskie, opolskie voivodships.

1 Consolidated version: Official Journal C 83/13, 30.03.2010.2 Official Journal L 214/3, 09.08.2008.

3 Journal of Laws of 2007, no. 59, item 404, unified text, as amended.4 Basic aid intensity levels are increased by 20 percentage points in the case of small enterprises and by 10 percentage points in case of medium-sized enterprises.


13/115


Map of regional aid intensities in Poland, 2007-2013:

Zachodniopomorskie

Pomorskie

Wielkopolskie

Dolnolskie

lskie

Lubuskie

Kujawsko-Pomorskie

Warmisko-Mazurskie

Podlaskie

Lubelskie

witokrzyskie

dzkie

Opolskie

Mapolskie Podkarpackie

Mazowieckie

Warszawa

Aid intensity5

:

30%

a) Warszawab) Voivodship: mazowieckie

since 01.01.2011

40%

a) Voivodship: mazowieckie until 31.12.2010

b) Voivodships: pomorskie, lskiedolnolskie, zachodniopomorskie,wielkopolskie

50%

Voivodships:lubelskie, lubuskie, dzkie, podlaskie,podkarpackie, warmisko-mazurskie,witokrzyskie, opolskie, maopolskie,kujawsko-pomorskie

5 Additional 20 p.p. for small and 10 p.p. for medium-sized enterprises


14/115

13Business climate

Please note that there are specific rulesfor calculating levels of aid for so-calledlarge investment projects.

Large investment projects are definedas projects exceeding the expenditurelevel of 50mn. The adjusted aid

ceiling, i.e. maximum amount of aid alarge investment project can receive, iscalculated as follows:

Development of a large investmentproject gives rise to additionalobligations. When the aid to be grantedexceeds certain levels (see the tablebelow), it has to be individually notifiedto the European Commission. In otherwords, there are cases when the

European Commission has to additionallyapprove the support a large project isto receive.

The aid levels which if exceeded giverise to the notification obligation are asfollows:

Aid intensity in the

region

Notification threshold

(level of aid)

30% 22.5mn

40% 30mn50% 37.5mn

Am I a large enterprise or an SME?

As shown above, the level of aid aninvestor can receive depends directly onits size. It is therefore crucial to assesswhether the investor meets the definition

of a small or medium-sized enterprise(SME). If not, it will constitute a largeenterprise.

Maximum aid amount for a large project = R (50 + 0.50 B + 0.34 C)

where: R is the unadjusted regional aid intensity ceiling for a given location

(e.g. 50% in lubelskie voivodship for a large project) B is eligible expenditure between 50mn and 100mn C is eligible expenditure above 100mn

Example:

Assumptions:

a) project located in an area with 50% regional aid intensityb) investment expenditures of 170mn

Maximum aid amount = 50% [50mn + 0.50 (100mn 50mn) + 0.34 (170mn 100mn)] = 49.4mn

Maximum aid amount of 49.4mn is 29% of eligible expenditures instead of the 50% normally allowedin that region of Poland. The level of support for the large investment project is therefore lower than thatresulting from the maximum aid intensity level.

The maximum aid amount for the investment can be utilised in different forms (find below more informationon combining aid from different sources). However, total support from various instruments would be 49.4mn in the example above and could not exceed this level.

Please refer to the example below to see how the formula is applied in practice.


15/115


Please see the following chart fora definition of SME:

However, it is important to note that evenif a company itself fulfils the definition ofan SME, it can in fact be a large companydue to its shareholding structure.Therefore, apart from the generaldefinition, one also has to learn whatlinked and partner enterprises are and

what are the consequences of being one.

A company is a linked enterprise whenit holds more than 50% of the capitalor voting rights in another enterpriseor another enterprise holds more than50% of the capital or voting rights inthe company. In the case of linkedenterprises the size of the companyin question is calculated by addingtogether the data (shown in the tableon the left) of the company and that ofthe linked enterprises.

A company is a partner enterprisewhen it holds independently or with otherlinked enterprises 25-50% of the capital

or voting rights in another enterpriseor another enterprise holds 25-50%of the capital or voting rights in thecompany. If this is the case, the size ofthe company in question is calculated byadding together the data (shown in thetable on the left) of the company andthat of the partner companies situatedimmediately upstream or downstream

from it. Aggregation is proportional to the

Enterprise

category

Medium-sized

Small

Micro

Level of

employment

(Annual Work Unit)

< 250

< 50

< 10

Annual turnover

50mn

OR

OR

OR

OR

10mn

2mn

Annual balance

sheet total

43mn

10mn

2mn


16/115

15Business climate

percentage interest in the capital or votingrights (whichever is greater).

When to start the investment so as notto lose aid opportunities?

When discussing regional aid, it isimportant to mention the investment

start issue. As a rule, an investment canonly start after the application for supporthas been filed with the relevant institution.Additionally, large enterprises are obligedto demonstrate the incentive effect ofthe aid applied for by providing an analysis(in the grant application) showing thatthe aid will lead to a material increasein the size, scope or value of the projector showing how it will accelerate projectcompletion.

Due to the investment start rule,the following steps cannot be takenbefore the application has been filedand, in the case of large enterprises, theincentive effect demonstrated:

construction work commitment to order machineryor equipment (i.e. conclusion ofa contract, placing an order)

making payments, includingprepayments.

Investors are, however, free to performfeasibility studies or prepare any technicaldocumentation needed for the project;these steps do not constitute investmentstart and can therefore be taken at anytime.

What types of cost are eligible for aid?As mentioned above, aid available fora given project is calculated on the basisof either investment costs or employmentcosts. Companies applying for aid choosethe higher of the two amounts as the basisfor calculating the aid pool.

If the aid pool is based on investment costs,expenses eligible for aid may include: expenditure on land, buildings and

plant/machinery technology transfer costs (purchase

of patent rights, licences, know-how orunpatented technical knowledge6)

costs of financial lease of assets otherthan land and buildings, provided that

the assets are purchased on expiry ofthe lease term costs of leasing land and buildings if

the lease continues for at least 5 years7after the investment is finished.

If a large enterprise applies for aid,the assets it buys must be new. This doesnot apply to SMEs and takeovers.

If the aid pool is based on employmentcosts, expenses eligible for aid are two-year employment costs of new employees

(costs related to job creation resultingfrom the new investment). The two-yearemployment costs cover: gross wages, and all obligatory employment-related

payments (e.g. social securitycontributions) made by the company.

Please note that new jobs are defined asa net increase in the number of employeesdirectly employed in a company comparedwith the average level of employment overthe previous 12 months.

Can different types of aid received fromdifferent sources be combined?

Regional aid available in Poland can be

granted in different forms, such as: cash grants (support from EU funds) cash grants under Multi-Annual Support

Programmes (support from domesticbudget)

CIT exemption in so-called specialeconomic zones (SEZ).

6 Intangible assets must be purchased from third parties on market conditions and meet several other criteria. Please note that for large enterprises such costs are eligibleonly up to 50% of the total eligible investment expenditure for the project.7 3 years in the case of SMEs.


