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Db in poland

  1. 1. Doing businessin Poland
  2. 2. Doing businessin PolandA guide to doing businessin Poland
  3. 3. 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 TazbirErnst & YoungAll Rights Reserved.Ernst & Young is a registered trademark.
  4. 4. PrefaceThe aim of this publication is to familiarise These areas are: general business to treat this publication as a generalpotential investors with the basics climate and investment incentives, overview and to seek specific adviceof the Polish business environment, company law, real estate, taxation, before any investment decisions areand to facilitate informed decision-making employment regulations, competition made. Doing Business in Poland is writtenby providing pertinent information. law, capital markets, accounting and by professionals from Ernst & YoungConsequently, it is hoped that investors auditing. The present publication is in co-operation with professionals fromwill be better placed to assess investment intended as a guide for investors with Domański Zakrzewski Palinka in legalopportunities and weigh up potential limited knowledge of the Polish economy. matters. The authors are all leadingbenefits against potential risks. While the information it contains was specialists in their field, with a provenEach of the eight chapters in Doing to the best of our knowledge correct track-record in providing expert adviceBusiness in Poland offers an authoritative at the time of writing, the rapid pace to domestic and foreign clients about allsummary of one key area of the business of change in Poland means that laws aspects of the Polish economy.environment. and regulations are unlikely to remain static. We would therefore urge readers Preface 3
  5. 5. Preface ........................................ 3 3. Real Estate ....................... 36 5. Human capital ................. 70 3.1. Acquisition of real estate 5.1. Residence of foreigners1. Business climate ............ 6 by foreigners ........................... 38 in Poland................................. 721.1. Market Overview and Key 3.2. Perpetual usufruct................... 41 5.2. The Polish Labour Code ........... 75 Drivers .................................... 8 3.3. Leases .................................... 42 5.3. Legal basis of the employment1.2. Foreign direct investment......... 9 3.4. Real estate purchase relationship ............................. 761.3. Investment incentives agreements............................. 42 5.4. Employment contract .............. 76 in Poland................................. 11 3.5. Land and mortgage register ..... 42 5.5. Termination of an employment 3.6. Reprivatisation ........................ 42 contract .................................. 76 3.7. Investment process.................. 43 5.6. Remuneration for work ............ 782. Establishing a business 3.8. Acquisition of agricultural land .. 43 5.7. Workplace rules ....................... 78 5.8. Working time........................... 78 presence ............................ 22 5.9. Overtime ................................ 782.1. Overview ................................ 24 4. Taxation ............................. 44 5.10. Holiday entitlement ................. 792.2. Companies .............................. 25 5.11. Protection of women at work2.3. Commercial partnerships ......... 31 4.1. Corporate Income Tax(CIT) ..... 46 and employment of minors ...... 792.4. Branches and representative 4.2. Personal Income Tax(PIT) ....... 58 5.12. Health and safety at work ........ 79 offices..................................... 34 4.3. Value Added Tax (VAT)........... 62 5.13. Group redundancies ................ 792.5. Commercial register ................ 34 4.4. Customs and Excise ................ 66 5.14. Trade unions ........................... 80 5.15. Company social fund................ 80 5.16. Foreigners ............................... 80 5.17. Temporary work ...................... 81 5.18. Works councils ........................ 814 Doing Business in Poland
  6. 6. Contents6. Competition law ............. 82 8. Accounting Contacts ..................................... 1046.1. Act on Combating Unfair and auditing..................... 92 About Ernst & Young......................... 106 Competition (1993) ............... 84 8.1. Introduction to the accounting About Domański Zakrzewski Palinka .. 1126.2. Competition and Consumer framework in Poland ................ 94 Protection Act (2007)............ 85 8.2. Major aspects of valuation of balance sheet items ............. 95 8.3. Financial statements................ 987. Capital markets .............. 88 8.4. Financial reporting and audit requirements .......................... 987.1. General ................................... 90 8.5. Consolidation .......................... 1007.2. Regulatory environment ......... 90 8.6. Principal differences between Polish and International Financial Reporting Standards ... 101 Contents 5
  7. 7. 1. Business climate
  8. 8. 1.1. Market Overview GDP growth rate – percentage change on previous year and Key DriversSince the collapse of communism in 1989,Poland has made dramatic progress, –9.8*moving from a centrally planned toa market-oriented economy. Tradeliberalisation, economic restructuring,privatisation, capital inflows, and –4.9 –7.8the gradual adaptation of legal and –1.5administrative standards to market- Poland Population: 38.1 mn peopleoriented practices have improved economic –13.7* Area: 312.7 thousand sqmstructures dramatically. In the mid-to late- –18* Capital: Warsaw1990s the Polish economy grew rapidly. –7.5* –15After a slowdown, due mainly to the –5situation in the global economy, Poland –4 –3.1 –5 +1.7has regained the pace of growth that itachieved in the second half of the 1990s. –4.8* –5.8* –2.2* –1.5 –3.6On 1 May 2004, Poland joined –6.3 –7.4 –7.1the European Union and thus became –5 –5.8*a member of the vast European single –2.9* –3.6market where goods, services, capital –5.9* –2*and labour move as freely as within onecountry. Accession to the EU crowned –1.1 –5.8*years 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 downturn * forecastPoland has been the only countryin Europe to show growth in GDP. Source: Eurostat8 Doing Business in Poland
