How to do Business Investors' Guide Poland - Polish Agency for ...

How to doBusinessInvestors’ GuidePolandwww.deloitte.com/plwww.paiz.gov.plWarsaw 2008

How to doBusinessInvestors’ GuidePolandWarsaw 2008

Table of ContentsHow to do BusinessI . Establishing a business step-by-step 8II. Establishing and doing business in Poland 101. Starting a business in Poland 101.1. General rules for conducting business activities in Poland,including activities of foreign enterprises 101.2. Corporate entities 111.3. Types of activities requiring licenses, concessions or permits 181.4. Process of establishing and registering an entity 201.5. Office rental 211.6. Acquiring real estate 221.7. Property and real estate permits 241.8. The construction process 241.9. Employment of workers 271.10. Polish social security system 362. Conducting business activities - basic regulations 402.1. Accounting and finance regulations 402.2. Taxes 422.3. Insurance regulations 552.4. Polish trade regulations 572.5. Currency and exchange controls 612.6. Intellectual and industrial property rights 622.7. Competition law 662.8. Product certification 692.9. Regulations for entering into contracts 702.10. Regulations governing mergers and acquisitions 712.11. Bankruptcy and restructuring 712.12. Public procurement regulations 722.13. CO2 emission allowances 75III. Investment incentives 781. Foreign investment policy 782. Grants and incentives in Poland in 2007-2013 782.1. Business opportunities - overwiew 782.2. EU Structural Funds 2007-2013 802.3. Special Economic Zones (SEZ) 813. Duty-free zones 824. Customs (bonded) warehouses 825. Support for hiring the unemployed 826. Exemptions from local taxes 837. OECD guidelines for multinational enterprises 83

In PolandIV. Poland in Brief 861. Key facts about Poland 861.1. Geographic location and climate 861.2 Population and language 881.3. Political system 891.4. Central and local government administration 901.5. System of justice 912. Infrastructure 922.1. Transport and communications 922.2. Telecommunications infrastructure 952.3. Telecommunications density and connections lease market 972.4. Data transmission systems and density 973. Natural resources 983.1. Coal and lignite 983.2. Oil and gas 983.3. Other deposits 993.4 Crops and livestock 994. Energy sector 995. Industry 1006. Tourism 1017. Polish banking and financial institutions 1027.1. The National Bank of Poland 1037.2. Commercial banks 1038. Stock exchange and capital market regulations 1048.1. Structure of the Warsaw Stock Exchange 1048.2. Financial Supervision Authority 1058.3. Acquisition of material blocks of shares 1058.4. Position of foreign investors 1068.5. Venture capital funds 1069. Education 1079.1. The education system 1079.2. Special education 1109.3. Teachers 1109.4. Scientific and R&D institutions 11010. Human resources 11110.1. Employment and the labour force 11110.2. Unemployment 11310.3. Salaries 11311. General macroeconomic indicators 11411.1. Gross Domestic Product 11411.2. Consumer Price Index 11611.3. Foreign trade 11611.4. Local cost effectiveness 11812. Poland on the international arena 12112.1. Poland in the European Union 12112.2. Poland in the Single Market 12612.3. Poland and the Monetary Union 12912.4. Other international organisations 130V. Sources of information 1321. Polish Information and Foreign Investment Agency (PAIiIZ) 1322. Regional Investor Assistance Centres - PAIiIZ’s partners 134VI. Appendices 1341. Selection of foreign direct investment by country 1342. International schools in Poland 144

How to do Business

I. Establishing a business step-by-stepSTEP 1Choice of legal formFor example:- limited liability company (spó∏ka z ograniczonà odpowiedzialnoÊcià)- joint-stock company (spó∏ka akcyjna)- branch office (oddzia∏)See page: 10, 11, 12, 16STEP 2Arranging for an official company address(at least a lease agreement for the office)See page: 21STEP 3Signing the company’s Articles of Association or Statute(applies to limited liability company and joint-stock company only)See page: 11, 20, 21STEP 4Registration of the company in the National Court Register(Krajowy Rejestr Sàdowy)- Registration should be effected in the District Court that has jurisdictionover the district in which the company will have its official address.- Addresses of Economic Divisions of the National Court Register andinformation on their territorial jurisdiction are available through theMinistry of Justice website, www.ms.gov.plSee page: 11, 20STEP 5Application to the Central Statistical Office (G∏ówny UrzàdStatystyczny - GUS) for a Statistical Identification Number(REGON)See page: 208

STEP 6Opening an account at a Polish bankAccording to Polish law, every business entity must have an account at aPolish bankSee page: 20, 40STEP 7Applying to the Tax Office for a Taxpayer Identification Number (NIP)Tax Office appropriate for the company’s official addressSee page: 20, 21, 42STEP 8Notifying the Social Insurance Institution (Zak∏ad UbezpieczeƒSpo∏ecznych - ZUS)This obligation arises after the employment of the first employeeSee page: 36, 55STEP 9Notifying the National Labour InspectorateAnd other institutions, if necessary, including, for instance, the GeneralPersonal Data Protection InspectorateSee page: 27STEP 10Receiving required permits or licensesSee page: 18, 19, 24, 25STEP 11Registration in the Tax Office as a VAT payerSee page: 49How to do Business. Investors’ Guide - Poland Establishing a business step-by-step 9

II. Establishing and doing business in Poland1. Starting a business in Poland1.1. General rules for conducting businessactivities in Poland, including the activitiesof foreign businessesThe principal legal act governing businessactivities in Poland is the Economic FreedomAct of 2nd July, 2004. It regulates the conduct,running and closure of businesses in Poland,as well as the tasks of public administrationin this domain. Foreign persons 1 from theEuropean Union and the European FreeTrade Association zones belonging to theEuropean Economic Area (EEA) may establishand conduct business under the same rules asthose that apply to Polish enterprises.The same rules also apply to foreigners livingoutside the EU and the EEA who:• have received a permit to settle in Poland;• have received a permit to stay in Polandunder the status of a long-term resident ofthe European Union;• have received a permit for a tolerated stay,• have a residency permit or refugee statusgranted by the Republic of Poland, or• enjoy temporary protection in Poland.• a limited liability company;• a joint-stock company.Such foreigners also have the right to enterinto the types of partnerships and companieslisted above, as well as acquire shares inthem. Furthermore, foreign entrepreneurs 2may conduct business activities in the form ofa branch office, or they may establishrepresentative offices in Poland.Provisions regarding the establishment andmanagement of the above-mentionedpartnerships and companies are placed in thesecond most important act regardingconducting business in Poland, i.e. the Codeof Commercial Partnerships and Companiesof 15 September 2000.Work is currently in progress to amend thelaws governing starting up businesses inPoland. The changes in question envisagereducing the number of formalities requiredto establish a company. Parliamentarydiscussions are currently in progress on thedraft amendments to the applicable laws.Unless international agreements state otherwise,foreigners other than those indicated abovehave the right to establish and conductbusiness activities only in the form of:• a limited partnership;• a limited joint-stock partnership;1: Under the law, a foreing person is: a) a private individualresiding abroad, without Polish citizenship; b) an incorporatedperson with its seat (registered office) abroad; c)an organisational unit with its seat abroad, not being alegal entity, but having legal capacity.2: According to the law, a foreign entrepreneur is a foreignperson conducting business activities abroad.10

1.2. Corporate entitiesForeign entrepreneurs may establish variousforms of companies. Possible legal forms forcompanies in Poland are presented below.1.2.1. Limited liability companyA limited liability company (sp. z o.o.) is thebasic type of company in Poland. A sp. z o. o.has a separate legal personality from itsshareholders, which means that when actingthrough its governing bodies (mainly themanagement board), it can acquire rights andincur liabilities on its own behalf. A sp. z o.o.has capital which is created from shareholdercontributions. Shareholders of a sp. z o.o. arenot liable for the liabilities of the company.The management of a sp. z o.o. is less formalthan that of a joint-stock company. It is,therefore, a significantly more popular formfor conducting business than a joint-stockcompany.A limited liability company is established inorder to conduct all activities permitted bylaw, by way of notarised Articles ofAssociation which specify:• the name of the company and its registeredoffice;• the description of the nature of businesswhich must be specified in accordance withthe Polish Classification of Activities (PolskaKlasyfikacja Dzia∏alnoÊci, PKD);• the amount of share capital;• the number of shares that one shareholdercan hold (this can be one or more);• the number and nominal value of the sharesacquired by each of the shareholders;• the duration of the company (if limited).Articles of Association of a Polish companymust be signed in front of a notary public inPoland. Both individuals and legal entitiesmay be founders. A limited liability companymay also be formed by a single shareholder,but it may not be established solely byanother single-shareholder limited liabilitycompany.A limited liability company acquires legalpersonality from its registration in theNational Court Register and is represented byits Management Board. However, it comesinto existence on the signing of the Articlesof Association. Although it does not have alegal personality, it can start operatingbefore its entry into the National CourtRegister as an “entity in organisation“.A limited liability company in organisationcan acquire rights and enter into obligations(therefore it can sign agreements), it can alsosue and be sued. Also, the principles ofrepresentation of a company in organisationand liabilities for its actions vary to those of afully registered company.The minimum initial capital of a limited liabilitycompany is PLN 50,000. The minimumnominal value of one share is PLN 50.If the company generates a profit after theannual balance sheet has been approved anddue taxes have been paid, a foreign shareholderis permitted to transfer the entire amount ofthe profit due to him abroad.Contributions to a limited liability companymay be made in cash or in kind.1.2.1.1. Corporate bodies of a limitedliability companyThe corporate bodies of a limited liabilitycompany are the Shareholders? Meeting, theManagement Board and the SupervisoryBoard, if required by law or if provided for inthe company’s Articles of Association.How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 11

The provisions of the Code of CommercialPartnerships and Companies, Polish practiceand jurisprudence clearly define and separatethe rights and obligations of each body of acompany. Polish corporate governance isbased on a two-tier system and a cleardemarcation of responsibilities between theexecutive - Management Board, and thenon-executive - Supervisory Board. Anexception to this system is a EuropeanCompany regulated under the EuropeanEconomic Interest Grouping and EuropeanCompany Law, which provides for thepossibility of choosing between one-tier andtwo-tier corporate governance.The authority of a Management Board cangenerally be described as conducting businessand representing the company in dealingswith third parties. Only a natural person withfull capacity to perform legal actions canserve as a Management Board member. TheManagement Board may consist fully or partiallyof foreign nationals.The Polish Code of Commercial Partnershipsand Companies provides for an obligatorySupervisory Body for joint-stock companiesand limited liability companies with a sharecapital of more than PLN 500,000 and morethan 25 shareholders.The Supervisory Board exercises ongoing supervisionover all areas of a company’s activity. TheBoard may not give any binding instructions tothe Management Board on running the company’sbusiness. The authority it has includes theassessment of the financial statements and theManagement Board’s motions on the distributionof profit or the method in which losses areto be covered, as well as submitting annualreports on its activities to the Shareholders?Meeting. The Board inspects the company’sdocuments, requests reports and explanationsfrom the Management Board and employeesand audits the company’s assets. A company’sArticles of Association can extend the powersof a Supervisory Board, specifically by providingthat the Management Board must obtain theconsent of the Supervisory Board before performingthe activities designated in theArticles.The right to control the company is vested inthe shareholders, unless the Articles ofAssociation provide for a Supervisory boardand simultaneously limit the powers of theshareholders.1.2.1.2. Liability in a limited liabilitycompanyResponsibility for the liabilities of a “companyin organisation“ is borne jointly and severallyby the company and the persons acting on itsbehalf. A shareholder of a “company inorganisation“ is jointly and severally responsiblewith these persons for the company’s liabilitiesup to the amount of the unpaid contributionto the shares to which he subscribed.As in the case of the shareholders,Management Board members, are not liablefor the company’s liabilities. An exception tothis principle is the personal joint liability ofthe Management Board members and thecompany for the company’s liabilities whenenforcement against the company provesineffective. Management Board members canrelease themselves from this liability if theyprove one of the following circumstances:that they punctually filed a motion to declarebankruptcy, or if composition proceedingshave been initiated, or if they have not filedfor bankruptcy, or composition proceedingshave not been initiated through no fault oftheir own or a creditor did not incur anyinjury from the failure to file a motion todeclare bankruptcy or failure to initiatecomposition proceedings.Moreover, Management Board members arejointly liable with the company to creditors in12

the event of the intentional or negligent provisionof false data in a representation statingthat the company’s share capital has beenfully paid up, which is filed upon incorporationof the company and at the time that thecompany’s share capital is increased.The founders are obliged to draw up thestatute in the form of a notarial deed in frontof a notary public in Poland. The companycomes into existence on the implementationof the company deed, but it obtains legalpersonality at the time when it is enteredA Management Board member (just as in thecase of a member of the Supervisory Board, AuditCommittee or liquidator) is liable to the companyfor damages caused by an action or omission inbreach of the law or the provisions of the Articlesof Association, unless he is not at fault.1.2.2. Joint-stock companyA joint-stock company has a separate legalpersonality from its stockholders, whichmeans that when acting through its governingbodies (mainly the Management Board) it canacquire rights and incur liabilities on its ownbehalf. A joint-stock company has capitalwhich is created from stockholder contributions.Stockholders of a joint-stock company are notliable for the company’s liabilities.Management of a joint-stock company ismore formal than that of a limited liabilitycompany. Therefore, this type of company isused for businesses where this form isrequired by law (for example a bank, orinsurance company), or where the company isplanning a floatation on capital markets.A joint-stock company can be founded by atleast one individual or one legal entity, forany purpose. A joint-stock company may beestablished by a single stockholder. However,a joint-stock company cannot be establishedby a limited liability company which is foundedby a single shareholder. Stockholders arenot liable for company liabilities.Only joint-stock companies may conductactivities in certain sectors. For instance, thisis true of insurance, commodity markets,investment funds, pension funds or gamingactivities and lotteries as well as many othersectors.into the National Court Register. Therefore,although it does not have a legal personality,it can start operating before its entry in theNational Court Register as an “entity inorganisation“. A joint-stock company inorganisation can acquire rights and enter intoobligations (therefore it can sign agreements),it can also sue and be sued. The foundersmay, but are not obliged, to become companystockholders. They act up to the time that theManagement Board is appointed and arejointly liable with other persons who actedon behalf of the company before itsregistration.How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 13