17/115


Different types of regional aid can becombined together. The only limitationis the aid intensity level set for theregion where the investment is located.If an investor receives regional aid ofdifferent types for the same investment,the total amount of aid cannot exceed

30-50% of the value of the investment8.For example, if a company secures CITexemption and is also awarded a cashgrant for the same investment, theamount of tax credit will be reduced bythe value of the grant, so that the totalvalue of aid does not exceed the allowedaid intensity threshold.

NB: This rule applies only to aid grantedfor a single investment. It is not forbiddento receive new aid for other investmentsin Poland. Each new investment willbe eligible for a new aid pool of up to30%-50% of its value.

What are the most importantobligations when the aid is granted?

Companies which receive public fundingin the form of cash grants (from EUor domestic resources) sign financialcovenants with appropriate publicinstitutions. These agreements lay down

the rights and obligations of the aidbeneficiaries. In the case of CIT exemptionin SEZs, the most important obligations areset out in the permit to operate in the SEZ.

One of the most important requirementsis to maintain the investment and its

results (such as new jobs, assets bought,environment-friendly solutions introduced)in the region for a minimum of 5 years9after the investment is finished.

We now move on to explain the basic ruleson applying for and receiving varioustypes of regional aid in Poland.

Cash grants from EU fundsEU member states are currently realisingthe 2007-2013 financial perspective,i.e. the seven-year framework for EUspending. Over this period Poland is toreceive the largest share of aid fromEU support funds of all EU members. Inparticular, 67.3bn has been allocated

for various operational programmes to bedistributed among defined beneficiaries,particularly companies.

Operational programmes set outthe general terms and conditions for

projects for which aid will be granted.In the case of companies registered inPoland aid can be given to support, e.g.: innovative new investments, which use

new technologies shared service centres, IT centres, and

R&D centres

production of energy from renewablesources.

How are cash grants from EU fundsaccessed?

In order to be eligible for a cash grant fromEU funds, applications have to be madewithin calls for proposals. Depending onthe support scheme, calls are organised

in the form of either closed or open calls.Closed calls for proposals have a fixedclosing date, e.g. 30 days from opening.In open calls for proposals the closing datedepends on fulfilment of the conditionthat, e.g. 120% or 150% of the budgetallocation for the given year has beenexceeded (i.e. applicants who have filed

applications have requested subsidieswhich total, e.g. 120% of the call budget).

When applications are submitted they arethoroughly evaluated in accordance withspecified criteria. The assessment process

8

50-70% for SMEs.9 3 years for SMEs.


18/115

17Business climate

takes approx. 3-4 months and coversa formal and content evaluation. In thecontent evaluation the application has tobe awarded a minimum number of marks(e.g. 60 out of 100) to secure the rightto the grant. However, in the most popularaid schemes the minimum number of

points can be insufficient to actuallyreceive the grant, due to the limitedbudget; if this is the case, cash grants goto applicants with the highest scores.

Example: What should I do to receivea cash grant for an innovativeinvestment?

There is a special aid scheme available

for investments using innovativetechnologies. This aid scheme supportsprojects of high innovative potentialwhich generate significant addedvalue for the economy (projects whichpromote innovation in the form of newtechnologies, products and services,which contribute to higher productivityand exports, and which introduce majororganisational changes in companies).It is designed to support investments withhigh innovation potential in the productionsector which are likely to incur highinvestments costs and lead to the creationof a significant number of new jobs.

In order to apply for a grant, investmentsmust fulfil the following entry criteria: investment costs of at least PLN

160mn and creation of at least 150new jobs, and

uses a technology which has beenused worldwide for less than 3 years

or whose dissemination within therelevant industry does not exceed 15%.

Despite the fact that this aid type fallsunder the definition of regional aid, thereis a maximum limit of 30% of costs eligiblefor aid that can be received in the form ofa cash grant. Thus it is important for theinvestor to be aware that it is entitled toapply for other types of aid for the sameinvestment, up to the limit of regional aidintensity allowed in a given investmentlocation.

This type of support is granted on the basisof open calls (until 100% of the budgetallocation has been applied for).

Example: What should I do to obtaina cash grant for shared servicecentres?

There is a separate aid scheme designedto support projects involving thedevelopment of shared service centres/BPOs, IT centres, and R&D centres.In order to apply for a grant the SSC and

IT centres have to declare that they willcreate at least 100 new jobs. There areno limits on the value of the investment.In the case of R&D centres, at least10 jobs have to be created and a minimumof PLN 2mn invested.

The maximum value of aid which canbe granted for SSC or IT investmentprojects is 30%. In the case of R&D centresthe maximum level of aid is calculatedaccording to the map of regional aidintensities.

This type of support is granted on the basisof open calls (until 150% of the budgetallocation has been applied for).

Corporate incometax exemption in SEZCompanies investing in Poland are alsoencouraged to use another type ofincentive, i.e. corporate income tax (CIT)exemption in a SEZ. SEZs were created

in the 90s and cover selected parts ofPoland where companies can operate onpreferential terms and conditions. Thistype of support is also a type of regionalaid and is available based on a SEZ permituntil the given SEZ ceases existence which at present is set for 31 December2020 for all 14 SEZs.


19/115


There are 14 headquarters, one for eachof the SEZs (see map), while each SEZconsists of several sub-zones located indifferent places, not necessarily adjacentto each other. The overall area of all zonesis over 13,000 ha, but the area may beextended up to 20,000 ha.

How do I calculate the maximum aidavailable in the form of CIT exemptionin SEZs?

The amount of support available in SEZs iscalculated in the same way as other typesof regional aid, i.e. according to the mapof regional aid intensities. However, in thisaid scheme there are no cash payments

(as with EU grants) the benefit is CITexemption. We explain below how the CITexemption limit is determined.

The support is granted for a newinvestment. Therefore, the maximum aidavailable is calculated according to themap of regional aid intensities (and based

on investment or employment costs).Afterwards, this aid pool is utilisedas CIT exemption in relation to incomegenerated on business activities carriedout by an investor in the SEZ and listed inthe SEZ permit. The investor can utilisethe aid pool until the end of the givenSEZs existence.

Sopot

Supsk

Olsztyn Suwaki

Kostrzyn

Bydgoszcz

d

Katowice

Starchowice

Tarnobrzeg

Mielec

Krakw

Legnica

Kamienna Gra

Wabrzych

Headquarters of SEZs in Poland


20/115

19Business climate

What is a SEZ permit?

To benefit from CIT exemption theinvestor must obtain a permit to operatein a SEZ. The permit specifies theconditions which the investor must meet,e.g. the value of the planned investment,the intended level of employment,

business start-up date and deadlines bywhich all the obligations set out in thepermit must be met.

The SEZ permit also specifies(by reference to Polish statisticalclassifications) the activities to beperformed in the SEZ which qualify for CITexemption. Revenues from activities notexplicitly mentioned in the SEZ permit aretaxable on standard rules.

According to regional aid rules,the investment activities can be startedonly after the SEZ permit is issued.Moreover, only investment costs borne(invoices paid) and new jobs created after

the SEZ permit is issued may be appliedto compute the tax exemption.