  9. 9. Given the above, and also considering In recent years, Poland has become one1.2. Foreign direct the fact that Poland is the co-organiser of Europe’s favourite locations for BPO/ investment of EURO 2012, it is no wonder that our SSC and R&D centres. The main reasons country is continuing to attract Foreign behind investors’ decisions to locateThere are several reasons for Poland’s Direct Investments, despite the global their outsourcing/offshoring businessoutstanding performance in the current economic crisis. According to initial in Poland are:difficult times, e.g.: estimates, the inflow of FDI in 2009 was • young, highly qualified workforce• it remains an attractive location for new worth approx. € 8.4mn (approx. 84% with extensive knowledge of foreign investments, both in the production of FDI in 2008). The top 10 investing languages (thanks to the considerable and services sectors (free access to countries are listed below. number of academic institutions the Common Market of approx. 500 throughout the country) million customers, a domestic market • system of incentives (both domestic FDI in Poland by country of approx. 40 million customers, and from EU sources) to encourage labour costs still lower than in Western 1. Germany investments of this type European countries, and highly skilled 2. The Netherlands • welcoming approach of the Polish workforce) 3. Luxembourg authorities towards investors• the Polish authorities have been 4. Sweden considering developing their BPO/SSC following a prudent macroeconomic 5. France in Poland. policy to ensure a stable economy; 6. Cyprus also the Polish banking sector has 7. Austria Some of the investors in SSC/BPO and proven to be stable R&D centres in Poland are shown on the 8. Iceland• EU membership guaranteed an inflow map below. 9. USA of significant additional funds (approx. 10. United Kingdom € 67bn for 2007-2013) encouraging many new investments in both public Source: Polish Information and Foreign Investment Agency (Polska Agencja and private sectors. Informacji i Inwestycji Zagranicznych), www.paiz.gov.pl Business climate 9
  10. 10. Selected SSC/BPO and R&D centres in Poland Bydgoszcz: JP MorganChase, Lucent Technologies, Atos Origin Katowice: Capgemini, Kroll, Bombardier, Rockwell Autom. Kraków: Tri-City Ahold, Bayer, Capgemini, ComArch, Electrolux, (Gdańsk, Gdynia, Sopot) Fortis Bank, Google, Hitachi, HSBC, IBM, Indesit, International Paper, Lufthansa, Philip Morris, RR, Szczecin Donneley, Shell, Tesco, ABB, Delphi, Motorola, UBS, Pliva, Sabre Lublin: Bydgoszcz Genpact, Intelligo, Telekomunikacja Polska SA, France Telecom Łódź: Poznań Warszawa ABB, Accenture, Central Wings, Citi Group, Fujitsu, GE, IBM, Bosch-Siemens, Microsoft, Indesit, Infosys, SAP Łódź Poznań: Carlsberg, Franklin Tempelton, GlaxoSmithKline, Intelligence, Lorenz, MAN, Microsoft Innovation, Open Text, Roche, Unilever Wrocław Lublin Szczecin: UniCredit Katowice Tri-City: IBM, Lufthansa, First Data Corporation Warszawa: Kraków ABN Amro, Accenture, AVON, Citi Group, 3M, Faurecia, GE, Microsoft, Oracle, Samsung Electronics, Hewlett-Packard, IBM, SAP, Tchibo Wrocław: ACP, Credit Suisse, Google, Hewlett Packard, QAD, UPS, Volvo, Alstom, Capgemini, Irvena, Nokia-Siemens, Opera Software, Siemens, Wabco,Source: Polish Information and Foreign Investment Agency Whirlpool10 Doing Business in Poland
  11. 11. General provisions on the admissibility How do I calculate the maximum level1.3. Investment of state aid are set out in the Treaty on of support available for my investment incentives European Union1, the relevant European in Poland? The maximum level of aid a project in Poland Commission regulations, e.g. Commission can receive depends on the size of the Regulation (EC) 800/2008 of 6 August 2008 declaring certain categories of aid company4 and where in Poland the projectThere are many opportunities for compatible with the common market is to be located, and is calculated ascompanies to obtain financial support for in application of Articles 87 and 88 a percentage of the higher amount of:projects in Poland from both European of the Treaty (General block exemption • eligible investment costs, andUnion Funds and domestic sources. Regulation)2 and the Act of 30 April 2004 • two-year employment costs of newlyIn this publication we focus on the most on Proceedings in State Aid Cases3. created jobs.popular of the aid schemes availablefor companies but it is worth noting that Levels of aid intensity, i.e. the maximumthere are many more that can be utilised.Therefore, when considering a new Regional aid levels of aid a project can receive based on for new investments investment or employment-related costs,investment in Poland, it is important for are as follows (see also map below foreach case to be analysed individually Regional aid is the most popular type of aid reference):– various sources and types of support for companies carrying out investment • 30% of eligible costs – Warsawmay be available, depending on the scope projects in Poland. It is granted for “initial” (the city), mazowieckie voivodshipof the project. or “new” investments, which are generally from 1 January 2011 defined as investments related to: • 40% of eligible costs – mazowieckieRegardless of the form of support, • setting up a new enterprise voivodship until 31 December 2010,the incentive system as a whole complies • extending an existing enterprise pomorskie, zachodniopomorskie,with EU requirements and includes: • diversifying output into new, additional dolnośląskie, wielkopolskie, śląskie• regional aid products voivodships• horizontal aid • a fundamental change in the overall • 50% of eligible costs – the rest of the• sectoral aid. production process of an existing country, i.e. warmińsko-mazurskie, enterprise. podlaskie, kujawsko-pomorskie, lubuskie, łódzkie, lubelskie, świętokrzyskie, podkarpackie, małopolskie, 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. Business climate 11
  12. 12. Map of regional aid intensities in Poland, 2007-2013: Pomorskie Warmińsko-Mazurskie Zachodniopomorskie Podlaskie Kujawsko-Pomorskie Mazowieckie Lubuskie Wielkopolskie Warszawa 5Aid intensity : Łódzkie a) Warszawa b) Voivodship: mazowieckie30% – since 01.01.2011 Lubelskie Dolnośląskie a) Voivodship: mazowieckie Świętokrzyskie – until 31.12.2010 Opolskie Śląskie40% b) Voivodships: pomorskie, śląskie dolnośląskie, zachodniopomorskie, wielkopolskie Podkarpackie Małpolskie Voivodships: lubelskie, lubuskie, łódzkie, podlaskie,50% podkarpackie, warmińsko-mazurskie, świętokrzyskie, opolskie, małopolskie, kujawsko-pomorskie5 Additional 20 p.p. for small and 10 p.p. for medium-sized enterprises12 Doing Business in Poland