Company statutes must specify:• the company’s name and registered office;• the description of the nature of businesswhich must by specified in accordance withthe Polish Classification of Activities (PolskaKlasyfikacja Dzia∏alnoÊci, PKD);• the company’s duration, if defined;• the level of the company’s capital and theamount paid up to cover the capital beforeregistration;• the nominal value of the stocks and theirnumber, with an indication of whether theyare registered or bearer stocks;• if various types of stocks are to beintroduced, the number of stocks of a specifictype and their related rights;• the names of the individual or corporatefounders;• the number of Supervisory andManagement Board members, or at leastthe minimum and maximum number ofmembers of these bodies, as well as theentity that is authorised to define themembership of the Management Board;• an announcement letter, if the companyintends to issue announcements anywhereother than in “Monitor Sàdowy iGospodarczy“.The minimum capital for a joint-stock companyis PLN 500,000 and the minimum stock valueis PLN 0.01.A joint-stock company differs from a limitedliability company in its ability to issue stockwhich may be subject to public trading.Companies listed on the Warsaw StockExchange must be joint-stock companies.If the company generates a profit, after theannual balance sheet has been approved anddue taxes have been paid, a foreign stockholderis allowed to transfer the entireamount of profit due to him abroad.1.2.2.1. Corporate bodies of a joint-stockcompanyThe corporate bodies of a joint-stock companyare the Shareholders’ Meeting, theManagement Board and the SupervisoryBoard. The basic rules of corporategovernance are the same as for a limitedliability company.However, a Supervisory Board consisting of atleast three people is obligatory in a jointstockcompany. In listed companies, theSupervisory Board consists of at least fivemembers. The Code of CommercialCompanies and Partnerships does not providefor the right of stockholders to personallysupervise the company’s activity.1.2.2.2. Liability in a joint-stock companyThe responsibility for the liabilities of a“company in organisation“ is borne jointlyand severally by the company and personsacting on its behalf. A stockholder of a“company in organisation“ is jointly andseverally responsible with these persons forthe company’s liabilities up to the amount ofhis unpaid contribution for the shares towhich he has subscribed.Just as in the case of the stockholders,Management Board members are not responsiblefor the company’s liabilities. The exception isthe joint personal liability of the ManagementBoard members and the company to creditorsin the event of the deliberate or negligentprovision of false data in declarations regardingpayments towards stock in the company’sapplication for registration or in the applicationto register an increase in the company’s sharecapital.A Management Board member (just as amember of the Supervisory Board, AuditCommittee or the liquidator) is liable to thecompany for damages caused by an action oromission in breach of the law or the provi-14

sions of the Statute, unless he is not at fault.A Management Board member is liable fordamages caused by a failure to lodge amotion declaring the company’s bankruptcy1.2.3. Civil partnershipA civil partnership is the most basic type ofpartnership. It is generally used for smallscale businesses.A civil partnership may be established underthe regulations of the Civil Code by at leasttwo private individuals or legal entities. Animportant feature is the lack of legal personalityand the inability to act in its own name in theeconomic exchange of goods and services.The partners are jointly and severally liablefor the partnership’s liabilities. The income ofa civil partnership is subject to personalincome tax. The partners in civil partnershipsmust be registered in the Business ActivityRegister. The civil partnership must be transformedinto a registered partnership andregistered at the National Court Registerwhen its annual income in two consecutivefinancial years amounts to at least EUR800,000. The partners in the partnership areobliged to file a motion with the NationalCourt Register within three months of theend of the second financial year.1.2.4. Registered partnershipA registered partnership is a personal partnershipestablished under the regulations of the Codeof Commercial Companies and Partnershipsto conduct economic activity on a larger scalethan that of a civil partnership. It is subject toregistration in the Register of Entrepreneursat the National Court Register. Despite thelack of legal personality, a registered partnershiphas the right to act in its own name in theeconomic exchange of goods and services.Every partner has unlimited liability for thepartnership’s liabilities.1.2.5. Limited partnershipThe main feature of a limited partnership isthat at least one partner has unlimited liabilityfor the partnership’s liabilities (GeneralPartner), while others are only liable up tothe amount specified in the partnershipagreement (Limited Partners).The business name of a limited partnershipmust include the names, or business names ofone or more general partners and the additionaldesignation of “spó∏ka komandytowa“(“limited partnership“). The name of a limitedpartner may not be included in the partnership’sbusiness name. If it is included in thepartnership’s business name, this limited partnerwill be liable to third parties as if he wereA civil partnership is the mostbasic type of partnership.It is generally used for small scalebusinesses.the general partner. A limited partnership hasthe right to act in its own name in the economicexchange of goods and services despitethe lack of legal personality. A notarial deedis required to establish a limited partnership.A limited partnership comes into existence atthe time it is entered into the National CourtRegister.An advantage of this form of business activityis that it is less formal than operating a company.A negative side is that the partnershipdoes not have separate legal personality andthe liability of the partners is unlimited.How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 15

1.2.6. Professional partnershipA professional partnership is a partnershipestablished by partners for the purpose ofworking in a profession. A partner may onlybe a natural person who is authorised topractice in a profession, such as an attorney,pharmacist, architect, building engineer,chartered accountant, insurance broker, taxadviser, auditor, doctor, dentist, veterinarysurgeon, notary public, nurse, midwife, legaladviser, patent agent, property valuer, sworntranslator or psychologist.The business name of a professional partnershipmust include the name of at least onepartner, the additional designation “i partner“(“and partner“) or “i partnerzy“ (“andpartners“) or “spó∏ka partnerska“ (“professionalpartnership“) and a specification of theprofession practiced in the partnership. Anotarial deed is required to establish a professionalpartnership. The professional partnershipcomes into being at the time it is enteredinto the National Court Register. An attractivefeature of this form of business is thatone partner is not liable for liabilities incurredby the other partners in the course of professionalactivities. A negative side is that thepartnership does not have separate legal personality.1.2.7. Limited joint-stock partnership (limitedpartnership issuing shares)A limited joint-stock partnership is a partnershipestablished by partners, acting in its ownname in the economic exchange of goodsand services. Its main feature is that at leastone partner is fully responsible for thepartnership’s liabilities (General Partner) andat least one partner is a shareholder. Thebusiness name of a limited joint-stockpartnership must include the names of oneor more general partners and the additionaldesignation “spó∏ka komandytowo-akcyjna“(“limited joint-stock partnership“).A shareholder’s name cannot be included inthe partnership’s business name. If it isincluded, such a shareholder will have thesame liability to third parties as the generalpartner. The minimum share capital is PLN50,000. A notarial deed is required to establisha limited joint-stock partnership. Such apartnership comes into existence at the timeit is entered into the National CourtRegister.This form of activity is uncommon in Poland.Therefore, there is little experience in thisnew type of partnership (introduced in 2001),but it is less formal than operating a company.1.2.8. Sole proprietorshipThis type of enterprise is established for thepurpose of operating a small business by aprivate individual. It is registered in theBusiness Activity Register held by the head ofthe municipality (wójt) or the mayor of atown (burmistrz). Applications for tax andstatistical registration can be filed in the sameplace. The tax charged is personal income tax(PIT).1.2.9. Branch officeBy reciprocity, foreign investors are able toestablish branches in Poland to conduct businessactivities. Foreign investors from EU, EEA andEFTA Member States are authorised toconduct business activities under the sameregulations as Polish enterprises. A branch is apart of a foreign company that does not haveits own legal personality, but conductsbusiness in Poland. The branch may conductbusiness activities from the moment it isentered into the National Court Register.The branch office’s business can only beconducted within the scope of the parentcompany’s activities.16

1.2.10. Representative officeForeign entrepreneurs may also establishrepresentative offices in Poland. The activitiesof these offices are limited to the advertisingand promotion of their foreign business. Themain difference between a representativeoffice and a branch is that the latter entitymay conduct business activities (althoughonly within the scope foreseen for theforeign enterprise) while the representativeoffice cannot.The representative office must be registeredin the Register of Representative Offices.This register is held by the Ministry of theEconomy.1.2.11. European CompanyThe European Company (Societa Europea, SE)is regulated by the European EconomicInterest Grouping and the EuropeanCompany Act dated 4th March, 2005. The Actincorporates the European Council’sRegulations and Directives related to theEuropean Company by providing bothcorporate rules and a framework for employeeinvolvement.According to the rules indicated above, mostnational laws would apply to EuropeanCompanies without additional amendmentsor adjustments within the scope that is notdirectly governed by the CommunityRegulations and Directives, just as they wouldapply to any joint-stock company incorporatedunder the laws of Poland or to specificactivities that it may choose to undertake.cash contributions, at least one-quarter oftheir nominal value should be covered beforecompany registration.The provisions of this Act provide some specificrules governing the registered office andits transfer between the EU Member States,in particular, protecting minority shareholderswho oppose the transfer of the registeredoffice to another EU Member State.Establishing and operating a European companyis a reasonably complex process.Therefore, this is only recommended for largescale business of an international dimension.1.2.11.1. Corporate bodies of a EuropeanCompanyA European Company’s founders may choosebetween a one-tier and a two-tier system ofcorporate bodies and disclose their decisionin the company’s by-laws. In the two-tier system,as traditionally recognised by Polish law,management is entrusted to theManagement Board (zarzàd), which is supervisedby the Supervisory Board (rada nadzorcza).In a one-tier system, management isentrusted to the Administrative Board (radaadministrujàca).A member of the Management or SupervisoryBoard, Administrative Board, AuditCommission or liquidator can only be a naturalperson with full capacity to perform legalactions.A European Company may be formed for anycommercial purpose.The share capital of a European Companyshould be at least EUR 120,000. Shares subscribedfor in-kind contributions must be coveredin full no later than before the end ofone year from the date of the company’s registration.In the case of shares subscribed forHow to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 17

1.2.11.2. Employee participation in aEuropean CompanyPolish employees participate in the managementof a European Company through tradeunions appointed to represent and defendtheir rights, as well as professional and welfareinterests. They also have the right toinformation and consultation, the scope ofwhich is to be specified in a separate act (itsproposal was under discussion at the time ofpublication).1.3. Types of activities requiring licenses,concessions or permitsPolish law states that the performance of certaintypes of activities is limited by the needto obtain appropriate consent from the stateauthorities. These activities may be dividedinto four groups:• activities that may be performed afterobtaining a concession;• activities that may be performed uponentry into the register of regulated activities;• activities that may be performed afterobtaining a permit;• activities that may be performed afterobtaining a license.1.3.1. ConcessionsPolish law requires that concessions beobtained in order to perform the activitieslisted below (the responsible issuing authorityis indicated for each type of activity).Concessions are granted for a period of no lessthan five years (unless otherwise requested bythe enterprise) and no more than 50 years.Concessions are granted upon the completion ofadministrative proceedings or, if the number ofconcessions is limited, following a public tender.The authority issuing the concession may monitorthe activities of the entity that received aconcession within the limits specified by the law.The time required for issuing a concessiondepends largely on the given case. By law theauthorities should not exceed a 2-month periodfor such proceedings.1.3.2. Permits and licensesPermits or licenses are required for activitiesincluding the following:• wholesale trade and production of alcoholicbeverages;• conducting economic activities in specialeconomic zones;• establishment of an investment fund or apension fund;• operation of a bank;• operation of an insurance company or brokerageagency;• operation of casinos, organisation of lotteriesand gaming;• railway transport;• road transport;• private investigation services;• operation of a customs agency;• tourism agency activities.The import and sale of certain goodsrequires certificates, licenses or proof ofstandardisation. Such goods include cosmetics,goods designated for children(crayons, paints, etc.), goods that are to bein contact with drinking water, humanremains, animals, meat, biological materials,18

plants and harvestable materials.Imports of certain goods are prohibited: (e.g.waste, asbestos and agents destroying theozone layer). Other import limitations may beintroduced temporarily, in order to protectthe Polish market.Export restrictions apply for example to certaincultural artefacts and monuments ofnational heritage. Other export restrictions,including export prohibition or the obligationto obtain an export license, may also beimposed by the Polish authorities on the basisof regulations issued by the Minister of theEconomy.Some import restrictions arise from internationalregulations. These apply to endangeredspecies of animals and plants,advanced technologies and goods subject tointernational embargoes.The time required for issuing a permit orlicense depends largely on the given case. Bylaw the authorities should not exceed a 2month period for such proceedings.Types of activity requiring a concessionType of activity requiring a concessionExploration, identification and excavation ofminerals and mineral materials, both fromdeposits and from waste remaining after miningworks and after the processes of enrichingminerals; non-tank storage of substancesin mounds and storage of waste in undergroundminesManufacturing and trading in explosives,weapons and ammunition, as well as goodsand technology for military or police useProduction, processing, storage, transmission,distribution and trade in fuels and energyProtection of people and propertyAir transportationBroadcasting radio and television programsAuthority issuing the concessionMinister of the Environment(approval of other authorities may berequired in certain special circumstances)Minister of Internal Affairs andAdministrationPresident of the Energy Regulatory AuthorityMinister of Internal Affairs andAdministrationPresident of the Civil Aviation OfficeNational Broadcasting CouncilHow to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 19

1.4. Process of establishing and registeringan entity1.4.1. Establishing and registering an entityAs was indicated, following the signing of theArticles of Association/Statutes of a limited liabilityand joint stock company in the formdescribed above, the entities acquire the statusof companies in organisation. This does not concernpartnerships, which are created only uponregistration in the register of entrepreneurs.The next steps in setting up a company are:Registration of a company by thetax office usually takes approximately1 month, after filing all thenecessary documents.• the arrangement of the company’s businessaddress - which will constitute the registeredoffice. This requires either acquiringreal estate or concluding a lease agreementfor relevant premises;• applying to the Central Statistical Office(CSO) for a statistical identification number(REGON). Registration of a company by theCentral Statistical Office takes 1-2 days andis free of charge;• opening a bank account for the purpose ofpaying in the share capital of the company.According to Polish law, every business entitymust have an account in a Polish bank. Banksusually open deposit accounts for companiesin organisation - such a deposit account isused to pay up the share capital.Subsequently, the account number must bepresented to the tax office.The following documents will be required bymost banks to open such an account:• the articles of association or the statutes;• specimen signatures of persons authorisedto represent the company;• certificate from the Central Statistical Officeon the REGON number;• copy of the application for registering thecompany in the National Court Registerincluding the court’s stamp confirming thefiling of the application (this document isusually required in order to transform thedeposit account into a regular account).The above list may vary depending on thebank chosen by the company.Further steps in settings up a company are:• paying up the share capital for the company- the entire initial capital (an in cash orin-kind contribution) in the case of a limitedliability company, or at least 25% of theissued initial shares in the case of a jointstockcompany;• filing the application to the National CourtRegister for registration of the company(described in more detail below),• filing an application for the purpose of registeringthe company with the tax officeand obtaining a taxpayer identificationnumber (NIP).Registration of a company by the tax officeusually takes approximately 1 month, afterfiling all the necessary documents. The feefor obtaining a NIP number is PLN 150.Registration at the appropriate District Courtrequires the following documents for a limitedliability company:• a written application;• the articles of association;• a document appointing the members of theManagement Board;• the Management Board’s specimen signatures;• a representation from all the members ofthe Management Board that the contributionsto pay up all the shares in the initialcapital have been made.20

The documents required from a joint-stockcompany are:• a written application;• the company’s statute;• the notarial deed on the company formationand the acquisition of the stock;• a representation from all the members ofthe Management Board that the contributionsfor the stock required by the statutehave been made in accordance with the law;• confirmation of payment for the stock froma bank or investment institution;• a document appointing the members of theManagement Board and Supervisory Board;• specimen signatures of all members of theManagement Board.Registration of a company by the RegistrationCourt usually takes approximately 3-4 weeks,after all of the necessary documents havebeen filed.The court fee for registration is currently PLN1,000 and PLN 500 for obligatory publicationof the incorporation in the OfficialCommercial and Legal Gazette.The time needed to fully establish and registera company is approximately 2 months. The costis PLN 1,650, which is the registration fee, butdoes not include the funds needed to pay upthe share capital in companies (PLN 50,000 fora limited liability company and limited jointstockpartnership, PLN 500,000 for a joint-stockcompany) and notarial fees for preparing thearticles of association (with the exception of acivil partnership and a registered partnership,where a notarial deed is not required).A limited liability company and a joint-stockcompany become legal persons after obtainingtheir National Court Register number(KRS). However, all actions and agreementsmade by them before, as companies in organisation,remain valid.1.5. Office rentalOffice rents are denominated in USD or EUR,but paid monthly or quarterly in Polish zlotys(PLN). With Poland’s new EU status andstrong exchange rates, landlords are encouragedto quote rents in EUR. Additionally, tenantsare obliged to pay service charges, whichaverage between EUR 3.5 and 5 per sq. m permonth. They mainly include the followingcosts: water, electricity, heating, air-conditioning,maintenance, cleaning, etc. They areadded to the net rents and are generally calculatedaccording to floor space. A charge isalso usually added to the net office space forcommon areas.The charge is calculated on the pro rata shareof common areas used (lift lobby, reception,toilets, etc.). Tenants are obliged to pay 22%value added tax (VAT) on the rent and servicecharges. The level of the rent depends onlocation, quality of finish, size and the rentalterm.The Polish office market is still a tenant’smarket. Various incentives are offered bylandlords to attract new tenants that have asignificant impact on the net effective rentalvalues (a 10%-15% reduction in rents). Theseinclude a fitting-out allowance, rent-freeperiods (from 1 to 9 months) or free parkingspaces. Rental agreements are becomingmore standardised, which in turn makesoffice premises more secure for investors. Thelevel of rents is becoming closer to that ofother European cities, such as Vienna, Berlinor Amsterdam.How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 21