How can I locate my investment in a SEZ?

Investors can locate their investments(business activity) in an already existingSEZ or they can apply for a SEZ extensionto cover private land where the plannedinvestment is to be located. In the lattercase, the investor has to fulfil specific

criteria. The SEZ extension processtakes at least 6 months as it requires anamendment to the Council of MinistersResolution.

How do I apply?

There are no calls for proposals in SEZs.Companies can submit an applicationat any time during the year. In a formalnegotiating procedure, a decision is takento extend the SEZ and/or issue a SEZpermit.

Multi-Annual SupportProgrammeA Multi-Annual Support Programme(MASP) is an aid scheme (a type of

regional aid) financed from the Polishbudget and is dedicated to supportinglarge investments which are consideredvital to the Polish economy.

In particular, under MASPs support maybe granted to: projects in so-called priority

sectors: automotive, electronics,aviation, biotechnology, new services(particularly IT centres, BPOs andtelecommunications), and R&D

significant investments in othersectors with eligible costs of at leastPLN 1bn and creating at least 500new jobs.

Although MASP constitutes regional aid,additional aid ceilings were introduced.As a result, maximum aid levels are asfollows: investment performed in a SEZ 15%

of eligible costs investment performed outside a SEZ

30% of eligible costs.

Support may be based on two-yearemployment costs of new staff hiredor eligible investment costs. Depending

on the type of eligible costs there aredifferent entry criteria for projects.


21/115


What are the entry criteria?

A. Support based on two-yearemployment costs of newly created jobs

Support can be granted to entrepreneursmeeting the following entry criteria: for priority production sectors:

incurring investment costs of at leastPLN 40mn and creating at least 250new jobs

for modern services sector: creatingat least 250 new jobs

for R&D sector: incurring investmentcosts of at least PLN 3mn and creatingat least 35 new jobs (for employeeswith university degrees)

for other sectors: incurring investmentcosts of at least PLN 1bn and creatingat least 500 new jobs.

The level of support based on newlycreated jobs ranges from PLN 3,200to PLN 18,700 per job, depending ona specific set of criteria.

In the case of investments in: counties with an unemployment

rate of at least 200% of the countryaverage (Central Statistics Office datain the month before the application issubmitted to PAIiIZ)

voivodships: warmisko-mazurskie,podlaskie, witokrzyskie, lubelskie,podkarpackie

the level of support may be increased by 8%.

B. Support based on eligibleinvestment costs

Support can be granted to entrepreneursfulfilling the following entry criteria: for priority sectors: incurring

investment costs of at least PLN160mn and creating at least 50 new

jobs for other sectors: incurring investment

costs of at least PLN 1bn and creatingat least 500 new jobs.

The level of support based on eligibleinvestment costs is up to 10% dependingon a specific set of criteria.

Having fulfilled the entry criteria, projectsare evaluated against additional detailedcriteria, including: processes performed by the company

(services provided to other parties) human capital (% of employees with

a university degree) investment location other (e.g. cooperation with

universities, the companys reputation,unique operations performed).

How do I apply?

There are no calls for proposals.Companies can submit applications at anytime during the year.

Other types of support

As already mentioned, there are manyother sources of support availablein Poland. Please find below someexamples.

CIT and other incentives (not state aid)

The following R&D incentives are alsoavailable under Polish tax law: entrepreneurs investing in R&D are

allowed to deduct from the tax baseup to 50% of costs actually incurredin purchasing new technology10 ina given year (entities operating in SEZsare not eligible). A new technology isdefined as technical knowledge in theform of intangible assets (in particularthe results of R&D work) enabling

production of new or modernisedgoods/services that has been appliedglobally for less than 5 years (thismust be confirmed by an independentscientific body)

costs of finished R&D work can bededucted from the tax base regardless

10 The purchase of a new technology is defined as acquiring the rights to technology by way of an agreement on transfer or right to use.


22/115

21Business climate

of the result (unless they can beclassified as an intangible asset anddepreciated)

12-month depreciation period forfinished R&D work (shortened from 36months)

22% VAT on R&D services.

Support for training

There are aid schemes designed to helpemployees and entrepreneurs raise theirqualifications and adjust their skills tomarket requirements. Maximum supportlevels are shown in the table below.

Please note that general traininginvolves tuition which is not applicableonly or principally to the employeespresent or future position in the company,but which provides qualificationswhich are largely transferable to othercompanies or fields of work and thereby

substantially improve the employability

of the employee. Specific trainingin turn involves tuition directly andprincipally applicable to the employeespresent or future position in the companyand provides qualifications which are notor only to a limited extent transferable toother companies or fields of work.

General training

small enterprises up to 80%medium enterprises up to 70%large enterprises up to 60% of eligible expenses

Specific training

small enterprises up to 45%medium enterprises up to 35%large enterprises up to 25% of eligible expenses


23/115


24/115

2. Establishing a business presence


25/115


2.1. Overview

The legal concept of doing businessis best described in Polish law in the Acton Freedom of Economic Activity (2004),which defines economic activityas manufacturing, construction, trading,provision of services, the search for,identification and extraction of naturalresources, as well as professional activitypursued for the purpose of gainingprofit and conducted in an organisedand continuous manner. The Act alsostates that undertaking and pursuingeconomic activity shall be free and allowed

to everyone on equal terms subjectto conditions specified in the law.

This definition of doing business alsoapplies to foreign investors undertakingeconomic activity in Poland. However,there are differences between investorsfrom EU and EFTA member countriesand those from other countries.

Investors from EU and EFTA membercountries or from countries, whichhave entered into specific internationalagreements with the EU may conducteconomic activity on the same termsas Polish citizens.

Other investors may conduct economicactivity on the same terms as Polishcitizens only if they hold specific permits,e.g. that legalise their stay in Polandand allow them to conduct commercialactivity. Such investors may conducteconomic activity by: establishing limited partnerships, limited

joint-stock partnerships, limited liability

companies and joint-stock companies purchasing and acquiring shares

in such companies.

The main legal forms available for doingbusiness in Poland are listed below.All these forms are available to Polishinvestors and foreign investors based

in EU and EFTA member countriesor countries which have entered intospecific international agreementswith the EU: joint-stock company (spka akcyjna

S.A.) European Company (Societas

Europea) (Spka Europejska SE)

limited liability company (spkaz ograniczon odpowiedzialnoci

sp. z o.o.) limited joint-stock partnership (spka

komandytowo-akcyjna S.K.A.) registered partnership (spka jawna

sp.j.)

limited partnership (spkakomandytowa sp.k.)

professional partnership (spkapartnerska sp.p.)

sole proprietorship (indywidualnadziaalno gospodarcza)

European Economic Interest Grouping(Europejskie Zgrupowanie IntereswGospodarczych EZIG)

civil law partnership (spkacywilna) all the partners in this typeof partnership have to be registeredas individuals jointly pursuing economicactivity. Therefore, such a partnershipis not a separate business entity thoughit may be used for joint investmentprojects or consortia.