  13. 13. Please note that there are specific rules Development of a large investment The aid levels which – if exceeded – givefor calculating levels of aid for so-called project gives rise to additional rise to the notification obligation are as“large investment projects”. obligations. When the aid to be granted follows: exceeds certain levels (see the tableLarge investment projects are defined below), it has to be individually notified Aid intensity in the Notification thresholdas projects exceeding the expenditure to the European Commission. In other region (level of aid)level of € 50mn. The adjusted “aid words, there are cases when the 30% €22.5mn 40% €30mnceiling”, i.e. maximum amount of aid a European Commission has to additionally 50% €37.5mnlarge investment project can receive, is approve the support a large project iscalculated as follows: to receive. Am I a large enterprise or an SME? Maximum aid amount for a large project = R × (50 + 0.50 × B + 0.34 × C) As shown above, the level of aid an investor can receive depends directly on where: its size. It is therefore crucial to assess • R is the unadjusted regional aid intensity ceiling for a given location whether the investor meets the definition (e.g. 50% in lubelskie voivodship for a large project) of a small or medium-sized enterprise • B is eligible expenditure between € 50mn and € 100mn (SME). If not, it will constitute a large • C is eligible expenditure above € 100mn enterprise.Please refer to the example below to see how the formula is applied in practice. Example: Assumptions: a) project located in an area with 50% regional aid intensity b) 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 allowed in that region of Poland. The level of support for the large investment project is therefore lower than that resulting from the maximum aid intensity level. The maximum aid amount for the investment can be utilised in different forms (find below more information on 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. Business climate 13
  14. 14. Please see the following chart for However, it is important to note that evena definition of SME: if a company itself fulfils the definition of an SME, it can in fact be a large company due to its shareholding structure. OR Therefore, apart from the general Level of definition, one also has to learn what Enterprise Annual balance employment Annual turnover “linked” and “partner” enterprises are and category sheet total (Annual Work Unit) what are the consequences of being one. A company is a “linked enterprise” when it holds more than 50% of the capital OR or voting rights in another enterprise or another enterprise holds more than Medium-sized < 250 ≤ € 50mn ≤ € 43mn 50% of the capital or voting rights in the company. In the case of linked enterprises the size of the company in question is calculated by adding together the data (shown in the table on the left) of the company and that of OR the linked enterprises. Small < 50 ≤ € 10mn ≤ € 10mn A company is a “partner enterprise” when it holds independently or with other linked enterprises 25-50% of the capital or voting rights in another enterprise or another enterprise holds 25-50% OR of the capital or voting rights in the company. If this is the case, the size of Micro < 10 ≤ € 2mn ≤ € 2mn the company in question is calculated by adding together the data (shown in the table on the left) of the company and that of the partner companies situated immediately upstream or downstream from it. Aggregation is proportional to the14 Doing Business in Poland
  15. 15. percentage interest in the capital or voting Investors are, however, free to perform If a large enterprise applies for aid,rights (whichever is greater). feasibility studies or prepare any technical the assets it buys must be new. This does documentation needed for the project; not apply to SMEs and takeovers.When to start the investment so as not these steps do not constitute investmentto lose aid opportunities? start and can therefore be taken at any If the aid pool is based on employmentWhen discussing regional aid, it is time. costs, expenses eligible for aid are two-important to mention the “investment year employment costs of new employeesstart” issue. As a rule, an investment can What types of cost are eligible for aid? (costs related to job creation resultingonly start after the application for support As mentioned above, aid available for from the new investment). The two-yearhas been filed with the relevant institution. a given project is calculated on the basis employment costs cover:Additionally, large enterprises are obliged of either investment costs or employment • gross wages, andto demonstrate the “incentive effect” of costs. Companies applying for aid choose • all obligatory employment-relatedthe aid applied for by providing an analysis the higher of the two amounts as the basis payments (e.g. social security(in the grant application) showing that for calculating the aid pool. contributions) made by the company.the aid will lead to a material increasein the size, scope or value of the project If the aid pool is based on investment costs, Please note that new jobs are defined asor showing how it will accelerate project expenses eligible for aid may include: a net increase in the number of employeescompletion. • expenditure on land, buildings and directly employed in a company compared plant/machinery with the average level of employment overDue to the “investment start” rule, • technology transfer costs (purchase the previous 12 months.the following steps cannot be taken of patent rights, licences, know-how orbefore the application has been filed unpatented technical knowledge6) Can different types of aid received fromand, in the case of large enterprises, the • costs of financial lease of assets other different sources be combined?incentive effect demonstrated: than land and buildings, provided that Regional aid available in Poland can be• construction work the assets are purchased on expiry of granted in different forms, such as:• commitment to order machinery the lease term • cash grants (support from EU funds) or equipment (i.e. conclusion of • costs of leasing land and buildings if • cash grants under Multi-Annual Support a contract, placing an order) the lease continues for at least 5 years7 Programmes (support from domestic• making payments, including after the investment is finished. budget) prepayments. • CIT exemption in so-called special economic 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. Business climate 15