1.6. Acquiring real estateReal estate, as defined under Polish law, comprisesland, buildings on plots of land andpremises (apartments, office space, etc.). Realestate can be used under the following legalforms:• ownership right;• perpetual usufruct, where ownership of theland rests with the State Treasury or amunicipality. The perpetual usufructor gainsownership rights over the buildings on agiven plot of land and the right to use theland for a period of 40-99 years in returnfor an annual charge of 1% (land under residentialbuildings) or 3% (other land) of thevalue of the land. The period of the perpetualusufruct must be prolonged unless it isin conflict with the purpose of the plot ofland determined in a local zoning plan. Theleaseholder may sell the right or use it assecurity on loans;• usufruct;• lease or rental.The main difference between lease and rentalis that a leaseholder acquires the right to usethe land and takes full financial advantage ofthe land’s properties over the duration of thelease contract. The leaseholder pays a fee tothe landlord for those rights. In the case ofrental, only the right to use the rented item isacquired in exchange for the rental chargespaid to the person letting the object, who isusually the owner or holder of a long-termlease.The handover of property ownership requiresa contract in the form of a notarial deed. Thetransfer takes place at the moment of theconclusion of the handover contract.A perpetual usufruct contract must be concludedin the form of a notarial deed. Anadditional condition for the right of perpetualusufruct to come into existence, other thanthe above contract, is the entry of this rightinto the land and mortgage register (seebelow). The transfer of the right of perpetualusufruct to another entity takes place inaccordance with the regulations governingthe establishment of this right, as mentionedabove.It is also possible to conclude a preliminarycontract to transfer ownership or the right ofperpetual usufruct. As a result, the owner orthe perpetual usufructor is obliged to transferhis right to the other party to the abovecontract for the price and by the deadlinespecified in this contract. In order to do this,the parties to the preliminary contract mustconclude a final contract on the transfer ofany of these rights. Both contracts, i.e. thepreliminary and final contracts, must benotarised; otherwise, they are invalid.The legal status of real estate is reflected inrecords called land and mortgage registerswhich are held by selected district courts.It is assumed that the legal status of realestate disclosed in a land and mortgage registeris correct and, as a result, is that found insuch a register. The negation of a rightrevealed in a land and mortgage registerrequires appropriate court proceedings.Land and mortgage registers are open andaccessible to all.Anyone is able to obtain an extract from theland and mortgage register containing all ofits listed information.All purchase of real estate or perpetualusufruct contracts must be made in the formof a notarial deed, otherwise being invalid.A foreigner may purchase real estate orperpetual usufruct only after receivingpermission from the Ministry of InternalAffairs and Administration (after approvalby the Ministry of Defence and, in the caseof farmland, also after receipt of approvalfrom the Minister of Agriculture). Themain exceptions to this rule are when the22

foreigner is citizen or company from aMember State of the European EconomicArea (details described below) and wherethe ownership or perpetual usufruct righthas been inherited.Permission is also required in the case ofacquisition or receipt of shares / holdings in acompany by a foreigner, if this companyowns or is in possession of the right of perpetualusufruct of real estate, if:• through this transaction, the companybecomes a controlled company (the shareholderhas the majority of the votes at theGeneral Meeting of Shareholders and hasthe right to appoint members of theManagement Board, members of theSupervisory Board and others, as providedfor in article 4.1, item 4 of the Code ofCommercial Partnerships and Companies);• the company is a controlled company andthe shares / holdings are acquired by anentity which was not a shareholder beforethe transaction.This permission is not required when theshares of the company are traded on theStock Exchange. Since the date of Poland’saccession to the EU (1st May, 2004), foreignerswho are citizens or entrepreneurs of ECMember States have not needed permissionto purchase real estate or to acquire orreceive shares / holdings in a company if thiscompany owns or is in possession of the rightof perpetual usufruct of real estate.Exceptions to the above are:• farmland and woodland - permission isrequired during the first 12 years from thedate of Poland’s accession to the EU.However, permission is not required if severalconditions are satisfied: if the person whowants to purchase real estate is a leaseholderover a specific period (seven years for westernregions of Poland and three years for theremainder, starting from the official authenticationof the lease contract), and if theleaseholder personally conducts agriculturalactivities and lives legally in Poland;• ”second house” - permission is requiredduring the first five years from the date ofPoland’s accession to the EU (however, permissionis not required if a foreigner haslived legally and continuously in Poland forfour years, or if he purchases a “secondhouse” in order to conduct business activitiesin tourism services).This permission is notrequired when the shares ofthe company are traded onthe Stock Exchange.The Ministry of Internal Affairs andAdministration must issue the permit in questionwithin:• a maximum of 30 days in the case of realestate located in Special Economic Zones;• a maximum of two months in the case ofother real estate.The exception to the above rules is the caseof companies that have acquired or are in theprocess of acquiring real estate with an areanot exceeding 0.4 ha, on condition that thereal estate is located in a developed area andis to be used for the company’s statutory purposes.Non-compliance with the above rulesmay result in the land purchase agreementbeing deemed invalid.A foreigner intending to buy real estate inPoland may apply for a promise to receive theabove permission. The promise is issued inaccordance with the principles of issuingadministrative decisions. It is valid for a periodof six months from the date of issue and obligesthe Minister of Internal Affairs andHow to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 23

Administration to grant permission unconditionallyfor the purchase of real estate.Rejection can only occur in the event of a considerablechange in circumstances. The promisemay also be issued to a legal entity with itsregistered office in Poland that is considered aforeign entity under the Polish legal system.A proprietary right (or rights) owned by thestate or a municipality may only be soldthrough an auction. In other cases, the salecan take place through private negotiations.The municipality or district is responsible forthe construction of technical infrastructure(e.g. roads, water supply system, sewage system,power grid) but the owner of the realestate located on the developed area mustparticipate in the cost of the construction ofsuch devices by paying a special fee. This feeis set by the district/municipality authorities.As in other EU countries, Poland has realestate agencies that help buy and sell realestate. They also have information on theprices of real estate. They generally have websiteswhere this information is also available.1.7. Property and real estatepermitsSpecial permission from the Ministry ofInternal Affairs and Administration isrequired if a foreign company (i.e. a companydirectly or indirectly controlled by a foreigner)wishes to purchase real estate in Poland.A permit is not required in the case of foreignerswho are citizens or companies from MemberStates of the European Economic Area, except for:• the acquisition of agricultural land andwoodland, for 12 years from the date onwhich Poland acceded to the EuropeanUnion;• a second home, for 5 years from the date onwhich Poland acceded to the EuropeanUnion.1.8. The construction processAccording to the Construction Law, the constructionprocess may be undertaken onlyafter obtaining building permission from theconstruction supervisory authorities (a nationaladministrator). This permission must be inline with the local zoning plan.Under the Zoning Law, local zoning plansspecify the purpose of the land, the layout ofpublic purpose investments and a specificationof the methods and conditions of landdevelopment. If a zoning plan exists for thearea planned for the investment, an applicationfor building permission may be fileddirectly on the basis of this plan.If there is no zoning plan, planning permissionmust be obtained before the methods ofland development can be determined. This isissued by the head of the municipality or thetown’s mayor, and is binding on the authoritythat later issues the building permit. Theplanning permit may only be issued when allthe following conditions are met (with certainexceptions regarding, for instance, productioninvestments):• at least one neighbouring plot, accessiblefrom the same public road, has been developedin a way that allows the requirementsfor the new land development methods tobe determined, i.e. maintaining the samepurpose, parameters, features and ratiosaffecting land development, includingarchitectural outlines and structural forms,building line and degree of land use (theso-called “good neighbour” principle);24

• the land has access to a public road;• the existing or planned infrastructure isadequate for the investment;• no change of use consent is required foragricultural or forest land to be used fornon-agricultural or non-forest purposes, orconsent has been obtained on the basis oflocal plans that are no longer valid;• the decision is compliant with separate regulations(e.g. the Environmental Protection Law,the Act on the Protection of Forests andAgricultural Land, the Monument ProtectionAct).Proceedings regarding establishing developmentconditions may be suspended for up to12 months from the date on which the applicationis filed.In addition to the planning permit, the applicationfor building permission should also beaccompanied by a construction design preparedby an authorised person in compliancewith the specific construction and technicalregulations. The design may be submitted forapproval even before applying for a buildingpermit. In such a situation, the application fora building permit must be submitted duringthe period when the decision approving thedesign is valid. This period is specified in thedecision approving the design, but may notexceed one year. The law specifies all otherconditions that should be met, as well as documentsthat should be attached to the applicationfor the building permit.The building permit expires if the constructiondoes not commence within two years ofthe date from which it was obtained, or ifthe construction is temporarily suspended fora period of longer than two years. The use ofthe completed building or facility may commenceupon notification of the constructionsupervisory authority 14 days before the firstuse of the construction facility and an obligatoryinspection (some exceptions exist).The construction law also provides a methodof legalising facilities erected without buildingpermission or not in compliance with thebuilding permission. However, such facilitiesmay only be legalised if:• the documents presented by the investorshow that the facility complies with the regulationsspecified above, including the planningpermission and, in particular, with therequirements of the applicable local zoningplan;• building plans are presented with all therequired details;• a fee for legalisation is paid.The current Law on Spatial Developmenteliminates the need to obtain planning permission.This only applies, however, to theareas for which new detailed zoning planshave been approved (in all other regions,planning permission will still be required).Such decisions can be legally transferred tothird parties. This opportunity could proveparticularly valuable to those selling theirinvestment properties together with validand final development decisions.Development of land must be consistent withthe local zoning plan (if such a plan exists).Any planning permission which does notcomply with the plan is deemed invalid. If thepreviously issued decisions are not consistentwith the new or revised plan, they expireunless building permission has already beenissued.The transfer of land destined for commercialor residential use is generally subject to VAT,with certain exemptions.1.8.1. Building permissionThe primary authority in the supervision ofconstruction is the national administrator. Heis empowered to delegate decisions to themunicipality.The national administrator should beapproached for building permission. TheVoivode (Wojewoda, Marshal of a region orvoivodeship) supervises special building projects(such as airports, hydro-technical con-How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 25

structions, military, defence and security constructions,etc.). He also serves as the instanceof appeal against the decisions of the loweradministrative level.The above bodies supervise and audit thecompliance of projects with the ConstructionLaw. In other words, these bodies ensure thatthe plans envisaged conform with the lawbefore building permission or approval for aconstruction project is issued.Construction formally beginsat the time when the preparatorywork on the constructionsite commences.Construction formally begins at the timewhen the preparatory work on the constructionsite commences (i.e. surveyor’s delimitation,levelling the site, establishment of theconstruction site, including construction oftemporary buildings and connection to theutility network for the needs of the constructionsite). No later than seven days before thestart, the investor is obliged to inform boththe authority that granted the permissionand the supervising architect of the datewhen construction is due to begin. A writtenstatement signed by the construction managerand the investor’s inspector, who assumesresponsibility for managing the buildingprocess, should be attached.The people participating in the buildingprocess are:• the investor;• the investor’s inspector;• the architect;• the construction manager.The functions of the construction managerand the investor’s inspector must be performedby separate individuals.The investor is obliged to inform the appropriateauthority in the event of the replacementof the construction manager, theinvestor’s inspector or the chief architect,specifying the date of the change.Construction supervisors may include a clausein the building permission stating that aftercompletion of the building process, theinvestor must obtain building occupancy permission.In such a case, the investor is obligedto send the notification of completion of theconstruction works to the following authorities:• Environmental Protection Inspection Office;• Sanitary Inspection Office;• State Fire Brigade;• National Labour Inspectorate.The above authorities are given 14 days toregister any objections. If no response isreceived within that time, it is assumed thatthere are no objections.Documents which need to be included in thenotice of completion of the construction are:• the original construction logbook;• a statement by the construction manageron compliance of the construction designswith Polish standards,• regulations and permissions stating that theconstruction site is in a state of order (includingthe street and the neighbouring property,if used);• a statement that bordering areas are properlymanaged, if the use of the buildingrequires this;• reports of examinations and checks;• a post•works survey list;• confirmation of handover of connectors foruse.26

1.9. Employment of workers1.9.1. Labour lawThe objective of Polish labour law is to regulatethe contractual conditions of employment,with special protection of employeerights. This role is fulfilled by the LabourCode, which is the most important legal actgoverning labour in Poland. Every employmentcontract should comply with the provisionsof the Code. In cases where the provisionsset out in an employment contract areless favourable to the employee than thoseof the Code, such provisions are deemedinvalid and are automatically replaced by therelevant provisions of the Code.These rules also apply to sources of labour lawother than an employment contract, namelycollective bargaining agreements and work regulations.Apart from the most important act onlabour issues - the Labour Code, there are manyother regulations in this area (such as the TradeUnions Act).The sources of labour law, other than theLabour Code described below contain a summaryof the characteristics of the work regulationsand collective bargaining agreements,as well as the principles of labour law.Work regulationsThe work regulations set the organisationand order of work, as well as the rights andduties of the employer and employees. Everyemployer is obliged to implement work regulationsunless he employs fewer than 20workers or the issues that are to be dealtwith by the work regulations are already stipulatedin an effective collective bargainingagreement.The most important matters contained in thework regulations are:• the organisation of work and the provisionof tools and materials to employees;• working time;• night-time work;• the time, place and frequency of payingremuneration;• the duties related to occupational safetyand health (OSH);• the list of jobs that youths and women areprohibited from performing.The work regulations are to be adopted bythe employer after consultation with tradeunions. If an agreement is not reached withina specific time and at plants where tradeunions do not operate, the work regulationsare specified by the employer.Collective bargaining agreementsCollective bargaining agreements are a specificsource of labour law. In general, everysuch agreement should set the conditions tobe met by employment relationships. The collectivebargaining agreements should at leastinclude the setting of principles of remuneration.They also include the mutual obligationsof the parties.Collective bargaining agreements are concludedbetween an employer and tradeunions.How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 27

Principles of labour lawThe following should be listed as beingamong the principles of labour law:• the employer’s respect of the employee’sdignity and other personal interests - this isone of the fundamental duties of theemployer; a serious breach of this principlemay constitute grounds for the employeeterminating the employment contract withimmediate effect; personal interests includehealth, freedom, honour, freedom of conscienceand privacy;• the employee’s right to decent remunerationfor his work - this means that thesalary paid to a worker should be equivalentto his effort made in the performanceof his job. Importantly, the regulations oflabour law set the minimum level of remunerationwhereby employers are notallowed to pay lower salaries (the minimummonthly salary in Poland set for 2008 is PLN1,126, approx. EUR 318);• the right of employees to rest - guaranteedboth by the Polish Constitution and the provisionsof the Labour Code. This right isimplemented by the regulations on workingtime (in general, 8 hours per day and anaverage forty hours per week) as well as bythe regulations on annual leave (in general,every employee is entitled to 20 or 26 dayspaid annual leave). Where the employerbreaches the regulations on work time, heis subject to liability for an offence;• the employer is obliged to treat employeesequally in terms of entering into/terminatingemployment relationships, working conditions,promotion and access to occupationaltraining regardless of their sex, age,disability, race, religion, nationality, politicalviews, membership in trade unions, ethnicorigin, sexual orientation, employmentfor a specified or unspecified duration aswell as full-time or part-time employment(these circumstances cannot affect theemployer’s decisions on employment matters).Employees also have the right toequal remuneration for identical work orwork that has an identical value. Where theemployer fails to treat employees equallyfor the reasons stated above (for exampleby unjustified dismissal of a disabledemployee, omitting him from promotion),this is considered to be discrimination. Alldiscrimination, direct or indirect, is forbidden.A discriminating employer is obligedto pay compensation.1.9.1.1. Employment contractsEmployment contracts may take variousforms:• a temporary contract for a probationaryperiod, no longer than three months. Thecontractual conditions may be renegotiatedat the transition to permanent employment,or they may remain unchanged. Ifthe parties do not reach agreement as tothe future contractual conditions, the contractexpires at the end of the probationaryperiod;• unlimited duration contract, i.e. a permanentemployment contract;• fixed-term contract.Work may also be performed under the followingcivil law contracts:• personal service contract (umowa zlecenie) -concluded for the performance of a specifiedactivity, (and not necessarily for a specifiedperiod), with remuneration related tothe performance of the activity that constitutesthe substance of the contract;• specific task contract (umowa o dzie∏o) -concluded for the performance of a commissionedactivity, leading to the achievementof specified results, with the remunerationrelated to the results of the work.This type of contract is regulated by theprovisions of the Civil Code and therefore,the issue of protection of employee rightsdoes not arise.28