Many of the laws governing businessoperations are contained in the followingActs: Code of Commercial Companies

(15 September 2000) covers formsin which companies and partnershipscan do business


26/115

25Establishing a business presence

Council Regulation (EC) No 2157/2001on the Statute for a European Company(8 October 2001)

Council Regulation (EEC) No 2137/85on the European Economic InterestGrouping (27 July 1985)

Act on European Economic Interest

Grouping and European Company(4 March 2005)

Act on the Freedom of EconomicActivity (2 July 2004).

Other regulations of significance forcommercial companies are: Banking Law (29 August 1997) Act on the Commercialisation

and Privatisation of State-owned

Enterprises (30 August 1996) Insurance Act (22 May 2003) Capital Market Regulation Act

(29 July 2005) Act on Public Offerings and Terms

on which Financial Instrumentsare Introduced to an Organised TradingSystem and on Public Companies

(29 July 2005) Act on Trading in Financial Instruments(29 July 2005).

These Acts contain provisions on bankingand insurance activities and public tradingin securities.

2.2. Companies

All types of companies are availableto a foreign investor provided thatthe investor: has a permit legalising his stay

and allowing him to conduct businessactivity in Poland, or

originates from an EU or EFTA membercountry or from a country that hasentered into specific internationalagreements with the EU.

If the above conditions are not met,the investor may establish a limited

partnership, limited joint-stockpartnership, limited liability companyor joint-stock company. There areno further limitations on the formof economic activity that investorschoose to udertake.

Joint-stock company

A Polish joint-stock company can beestablished by one or more foundingmembers. A limited liability companywith one shareholder cannot be the solefounding member of a joint-stockcompany.

However, the law does not prohibita joint-stock company from having onlyone shareholder that also happensto be a joint-stock company with oneshareholder.

Company formation

The founding members agree uponand sign the joint-stock companysarticles of association, supply at least25% of the initial capital, and make all thevital management decisions concerningthe company before the managementboard and supervisory board areappointed.

The formation of a joint-stock companyinvolves the following: execution of the articles of association

by the founding members the shares being paid up in accordance

with the law (see Share capitalrequirements)

appointment of a managementboard and a supervisory board(see Management)

the company being enteredin the commercial register (partof the Polish Court Register).


27/115


The articles of association should bedrawn up in the form of a notarial deedand signed by the founding members.

All founding members should providethe notary with documents confirmingtheir legal status (e.g. for a foreign

corporate shareholder, an excerpt fromthe appropriate commercial registeror a deed of incorporation that usuallyhas to be validated by way of an apostilleor in a Polish embassy or consulate,together with a sworn translation intoPolish).

The company is then registered by

the registration court.

The following documentation should befiled with the court: application for registration signed

by all the members of the companysmanagement board

the companys articles of association

and share subscription statements inthe form of notarial deeds a statement signed by all

the management board membersto the effect that the shares have beenpaid up as provided for in the articlesof association and in accordance withthe law

proof that payment for the shareshas been made to the bank accountof the company in organisationcertified by a bank or brokerage house;if the articles of association providefor share capital to be covered byin-kind contributions after the company

is registered, the appropriate statementmade by all the management boardmembers must be attached

a document showing that the membersof the companys authorities have beenappointed, together with a list of theirnames

the relevant permit or evidencethat the articles of association have

been approved by a competentadministrative authority if suchdocuments are required for thecompanys incorporation

specimen signatures of allthe management board members.

For the company to become fully

operational, the statistical office shouldbe notified, whereupon the company willreceive its own statistical identificationnumber (REGON). The company will alsoneed to apply to the tax office for a taxidentification number (NIP). There isa statutory requirement for a joint-stockcompany to carry out an annual audit.

Share capital requirements

The minimum share capital requirementis PLN 100,000. The value of each sharemust be at least PLN 0.01 (1 grosz).Shares are equal and indivisible. Sharesacquired in exchange for a contributionin kind should be fully paid up no later

than one year after the companysregistration. Shares taken up in cashshould be paid up to 25% beforethe company is registered. If shares areacquired solely through a contributionin kind, or through a contributionin kind plus a cash contribution, 25%of the nominal share capital should bepaid up prior to registration.

If the shares are covered by a contributionin kind, the founders must draw upa special valuation report to be examinedduring the registration process by auditorsappointed by the registration court.

Preference shares may be issued,

awarding, for example, preferentialdividend rights (though these arelimited), voting privileges (up to twovotes per share), or privileges withrespect to the distribution of assetsin the event of the companys liquidation.A joint-stock company may issue eitherregistered or bearer shares.


28/115


There are no legal restrictionson the transferability of bearer sharesunder the law and none can be imposedin a companys articles of association.

Shares which are not paid up to theirfull nominal value or which are taken up

in exchange for a contribution in kindcannot be issued as bearer shares.Registered shares can only be transferredby way of a written statement madeby the previous shareholder and deliveryof the share certificate.

Reserve capital

A reserve fund for potential losses must be

created by 8% of the joint-stock companysannual profits being transferred to the funduntil the amount on the reserve capital isone third of share capital.

Management

The authorities of a joint-stockcompany are the shareholdersmeeting, the management boardand the supervisory board.

Shareholders meeting

The shareholders meeting is empowered to: examine and approve the management

board report, the balance sheetand the profit and loss account forthe previous year

allocate profit or absorb losses,and make decisions regarding claimsfor any damage caused duringthe establishment, managementor supervision of the company

dispose of or lease the companysbusiness or an organised part thereof

or establish a limited property rightthereon

dispose of or acquire real estate,perpetual usufruct of real estate orpart thereof (unless otherwise statedin the articles of association)

issue convertible bonds or bonds witha pre-emptive right

amend the companys articles

of association increase or decrease the companys

share capital (subject to specificexceptions)

for a period of two years after companyregistration, acquire a propertyfor a price more than 1/10 higher thanthe paid-up share capital from certaincategories of related entities, suchas a founding member or a companyshareholder.

An absolute majority of votes castis sufficient for most decisions. However,some resolutions may be adopted only by: a unanimous vote of the shareholders

concerned (for example, amendments

to the articles of association increasing

shareholders preferential dividendrights or reducing individual rightsvested personally in shareholders)

a qualified majority of three quartersof votes cast (for example, whenamending the articles of associationor decreasing share capital or

when taking a decision to mergethe company).

The articles of association may containmore stringent conditions for the adoptionof such resolutions.

Management board

The supervisory board appoints

the joint-stock companys managementboard unless otherwise specifiedin the articles of association.

The management board membersterm of office cannot exceed five years.The management board has the exclusivepower to represent the company beforethird parties, both in and out of court,but any limitations in this respect will notbe effective towards third parties.

The management board is a collectivebody, so it makes decisions by wayof resolutions.


29/115


Supervisory board

A joint-stock company must havea supervisory board of no fewer thanthree persons (five in public companies)appointed by the shareholders meeting.

The supervisory board permanently

supervises the companys operations in allareas of its business and specifically hasthe power to: examine the managementboard report and the companys financialstatements to ensure that they accuratelyreflect the companys books of account,documents, and the actual state of affairs;examine the management boardsactivities regarding allocation of profit and

absorption of losses and submit an annualwritten report on the result of itsexamination to the shareholders meeting.