  16. 16. Different types of regional aid can be the rights and obligations of the aid projects for which aid will be granted.combined together. The only limitation beneficiaries. In the case of CIT exemption In the case of companies registered inis the aid intensity level set for the in SEZs, the most important obligations are Poland aid can be given to support, e.g.:region where the investment is located. set out in the permit to operate in the SEZ. • innovative new investments, which useIf an investor receives regional aid of new technologiesdifferent types for the same investment, One of the most important requirements • shared service centres, IT centres, andthe total amount of aid cannot exceed is to maintain the investment and its R&D centres30-50% of the value of the investment8. results (such as new jobs, assets bought, • production of energy from renewableFor example, if a company secures CIT environment-friendly solutions introduced) sources.exemption and is also awarded a cash in the region for a minimum of 5 years9grant for the same investment, the after the investment is finished. How are cash grants from EU funds accessed?amount of tax credit will be reduced bythe value of the grant, so that the total We now move on to explain the basic rules In order to be eligible for a cash grant fromvalue of aid does not exceed the allowed on applying for and receiving various EU funds, applications have to be madeaid intensity threshold. types of regional aid in Poland. within calls for proposals. Depending on the support scheme, calls are organisedNB: This rule applies only to aid granted Cash grants from EU funds in the form of either closed or open calls.for a single investment. It is not forbidden EU member states are currently realising Closed calls for proposals have a fixedto receive new aid for other investments the 2007-2013 financial perspective, closing date, e.g. 30 days from opening.in Poland. Each new investment will i.e. the seven-year framework for EU In open calls for proposals the closing datebe eligible for a new aid pool of up to spending. Over this period Poland is to depends on fulfilment of the condition30%-50% of its value. receive the largest share of aid from that, e.g. 120% or 150% of the budget EU support funds of all EU members. In allocation for the given year has beenWhat are the most important exceeded (i.e. applicants who have filed particular, € 67.3bn has been allocatedobligations when the aid is granted? applications have requested subsidies for various operational programmes to beCompanies which receive public funding distributed among defined beneficiaries, which total, e.g. 120% of the call budget).in the form of cash grants (from EU particularly companies.or domestic resources) sign financial When applications are submitted they arecovenants with appropriate public Operational programmes set out thoroughly evaluated in accordance withinstitutions. These agreements lay down the general terms and conditions for specified criteria. The assessment process8 50-70% for SMEs.9 3 years for SMEs.16 Doing Business in Poland
  17. 17. takes approx. 3-4 months and covers In order to apply for a grant, investments IT centres have to declare that they willa formal and content evaluation. In the must fulfil the following entry criteria: create at least 100 new jobs. There arecontent evaluation the application has to • investment costs of at least PLN no limits on the value of the investment.be awarded a minimum number of marks 160mn and creation of at least 150 In the case of R&D centres, at least(e.g. 60 out of 100) to secure the right new jobs, and 10 jobs have to be created and a minimumto the grant. However, in the most popular • uses a technology which has been of PLN 2mn invested.aid schemes the minimum number of used worldwide for less than 3 yearspoints can be insufficient to actually or whose dissemination within the The maximum value of aid which canreceive the grant, due to the limited relevant industry does not exceed 15%. be granted for SSC or IT investmentbudget; if this is the case, cash grants go projects is 30%. In the case of R&D centresto applicants with the highest scores. Despite the fact that this aid type falls the maximum level of aid is calculated under the definition of regional aid, there according to the map of regional aidExample: What should I do to receive is a maximum limit of 30% of costs eligible intensities.a cash grant for an innovative for aid that can be received in the form ofinvestment? a cash grant. Thus it is important for the This type of support is granted on the basisThere is a special aid scheme available investor to be aware that it is entitled to of open calls (until 150% of the budgetfor investments using innovative apply for other types of aid for the same allocation has been applied for).technologies. This aid scheme supports investment, up to the limit of regional aidprojects of high innovative potential intensity allowed in a given investment Corporate incomewhich generate significant added location.value for the economy (projects which tax exemption in SEZpromote innovation in the form of new Companies investing in Poland are also This type of support is granted on the basistechnologies, products and services, encouraged to use another type of of open calls (until 100% of the budgetwhich contribute to higher productivity incentive, i.e. corporate income tax (CIT) allocation has been applied for).and exports, and which introduce major exemption in a SEZ. SEZs were createdorganisational changes in companies). Example: What should I do to obtain in the 90s and cover selected parts ofIt is designed to support investments with a cash grant for shared service Poland where companies can operate onhigh innovation potential in the production centres? preferential terms and conditions. Thissector which are likely to incur high There is a separate aid scheme designed type of support is also a type of regionalinvestments costs and lead to the creation to support projects involving the aid and is available based on a SEZ permitof a significant number of new jobs. development of shared service centres/ until the given SEZ ceases existence BPOs, IT centres, and R&D centres. – which at present is set for 31 December In order to apply for a grant the SSC and 2020 for all 14 SEZs. Business climate 17
  18. 18. There are 14 headquarters, one for each Headquarters of SEZs in Polandof the SEZs (see map), while each SEZconsists of several sub-zones located indifferent places, not necessarily adjacentto each other. The overall area of all zones Sopotis over 13,000 ha, but the area may be Słupskextended up to 20,000 ha. Suwałki OlsztynHow do I calculate the maximum aidavailable in the form of CIT exemptionin SEZs? BydgoszczThe 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 Kostrzyn(as with EU grants) – the benefit is CITexemption. We explain below how the CIT Łódźexemption limit is determined. LegnicaThe support is granted for a new Kamienna Górainvestment. Therefore, the maximum aid Wałbrzych Starchowiceavailable is calculated according to the Katowicemap of regional aid intensities (and based Tarnobrzegon investment or employment costs). MielecAfterwards, this aid “pool” is utilised Krakówas 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 givenSEZ’s existence.18 Doing Business in Poland