A contract of employment should be drawnup in writing and should include all the mostimportant employment conditions, such asthe parties, the type and date of the contract,the place and nature of the work performed,the remuneration corresponding to thenature of the work performed with an indicationof the elements of the remuneration,work time and start date.Since 2003, Polish labour law, as embodied inthe Temporary Employment Act, has allowedfor the employment of workers by temporaryemployment agencies based on two contracts:an employment contract between theagency and the employee and a service contractbetween the agency and an employerfor whose benefit the work is performed).The latter should specify the nature of thework, the required qualifications, the place ofwork, as well as the period of work and theworking hours.An employee is obliged to perform his workwith due diligence in the hours specified in thecontract, carry out the instructions of his supervisorsand act solely in the interest of theemployer. Employees can be held accountablefor damages caused to the employer up to anamount equivalent to three months’ salary,unless the damages relate to an item entrustedto the employee (e.g. cash) or the cause of thedamage was intentional.1.9.1.2. DismissalsEmployment contracts expire automatically atthe end of the term for which the contractwas concluded (in the case of fixed-term contracts),or when a given activity or task hasbeen completed (in the case of personal servicecontracts and specific task contracts), orupon mutual consent of the parties to thecontract.An employment contract can also be terminatedupon a declaration by one of the parties. Ingeneral, the minimum notice period requiredwhen dismissing an employee depends on thelength of service with the employer (exceptionsto the prescribed notice period include achange in ownership or transformation of thecompany). Standard notice periods of anunlimited duration contract are:An employment contract can alsobe terminated upon a declarationby one of the parties.• 2 weeks - for a duration of employment ofup to six months;• 1 month - for a duration of employment ofbetween six months and three years;• 3 months - for a duration of employment ofover three years.Other notice periods are stipulated for probationaryperiod contracts and for fixed-termcontracts.The following groups of employees, amongothers, are legally protected against dismissal:people within four years of retirement age,pregnant women, women on maternity leave,people on annual leave or sick leave, boardmembers of trade union organisations, andmembers of works councils. Notice should beprovided in writing and, in the case of a permanentemployment contract, it should alsostate the reasons for the dismissal.Dismissal without notice due to the fault ofthe employee is possible if the employee:• seriously violates his basic employmentduties;• commits an offence, making his employmentin the present post impossible, if theoffence is obvious or confirmed by a legallybinding court ruling;• loses the license required for performingthe duties connected with his post.How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 29

Dismissal without notice is also possible:• if the employee is unfit to work because ofsickness:a) longer than three months, if the employeehas been employed by a given employerfor less than six months;All litigation between theemployer and employee is settledby the Labour Court.b) longer than the period in which hereceives social insurance benefits and aperiod of three months where he receivesremedial benefits (which is approx. 272days), if the employee had been employedby a given employer for at least six monthsor if he has become unfit to work due toan accident at work or through sickness;• in the event of the employee’s justifiedabsence from work for reasons other thanthose mentioned above for a period ofmore than one month.Irrespective of the way in which the employmentcontract is terminated, the employer isobliged to present the employee with his workcertificate (containing information used as areference by his next employer, e.g. regardingholidays, sick leave, etc.). The certificate mayalso include information on remuneration atthe employee’s request. The employee is entitledto demand that amendments be made tothis certificate if he disagrees with its content.must generally (with some exceptions) beagreed with the trade unions and require theimplementation of official procedures, as wellas the payment of severance pay.1.9.1.3. RemunerationSalaries should be negotiated individuallywith every employee, unless they are subjectto a collective bargaining agreement. Theminimum salary in Poland is negotiated periodicallyby the Tripartite Commission (comprisingemployee, employer and governmentrepresentatives). Basic salaries must be paidat least once a month in cash, in accordancewith the rules and regulations that apply atthe given workplace.With a few exceptions, salaries must be calculatedand paid in PLN. Foreigners may transfertheir remuneration abroad once all therelevant taxes have been paid.Salaries should also be paid during the periodswhen the employee is not able to workfor reasons that are beyond his control, aswell as for a period of sick leave of up to 33days in a given calendar year (remuneration isthen paid at a level of 80% of the amount ofthe salary). If the incapacity to work due tosickness exceeds 33 days in a given calendaryear, the employee receives sickness benefitfrom the Social Insurance Institution (ZUS). Inthe event of an employee’s death, his familyhas the right to severance paid at an amountfrom one to six months’ remuneration,depending on the employee’s length ofemployment.All litigation between the employer andemployee is settled by the Labour Court. Ingeneral, the court fees in cases related to theemployee’s claims under an employment relationshipare relatively low.Collective dismissals are possible in Poland(under the Collective Dismissals Act), but they30

1.9.1.4. Work timeIn general, working hours should not exceedan average of 8 hours per day and 40 hoursper week in an average five-day workingweek over any settlement period of nolonger than four months. However, theLabour Code provides for several exceptionsto this rule. Overtime (i.e. work performedoutside the hours applicable to an employeespecified in the contract) is permissible onlyunder the following conditions:• rescue operations saving the lives of peopleor protecting property, or• extraordinary requirements of theemployer,and the overtime performed cannot exceed150 hours in a calendar year unless an individualcontract, internal regulations or collectivelabour agreements do not provide for ahigher amount of overtime of up to 416hours in a calendar year.Weekly work time, including overtime, maynot exceed an average of 48 hours in agiven settlement period (given thatemployees are allowed to have 11 hours ofrest during every 24 hours and that anaverage working day is no longer thaneight hours, in practice, overtime is a maximumof five hours per day).An employee working overtime is entitled toan additional:• +50% of basic pay for overtime work;• +100% of basic pay for overtime hours onSundays and holidays, which were not designatedas working days for the givenemployee; at night-time (i.e. between 9:00p.m. and 7:00 a.m.); and on a rest daygiven to an employee in exchange for workon Sunday, or a national holiday, in accordancewith the given employee’s workingschedule.Employees in managerial positions are notgenerally entitled to extra remuneration forworking overtime. However, heads of separateorganisational units, if required by theiremployer to work on Sundays or on publicholidays are entitled to a day’s leave in lieu(if they do not benefit from financial compensation).Work is permitted on Sundays and holidaysin, e.g. rescue operations; in industries thathave a continuous production cycle; in workperformed in a “continuous operation system”;in work performed exclusively onFridays, Saturdays and Sundays; as well as inthe public utility sectors.In situations where two public holidays fallbetween Monday and Saturday inclusive, theemployee’s working time is reduced by 8hours for each of these holidays. This meansthat employees will not be required to makeup the working time on another Saturday tomeet the statutory work time limit, which hasbeen the case till now.Paid leave cannot be renounced or financiallycompensated. Employees in their first job areeligible to take their first annual leave afterone month of employment, to a level of 1/12of their annual leave. In each subsequentyear of employment, the employee is entitledHow to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 31

to the full amount of annual leave. The numberof days allowed as paid leave depends onthe employee’s employment history:• 20 days - up to 10 years of employment;• 26 days - after 10 years of employment.Time spent in education is also included inthe calculation of the period of employment,depending on the level of education completed.Detailed regulations for these calculationsare specified in the Labour Code (after completionof secondary education - four years,after completion of tertiary education - eightyears).Employees are eligible to 18 weeks of maternityleave at the first birth, 20 weeks for subsequentbirths or 28 weeks in the case of amultiple birth. At least two weeks of thisleave should be taken before the expecteddelivery date.The Labour Code contains additional provisionsfor periods of sick leave and one or twodays are allowed for extraordinary eventssuch as childbirth, weddings, funerals, etc.Occupational safety and health (OSH)The employer is obliged to ensure occupationalsafety and health (OSH). In particular,he is responsible for the observance of OSHregulations by employees (this is a fundamentalduty of the employee). If employees fail toobserve these regulations, the employer has aduty to give instructions and orders toenforce an appropriate attitude. The employeralso has a duty to provide training toemployees regarding OSH.Every employer starting business activity (i.e.an enterprise planning to employ workers)has a duty to notify the labour inspectorateand the health and safety inspector of this inwriting within 30 days of starting businessactivity. The labour inspectors are authorisedto inspect the observance of the OSH regulationsat any time.Before starting work, every employee mustobtain a medical certificate stating he iscapable of working in the given position(the employer must prepare the applicationfor the medical examination and pass it tothe employee). If the enterprise employsmore than 100 employees, it has a duty toappoint an OSH officer, who performs controland consulting functions regarding OSH.Where the number of employees is no morethan 100, the employer entrusts OSH dutiesto a nominated employee. An enterpriseemploying more than 250 employees has aduty to appoint an OSH commission, which isa consultative body to the employer. Thecommission consists of the employer’s representatives,as well as members of the OSHstaff and employee representatives.Protection of women’s work / rights connectedwith motherhoodProtection of women’s work / rights connectedwith motherhood:• women are not allowed to perform heavywork and work that is harmful to health;• the employer cannot terminate an employmentcontract during the period of pregnancyor during maternity leave;• pregnant women cannot be employed duringovertime hours or during night-timehours;• pregnant women cannot be seconded awayfrom their permanent places of work withouttheir prior consent;• after the child’s birth, its mother has theright to a break for the purpose of feedingthe child (two 30 minute breaks includedduring working time);• an employee who is employed for at least 6months (which also includes previousemployment) is entitled to parental leave totake care of his children up to the age of 4;the duration of this leave cannot exceed 3years - the employer cannot terminate theemployment contract during parental leave(this prohibition applies to the time starting32

from the date of submitting the request forparental leave).1.9.2. Trade unionsAccording to Polish law, both employees andemployers have the right to form organisationsin order to represent and defend theirinterests.All employees have the right to associate andjoin trade unions. This right is guaranteed bythe Polish Constitution, the Labour Code andthe Trade Unions Act.An employee may not suffer adverse consequencesbecause of membership of, or refusalto join, a trade union. It is forbidden to makeemployment or promotion conditional uponmembership of a trade union. Persons representingtrade unions enjoy special protectionagainst dismissal. A trade union may beformed by at least 10 employees.The Trade Unions Act provides for consultationwith trade unions in several cases.According to the Labour Code, an employer isobliged to consult the trade union representinga particular employee in the event of thedismissal of an employee on a permanentemployment contract.According to the Collective Dismissals Act,consultation and negotiation with tradeunions on the terms of dismissal is also necessaryin the event of mass redundancies.If no trade union exists in a work establishment,representatives of the employeesshould be consulted in the above situation.1.9.3. Employment officesThere are various methods of seeking workin Poland. However, it is recognised that anapplication (a CV and a covering letter) sentdirectly to an employer considerablyincreases the chances of employment. It ispossible to seek job offers through stateemployment services, non-state employmentagencies, press advertisements and throughthe Internet.State employment servicesThere are links to borough (powiat) labouroffices on the websites of regional(województwo) labour offices, which post joboffers on the Internet. According to the Act onthe Promotion of Employment and LabourMarket Institutions, citizens of EU MemberStates, as well as citizens of countries withwhich the European Union has signed agreementson the free movement of persons, haveAccording to Polish law, bothemployees and employers havethe right to form organisations inorder to represent and defendtheir interests.the right to use the labour agency servicesoffered by the borough and regional labouroffices. The use of these services is conditionedupon registering at a borough labour office asbeing unemployed or seeking work. Anyonewishing to register as unemployed or seekingwork at a local borough labour office mustprovide school certificates, work certificatesand a personal identification document.Administrative borough labour offices, as wellas information and career guidance centresoperating within the framework of the stateemployment services have computer terminalswith Internet connections at their disposal forclients. Both local and national press is alsoavailable.How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 33

Non-state employment agenciesNon-state employment agencies have beenoperating on the Polish labour market for anumber of years, conducting personnel searchand selection for employers. This recruitmentmethod is becoming increasingly popular,especially in large industrial cities (with populationsover 100,000), such as Warsaw,Poznaƒ, Kraków etc. These agencies are keento advertise their services on the Internet.Employment agencies in Poland must beentered into the Register of EmploymentAgencies held by the Ministry for Labour andSocial Policy. A certificate is issued as confirmationof such an entry. A list of registered agenciesmay be obtained from regional and boroughlabour offices, as well as information andcareer guidance centres. It can also be foundon the website of the Labour Office informationservice, under the heading of employmentagencies.Job offers in the pressThe most popular national Polish daily newspaperswith job offers are the “GazetaWyborcza” Jobs supplement (Praca) onMondays, the “Rzeczpospolita” My Careersupplement (Moja Kariera) on Wednesdaysand the “˚ycie Warszawy” Work andEducation supplement (Praca i Nauka) onWednesdays. These supplements contain jobadvertisements for managers, directors, juniormanagers, finance and banking experts, engineers,IT specialists, accountants, secretariesand clerks.Furthermore, job offers are published in alllocal daily newspapers. However, these areusually job advertisements within the respectiveregion. They contain job advertisementsfor manual workers, such as carpenters,welders, drivers, construction workers, etc.Some newspapers such as “GazetaWyborcza”, which publish job advertisements,also post the information on their websites.Job offers on the InternetThe Internet is the richest source of informationfor job advertisements in Poland. Here, itis possible to find many advisory services,employment agencies, job advertisements,press advertisements, discussion group pagesand information on companies. This informationmay be searched using various searchoptions, ranging from the preferred place ofwork to the type of job.1.9.4. Residence and work permits1.9.4.1. Right of residenceVisas applicable to non-residents intending tostay in Poland can be of several types:A temporary residence visa allows the holderto stay in Poland without being employed orrunning profit-oriented activities. A temporaryresidence visa is issued for a limited period.The total time for which a foreigner ispermitted to stay in Poland on such a visacannot exceed six months within a 12-monthperiod from the date of his first entry.A visa with a work permit entitles the holder tobe employed or be involved in profit-orientedactivities. A visa with a work permit can begranted to a foreigner who has received awork permit by the Voivode (province governor)with jurisdiction over the territory wherethe employer’s company has its registeredoffice. The visa is issued for the duration specifiedin the work permit, but for no longer thanone year. The visa may be extended.Afterwards, a foreigner who wishes to remainin Poland must apply for a temporary residencepermit. Visas are issued in the home country ofthe individuals by Polish diplomatic agenciesand consular offices. Visa extensions are issuedin Poland by the voivodeship authority withjurisdiction over the territory where the foreigneris staying or planning to stay.34