In case of public joint-stock companies,in which the supervisory board iscomposed of more than five persons, anAudit Committee should be appointed.The Audit Committee should be composedof three or more members, at least oneof which should fulfil the independencerequirements of the Certified AuditorsAct and be qualified in accountingand financial revision. The membersof the Audit Committee are appointedby the supervisory board from amongits members. The Audit Committee is

responsible, inter alia, for:

monitoring the financial reportingprocess

monitoring the effectiveness of theinternal control systems, internal auditand risk management

monitoring the financial revision monitoring the independence of the

certified auditor and, in some cases,of the entity authorized to review thefinancial statements of the company.

Liability

A joint-stock companys shareholdersare not personally responsible forthe companys liabilities. Managementboard members are liable jointly and

severally with all their assets for anytax arrears the company may haveif enforcement against the companyproves ineffective, unless board memberscan show that a petition in bankruptcywas filed or arrangement proceedingswere initiated in due time, or that failureto file a petition or enter into arrangementproceedings was not due to a fault on theirpart, or if they indicate property on whichthe enforcement can be effected.

Management board members arealso responsible for any tax liabilitiesarising during the period in whichthey sat on the management board.The Code of Commercial Companies

provides for civil and criminal liability

of the companys founders, managementboard and supervisory board membersand shareholders for certain activitiescarried out in violation of the law.

Dissolution

A joint-stock company can be dissolved:

for reasons set out in the companysarticles of association

by way of a resolution adoptedby the shareholders meetingto dissolve the company or to transferthe registered office or principalestablishment of the company abroad

when the company is declaredbankrupt by a court

for other reasons provided for by the law.

European Company

A European Company is a companywhich is intended for large, Europe-widebusinesses. It is not bound by the legaland practical constraints arising fromthe domestic company laws of eachEU member state. The main advantage ofa European Company is that it can moveits registered office from one EU stateto another without losing legal personality.

A European Company is governed byRegulation No 2157/2001 on the Statutefor a European Company, the EuropeanCompanys articles of association,

the laws of EU member states adopted


30/115


in implementation of EU measures relatingto European Companies and the laws of EUmember states which would apply to a

joint-stock company formed in accordancewith the law of the member state wherethe European Company has its registeredoffice. This means that, to the extent not

regulated in EU law, European Companieswith registered offices in Poland will besubject to Polish provisions on joint-stockcompanies established under the PolishCode of Commercial Companies.

Formation

A European Company may be formedthrough:

merger of two joint-stock companiesfrom different EU member states

formation of a holding company by twojoint-stock companies or limited liabilitycompanies from different EU memberstates or by any two joint-stockcompanies or limited liability companiesthat have had a subsidiary or a branchin another EU member state fora minimum of two years

formation of a joint subsidiary by twoentities from different EU memberstates or by two entities that have hada subsidiary or a branch in anotherEU member state for a minimumof two years, or

transformation of a joint-stock company

previously formed under national law

which has had a subsidiary in anotherEU member state for two years.

Any existing European Company maymove its registered office to Poland.

Capital requirements

The minimum capital requirement fora European Company is 120,000(unless Polish law requires larger capitalfor companies carrying on certain typesof activity).

Management

The founders of a European Companymay choose between a two-tier system

(i.e. involving a management board anda supervisory board, similar to the Polish

joint-stock company described above)or a single-tier system (i.e. wherethe European Company is managedby an administrative board, closerto the concepts in Spanish or Italiancompany law). Under the one-tier system,the European Companys administrativeboard runs its affairs, represents itand supervises its business.

The administrative board may appointmanaging directors from among itsmembers or third parties. However,at least half the number of administrativeboard members should not be managing

directors.

Limited liability company

A limited liability company may haveonly one shareholder, though it cannotbe formed solely by another limitedliability company with one shareholder.Incorporation of a limited liability

company generally involves the sameprocedure as incorporation of a joint-stock company. A limited liabilitycompany does not necessarily have to beaudited every year (see Accounting andaudit requirements).

Share capital requirements

The minimum share capital in a limited

liability company is PLN 5,000 and itmust be paid up in full before registration.The nominal value of one share cannot beless than PLN 50.

A shareholder can hold either one share(when shares are divisible and unequal)or more than one share (when they are

indivisible and equal). Preference sharesmay be issued. The transfer or pledge ofa share or part thereof in a limited liabilitycompany should be made in written formwith signatures certified by a notary.

Reserve capital

There is no requirement for a limitedliability company to have a reserve fund.


31/115


Management

The authorities of a limited liabilitycompany are the shareholders meetingand the management board.

A supervisory board or auditcommittee is optional, unless the

limited liability company has sharecapital of more than PLN 500,000and more than 25 shareholders.The shareholders meeting is thesupreme authority in a limited liabilitycompany. The shareholders meetinghas rights similar to those in a joint-stock company, although some of itspowers and majority ratios required for

passing resolutions on certain issuesmay differ. The management board isappointed by the shareholders meeting.The powers of the management boardare similar to those in a joint-stockcompany, except that any individualboard member may conduct matterswithin the ordinary course of business.Members of the management boardin a limited liability company may beappointed for a non-fixed term. Eachshareholder has the right of inspection.In order to exercise this right, eachshareholder (or a shareholderaccompanied by an authorised person)may at any time inspect the companysbooks and documents, draw up

a balance sheet for his/her own use

and request the management boardto provide explanations. Where thereis a supervisory board or an auditcommittee, the companys articlesof association may exclude the rightof individual inspection by shareholders.The supervisory board (audit committee)

of a limited liability company, if appointed,must be composed of a minimum of threepersons. The powers of the supervisoryboard in a limited liability company are

similar to those of the supervisory boardin a joint-stock company.

Liability

The rules are the same as those givenabove for a joint-stock company.

Dissolution

A limited liability company may bedissolved for reasons similar to those thatapply to a joint-stock company.

Major differences between limited liability companies and joint-stock companies:

Shareholders Limited liability company Joint-stock company

Number of foundingmembers

One or more shareholders.A limited liability company cannot be formedsolely by another limited liability companywith one shareholder.

One or more founding members.A limited liability company with oneshareholder cannot be the sole foundingmember of a joint-stock company.

Minimum sharecapital

PLN 5,000 PLN 100,000

Minimum valueof one share

PLN 50 PLN 0.01 (1 grosz)

Contributions In cash or in kind; share capital must be fully

paid up before registration.

In cash or in kind; shares covered by

an in kind contribution should be fullypaid up no later than one year aftercompany registration.Shares taken up in cash shouldbe 25% paid up prior to companyregistration. If the shares are acquiredsolely through a contribution in kind,or through a contribution in kind plusa cash contribution, 25% of the nominalshare capital should be paid up priorto registration.


32/115


2.3. Commercialpartnerships

There are four types of commercialpartnership under Polish law.The rights and obligations of a partner

in a partnership may on certainconditions be transferred to anotherparty, who becomes a partner after therights are effectively transferred.

Registered partnershipThis form of partnership is regulatedby the Code of Commercial Companies.