  19. 19. What is a SEZ permit? How can I locate my investment in a SEZ? In particular, under MASPs support mayTo benefit from CIT exemption the Investors can locate their investments be granted to:investor must obtain a permit to operate (business activity) in an already existing • projects in so-called “priorityin a SEZ. The permit specifies the SEZ or they can apply for a SEZ extension sectors”: automotive, electronics,conditions which the investor must meet, to cover private land where the planned aviation, biotechnology, new servicese.g. the value of the planned investment, investment is to be located. In the latter (particularly IT centres, BPOs andthe intended level of employment, case, the investor has to fulfil specific telecommunications), and R&Dbusiness start-up date and deadlines by criteria. The SEZ extension process • “significant” investments in otherwhich all the obligations set out in the takes at least 6 months as it requires an sectors with eligible costs of at leastpermit must be met. amendment to the Council of Ministers PLN 1bn and creating at least 500 Resolution. new jobs.The SEZ permit also specifies How do I apply? Although MASP constitutes regional aid,(by reference to Polish statisticalclassifications) the activities to be There are no calls for proposals in SEZs. additional aid ceilings were introduced.performed in the SEZ which qualify for CIT Companies can submit an application As a result, maximum aid levels are asexemption. Revenues from activities not at any time during the year. In a formal follows:explicitly mentioned in the SEZ permit are negotiating procedure, a decision is taken • investment performed in a SEZ – 15%taxable on standard rules. to extend the SEZ and/or issue a SEZ of eligible costs permit. • investment performed outside a SEZAccording to regional aid rules, – 30% of eligible costs.the investment activities can be started Multi-Annual Supportonly after the SEZ permit is issued. Programme Support may be based on two-yearMoreover, only investment costs borne A Multi-Annual Support Programme employment costs of new staff hired(invoices paid) and new jobs created after (MASP) is an aid scheme (a type of or eligible investment costs. Dependingthe SEZ permit is issued may be applied regional aid) financed from the Polish on the type of eligible costs there areto compute the tax exemption. budget and is dedicated to supporting different entry criteria for projects. large investments which are considered vital to the Polish economy. Business climate 19
  20. 20. What are the entry criteria? • voivodships: warmińsko-mazurskie, How do I apply? podlaskie, świętokrzyskie, lubelskie, There are no calls for proposals.A. Support based on two-year podkarpackie Companies can submit applications at anyemployment costs of newly created jobs the level of support may be increased by 8%. time during the year.Support can be granted to entrepreneursmeeting the following entry criteria: B. Support based on eligible• for “priority” production sectors: investment costs Other types of support incurring investment costs of at least Support can be granted to entrepreneurs As already mentioned, there are many PLN 40mn and creating at least 250 fulfilling the following entry criteria: other sources of support available new jobs • for “priority” sectors: incurring in Poland. Please find below some• for modern services sector: creating investment costs of at least PLN examples. at least 250 new jobs 160mn and creating at least 50 new• for R&D sector: incurring investment jobs CIT and other incentives (not state aid) costs of at least PLN 3mn and creating • for other sectors: incurring investment The following R&D incentives are also at least 35 new jobs (for employees costs of at least PLN 1bn and creating available under Polish tax law: with university degrees) at least 500 new jobs. • entrepreneurs investing in R&D are• for other sectors: incurring investment allowed to deduct from the tax base costs of at least PLN 1bn and creating The level of support based on eligible up to 50% of costs actually incurred at least 500 new jobs. investment costs is up to 10% depending in purchasing new technology10 inThe level of support based on newly on a specific set of criteria. a given year (entities operating in SEZscreated jobs ranges from PLN 3,200 are not eligible). A new technology isto PLN 18,700 per job, depending on Having fulfilled the entry criteria, projects defined as technical knowledge in thea specific set of criteria. are evaluated against additional detailed form of intangible assets (in particular criteria, including: the results of R&D work) enablingIn the case of investments in: • processes performed by the company production of new or modernised• counties with an unemployment (services provided to other parties) goods/services that has been applied rate of at least 200% of the country • human capital (% of employees with globally for less than 5 years (this average (Central Statistics Office data a university degree) must be confirmed by an independent in the month before the application is • investment location scientific body) submitted to PAIiIZ) • other (e.g. cooperation with • costs of finished R&D work can be universities, the company’s reputation, deducted from the tax base regardless unique operations performed).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.20 Doing Business in Poland
  21. 21. of the result (unless they can be Please note that “general training” of the employee. “Specific training” classified as an intangible asset and involves tuition which is not applicable in turn involves tuition directly and depreciated) only or principally to the employee’s principally applicable to the employee’s• 12-month depreciation period for present or future position in the company, present or future position in the company finished R&D work (shortened from 36 but which provides qualifications and provides qualifications which are not months) which are largely transferable to other or only to a limited extent transferable to• 22% VAT on R&D services. companies or fields of work and thereby other companies or fields of work. substantially improve the employabilitySupport for trainingThere are aid schemes designed to help small enterprises – up to 80%employees and entrepreneurs raise their General training medium enterprises – up to 70% large enterprises – up to 60% of eligible expensesqualifications and adjust their skills to small enterprises – up to 45%market requirements. Maximum support Specific training medium enterprises – up to 35%levels are shown in the table below. large enterprises – up to 25% of eligible expenses Business climate 21
  22. 22. 2. Establishing a business presence