A temporary residence permit can be grantedwhen a foreigner proves the existence of justifyingcircumstances, which can be e.g. thereceipt of a work permit or conducting businessactivities in Poland.Permission for permanent residence can begranted to a foreigner who satisfies the followingconditions:• he can prove his permanent, family or economicrelations with Poland;• he has secured accommodation;• he has stayed in Poland with permission forat least five years immediately beforeapplying for permanent residence.All residence permits are issued by theVoivode with jurisdiction over the foreigner’splace of residence in Poland.Citizens of EU and EEA countries do not needto have a visa to stay in Poland.1.9.4.2. Employment of foreignersThe necessary condition for a foreigner to beemployed in Poland (with some exceptionsthat are provided for by law) is the receipt ofa work permit. This condition does not referto foreigners who, for example:• are EU nationals,• are non-EU nationals, but are nationals ofcountries within the European EconomicArea (EEA);• have been granted a permit to settle inPoland;• have been granted refugee status byPoland;• have permission to stay;• enjoy temporary protection in Poland;• have consent for a “tolerated stay” inPoland;• are family members of the foreignersreferred to in points 1-7 above (subject tocertain conditions);• are exempt from the need for a work permiton the basis of separate regulations,e.g. under the Ordinance of the Ministry ofLabour and Social Policy dated 31 August2006 on restrictions on work by foreignersin the Poland, which covers among others:a) training or participation in internships oradvisory programs conducted within theframework of EU activities or other internationalsupport programs;b) foreigners from countries with whichPoland has signed international agreementsallowing for employment withoutwork permits;c) foreigners performing art-related services,individually or in teams, for up to 30 daysin a calendar year;d) citizens of non-EU and non EEA countrieswho are members of corporate bodies oflegal entities in Poland and who haveworked in Poland for a period not exceeding6 months within the previous 12 months.e) foreigners who have permanent residenceabroad and are delegated to the territory ofPoland by a foreign employer for a periodof no longer than three months in order to:- perform assembly or maintenance work,or repairs of technologically completestructures, machines or other equipment,if these are manufactured by this foreignemployer;- give acceptance approval for machines orother equipment manufactured by aPolish company;- train the employees of a Polish employerwho is the recipient of the structures,machines or other equipment, on theoperation and maintenance of this equipment;- assemble, disassemble and supervise exhibitionstands, if the exhibitor is a foreignemployer who delegates the foreigner.The procedure of issuing a work permit consistsof the following three stages:• the employer who intends to hire a foreignerreceives a promise that the workpermit will be issued;How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 35

• the foreigner receives a visa with a workpermit or a temporary residence permit;• the work permit is granted to the foreigner.Promises to grant a work permit and workpermits are issued by the Voivode with jurisdictionover the territory in which theemployer’s company has its registered office.The promise is granted for a limited period,to a defined person and employer, for a specifiedposition or type of work. The permit isissued on the conditions specified in thepromise, for a period that does not exceedthe period of residence defined in the visa orthe validity period of the temporary residencepermit. The Voivode may extend the validityof the work permit granted to the foreignerupon the employer’s application. If the foreigneralready holds a temporary residencepermit on the date of submission of theapplication for the work permit, the Voivodedecides whether to issue the permit withoutbeing obliged to grant a promise.1.10. Polish social security systemSocial insurance in Poland consists of pension,disability, accident and sickness insurance.Contributions to pension and disability insuranceare payable until a given individual’sgross cumulative annual remunerationexceeds the cap amount (currently PLN85,290). Sickness and accident insurance contributionsare paid at the full amount. Theobligatory social insurance contributions arepayable on a monthly basis. The employercontributes between 14.93% and 17.96% ofthe employee’s gross salary, and the employeecontributes 13.71%, up to the level of his/cumulative earnings of PLN 85,290 in 2008.The amounts of contributions payable by theemployer and the employee to each kind ofinsurance are presented in Table 2 below.Under the current social insurance regulations,the Polish pension system consists ofthree pillars:• Pillar I: each individual or employee has aseparate account at the social security(ZUS) office, to which pension contributionsare paid. The level of the pensioninsurance contribution to be retained inpillar I depends on whether the individualis eligible / obliged to participate in pillarII. Participation in pillar I is obligatory foreveryone covered by social insurance. Ifthe individual is not eligible for participationin pillar II, the total of his pensioncontribution transferred both by him andhis employer is retained by the SocialInsurance Institution. If, on the otherhand, the individual participates in pillarII, part of the employee’s contribution (asillustrated in Table 2) is transferred by theSocial Insurance Institution to an openendedpension fund chosen by the individual.• Pillar II consists of open-end pension funds.Participation in pillar II is obligatory foreveryone born after 31st December 1968and optional for people born between 31stDecember 1948 and 1st January 1969.People born before 31st December 1948may only participate in Pillar I. As indicatedabove, a part of the pension contribution ofindividuals participating in pillar II is transferredfrom their social insurance accountsto the open-ended pension fund of theirchoice. Table 2 presents the split of pension36

contributions between the first and the secondpillars.• Participation in pillar III is voluntary. Within thispillar, contributions are paid either by theemployee himself or by his employer (employeepension funds) into life assurance, an investmentfund or for additional insurance in a pensionfund.Employees born before 31st December 1948are not subject to the new social security regulations.They remain within the old pensionsystem, where all pension contributions arepaid to the Social Insurance Institution andtheir pension will be calculated and paidaccording to the rules that applied before 1stJanuary 1999.Poland joined the European Union on 1stMay 2004 and, since then, the provisions ofEU Regulation 1408/71 have been implementeddirectly as part of Polish social securitylegislation. This regulation has notreplaced the provisions of the national socialsecurity law, but has harmonized social securitysystems within the European EconomicArea, i.e. within the EU Member States,Norway, Iceland, Lichtenstein andSwitzerland (which is not an EEA MemberState, but for ease of reference, for our purposesthe term “EEA countries” also includesSwitzerland) so as to guarantee that citizensof EEA countries moving within the EEA willnot suffer disadvantages regarding theirsocial security. Therefore, as of 1st May2004, the provisions of Regulation 1408/71became applicable to citizens of EEA countriesperforming their duties in Poland(Switzerland adopted this regulation on 1stApril 2006).Obligatory social insurance contributions paid by the employee and the employer (as of 1st April 2006)Category of insurance % contributed Contribution splitEmployerEmployeePension 19.52% of salary including: 9.76% of the 9.76% of the- 12.22% of the salary salary split into: salary split into:to Pillar I - Pillar I - - Pillar I -- 7.3% of the salary 9.76% of the 2.46% of theto Pillar II salary salary- Pillar II - - Pillar II - 7.3%no contribution of the salaryDisability 10% of salary 4.5% 1.5%Accident - employers employing up 0.67% - 3.6% -to nine workers: 1.80% of salary- employers employing 10workers and more:the contributionis between 0.67% and 3.6%of salary, depending on thelevel of occupational hazardin a given tradeSickness 2.45% of salary - 2.45%Labour Fund 2.45% of salary 2.45% -(additional contribution)Employee Benefits 0.10% of salary 0.10% -Guarantee Fund(additional contribution)How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 37

Based on the above regulations, citizens ofEEA countries (Polish and foreign nationals)should only be subject to the social securitylegislation on an obligatory basis of oneMember State at a time. The regulation alsostipulates that social security legislationshould be applicable to the place where thework is performed. This implies that an individualis subject to social security in the statewhere he actually works and not in the statewhere his employer has its registered office(the “pay where you work” principle).Regulation 1408/71 provides for someexceptions to this general rule. One ofthese, indicated in Art. 14, item 1a stipulatesthat individuals who are posted bythe organisation to which they are normallyattached to the territory of anotherMember State to perform work for thisorganisation, shall continue to be subjectto their home country’s legislation, providedthat the anticipated duration of thatwork does not exceed 12 months (with thepossibility of prolonging it for another 12subsequent months) and that the individualis not sent to replace another personwho has completed his term of assignment.The exemption works automatically,which means that the home country’ssocial security authorities are obliged toissue a certificate (form E101) confirmingthe attachment to the home country socialsecurity system if the conditions mentionedabove are met. The E101 exemptionmay be subsequently prolonged uponextension of the assignment for another12-month period (form E102); however,the host country social security authoritiesshould agree to such an extension.In the case of longer assignments, an exemptionfor a longer period is only possible followinga decision issued under the approvalof the social security authorities of bothcountries. Specifically, Art. 17 of Regulation1408/71 provides for the ability of the socialsecurity authorities of the home and hostcountry to mutually agree on an exception tothe general rule under which it is possible toremain in the social security scheme of thehome country. Such an exceptional agreementmay be granted if, for example, remainingin the social security scheme of the countryof usual employment is in the best interestsof the assignee. In this case, the socialsecurity authority of the home country issuesthe E101 certificate of coverage after seekingagreement for the application of this exceptionfrom the social security authority of thehost country.After that period, if an individual continuesto work in the host country, this personshould be transferred to that country’s socialsecurity system. It should be noted that if,during the total period of employment, theperson performs services in various EU countries,upon retirement, a pension will be paidby the social security authorities of each ofthe EU countries in which services were performedon a “pro-rata” basis.Based on the above provisions, once anassignee is granted an E101 form by thehome country’s social security authorities, heshould automatically be exempt from thehost country’s obligatory social security contributions.In cases where an individual performsemployment duties in several EEA countriesduring the period of an assignment, heshould be subject to social security in hiscountry of residence if he pursues activitypartly in that territory, or if he is attached toseveral organisations or several employerswho have their registered offices or places ofbusiness in the territory of different MemberStates (based on Art. 14 item 2a).The above regulations do not apply to individualsfrom countries other than the EEA who38

work / provide their services in Poland.Accordingly, such individuals are covered by theregular rules of the Polish social security systemunder the existence of a formal contract, whichdetermines whether an individual is to beincluded in the Polish social security system ornot. In the case of the Polish source of compensation(e.g. an employment contract with aPolish entity), as a rule, social security contributionsare due from both the employer andemployee. However, when the source of remunerationis located outside Poland (i.e. the individualis paid under a contract signed with anon-Polish entity), the obligatory Polish socialsecurity contributions are not applicable.How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 39

2. Conducting business activities -basic regulations2.1. Accounting and financeregulations2.1.1. Accounting regulationsPolish accounting standards do not differ significantlyfrom international standards, especiallyafter the recently introduced amendmentsand interpretations. Furthermore, incases where no national accounting standardsexist, the appropriate International FinancialReporting Standard(s) (IFRS) may be applied.As of 1st January 2005, all companies listedon the Warsaw Stock Exchange are obligedto prepare their consolidated financial statementsin accordance with InternationalFinancial Reporting Standards. In addition,the Polish subsidiaries of companies listed onany stock exchange within the EuropeanUnion may decide to prepare their statutoryfinancial statements under InternationalFinancial Reporting Standards that have beenadopted by the EU, rather than in accordancewith local accounting laws.Accounting may be handled by the companyitself (at the company’s registered office)or by another authorised entity providingexternal accounting services. The Tax Officeshould be informed of the latter case inwriting.All accounting documentation, records andreports must be prepared in Polish languageand Polish currency (zloty, PLN). Only thesource documents do not need to be translatedinto Polish. However, a reliable translationof the specified bookkeeping vouchers mustbe provided at the request of the fiscal auditauthorities or an auditor. All source documents,records and reports for the last fiveyears of activity (including tax returns) mustbe held by the company. For some specificdocuments (i.e. relating to employees) thisperiod is extended. The approved annualfinancial statements must be retained permanently.Companies must apply the accounting principlesspecified in the Accounting Act to ensurea true and fair presentation of their economicand financial position, as well as theirfinancial results. Activities (including businesstransactions) must be entered into theaccounting ledgers and disclosed in the financialstatements according to the nature of thebusiness. An entity may simplify some elementsof the application of accounting rules,on condition that these do not significantlyaffect the outcome of the accounting andbookkeeping procedures. The manager of the40

entity is responsible for the accounting obligationsbeing fulfilled.The accounting year (which must overlap thetax year) must cover 12 sequential months.Should it not coincide with the calendar year,the appropriate Tax Office should beinformed accordingly.Accounting records, financial statements and bookkeepingvouchers should be stored for the periodsspecified in section 8 of the Accounting Act.2.1.2. Financial statementsAnnual financial statements consist of a balancesheet, profit and loss account, additionalinformation (including an introduction to thefinancial statements), as well as supplementaryinformation and explanations (notes).Companies audited in a given year must alsopresent a cash flow statement and a statementof changes in the company’s share capital.Together with the annual financial statements,the management must prepare areport on the company’s activities, which, inparticular, contains information on majorevents that are material to the company’sactivities, the company’s expected developmentand major achievements in the area ofR&D, as well as the company’s present financialcondition and projections.2.1.3. AuditsAnnual consolidated financial statements ofcapital groups and annual financial statementsof joint-stock companies, banks, insurersand investment and pension funds mustbe audited.Other companies must be audited if two ofthe following three conditions were met inthe preceding financial year:• average annual employment amounted toat least 50 people;• the total net turnover and financial incomeamounted to at least EUR 5 million;• the total balance sheet assets as at the endof the accounting year amounted to at leastEUR 2.5 million.The EUR/PLN exchange rate announced by theNational Bank of Poland (NBP) on the last dayof the fiscal year is used for the calculation.Audits must be conducted by an independentcompany with a license to perform auditsbefore the financial statements are acceptedby the Annual General Shareholders’Meeting.All companies that have a duty to prepareannual audits must publish their balancesheet, profit and loss account, statementof changes in the share capital and cashflow statement as well as an introductionto the financial statements, the auditor’sopinion, the statement of dischargegranted by the Annual GeneralShareholder’s Meeting and the decisionon profit distribution in the publication“Monitor Polski B”.The manager of the company must submit allthe above documents to the appropriateCourt Register for publication within 15 daysof the date on which the annual financialstatements are approved.Several changes are envisaged with regard toaccounting regulations mainly concerning theimplementation of EU directive 2006/46/WE,which will require additional financial statementdisclosures regarding:• the character and purpose of contracts normallyrecognised as off the balance sheet,(such as special purpose entities, lease oroutsourcing contracts);• related party transactions including thosecarried out in non-market conditions;• information about of the auditor’s feeincluding separate disclosure for all types ofservices rendered;• establishment of common responsibility forHow to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 41

members of the management, supervisoryas well as the administrative board forpreparing and publishing financial statements;• corporate governance principles (for publiccompanies only).Probably, together with the changes resultingfrom the above-mentioned directive, otherchanges will be made that are aimed at closerrelations of national accounting rules to IFRSrequirements as well as the adaptation ofsome regulations to new economic realities.2.2. Taxes2.2.1. Taxes in PolandThe taxation system is uniform across theRepublic of Poland, and only small differencesmay appear in local taxes. In general,foreign companies and individuals pay thesame taxes as Polish legal entities or privateindividuals. The exceptions to this rule arebusinesses where taxation is regulated byinternational treaties signed by Poland(Double Taxation Treaties).The main taxes in Poland are:• corporate income tax (CIT);• personal income tax (PIT);• Value Added Tax (VAT);• excise duty;• stamp duty / tax on civil law transactions.All companies intending to conduct businessactivities are given a tax identification number(NIP) after registration with the appropriate localTax Office. Taxpayers are responsible for keepingtheir accounts and proper calculation of tax.2.2.2. Tax system and regulationsAll taxes in Poland are imposed by the governmentin Taxation Acts which set the rulesfor imposing taxes, their rates and duties, aswell as the responsibilities of taxpayers. TheMinister of Finance may be authorised by anAct to decree regulations. All legislation ispublished in official publications, such as theJournal of Laws (Dziennik Ustaw, Dz. U.) andthe Official Journal of the Republic of Poland(Monitor Polski, M.P.).The Tax Ordinance is the most general taxregulation which defines:• the structure of tax administration;• general taxation regulations, e.g. paymentof taxes and issues concerning tax arrears;• tax responsibility of third parties;• tax information;• tax proceedings;• fiscal confidentiality.Taxes in Poland are administered by:• Tax Offices - units supervising the collectionof taxes in their territories. They also issueindividual administrative decisions in taxationcases. Fiscal audit offices also exist,which perform taxation and proceduralaudits of fiscal accounting;• Tax Chambers - supervise the Tax Officesand are empowered to review the administrativedecisions of Tax Offices and FiscalAudit Offices;42