It does not have legal personality, thoughit may act on its own behalf and haveits own assets and debts. All partnersare jointly and severally liable for thepartnerships obligations, but creditorsare obliged to seek satisfaction from thepartnerships assets first. The partnersliability cannot be excluded.

All partners are entitled to represent thepartnership and manage its business.

A partner may be excluded fromrepresenting the partnership inthe partnership deed or by a court.The registered partnership deed mustbe drawn up in writing; otherwise it will

be null and void.

Shareholders Limited liability company Joint-stock company

Valuation procedurein the event ofa contribution in kind

No valuation report needs to be drawn up byshareholders.

Founders must draw up a specialvaluation report to be examined duringthe registration process by auditorsappointed by the registration court.

Additional payments The companys articles of association mayoblige shareholders to make additional

payments up to a specified amountin proportion to their shareholding.

Shareholders may be obliged to makeadditional payments only in exchange

for additional privileges granted fortheir shares.

Increasesin authorised capital

The law does not provide for share capitalto be increased by the managementboard a shareholders meeting resolutionis required.

The articles of association mayauthorise the management board toconditionally increase the share capitalfor a period of not longer than threeyears.

Supervision Each shareholder has the right of inspection.A supervisory board or audit committeeis optional unless the company has share

capital of more than PLN 500,000 and morethan 25 shareholders.

Shareholders have no rightof inspection. The company must havea supervisory board.

Exclusion ofa shareholder

The court may exclude an individualshareholder on the request of all the othershareholders, provided that the value of theshares held by the shareholders requestingthe exclusion exceeds one half of the initialcapital.

The law does not provide forthe possibility of a shareholderbeing excluded, though it does allowfor a compulsory buyout of shares(a so-called squeeze-out).

Liability Management board members are liable jointlyand severally with all their assets for the

companys liabilities towards its creditors andfor the companys tax arrears if enforcementagainst the company proves ineffective,unless management board members canshow that a petition in bankruptcy was filedor arrangement proceedings were initiatedin due time, or that failure to file a petitionor enter into arrangement proceedings wasnot due to a fault on their part, or if theyindicate property on which the enforcementcan be effected.

Management board members areliable jointly and severally with all their

assets for the companys tax arrearsif enforcement against the companyproves ineffective, unless managementboard members can show that a petitionin bankruptcy was filed or arrangementproceedings were initiated in duetime, or that failure to file a petition orenter into arrangement proceedingswas not due to a fault on their part,or if they indicate property on whichthe enforcement can be effected.


33/115


Limited partnershipLimited partnerships are also regulated bythe Code of Commercial Companies andalso have no legal personality.

There are two types of partners in thispartnership and they differ in terms

of liability. The personal liability of certainpartners is limited to a declared amountwhich is stated in the commercial register.Such partners are free of any liabilityabove the amount of their contributionto the partnership. A limited partner canonly represent the partnership to a limitedextent set out in a power of attorneygranted to him by the partnership.

Other partners are liable jointlyand severally for all the partnershipsobligations with their personal assetsin the appropriate way as partnersin a registered partnership.

The limited partnership deed must be

drawn up by a notary in the form ofa notarial deed; otherwise it will be nulland void. In most matters, the provisionson registered partnerships also applyto limited partnerships.

Professional partnershipThis partnership is available for investorswishing to conduct economic activitiesdefined as freelance professionsin Poland. These include attorneys-at-law,notaries, dentists, architects andaccountants, and the professions that

are listed in Article 88 of the Codeof Commercial Companies. This typeof partnership has no legal personality.

Partners in this partnership must beauthorised to work in the professionconcerned. They are liable forthe partnerships obligations with alltheir personal assets.

However, their liability is limitedto obligations arising from the actionsor omissions of people working forthe partnership under the managementof a certain partner. The partnershipdeed may provide that partners are liablefor all the partnerships obligations.

Each partner is entitled to representthe partnership independently unlessthe deed states otherwise. A partner maybe deprived of the right to represent thepartnership by a resolution taken by theother partners. The partnership deedmust be drawn up in writing; otherwiseit will be null and void.

Limited joint-stockpartnershipThis partnership has no legal personalityeither, though it is a hybrid of a joint-stock company and a limited partnership.The partnership deed must be drawn upby a notary; otherwise it will be null and

void. Two types of partner are required toform this partnership: a partner whose liability for all

the partnerships obligations is notlimited in any way and is regulatedin the same way as in a registeredor limited partnership

a shareholder who is not liable forthe partnerships obligations but isobliged to acquire and pay up shares the legal status of this shareholderequates to that of a shareholderin a joint-stock company.

Partners are entitled to representthe partnership, while shareholders maydo so only on the basis of a power of

attorney. Partners manage the day-to-daybusiness of the partnership. In certainsituations, some partners may be excludedfrom management and representation.The minimum share capital in this typeof partnership is PLN 50,000. Partnersmay contribute to the company in cash orin kind, but this is not obligatory.


34/115


This partnership may appoint the followingauthorities:

Supervisory board

If there are more than 25 shareholders,a supervisory board must be set up.If there are fewer than 25 shareholders,

the supervisory board may be establishedby the general meeting. The members ofthis corporate authority are appointed bythe general meeting.

General meeting

The general meeting is different fromthat in a joint-stock or limited liabilitycompany. It consists of shareholders and

partners who may take part in the meetingeven if they do not hold any shares inthe partnership.

The meeting has the sole power to: examine and approve the partners

reports and financial statementsfor the previous year and dissolvethe partnership

acknowledge that the members ofthe supervisory board and partnersmanaging the day-to-day businessof the partnership have dischargedtheir duties

appoint a certified auditor, unless this isreserved for the supervisory board.

The provisions on voting in joint-stockcompanies apply to this partnershipaccordingly. However, in certain casesa unanimous resolution of the partnersis obligatory. In other cases, a resolutionpassed with a majority of the partnersvotes is sufficient if, together with the

votes of the shareholders, the requiredmajority is reached.

If the provisions on this type of companydo not provide a comprehensive solution,the provisions on limited partnershipsapply accordingly to the legal statusof partners and their contributionsto the partnership. In other cases,

the rules on joint-stock companiesapply accordingly to a limited joint-stockpartnership.

European EconomicInterest GroupingThe purpose of the European Economic

Interest Grouping is to facilitate or developthe economic activities of its members.A European Economic Interest Groupinghas legal capacity but its members arefully liable for its debts. It can be formedby companies, firms and other entitiesgoverned by public or private law whichhave been formed in accordance withthe law of any EU member state and which

have their registered office in the EU.It can also be formed by individualscarrying out industrial, commercial,craft or agricultural activity or providingprofessional or other services in the EU.However, a minimum of two membersmust reside or have their registered

offices in different EU member states.

Unless otherwise regulated in RegulationNo 2137/85 on the European EconomicInterest Grouping or in the Acton European Economic Interest Groupingand European Company, Polish lawregulating registered partnerships appliesto a European Economic Interest Grouping

with its registered office in Poland.

Sole proprietorshipThis form of business entity is widely usedin Poland, especially for small enterprises.It is not subject to any special regulationexcept for the Act on the Freedom of

Economic Activity. A natural person mayconduct economic activity in this formusing either his/her name or the nameof the enterprise.