  23. 23. Investors from EU and EFTA member • limited liability company (spółka2.1. Overview countries or from countries, which z ograniczoną odpowiedzialnością have entered into specific international – sp. z o.o.)The legal concept of “doing business” agreements with the EU may conduct • limited joint-stock partnership (spółkais best described in Polish law in the Act economic activity on the same terms komandytowo-akcyjna – S.K.A.)on Freedom of Economic Activity (2004), as Polish citizens. • registered partnership (spółka jawnawhich defines economic activity – sp.j.)as “manufacturing, construction, trading, Other investors may conduct economic • limited partnership (spółkaprovision of services, the search for, activity on the same terms as Polish komandytowa – sp.k.)identification and extraction of natural citizens only if they hold specific permits, • professional partnership (spółkaresources, as well as professional activity e.g. that legalise their stay in Poland partnerska – sp.p.)pursued for the purpose of gaining and allow them to conduct commercial • sole proprietorship (indywidualnaprofit and conducted in an organised activity. Such investors may conduct działalność gospodarcza)and continuous manner”. The Act also economic activity by: • European Economic Interest Groupingstates that undertaking and pursuing • establishing limited partnerships, limited (Europejskie Zgrupowanie Interesóweconomic activity shall be free and allowed joint-stock partnerships, limited liability Gospodarczych – EZIG)to everyone on equal terms subject companies and joint-stock companies • civil law partnership (spółkato conditions specified in the law. • purchasing and acquiring shares cywilna) – all the partners in this type in such companies. of partnership have to be registeredThis definition of “doing business” also as individuals jointly pursuing economicapplies to foreign investors undertaking The main legal forms available for doing activity. Therefore, such a partnershipeconomic activity in Poland. However, business in Poland are listed below. is not a separate business entity thoughthere are differences between investors All these forms are available to Polish it may be used for joint investmentfrom EU and EFTA member countries investors and foreign investors based projects or consortia.and those from other countries. in EU and EFTA member countries or countries which have entered into Many of the laws governing business specific international agreements operations are contained in the following with the EU: Acts: • joint-stock company (spółka akcyjna • Code of Commercial Companies – S.A.) (15 September 2000) – covers forms • European Company (Societas in which companies and partnerships Europea) (Spółka Europejska – SE) can do business24 Doing Business in Poland
  24. 24. • Council Regulation (EC) No 2157/2001 However, the law does not prohibit on the Statute for a European Company 2.2. Companies a joint-stock company from having only (8 October 2001) one shareholder that also happens All types of companies are available• Council Regulation (EEC) No 2137/85 to be a joint-stock company with one to a foreign investor provided that on the European Economic Interest shareholder. the investor: Grouping (27 July 1985) • has a permit legalising his stay Company formation• Act on European Economic Interest and allowing him to conduct business Grouping and European Company The founding members agree upon activity in Poland, or (4 March 2005) and sign the joint-stock company’s • originates from an EU or EFTA member• Act on the Freedom of Economic articles of association, supply at least country or from a country that has Activity (2 July 2004). 25% of the initial capital, and make all the entered into specific internationalOther regulations of significance for vital management decisions concerning agreements with the EU.commercial companies are: the company before the management• Banking Law (29 August 1997) board and supervisory board are If the above conditions are not met,• Act on the Commercialisation appointed. the investor may establish a limited and Privatisation of State-owned partnership, limited joint-stock Enterprises (30 August 1996) The formation of a joint-stock company partnership, limited liability company• Insurance Act (22 May 2003) involves the following: or joint-stock company. There are• Capital Market Regulation Act • execution of the articles of association no further limitations on the form (29 July 2005) by the founding members of economic activity that investors• Act on Public Offerings and Terms • the shares being paid up in accordance choose to udertake. on which Financial Instruments with the law (see Share capital are Introduced to an Organised Trading requirements) System and on Public Companies • appointment of a management Joint-stock company (29 July 2005) board and a supervisory board A Polish joint-stock company can be (see Management)• Act on Trading in Financial Instruments established by one or more founding • the company being entered (29 July 2005). members. A limited liability company in the commercial register (part with one shareholder cannot be the sole of the Polish Court Register).These Acts contain provisions on banking founding member of a joint-stockand insurance activities and public trading company.in securities. Establishing a business presence 25
  25. 25. The articles of association should be • proof that payment for the shares Share capital requirementsdrawn up in the form of a notarial deed has been made to the bank account The minimum share capital requirementand signed by the founding members. of the company in organisation is PLN 100,000. The value of each share certified by a bank or brokerage house; must be at least PLN 0.01 (1 grosz).All founding members should provide if the articles of association provide Shares are equal and indivisible. Sharesthe notary with documents confirming for share capital to be covered by acquired in exchange for a contributiontheir legal status (e.g. for a foreign in-kind contributions after the company in kind should be fully paid up no latercorporate shareholder, an excerpt from is registered, the appropriate statement than one year after the company’sthe appropriate commercial register made by all the management board registration. Shares taken up in cashor a deed of incorporation that usually members must be attached should be paid up to 25% beforehas to be validated by way of an apostille • a document showing that the members the company is registered. If shares areor in a Polish embassy or consulate, of the company’s authorities have been acquired solely through a contributiontogether with a sworn translation into appointed, together with a list of their in kind, or through a contributionPolish). names in kind plus a cash contribution, 25% • the relevant permit or evidence of the nominal share capital should beThe company is then registered by that the articles of association have paid up prior to registration.the registration court. been approved by a competent administrative authority if such If the shares are covered by a contributionThe following documentation should be documents are required for the in kind, the founders must draw upfiled with the court: company’s incorporation a special valuation report to be examined• application for registration signed • specimen signatures of all during the