• the Minister of Finance - is responsible forPolish budgetary policy and supervises theentire taxation system.Taxpayers may appeal to the Tax Chamberagainst the decisions of the local Tax Officeor Fiscal Audit Office. An appeal against adecision of the Tax Chamber may be directedto the Regional Administrative Court.Taxpayers are also entitled to resort to theSupreme Administrative Court to reviewjudgments of the Regional AdministrativeCourts.The concept of tax rulings existing in Poland.The Minister of Finance issues two types oftax rulings:• general - aimed at making the applicationof tax law by the tax authorities uniform(this may be applied by all taxpayers inrespect to the background presented by theMinister of Finance);• individual - issued upon written applicationof a taxpayer (this may be used only by thetaxpayer that obtained the ruling).The above interpretations are help to avoidcertain negative tax consequences of aplanned transaction. Namely, in case the taxconsequences of a transaction occur afterreceiving an individual or the publishing of ageneral interpretation, the taxpayer is notobliged to pay tax liability established by thetax authorities as regards the transactiondescribed in the ruling (in case during a taxaudit they present an approach different fromthe one presented in the ruling). The aboveexemption from the payment of tax liabilitywould apply to the tax consequences of atransaction that occurred up to the end of themonth/quarter/year in which the tax rulingwas changed, depending on the tax settlementperiod. In the event that the tax effectsarising from the transaction described in theapplication occur before receiving an individualor the publishing of a general interpretation,there would be no exemption from thepayment of tax liability. However, generally,the taxpayer who complies with such an interpretationwould not be subject to penal-fiscalliability and would not be charged with penaltyinterest on tax arrears in the event of a disputewith the tax authorities (with respect tothe tax arrears that arose before the tax rulinghad been changed).2.2.3. Corporate income tax (CIT)Companies and organisational units (with theexception of partnerships) are subject to corporateincome tax. Taxpayers that have theirregistered office or their management boardin Poland, are liable for Polish CIT on theirglobal income. If a corporate taxpayer doesnot have either its registered office or managementboard in Poland, tax is only leviedon income derived in Poland. DoubleTaxation Treaties may modify these rules.Having satisfied several conditions, companiesmay establish a “fiscal unity“, i.e. a group ofcompanies treated as a single CIT taxpayer(the concept of a “fiscal unity” is discussed inmore detail in section 2.2.3.5 of this guide).2.2.3.1. Taxable income and tax ratesThe calendar year is generally the tax year.Taxpayers may, however, select a differenttax year covering 12 consecutive calendarmonths.Taxable income is the aggregate of all revenuesearned in a tax year - both financialand operational (with exceptions), net ofdeductible costs. Income decreased by additionalspecific expenses (e.g. deductible donations)constitutes the basis for the calculationof taxation. Generally, tax-deductible costsare expenses borne in the course of generatingtaxable revenue. Some expenditure, however,is not tax-deductible (e.g. entertainmentcosts, some kinds of administrative orcontractual penalties, etc.). Advertising costsHow to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 43

are entirely tax deductible, while representationcosts are not.Income (tax base) that is calculated in accordancewith tax provisions is subject to CIT ata rate of 19%, which ranks among the lowestin Europe.Revenues / deductible costs generated by apartnership are added to each partner’s revenues/ deductible costs in proportion to theirshares in the partnership; thus, the income isThe calendar year is generallythe tax year. Taxpayers may,however, select a different taxyear covering 12 consecutivecalendar months.effectively taxed at the level of each partner.Fixed assets and intangibles are subject todepreciation/amortization write-offs. Wheretheir value is not more than PLN 3,500, theycan be recognised as tax deductible in total inthe month in which they are brought intouse. Certain assets, such as land and works ofart, cannot be depreciated.A tax relief for the purchase of new technologiesenables the expenditures of enterpriseson new technologies to reduce their tax baseby 50%. The taxpayer may still depreciate thevalue of technologies purchased in full.Additionally, the minimum period for thedepreciation of costs of completed R&D workhas been reduced to 12 months.2.2.3.2. Taxation of dividendsDividends obtained by Foreign CompaniesRevenue (income) from distribution of profitsof a corporate entity with its registered officein Poland, including dividend income (as wellas the redemption of shares, liquidation proceeds,income / supplementary capital allocatedto share capital, etc.), is taxed at a rate of19%. This tax is withheld and remitted by thecompany paying the dividends. An exemptionfrom withholding tax on revenue (income)from profit sharing in a corporate entityearned by EU companies (or companies fromthe European Economic Area, “EEA“) applies.In order to benefit from the above exemption,the recipient of the dividend needs tosatisfy the following conditions:• it is subject to unlimited tax liability in anEU or EEA Member State (i.e. it is subject tocorporate income tax on its world-wideincome in an EU or EEA Member State);• it holds directly at least 10% (15% until theend of 2008) of the shares of a Polish companypaying dividends for an uninterruptedperiod of at least two years;• the Polish company paying dividendsreceives a certificate of tax residence fromthe recipient of the dividend.In addition, if the requirement to hold sharesin a Polish company for two years is notsatisfied at the time of the distribution of thedividend, the exemption is still available tothe recipient of the dividend. However, if theshares are alienated before the two-year periodelapses, the exemption expires and thecompany receiving the dividends is requiredto pay the dividend withholding tax accordingto the relevant Double Taxation Treaty (ifapplicable), together with penalty interest.These regulations only apply to companiesincorporated in EU or EEA Member Statesand since 1st July 2005 they also apply tocompanies registered in the SwissConfederation (the list of eligible companiesis provided in an appendix to the CorporateIncome Tax Act).The withholding tax rate on dividendspayable to foreign companies may be44

educed under the applicable DoubleTaxation Treaties. In order to benefit fromthe reduced Treaty rates, the foreign recipientof the income should provide a certificateof tax residency issued by the tax authoritiesin his home country to the Polish remitter ofthe dividend.Dividends obtained by Polish CompaniesDividends received by Polish tax residentsfrom Polish and foreign companies are aggregatedwith other taxable revenues and subjectto CIT at a rate of 19%. However, withholdingtax payable abroad may be creditedagainst CIT liability in Poland (although thecredit may not exceed the CIT attributable todividend-type income).Withholding tax paid with respect to dividendsobtained from Polish companies cannotbe credited.According to the Polish CIT Law, an exemptionis provided from the withholding tax ondividends received by Polish taxpayers froman entity that is domiciled in an EU or EEAMember State including Poland. The applicationof the so-called participation exemptionis possible if:• the Polish company holds directly a minimum10% (15% until the end of 2008) ofthe shares in a company paying a dividend(if the payer is a Swiss company the thresholdis 25%), and• the Polish company holds the shares for anuninterrupted period of at least two years(this requirement does not have to be metat the moment of receiving the dividends).As of 1st January 2007, where a dividend orprofits subject to distribution are paid to acompany that is tax resident in Poland, thetax paid on profits subject to distribution maybe credited against the CIT liability of thePolish company (so-called underlying taxcredit). This is the case only if the dividend ispaid by an entity that is a resident of a non-EU state (and not an EEA member orSwitzerland) with which Poland has concludeda Double Tax Treaty.Underlying tax may be credited against CITliability provided that: (i) the Polish companyholds directly at least 75% of the shares inthe share capital of the dividend payer, and(ii) the Polish company holds the shares for atleast two years (this requirement does nothave to be met at the moment of paying thedividends). The aggregate value of deductionmay not exceed the amount of tax calculatedbefore the deduction and which proportionallycorresponds to the income obtained bythe Polish company from the foreign entity.Furthermore, tax credit cannot be carried forward.2.2.3.3. Taxation of interest, royalties andintangible servicesThe general rule is that interest is recognisedfor CIT purposes on a cash basis (both as arevenue and as a deductible expense), i.e.interest constitutes a tax-deductible expenseto the debtor and taxable income to a creditorwhen it is paid or settled in any otherway.Interest and royalties paid to an entity withouttax residence in Poland is subject to awithholding tax at a rate of 20%, unless arelevant Double Taxation Treaty provides fora reduced tax rate.Similarly, the 20% withholding tax applies tocertain intangible services (such as consulting,accounting, market research, legal services,advertising, management and control, dataprocessing, human resources, guarantees andother services of a similar nature), unless arelevant Double Taxation Treaty providesotherwise. In general, payments for intangibleservices are classified under DoubleTaxation Treaties as business profits that areHow to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 45

not subject to withholding tax in the sourcecountry.Based on the EU Interest and RoyaltiesDirective, withholding tax rates that apply tointerest and royalties will be subject to agradual reduction according to the followingtimetable:• from 1st July 2005 until 30th June 2009 -the applicable rate is 10%;• from 1st July 2009 until 30th June 2013 -the applicable rate is 5%;• as of 1st July 2013 - the exemption applies.In principle, in order to benefit from theabove reduction in tax rates, the followingconditions should be met:• the interest payments are made by a taxpayerhaving its registered office or place ofmanagement in Poland or (under certainconditions) by a permanent Polish establishmentof a company being a taxpayer inanother EU Member State on its world-wideincome;• the interest payments are made to a companythat is a taxpayer in another EUMember State on its world-wide income, or(under certain conditions) such a company’spermanent establishment located in anotherEU Member State;• the final recipient of the interest paymentsis a company that is a taxpayer in anotherEU Member State on its world-wide income;• there is at least a 25% direct shareholdingrelationship between the recipient and thepayer and the shares are held or will beheld uninterruptedly for a period of at leasttwo years;• this benefit is also available when the recipientof the interest (royalties) is a sistercompany of the Polish company paying theinterest (royalties), provided that the parentcompany directly holds at least 25% of theshares in both sister companies uninterruptedlyfor at least two years.If the requirement to hold the shares for twoyears is not satisfied at the time of paying theinterest (royalties), the benefit can still begained from the exemption. However, if theshares are disposed of before the two-yearperiod elapses, the exemption expires andthe recipient company is required to pay thewithholding tax according to a relevantDouble Taxation Treaty (if applicable), and itis also obliged to pay penalty interest.The above regulations only apply to companiesincorporated in EU Member States,whereas, since 1st July 2005, they have alsoapplied to the companies from the SwissConfederation. The list of eligible companiesis provided in an appendix to the CorporateIncome Tax Act.The entity paying interest or royalties withholdsand remits the tax. A certificate of residencyis needed in order to apply a reducedtax rate, or to refrain from withholding thetax in accordance with a Double TaxationTreaty, or to apply benefits resulting fromthe implementation of the Interest andRoyalties Directive.2.2.3.4. Carrying losses forwardThe CIT regulations allow taxpayers to carrylosses forward to future years. It is not possibleto carry losses back and offset themagainst income from prior years. Losses maybe offset against the income generated inthe following five tax years. The maximumamount of a given year’s loss offset in anysingle tax year may not exceed 50% of thisannual loss.The right to carry losses forward is alwayslinked to the entity that incurred the losses,rather than to the entity’s specific assets. Thismeans that the tax losses are not transferablewith assets or the business (e.g. if the wholeof a given taxpayer’s operations are transferredto another entity). Furthermore, in the46

case of mergers only the tax losses of the survivingcompanies may be still utilized, whereasthe tax losses of the acquired companiesare forfeited. If the merger results in theestablishment of a new company, the taxlosses of the merging companies cannot beutilized.2.2.3.5. Group company regulationsThe CIT Act allows for the creation of a “fiscalunity“/tax consolidated group, underwhich companies in a group are treated as asingle taxpayer of CIT.The basic requirements for obtaining the statusof a tax consolidated group are the following:• the group may be established only by limitedliability companies or joint-stock companieswith registered offices in Poland;• the average share capital of each membercompany should amount to at least PLN1,000,000;• the holding company should hold at least95% of the shares in the remaining groupcompanies;• subsidiary companies may be shareholdersneither in the holding company, nor othersubsidiary companies in the group;• none of the members of the group canhave tax arrears (this condition is deemedto be satisfied if a member of the grouppays the tax arrears together with penaltyinterest within 14 days of correction of thetax return / receipt of the tax decision);• the holding company and the subsidiarieshave agreed to establish the capital groupfor at least three years by means of a notarialdeed; the agreement must also be filedwith the Tax Office which issues an administrativedecision and registers the capitalgroup if all the conditions are met.After the creation of the tax consolidatedgroup, the companies forming this groupshould additionally satisfy the followingrequirements:• none of the companies included in thegroup can benefit from CIT exemptionsindicated in other Acts;• the annual level of the group’s profitabilitycannot be less than 3%;• companies from the group cannot maintainrelationships with companies from outsidethe group resulting in a breach of transferpricing restrictions.The tax consolidated group formed and registeredwith the relevant tax authorities istreated as a one entity for CIT purposes,which results in particular in the followingadvantages:• the losses of some of the members of thetax consolidated group can be offsetagainst the taxable income of its othermembers;• the regulations on transfer pricing do notapply to transactions between companieswithin the group;• donations between companies within thegroup are deemed to be a tax-deductibleexpense for the donor;• the simplification of tax formalities, as onlyone company in the group prepares a taxreturn.2.2.3.6. Thin capitalizationThe Polish CIT Act contains provisions on thincapitalization, restricting the debt / equityratio to 3:1. Interest paid on loans in excessof this ratio is not tax deductible. These regulationsapply when loans are granted to acompany by:• a shareholder owing at least 25% of thevoting shares;• shareholders jointly owning at least 25% ofthe voting shares;• another company, if the same shareholderowns at least 25% of the voting shares ineach of the companies.The term “loans“ includes also debt securities,deposits and irregular deposits. The thinHow to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 47

capitalization restrictions apply both to residentand non-resident creditors.2.2.3.7. Transfer pricing (documenting transactionswith related parties)In principle, Polish transfer pricing rules arebased on the OECD Transfer PricingGuidelines. The rules are based on the conceptof the ?arm’s length? level of transferprices. If related parties (e.g. those with acommon shareholder) conclude transactionson terms that differ from market practiceand, in consequence, the Polish entity disclosesa taxable income lower than it would havedisclosed otherwise, the taxable income ofthe entity will be adjusted in accordance withthe arm’s length concept.Moreover, if intangibles or services are thesubject of such a transaction and the benefitsrationally expected from the transaction areobviously lower than the expenses incurred,then such expenses are not deductible for taxpurposes.The rules also apply to “dealings“ of PEs.Tax informationTaxpayers conducting transactions with foreignrelated parties are subject to certainnotification requirements. These rules areadditional to the transfer pricing rules andapply to all transactions between Polish companies,as well as Polish and foreign legal persons.The requirements are as follows:• where a taxpayer and a related foreign partyengage in transactions exceeding EUR300,000 in a given tax year, the tax authoritiesmust be informed within three monthsof the year end;• where the foreign entity has also a representativeoffice or a permanent establishmentin Poland, the tax authorities must beinformed of transactions with a valueexceeding EUR 5,000.Documenting transactions with related partiesTransfer pricing documentation requirementsrelate to transactions with related parties andwith companies having their registeredoffices in tax havens. The rules also apply to“dealings” of PEs.According to this law, the duty arises to preparedocumentation for a transaction (ortransactions) concluded between related parties,where the total amount arising from thecontract or the amount due (and actuallypaid) in the tax year exceeds:1. EUR 100,000 - if the value of the transactiondoes not exceed 20% of the share capitaldefined in accordance with the regulationson thin capitalization; or2. EUR 30,000 - with respect to services, salesor use of intangibles; or3. EUR 50,000 - in all other cases.The duty to prepare documentation alsorelates to transactions concluded with companieshaving their registered offices in taxhavens, if the total amount arising from thecontract or the amount due (and actuallypaid) in the tax year exceeds EUR 20,000.Taxpayers must present the documentationwithin seven days of the request of the taxauthorities. If the authorities establish thatthe taxpayer’s profit is higher (or the loss islower) than the amount declared by the taxpayerand the taxpayer does not provide theauthorities with the required documentation,the difference between the profit declared bythe taxpayer and the profit defined by theauthorities may be subject to taxation at arate of 50%.Advance pricing agreements (APA)APA procedure allows taxpayers to verify thecorrectness of the pricing methodologyapplied in domestic / foreign-related partytransactions and ascertain the up-front acceptanceof the transfer pricing methodology bythe tax administration. The rules also apply to“dealings” of PEs.48