A person using this form of economicactivity is liable for all obligations arisingfrom it with all his/her personal assets.


35/115


2.4. Branches andrepresentativeoffices

Under the Act on Freedom of Economic

Activity, foreign investors may usethe following forms of business entity: branch representative office.

A branch is registered in the commercialregister, part of the Polish Court Register,under the name of the foreign investortogether with the words Branchin Poland. The branch can only conductactivities within the scope of the foreigninvestors business. The Ministerof the Economy may prohibit a branchconducting activities in certain situationsspecified by the law. A representativeoffice can only promote and advertisethe foreign investor establishing the office.

No other economic activity may beconducted in this form. A representativeoffice is registered in a special registerof representative offices kept bythe Ministry of the Economy. Registrationmay be refused in certain situationsprovided by law.

Establishing a branch or representativeoffice does not require any permits to beobtained from administrative authorities.In both cases, registration and entryin the appropriate register are obligatory.

2.5. Commercialregister

According to the Polish Court RegisterAct of 7 October 1997, companiesand commercial partnerships must beregistered in the commercial register,

which is part of the Polish Court Registerkept by district courts. The commercialregister is accessible to the publicand comprises six parts. The informationin it covers: part 1 the companys name

and legal form, its REGON number,any previous number in a commercialor business register, place where

business is conducted and addressof the companys registeredoffice, names of the shareholdersin commercial partnerships, detailsof any company branches, amountof the companys share capital

(and whether it was covered bycontributions in cash or in kind),names of the shareholders in limitedliability companies and the numberof shares held by each (onlythose shareholders holding morethan 10% of share capital), name

of the sole shareholder in a joint-stockcompany, information on executionof the companys articles of associationand any amendments thereto

part 2 details of companyrepresentatives, supervisoryauthorities and holders of commercialpowers of attorney

part 3 the companys objects,

information on whether and whenthe companys annual financialstatements, auditors reports,resolutions approving the financialstatements were filed and details ofprofit distribution and loss absorption

part 4 details of overdue taxand other payments and socialsecurity contributions coveredby enforcement if they were notpaid within sixty days of initiationof enforcement proceedings, detailsof the companys creditors and theirclaims if a creditor has an executiontitle for a claim that was not paid


36/115


within thirty days of the date onwhich he/she called on the companyto make the performance, informationon securing the debtors assetsin bankruptcy proceedings by wayof suspending execution, dismissalof a petition in bankruptcy due to

the fact that the insolvent debtorsassets are insufficient to coverthe costs of the proceedings

part 5 appointment or recallof conservators for the company

part 6 initiation and closingof liquidation proceedings, dissolutionand cancellation of the companysarticles of association, mergers and

transformations, initiation and closingof reorganisation proceedings andother information about proceedingsdisclosure of which in the Polish CourtRegister is required by law.

A partnership may start operating onceit is entered in the commercial register.This does not apply to companies that canstart operating before they are entered inthe register. A company is entered in theregister upon an application madeby its management board. Any changes

in data contained in the register mustbe reported to the court and must beentered in the register. An applicationfor a company to be enteredin the register or for data containedtherein to be changed must be filed usinga special official form. The court is obligedto issue decisions to enter the companyin the register or for changes to be

made to the data therein within 7 daysof an application being filed, thoughin practice it may take longer.


37/115

3. Real estate


38/115


39/115


3.1. Acquisition ofreal estate byforeigners

As a rule, under current regulations(the Act on the Acquisition of Real

Estate by Foreigners the Act), foreignnationals (individuals and entities)wishing to purchase real estate in Polandmust obtain a permit from the Ministerof Internal Affairs and Administration.

Under the Act, foreign investors mustalso obtain a permit from the Ministerof Internal Affairs and Administrationif they wish to purchase sharesin a commercial company that has itsregistered office in Poland or executeany other legal transaction involving suchshares, if a company that is the owneror perpetual usufructuary of realestate in Poland becomes, as the resultof the purchase or other transaction,

a controlled company. A permit is alsorequired to purchase or subscribe forshares in an already controlled commercialcompany with its registered officein Poland if the company is the owneror perpetual usufructuary of real estatein Poland and the shares are purchased/subscribed for by a foreign investor thatis not a shareholder in that company.

There are, however, numerous exceptionsto the above rule, the most important oneconcerning citizens and entrepreneurs(including companies) of EEA countries(EU countries + Iceland, Liechtensteinand Norway) and Switzerland. Thesecitizens and entrepreneurs do not have

to obtain a permit to acquire real estateor shares in companies which are ownersor perpetual usufructuaries of real estateunless the real estate comprises forestor agricultural land this restrictionwill continue to apply until 2 May 2016(there are, however, some additionalexceptions to this restriction, namelyunrestricted acquisition of agricultural

or forest land is enjoyed by tenants fromthe EEA and Switzerland that have usedthe land under lease agreements (umowadzierawy) for a minimum of 3 or 7 years,depending on the location of the landand subject to certain other conditions).

Consequently, the requirementto obtain a Minister of Internal Affairs

and Administration permit to acquirereal estate or shares in a company thatis the owner or perpetual usufructuaryof real estate currently applies mainlyto foreigners from outside the EEAand Switzerland.

Investors from countries other thanthose in the EEA and Switzerland caneasily avoid this restriction by settingup a subsidiary or a branch in Poland,another EEA country or in Switzerland,that can without restriction(e.g. without having to obtain a permit

from the Minister of Internal Affairsand Administration) acquire real estate(or shares in a Polish company thatis the owner or perpetual usufructuaryof real estate). The subsidiary or branchwill then be regarded as an entrepreneurof the EEA or Switzerland, i.e. one thatis allowed, under the general exemption,to make acquisitions without having

to obtain a permit (with certainexceptions discussed above).

Real estate is defined in the Polish CivilCode as land which constitutes a separateobject of ownership and buildingspermanently attached to the land or theirparts if under special provisions theyconstitute an object of ownership separate

from the land.


40/115

39Real Estate

In the Act, a foreigner is defined as: a person who is not a Polish citizen, or a legal person with its registered office

outside Poland, or a partnership of the persons mentioned

in items above with its registered officeabroad, established in accordance with

the law of the relevant foreign country,or a company or a legal person with its

registered office in Poland controlleddirectly or indirectly by the companiesor person/s mentioned in the itemsabove.

A commercial company is deemed

to be controlled if a foreigneror foreigners have directly or indirectlyover 50% of votes at the generalmeeting of shareholders, also asa pledgee, usufructuary or on the basisof agreements with other parties,or if foreigners are dominant entitiesin this company as defined in Article 4 1 point 4 (b), (c) or (e) of the Code

of Commercial Companies.

The definition of a dominant entityin Article 4 1 point 4 (b), (c) or (e)of the Code of Commercial Companiescovers the following: the entity is entitled to appoint and

remove the majority of the membersof the management board or supervisory

board of another entity (dependententity), also on the basisof agreements with third parties

the entity has directly or indirectlya majority of votes in a dependentpartnership or at the general meetingof a dependent cooperative, alsoon the basis of agreements with thirdparties.