registration process by auditors by all the members of the company’s the management board members. appointed by the registration court. management board• the company’s articles of association For the company to become fully Preference shares may be issued, and share subscription statements in operational, the statistical office should awarding, for example, preferential the form of notarial deeds be notified, whereupon the company will dividend rights (though these are• a statement signed by all receive its own statistical identification limited), voting privileges (up to two the management board members number (REGON). The company will also votes per share), or privileges with to the effect that the shares have been need to apply to the tax office for a tax respect to the distribution of assets paid up as provided for in the articles identification number (NIP). There is in the event of the company’s liquidation. of association and in accordance with a statutory requirement for a joint-stock A joint-stock company may issue either the law company to carry out an annual audit. registered or bearer shares.26 Doing Business in Poland
  26. 26. There are no legal restrictions • allocate profit or absorb losses, shareholders’ preferential dividendon the transferability of bearer shares and make decisions regarding claims rights or reducing individual rightsunder the law and none can be imposed for any damage caused during vested personally in shareholders)in a company’s articles of association. the establishment, management • a qualified majority of three quarters or supervision of the company of votes cast (for example, whenShares which are not paid up to their • dispose of or lease the company’s amending the articles of associationfull nominal value or which are taken up business or an organised part thereof or decreasing share capital orin exchange for a contribution in kind or establish a limited property right when taking a decision to mergecannot be issued as bearer shares. thereon the company).Registered shares can only be transferred • dispose of or acquire real estate,by way of a written statement made perpetual usufruct of real estate or The articles of association may containby the previous shareholder and delivery part thereof (unless otherwise stated more stringent conditions for the adoptionof the share certificate. in the articles of association) of such resolutions. • issue convertible bonds or bonds withReserve capital a pre-emptive right Management boardA reserve fund for potential losses must be • amend the company’s articles The supervisory board appointscreated by 8% of the joint-stock company’s of association the joint-stock company’s managementannual profits being transferred to the fund • increase or decrease the company’s board unless otherwise specifieduntil the amount on the reserve capital is share capital (subject to specific in the articles of association.one third of share capital. exceptions) • for a period of two years after company The management board members’Management term of office cannot exceed five years. registration, acquire a propertyThe authorities of a joint-stock for a price more than 1/10 higher than The management board has the exclusivecompany are the shareholders’ the paid-up share capital from certain power to represent the company beforemeeting, the management board categories of related entities, such third parties, both in and out of court,and the supervisory board. as a founding member or a company but any limitations in this respect will not shareholder. be effective towards third parties.Shareholders’ meetingThe shareholders’ meeting is empowered to: An absolute majority of votes cast The management board is a collective• examine and approve the management is sufficient for most decisions. However, body, so it makes decisions by way board report, the balance sheet some resolutions may be adopted only by: of resolutions. and the profit and loss account for • a unanimous vote of the shareholders the previous year concerned (for example, amendments to the articles of association increasing Establishing a business presence 27
  27. 27. Supervisory board • monitoring the financial reporting of the company’s founders, managementA joint-stock company must have process board and supervisory board membersa supervisory board of no fewer than • monitoring the effectiveness of the and shareholders for certain activitiesthree persons (five in public companies) internal control systems, internal audit carried out in violation of the law.appointed by the shareholders’ meeting. and risk management • monitoring the financial revision DissolutionThe supervisory board permanently • monitoring the independence of the A joint-stock company can be dissolved:supervises the company’s operations in all certified auditor and, in some cases, • for reasons set out in the company’sareas of its business and specifically has of the entity authorized to review the articles of associationthe power to: examine the management financial statements of the company. • by way of a resolution adoptedboard report and the company’s financial by the shareholders’ meetingstatements to ensure that they accurately Liability to dissolve the company or to transferreflect the company’s books of account, A joint-stock company’s shareholders the registered office or principaldocuments, and the actual state of affairs; are not personally responsible for establishment of the company abroadexamine the management board’s the company’s liabilities. Management • when the company is declaredactivities regarding allocation of profit and board members are liable jointly and bankrupt by a courtabsorption of losses and submit an annual severally with all their assets for any • for other reasons provided for by the law.written report on the result of its tax arrears the company may have if enforcement against the company European Companyexamination to the shareholders’ meeting. proves ineffective, unless board members A European Company is a companyIn case of public joint-stock companies, can show that a petition in bankruptcy which is intended for large, Europe-widein which the supervisory board is was filed or arrangement proceedings businesses. It is not bound by the legalcomposed of more than five persons, an were initiated in due time, or that failure and practical constraints arising fromAudit Committee should be appointed. to file a petition or enter into arrangement the domestic company laws of eachThe Audit Committee should be composed proceedings was not due to a fault on their EU member state. The main advantage ofof three or more members, at least one part, or if they indicate property on which a European Company is that it can moveof which should fulfil the independence the enforcement can be effected. its registered office from one EU staterequirements of the Certified Auditors to another without losing legal personality.Act and be qualified in accounting Management board members areand financial revision. The members also responsible for any tax liabilities A European Company is governed byof the Audit Committee are appointed arising during the period in which Regulation No 2157/2001 on the Statuteby the supervisory board from among they sat on the management board. for a European Company, the Europeanits members. The Audit Committee is The Code of Commercial Companies Company’s articles of association,responsible, inter alia, for: provides for civil and criminal liability the laws of EU member states adopted28 Doing Business in Poland