Polish law defines three kinds of APAs:• unilateral;• bilateral;• multilateral agreements.Taxpayers requesting APAs in Poland arerequired to justify the selected transfer pricingmethod, prepare a description andexplain the application of the selectedmethod, indicate the circumstances thatcould influence the correctness of the pricingmethodology, prepare the documentationused as a basis for setting the level of thetransactional prices, including e.g. agreementsand other documents that indicate theintentions of both parties and propose thetax years to be covered by the APA.Before the submission of the application forthe advance pricing agreement, the domesticentity interested in concluding an APA mayrequest the Ministry of Finance to clarifydoubts regarding the individual case, in particular,the usefulness of entering into theAPA, the scope of the necessary informationto be submitted, as well as the procedure andprobable date of conclusion of such an agreementfor a particular transaction. The applicationshould be submitted by the Polish entity.In the event of any doubts regarding thetransaction pricing method chosen by the taxpayeror doubts regarding the content of thedocuments attached to the application, theMinistry of Finance may request an explanationof such doubts or additional documents.There is an application fee which should bepaid within seven days of the date of the submissionof the application. The application feeis 1% of the transaction value, within the limitsof PLN 5,000 - PLN 200,000 (EUR 1,400 - EUR55,000), depending on the type of agreement.The result of the proceedings is a decisionwith a validity of no longer than five years.The validity of the decision can be extendedat the taxpayer’s request. The extended periodof the decision’s validity cannot exceed afurther five years.The proceedings should be finalised as follows:unilateral agreement - no later than sixmonths from its initiation, bilateral agreement- no later than one year from its initiation,and in the case of a multilateral agreement- no later than 18 months from its initiation.2.2.3.8. Branches of foreign companiesForeign companies basically have the right toestablish branches in Poland. The range ofactivities of these branches is limited to thescope of activities of the foreign headquarters.The establishment of a branch requiresregistration in the National Court Register.Such branches are subject to similar tax rulesas those imposed on limited liability andjoint-stock companies.Foreign companies may also operate inPoland in the form of representative offices.The range of activities of representativeoffices is limited to representation and advertising.2.2.4. VAT rates and regulationsVAT regulations were subject to significantchanges in 2004 because of Poland’s accessionto the EU. Polish regulations are currentlybased on EU directives. In brief, after 1st May2004, the scope of VAT taxation has beenvastly extended. Exports and imports to andfrom EU Member States were replaced withintra-community supply and acquisition, andthe rules for VAT recovery were changed. Thenew VAT law introduced new rules in placeof taxable supplies of goods and services. Thegeneral principles of the new system are presentedbelow.Value added tax on goods and services (VAT) isa broad-based tax levied on the supply ofHow to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 49

goods and services in Poland. A Polish entity isrequired to register for VAT once its annualturnover on transactions subject to VAT exceedsPLN 50,000 (c.a. EUR 14,000). Foreign entrepreneursmust register for VAT in Poland beforethey start any VAT-able activity in Poland(except for limited, clearly specified cases). VATis imposed on every supply of goods and servicesat the base or reduced VAT rate, unlessthe transaction is exempt from Polish VAT.The standard rate of VAT is 22% and ischarged on most goods and services.A reduced VAT rate of 7% is imposed on theenumerated sale of products or supply of services,e.g.:• certain foodstuffs;• medicines and goods used in health care;• certain children’s goods;• repair of clothing and textile articles used inhouseholds;• repair of bicycles;• services performed by hairdressers and barbers.A reduced 0% VAT rate is levied on the intracommunitysupply of goods, exports ofgoods, as well as some international transportservices and the services related to internationaltransport.A reduced 0% VAT rate may be applied tothe sale of certain books and magazines andsome domestic supplies, e.g. equipment forselected ships and airplanes.Some financial and insurance services, culturalservices, research and development services,etc., are exempt from VAT, whichaccordingly prevents the taxpayer from recoveringinput VAT incurred in relation to suchservices.The tax due is calculated as the surplus ofoutput VAT charged on sales over recoverableinput VAT stated on purchase invoicesand other specified documents.• hotel and catering services;• construction and repair services related tohousing;• some transport services;• municipal services (e.g. water supply,sewage treatment, street maintenance, etc.);• fertilizers;.• repair of shoes and other leather articles;Transactions between VAT taxpayers must bedocumented with a VAT invoice. Sales to individualswho do not conduct business activitiesmust be registered by a fiscal cash register ifthe turnover with individuals exceeds a specificthreshold. This threshold generallyamounts to PLN 40,000 (c.a. EUR 11,000), butsales of several kinds of goods need to beregistered in a fiscal cash register regardlessof the value of sales during the year.Registered VAT taxpayers are required to submitmonthly VAT returns (or quarterly VATreturns in the case of those having the statusof “small taxpayers”) to the appropriate TaxOffice and keep registers of purchases andsales subject to VAT. In addition to monthlyVAT returns, EC Sales and Purchase Lists and50

Intrastat declarations must be submitted bythe taxpayer with respect to its intra-EUtransactions.Generally, VAT due must be paid by the 25thday of the month following the month (quarter)in which the VAT obligation arises.Although Polish VAT law is generally compliantwith the VAT Directive of the EU(2006/112/EC), it contains various country-specificprovisions and requirements, which arenot common in other local VAT regimes.These are usually very troublesome for foreignentrepreneurs. In consequence, VAT andIntrastat compliance is often a challenge andis being outsourced to firms experienced inPolish VAT settlements. Deloitte offers suchassistance.Based on certain rules defined in a decree ofthe Ministry of Finance, foreign business entitiesnot registered for VAT in Poland mayapply for a refund of input VAT incurred onpurchases in Poland on a reciprocal basis.2.2.5. Excise dutyBased on the Excise Duty Act, goods on whichexcise duty is imposed can be divided intotwo groups:Harmonised excise duty goods, i.e.:• engine fuel and its components;• alcohol and beverages;• tobacco products.Non-harmonised excise duty goods, i.e.:• cars;• perfumes and cosmetics;• electricity.• intra-community supply and intra-communityacquisition.Harmonised excise duty goods are subject toexcise duty that is covered by special ruleswhich are stipulated in Polish legislation onthe basis of EU Directives. In particular, theymay only be stored in bonded warehousesand excise duty is due when they are movedout of the bonded warehouse (unless theyare moved under the excise duty suspensionprocedure).Excise duty is calculated either as a percentageof the value of goods produced (or thecustoms value of the commodities) or on avolume basis (fixed rate per unit).The Minister of Finance may amend theexcise rates within given limits during theyear. The law also provides for certainexemptions that may be made in relation tocertain goods, based, for instance, on theiruse or in the event of exporting excise goods.2.2.6. Tax on income derived from capital(natural persons)As a rule, capital gains derived in Poland aresubject to a 19% tax. The same rules apply tocapital gains realised outside Poland.There is no requirement to pay tax advanceson capital gains derived from the sale ofshares. With some exceptions, income derivedfrom the sale of shares is subject to a 19% taxat the time that the individual files a separateannual tax return disclosing the capital gainsrealised during the given tax year.As a rule, dividends, interest, as well as othertypes of capital gains are subject to a 19%flat rate tax.Excise duty is levied on the:• production of harmonised excise goods;• movement of harmonised excise goodsfrom a bonded warehouse;• sale of excise goods in Poland;• exports and imports of excise goods;How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 51

2.2.7. Personal income tax (PIT)Under the Polish PIT Law, individuals may besubject to either limited or unlimited tax liabilityin Poland. According to the provisionsof the PIT Law, tax residency status of a givenindividual depends solely on whether he hashis place of permanent residence in Poland.The term “place of residence” is defined insection 1a of Art. 3 of the PIT Law. Further tothe statute, a person having his place of residencein Poland is a person who: has his centreof economic or personal interest (centreof vital interest) located in Poland or stays inPoland longer than 183 days during a taxyear. These provisions should be understoodin the following way: if an individual’s stay inPoland exceeds 183 days, under Polish legislation,such individual would be considered aPolish tax resident. Should that be the case,as a result, he would be subject to taxation inPoland on his worldwide income. On theother hand, individuals whose stay in Polanddoes not exceed 183 days in a given yearshould not be considered as Polish tax residents,unless it would be proved that theyhave their centre of vital interests in Poland.The status of a Polish tax resident implies thatthe total world-wide income received by agiven individual is subject to taxation inPoland, unless Double Tax Treaties state otherwise.An individual enjoying Polish tax nonresidentstatus is, on the other hand, taxablein Poland only on his Polish source income.The tax year for individuals is the calendaryear.In general, cash and benefits put at an individual’sdisposal constitute his taxableincome, unless a particular income is taxexemptin Poland according to Polish domesticlaw and/or the appropriate DoubleTaxation Treaty.Examples of income exempt from taxation inPoland include:• amounts due to the individual while on abusiness trip (per diems, travel and accommodationexpenses), up to the limitsdefined in the provisions of other Polishlaws;• amounts paid by an employer for educationand raising the professional qualificationsof his employees (e.g. the value of coursesand training financed by the employer).Possible deductions from income include:• contributions paid to the Polish social securitysystem;• donations made to organisations conductingactivities in the field of public welfare,as well as donations made for religious purposes(except for donations to natural persons),up to a level of 6% of the individual’sincome;• donations to church charities (applicableonly to church legal entities) - no deductionlimit is provided (but some additional conditionsmust be met to take advantage ofthis deduction);Personal income tax rates for 2008(Currency translations based on the rate of USD 1 = approx. PLN 2.315)Taxable IncomePersonal Income TaxUp to PLN 44 490 19% minus PLN 586.85(USD 19,218) (19% minus USD 253)PLN 44,490 - PLN 85,528 PLN 7,866.25 + 30% of taxable income over PLN 44,490(USD 19,218 - USD 36,945) (USD 3,398 + 30% of taxable income over USD 19,218)Above PLN 85,528 PLN 20,177.65 + 40% of taxable income over PLN 85,528(USD 36,945) (USD 8,716 + 40% of taxable income over USD 36,945)52

• expenses incurred by an individual for usingthe Internet in the place where the individuallives, up to the value of PLN 760 peryear;• expenses incurred for rehabilitation purposes(some additional conditions must be metto take advantage of this deduction).Possible tax deductions:• 7.75% of the basis for calculating healthcarecontributions paid by an individual in agiven calendar year for his national healthcareinsurance in Poland;• child deduction - available for parents briningup children (if certain conditions aremet) - up to PLN 1,173.70 per child (in 2008).An individual may decide to donate 1% of hisannual tax liability to a chosen welfare organisationby indicating this decision in his annualtax return. Such a donation is made by the taxoffice.The personal income tax rates for 2008 are asfollows:As a rule, the PIT rates indicated in the tableabove are applicable to an individual’s totalincome. Notwithstanding the above, thePolish PIT Law provides for linear or lumpsum taxation on certain sources of income(instead of progressive taxation).The following items are subject to a linear taxrate:• capital gains (see section 2.2.6 above) -19%;• income from the sale of real estate (providedthat it is non business-related): if thesale of the real estate takes place after fivefull calendar years from the date of purchase,no tax is levied, otherwise - for realestate purchased in 2007 and later - 19% onthe difference between the price receivedand the cost incurred (additional exemptionpossible), for real estate purchased before2007 - 10% on the entire price received(additional exemption possible);.• Polish source income derived by non-residentsfrom independent artistic, literary, scientific,educational and journalistic activities,copyrights and inventions, as well asfrom personal service contracts, specific taskcontracts, managerial contracts, or similarcontracts and from board member fees -20%;• income derived from conducting businessactivities in Poland - progressive taxationunless the entrepreneur declares otherwiseand chooses 19% linear taxation of his businessactivity income.Apart from the above, according to the provisionsof the Act on Lump-Sum Taxation of certainrevenues earned by private individuals, thetaxpayer may enjoy flat rate taxation (lumpsumtaxation) on certain sources of income, ifhe chooses to apply this taxation system insteadof applying the progressive taxation governedby the provisions of PIT Law.Lump-sum taxation is applicable to suchincome as:• revenues derived from renting real estate -8.5% up to a level of revenues of EUR 4,000and - 20% thereafter;• revenues derived from the performance ofcertain types of business activity;• revenues derived from performing independentservices of certain types.Tax is generally due on a monthly basis.Polish employers are obliged to calculate,withhold and pay the tax advances due onthe remuneration of their employees to theTax Office with jurisdiction over the employer’sregistered office.Individuals who receive income from abroador perform independent services, are personallyresponsible for disclosing the income ona monthly basis and for the payments ofmonthly tax advances.How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 53

As a rule, every taxpayer is obliged to file anannual tax return disclosing his aggregateannual income at the end of the tax year.The deadline for filing the tax return andpaying the annual tax liability is 30th April ofthe year following the tax year for which thereturn is filed. No extensions are possible.Taxpayers may file the annual tax returnjointly with their spouses, if the followingconditions are met simultaneously:• the spouses remain married throughout theentire tax year in question;• both spouses are subject to “unlimited taxliability” (tax resident status) in Poland forthe tax year in question;• there is marital co-ownership between thespouses;• neither of the spouses receives income subjectto the provisions of the Act of 20thNovember 1998 on lump-sum income tax oncertain revenues earned by private individuals(except for rental income) or chooses19% linear tax rate on business activityincome.A taxpayer may also file a joint marital annualtax return in the event of the death of onespouse if this occurred during the tax year orat its end, but before the annual tax return isfiled.2.2.8. Double Taxation TreatiesThe personal income tax and corporateincome tax regulations provide that the creditmethod of avoidance of double taxation isused, unless a specific Double Taxation Treatystates otherwise. Poland has signed DoubleTaxation Treaties with over 70 countries.Most of the treaties signed by Poland arebased on the 1977 OECD Model Convention,although some exceptions in several casesappear.2.2.9. Local taxes and chargesLocal taxes include:• real estate tax;• road vehicle tax (generally imposed ontrucks and buses);• agricultural tax;• forestry tax;• inheritance and donations tax.Local communities are entitled to establishrates and/or exemptions for the above taxeswithin the limits set by Parliament (except forthe inheritance and donations tax the ratesfor which are set by Parliament).2.2.10. Stamp dutyStamp duty is payable on certain filings andadministrative acts, including:• official applications;• official deeds;• certificates;• permits;• other documents, e.g. submitting a powerof-attorneybefore authorities and courts.2.2.11. Transfer taxThe following acts are subject to transfer tax:• sales agreements and agreements on theexchange of goods and property rights;• loan agreements;• donation agreements - to the extent regardingthe acquisition of debts and encumbrancesby the recipient or the donor’s liabilities;• annuity agreements;• agreements on the division of inheritanceand agreements on the dissolution of coownershipin the part concerning repaymentsor contributions;• establishment of mortgages;• establishment of usufruct for consideration,including improper usufruct and servitude,for consideration;• irregular deposit agreements;• company deeds (Articles of Association).54