A permit is issued on a foreignersapplication if: the acquisition of real estate by

the foreigner does not pose a threatto national defence, safety or publicorder, and does not contravene socialand health policy

the foreigner can prove that he/she has

links with Poland (e.g. Polish nationality,Polish origin, marriage to a Polishnational, has a permit to temporarilyreside in Poland, a permanent residencepermit or a EU long-term residencepermit, is a member of a managingauthority of a controlled companyin Poland, or conducts business

or agricultural activity in Poland).

The area of real estate acquired bya foreign citizen for residential purposescannot exceed 0.5 ha. If real estateis acquired by a foreigner conductingbusiness operations in Poland, the areashould be sufficient to meet the needsof that business.

Applications are currently reviewedwithin 2-4 months (including the timeneeded for consultations with the Ministerof National Defence and the Ministerof Agriculture) but the proceduresometimes takes longer. It also takesa few weeks to compile all the documentsrequired before an application can be filed.

The Minister of Internal Affairsand Administrations policy is to grantpermits only to companies (or branches)that are incorporated in Poland.Consequently, there is little chanceof a permit being issued to a foreigncompany incorporated abroad.


41/115


If the investor does not have a commercialcompany in Poland, he/she can submitan application and obtain a permitpromise. This promise is subjectto the relevant regulations on suchpermits. A permit promise is valid forone year from the issue date. During

this period, the Minister cannot refuseto grant a permit unless there is a changein the material facts of the case.

In addition to the general exemptionsavailable to EEA and Swiss citizensand entrepreneurs, a permit is notrequired, inter alia, in the following cases: purchase of a self-contained apartment

purchase of a self-contained garageif connected with meeting the housingneeds of the purchaser/owner of realestate or a self-contained apartment

purchase of real estate by a foreigncitizen that has resided in Polandfor at least 5 years (from the datea permanent residence permit or anEU long-term residence permit was

obtained)

acquisition by a foreign citizen whosespouse is a Polish citizen, providedthat the foreign citizen has residedin Poland for at least 2 years sinceobtaining a permanent residence permitor an EU long-term residence permit,of real estate which will become part

of the spouses joint marital property purchase of real estate by a foreigncitizen if on the date of purchasethe foreign citizen is the statutory heirof the real estate seller, and if the sellerhas been the owner or perpetualusufructuary for at least 5 years

purchase for business purposesby legal persons and partnerships

which are not legal entities controlleddirectly or indirectly by foreignersof undeveloped real estate locatedwithin city limits whose area, togetherwith the area of other real estatealready owned in Poland by the sameforeigner, does not exceed 0.4 ha

acquisition of real estate by a bankholding a mortgage as a result of an

unsuccessful auction sale

acquisition (by purchase or otherwise)by a bank controlled directlyor indirectly by foreign investorsof shares or interests in a companyor partnership which is the owneror perpetual usufructuary of realestate, if the acquisition involves

enforcement of bank claims arisingfrom its banking business acquisition of shares in companies that

are listed on a stock exchange or anOTC (over-the-counter) market

acquisition of shares in companies thatare owners/perpetual usufructuariesof real estate the acquisition of whichis exempt from the permit requirement.

The above exemptions do not applyif the real estate is located in a borderzone or constitutes agricultural landof over 1 ha.

Stamp duty of PLN 1,570 is payableon a permit.


42/115

41Real Estate

3.2. Perpetual usufruct

Perpetual usufruct is a right of a naturesimilar to ownership, althoughit is established for a limited time.It is governed by the provisions of the CivilCode and the Real Estate Management Act.

A perpetual usufruct may be establishedon land owned by the state withinthe boundaries of cities (or outside citiesbut covered by local development plans)and on land owned by local municipalauthorities and other state or municipalland as provided for in special regulations.

The term of a perpetual usufructis between 40 and 99 years. When thisterm ends, the perpetual usufruct maybe extended for another period of upto 99 years (further extensions are alsopossible). Extension can only be refusedif important public interests are at stake.

In principle, a perpetual usufruct

is established by way of a contractdrawn up in the form of a notarial deed(it must also be entered in the landand mortgage register). This contractwill also cover the transfer of ownershipof buildings (or other constructions)to the usufructuary.

Charges for the transfer of landin perpetual usufruct are an one-off feeon hand-over and annual fees thereafter.The initial fee is payable in a lump sumnot later than on the perpetual usufructcontract execution date.

Annual fees are paid throughoutthe contract term (by 31 March eachyear) starting from the year followingthat in which the perpetual usufruct wasestablished. The initial fee is 15%-25%of the value of the land, while the annualfees vary from 0.3% to 3% of the valuedepending on the purpose for whichthe land is taken in perpetual usufruct.

Buildings (or other structures) erectedby the usufructuary on land heldin perpetual usufruct are the propertyof the usufructuary, while the generalrule is that any buildings standingon the owners land are the propertyof the owner of the land. Accordingly,the ownership of existing buildings must

be transferred together with the transferof the perpetual usufruct.

A usufructuary can assign the righthe has acquired or, in more colloquialterms, he can sell property he holdsin perpetual usufruct. In this casethe provisions governing transferof ownership apply.

At the end of the perpetual usufructterm the usufructuary is entitledto compensation for any buildings(and other constructions) erectedunless they were erected in breachof the perpetual usufruct contract.The amount of the compensationconstitutes the value of the buildings(or other constructions) on the usufruct

expiry date.


43/115


3.3. Leases

Polish and foreign legal entitiesand individuals may lease real estatewithout having to obtain a permitfrom the Minister of Internal Affairsand Administration. Polish law recognises

two types of lease contract: umowanajmu and umowa dzierawy. Underumowa najmu the lessee may onlyuse the property, while under umowadzierawy the lessee may use the propertyand collect benefits therefrom. Bothtypes of contract may be executed fora fixed or non-fixed term. An exampleof an umowa najmu would be the short-term lease of an apartment or office.An umowa dzierawy would typically beused for the lease of farmland or a sitefor development. Any lease for a periodof more than one year should be executedin writing. Both Polish and foreignentities can also use real estate undervarious leasing schemes (particularly

on the basis of so-called sale and leaseback transactions). No permit is neededfrom the Minister of Internal Affairsand Administration in this case.

3.4. Real estatepurchaseagreements

In principle, real estate owned by stateor local authorities can be purchased

only by auction or tender. Real estateowned by other entities or persons can beacquired under a sale contract, donation,inheritance, etc. According to the CivilCode, a real estate purchase contractmust take the form of a notarial deedexecuted by a Polish notary. A contractin any other form will be null and void.Prior to obtaining a Ministry permit,

a preliminary agreement can be executedin which the seller undertakes to sella specific real property to the purchaserand the purchaser undertakes to paythe price for the real estate to the selleron a specific date or on a specificcondition, e.g. obtaining a permit.This agreement does not transfer

the ownership title to the real estatebut is the basis for a claim for executionof the final agreement once the permitis obtained. After the Ministry issuesthe per

poland business analysis

Documents