  28. 28. in implementation of EU measures relating which has had a subsidiary in another Limited liability companyto European Companies and the laws of EU EU member state for two years.member states which would apply to a A limited liability company may havejoint-stock company formed in accordance Any existing European Company may only one shareholder, though it cannotwith the law of the member state where move its registered office to Poland. be formed solely by another limitedthe European Company has its registered liability company with one shareholder.office. This means that, to the extent not Capital requirements Incorporation of a limited liabilityregulated in EU law, European Companies The minimum capital requirement for company generally involves the samewith registered offices in Poland will be a European Company is € 120,000 procedure as incorporation of a joint-subject to Polish provisions on joint-stock (unless Polish law requires larger capital stock company. A limited liabilitycompanies established under the Polish for companies carrying on certain types company does not necessarily have to beCode of Commercial Companies. of activity). audited every year (see Accounting and audit requirements).Formation ManagementA European Company may be formed The founders of a European Company Share capital requirementsthrough: may choose between a two-tier system The minimum share capital in a limited• merger of two joint-stock companies (i.e. involving a management board and liability company is PLN 5,000 and it from different EU member states a supervisory board, similar to the Polish must be paid up in full before registration.• formation of a holding company by two joint-stock company described above) The nominal value of one share cannot be joint-stock companies or limited liability or a single-tier system (i.e. where less than PLN 50. companies from different EU member the European Company is managed states or by any two joint-stock by an administrative board, closer A shareholder can hold either one share companies or limited liability companies to the concepts in Spanish or Italian (when shares are divisible and unequal) that have had a subsidiary or a branch company law). Under the one-tier system, or more than one share (when they are in another EU member state for the European Company’s administrative indivisible and equal). Preference shares a minimum of two years board runs its affairs, represents it may be issued. The transfer or pledge of• formation of a joint subsidiary by two and supervises its business. a share or part thereof in a limited liability entities from different EU member company should be made in written form states or by two entities that have had The administrative board may appoint with signatures certified by a notary. a subsidiary or a branch in another managing directors from among its EU member state for a minimum members or third parties. However, Reserve capital of two years, or at least half the number of administrative There is no requirement for a limited• transformation of a joint-stock company board members should not be managing liability company to have a reserve fund. previously formed under national law directors. Establishing a business presence 29
  29. 29. Management and request the management board similar to those of the supervisory boardThe authorities of a limited liability to provide explanations. Where there in a joint-stock company.company are the shareholders’ meeting is a supervisory board or an auditand the management board. committee, the company’s articles Liability of association may exclude the right The rules are the same as those givenA supervisory board or audit of individual inspection by shareholders. above for a joint-stock company.committee is optional, unless the The supervisory board (audit committee) Dissolutionlimited liability company has share of a limited liability company, if appointed,capital of more than PLN 500,000 must be composed of a minimum of three A limited liability company may beand more than 25 shareholders. persons. The powers of the supervisory dissolved for reasons similar to those thatThe shareholders’ meeting is the board in a limited liability company are apply to a joint-stock company.supreme authority in a limited liabilitycompany. The shareholders’ meetinghas rights similar to those in a joint- Major differences between limited liability companies and joint-stock companies:stock company, although some of its Shareholders Limited liability company Joint-stock companypowers and majority ratios required for Number of founding One or more shareholders. One or more founding members.passing resolutions on certain issues members A limited liability company cannot be formed A limited liability company with onemay differ. The management board is solely by another limited liability company shareholder cannot be the sole founding with one shareholder. member of a joint-stock company.appointed by the shareholders’ meeting.The powers of the management board Minimum share PLN 5,000 PLN 100,000are similar to those in a joint-stock capitalcompany, except that any individual Minimum value PLN 50 PLN 0.01 (1 grosz)board member may conduct matters of one sharewithin the ordinary course of business. Contributions In cash or in kind; share capital must be fully In cash or in kind; shares covered byMembers of the management board paid up before registration. an in kind contribution should be fullyin a limited liability company may be paid up no later than one year afterappointed for a non-fixed term. Each company registration. Shares taken up in cash shouldshareholder has the right of inspection. be 25% paid up prior to companyIn order to exercise this right, each registration. If the shares are acquiredshareholder (or a shareholder solely through a contribution in kind, or through a contribution in kind plusaccompanied by an authorised person) a cash contribution, 25% of the nominalmay at any time inspect the company’s share capital should be paid up priorbooks and documents, draw up to registration.a balance sheet for his/her own use30 Doing Business in Poland