Furthermore, subject to the transfer tax are:• amendments to the transactions listedabove if they result in an increase in thebase for transfer tax; and• court rulings, including conciliatory courts,and settlements, if they produce the samelegal effects as the transactions listed above.Amendments to company deeds include: anincrease of the share capital, a loan grantedto the company by its shareholder(s) andadditional capital payments.The transfer tax rates are as follows:• on sale agreements:a) real estate, property rights related to realestate and tangible assets - 2%;b) other property rights - 1% of the fair marketvalue of the object of the transaction;subject to a 20% penalty transfer tax rate(this is mainly the case, if the tax has notbeen paid within the statutory time limits).In principle, the tax liability arises at the timewhen the transaction takes place. Paymentshould be made within 14 days, togetherwith submission of the PCC-1 declarationform (transfer tax return). In case of transactionseffected in the form of notarial deedsthe tax is collected by the notary.2.2.12. Most important changes announcedby government regarding the abovePersonal Income TaxSignificant amendments will be introduced tothe Polish PIT Law as of 1st January 2009. Themajor changes shall apply to Personal IncomeTax rates. Instead of three existing tax rates,Major changes in Personal Income Tax rates from 2009Taxable IncomePersonal Income TaxUp to PLN 85, 528 18% minus PLN 556.02(USD 36,945) (18% minus USD 240)Above PLN 85,528 PLN 14,839.02 + 32% of taxable income over PLN 85,528(USD 36,945) (USD 6,410 + 32% of taxable income over USD 36,945)• on exchange agreements:a) real estate, property rights related to realestate and tangible assets - 2%;b) other property rights - 1% of the fair marketvalue of the object of the transactionwhich is liable to higher tax;• on loan agreements - 2% of the principalamount of the loan;• on the establishment of mortgages:a) to secure an existing liability - 0.1% of theamount of the secured liability;b) to secure a liability of an unfixed amount - PLN 19.• on company deeds: 0.5%.Loan agreements, irregular deposits andestablishment of irregular usufruct may betwo decreased rates of 18% and 32% ratesshall be introduced (as per the below table).VATLastly, the Ministry of Finance has proposedamendments to the Polish VAT Act. The mainconsidered changes include:• implementation of consignment stock relieffor certain taxpayers;• cancellation of a guarantee deposit of PLN250k;• annulling the 30% VAT sanction;• defining perpetual usufruct as the supply ofgoods;• extension of VAT exemption on the supplyof buildings and the option to tax such supplies;How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 55

• import VAT relief - i.e. reporting outputVAT in VAT returns instead of payment tothe customs authority;• more flexible rules regarding input VATdeduction;• changes from monthly to quarterly VATreporting.Please note that during the legislationprocess the above amendments may changeor even may not be implemented. At thisstage it is envisaged that the amendment willcome into force as of 1 July 2008.2.3. Insurance regulationsThe following insurance is obligatory underPolish law:• third party liability insurance (“OC“) formotor vehicle owners;• insurance against fire and other natural disastersfor commercially used buildings onfarms;• third party liability insurance for farmers;• other types of insurance, as specified in prevailinglaws, or based on internationalagreements ratified by the Republic ofPoland.Institutions, such as the Financial SupervisoryCommission, the Insurance Guarantee Fund,the Insurance Ombudsman and the PolishInsurance Chamber, were established to protectthe interests of policy holders by monitoringthe funding and financial standing ofinsurance funds.The insurance market is monitored by theFinancial Supervisory Commission. TheCommission’s main objectives include the protectionof interests of insuring, insured, beneficiariesand persons entitled to rights resulting from aninsurance contract. It is also tasked with the preventionof situations where insurance companiesbecome unable to pay compensation or benefits.The Commission grants insurance business permitsand monitors the activities of insurancecompanies. A single company cannot offer bothlife assurance and other types of insurance.An insurance business in Poland can be operatedby a joint-stock company, a mutual insurancesociety or a branch of a foreign insurance company(based on the reciprocity rule). An insurancecompany that has a registered office in an EUMember State may conduct insurance activities inPoland if it holds an appropriate permit issued bythe relevant authority of its home state.The minimum amount of a guarantee fundfor a life assurance company operating as ajoint-stock company is EUR 3,000,000, whilefor a mutual insurance society it is EUR2,400,000. The minimum guarantee fund fora non-life insurance company operating as ajoint-stock company is EUR 2,200,000 or EUR3,200,000, depending on the type of insuranceoffered. The levels for a mutual insurancesociety are set at EUR 1,650,000 and EUR3,200,000, according to the type of insurance.Under particular conditions the minimumfund for a mutual insurance society consideredas small may be zero.56

2.4. Polish trade regulationsOne of the most important implications ofPoland’s accession to the European Union ismembership of the Customs Union encompassingall 27 Member States. For customspurposes, the whole territory of theEuropean Community is recognised as a singlecustoms zone, which implies that as of 1stMay 2004, no customs duties are imposed intrade between Poland and other EU MemberStates (free movement of goods).Another consequence of accession was theunification of customs regulations betweenPoland and other EU Member States.Consequently, the Polish Customs Code andmost of the national customs regulations(including the Polish Customs Tariff), havebeen replaced by Community law, in particularby the Community Customs Code andCommon Customs Tariff, which currentlyapply to trade between Poland and thirdparty (non-EU) countries.2.4.1. Import / export licensing requirementsAll business entities operating in Poland(including foreign companies) have equalaccess to international trade. However, thisaccess is subject to trade policy measuresintroduced by the EU, which Poland is nowrequired to observe. Licensing is a form oftrade restriction imposed by the EuropeanUnion with regard to certain goods andcountries. Importing into Poland is currentlysubject to the same licensing requirements asimporting into all other EU Member States.The licensing system is operated by theEuropean Commission in cooperation withthe authorities of the Member States.Trading in certain goods (or in certain specificcases) may be restricted by the EuropeanUnion by value or volume through the introductionof quantitative import or export quotas.The import of goods covered by animport quota is prohibited outside the quotasystem. Quotas are allocated among the companiesapplying for a license. Licenses arevalid in all Member States, except for situationswhere the quota is limited to one ormore regions of the EU. When the quota isentirely exhausted, imports (exports) are notpossible until a new quota is established.Moreover, there are certain restrictions notrelated to commercial policies covering licensingrequirements for trading in “dual-use”(i.e. both civil and military use) goods andtechnologies, certain chemicals, in particularnarcotic drugs and psychotropic drugs or culturalgoods.Separate arrangements are applied to theimport and export of certain agriculturalproducts under the Common AgriculturalPolicy (CAP), including import/export licensing,quantitative restrictions, export refundsor preferential tariff arrangements.Licenses and permits for trading in goodsthat require such licenses or permits areissued by the Minister of the Economy or bythe Agricultural Market Agency, which cooperatewith the European Commission.How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 57

2.4.2. Customs tariffs and tariff quotasAs mentioned above, the Common CustomsTariff is applied in trade between Poland andnon-EU countries.The basic rates included in the Tariff, i.e. the“conventional duty rates”, apply generally tothe import of goods originating in WTOcountries, or countries benefiting from the“most favoured nation” status granted by theEU (e.g. Russia). If autonomous customs dutyrates established by the EU are lower thanconventional rates, autonomous rates areapplied.Preferential rates are applied to countriesbenefiting from tariff preferences establishedeither unilaterally by the EU, e.g. within theframework of the Generalised System ofPreferences (mainly developing countries), oron the basis of bilateral agreements concludedby the EU with certain countries, e.g. theagreement establishing the EuropeanEconomic Area (EU, Norway, Iceland andLiechtenstein).The European Union may also establish tariffquotas, tariff ceilings and tariff suspensions.Tariff suspensions and quotas permit thetotal or partial waiver of normal duties thatare applicable to imported goods for anunlimited quantity (suspension) or a limitedquantity (quota), normally for an unlimitedvalidity period. These are exceptions to thegeneral rule represented by the CommonCustoms Tariff. Imports outside the tariffquota are possible, but at the regular (higher)duty rate defined in the Common CustomsTariff. Most tariff quotas are managed on a“first-come, first-served” basis, irrespective ofwhere the goods are imported into the EU.Other tariff quotas are managed through asystem of import licenses.The European Union may also introduce additionalcustoms duties in the case of dumpedor subsidised imports of certain goods fromcertain countries. Anti-dumping, anti-subsidyand other safeguard measures are appliedafter the conclusion of formal procedures bythe European Commission.2.4.3. Customs proceduresThe following customs procedures regulatedby the Community Customs Code can beoperated in Poland:• release for free circulation;• transit;• inward processing;• outward processing;• temporary importation;• processing under customs control;• bonded warehousing;• exportation.The procedures mentioned in points 3-7 arecalled “customs procedures with economicimpact“. Authorisation issued by the customsauthorities is required in order to be able totake advantage of these procedures. Animporter does not need to pay customs dutyand VAT, but all duties must be secured, e.g. inthe form of a bank guarantee presented to theCustoms Office.The procedure for release into free circulationis granted when all conditions of theCustoms Law are satisfied, in particular theprovisions regarding the payment of customsduties and the award of the customs status of“Community goods“ to foreign goods.The transit procedure allows for the transportationof non-Community goods (i.e. notreleased for free circulation on the territoryof the EU) from one point to another withinthe EU. This is called “external” transit.Collateral, which is equivalent to the amountof customs duties which would be due (aswell as, possibly, other charges), is requiredon transit shipments. In some cases, it is possibleto waive this obligation.58

The modification of this scheme is aninternal transit procedure, which allowsfor the transport of Community goods(i.e. released for free circulation) fromone point to another within the EUthrough the territory of a non-EU countrywithout losing their Community status.The advantage of internal transit is thatno customs duties or trade policy measuresare applied with respect to thegoods that are re-imported into the EUunder this procedure.Bonded warehousing allows companies tostore the following goods in public or privatecustoms (bonded) warehouses:• non-Community goods that are not subjectto any customs duties or any special restrictionsor prohibitions resulting fromCommunity regulations at the time;• Community goods that would attract theapplication of measures that would normallybe applicable on their exportation at thetime they are placed in a bonded warehouse,e.g. export refunds granted withinthe framework of the Common AgriculturalPolicy;• there is usually no time limit on warehousing,although, in some cases, the CustomsOffice may restrict the time or revoke thepermit to stock the goods.The inward processing procedure allows forthe performance of one or more valueaddingprocesses on the territory of the EUwith respect to:• non-Community goods intended for reexportfrom the Community customs zonein the form of compensating products,without such goods being subject to importduties or commercial policy measures;• goods released for free circulation withrepayment or remission of import dutieschargeable on such goods, if they areexported from the Community customszone in the form of compensating products.Inward processing may consist of:• processing of goods, including assembly, orinstallation in other goods;• renovation of goods, including restorationand segregation;The Common Customs Tariffis applied in trade betweenPoland and non-EU countries.• utilisation of some goods that are not partof the compensating products, but enableor facilitate their production (if those goodsare fully or partially used in the process),excluding tools, equipment and fittings.Processing under customs control allows forthe use of non-domestic products on the territoryof the EU in processes that alter theirform or substance (without applying customsduties or trade policy measures) as well as forthe release of processed products for free circulation,by applying the appropriate customscharges. In most cases, this procedure isapplied if the rate of duty levied on processedgoods is lower than the rate levied on importedmaterials.An authorisation for processing under customscontrol may be issued for Communityentities when the following conditions aresatisfied:• it is possible to confirm that the incominggoods will form part of the final processedgoods;• the incoming goods, after being used forprocessing, cannot be returned to theirprevious state without incurring substantialcosts;• the application of this procedure will notconstitute a circumvention of the regula-How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 59

tions on the origin of the goods, or thequantitative restrictions that apply to theend products being released for free circulation.The procedure of temporary importationallows for the complete or partial exemptionfrom customs duty of non-Community goodsto be used in the EU, provided that nochanges are made to the goods, with theexception of regular wear arising from theuse of those goods.The Customs Office sets a date (normally upto two years) after which the goods musteither leave the EU or receive a new customsstatus. This period may be extended.The ATA carnet can be used for temporaryimportation/exportation of some goods, i.e.promotional goods, goods destined for exhibitions,etc.Outward processing allows for the partial, orcomplete exemption from customs duty ofgoods which are temporarily exported fromthe EU for processing to increase their valueand are then re-imported into the EU.Such an authorisation would only be issuedto the EU entity if it can be proved that thegoods exported from the EU constitute a partof the final products subsequently importedinto the EU.The procedure of outward processing cannotbe applied to goods:• the export of which would entail the reimbursementor cancellation of customs dutiesalready levied;• which, before their export, were admittedto free circulation with a total exemptionfrom customs duties because of their end use(this remains in force as long as regulationsgranting such exemptions remain in force).The export procedure enables Communitygoods to leave the EU customs zone.Admission for exportation can be effectedafter satisfying all the requirements of theCustoms Law, including trade policy measures,as well as regulations regarding exportcustoms duties, if applicable.Every Community product intended to beexported should be subject to this procedure,with the exception of goods that are subjectto outward processing.Goods should be declared for customs proceduresusing SAD forms. Depending on thecustoms procedure, the declaration should befiled with the Customs Office located eitherin the area where the company is registeredor where the goods are physically located /processed / loaded, etc.60

transactions with them have fewer restrictionsthan currency transactions with non-residentsfrom third countries.2.5. Currency and exchange controlsThe new Foreign Exchange Law of 27th July2002 came into effect on 1st October 2002.It has since then been amended severaltimes, most recently in 2007. The lastamendment abolished several restrictions ontransactions involving foreign exchange.This Law defines a resident as:• An individual with his permanent place ofresidence in Poland.• A legal entity or another entity that has theright to contract obligations and to acquirerights for itself, while having its place ofregistration in Poland.• A branch, representative office or companyestablished in Poland by a non-resident.A non-resident is:• An individual with his permanent place ofresidence abroad.• A legal entity or another entity that has theright to contract obligations and to acquirerights for itself while having its place ofregistration abroad.• Branch offices, representative offices andenterprises located abroad that are establishedby a resident.The new Foreign Exchange Law introduces adistinction between non-residents from EUMember States and non-residents from thirdcountries, with the third countries limited notonly to countries outside the EU, but alsoOECD and EEA (European Economic Area)countries. Non-residents from the EU (as wellas OECD and EEA) have priority and currencyThe Foreign Exchange Law defines the restrictionsand obligations connected with transactionsin foreign currencies. The avoidance ofthese restrictions and obligations requires ageneral permit (issued by the Minister ofFinance in the form of a regulation) or anindividual foreign exchange permit.Foreign exchange permits issued by thePresident of the National Bank of Poland(NBP) are needed:• for residents to export, transfer or senddomestic or foreign currencies to thirdcountries, with the aim of starting up ordeveloping business activities in those countries,including buying real estate, with theexception of activities such as direct servicesin the execution of signed contracts andactivities consisting of promoting andadvertising business activities conducted bythe resident domestically;• for residents to open accounts in banks andbranches of banks, located in third countries,both directly and through other entitieswith the exception of their stay in thecountry or in connection with the businessactivities mentioned above in point 1;• to make payments between residents in foreigncurrencies, excluding paymentsbetween private individuals, if they are notconnected with business activity;• for a resident to buy (directly or throughother entities):a) stocks and shares in companies establishedin third countries,b) participation units in funds established inthird countries,c) debt papers issued by non residents fromthird countries,d) liabilities and other rights, sold by residentsfrom third countries, if cash settlementsarise from them;How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 61

• for a resident to sell in third countries,(directly or through other entities):a) debt papers with a redemption term of lessthan one year, with the exception of debtpapers bought in those countries on thebasis of a foreign exchange permit,b) liabilities and other rights, if cash settlementsarise from them, with the exceptionof bought in those countries on the basisof foreign exchange permit.Special restrictions may be introduced on foreignexchange transactions with foreigncountries, if they are necessary to:• implement the decisions of the authoritiesof international institutions, of which theRepublic of Poland is a member;• ensure public order and security;• ensure a balance of payments, in the caseof its general imbalance, a sudden slump ora threat of this;• ensure the stability of the Polish currency inthe event of sudden fluctuations of itsexchange rate or any threat to this.As a rule, all operations and payments inPoland are required to be made in Polishcurrency.Residents are obliged to provide the NationalBank of Poland with the required data specifiedin a regulation, especially when:a) they and non-residents conclude sale orpurchase contracts the subject of which aregoods, including real estate, or services,b) they and a non-resident conclude a contractfor credit or a loan,c) they possess shares in foreign companies,d) 10% of the share capital of a resident -company is held by a non-resident.2.6. Intellectual and industrial property rightsPolish law protects intellectual property andprevents unfair competition in industry, literature,scientific achievements and artisticworks. This protection relates to the works ofpracticing artists, computer programs, soundtracks,radio and television programs, inventions,industrial designs, trademarks, logosand commercially used names.The European Union’s legislation on industrialproperty rights is directly applicable inPoland. This legislation most notably includesthe regulation on the protection of communitytrademarks, community designs and geographicalsigns and designations of origin.Poland is also a member of virtually all internationalconventions on the protection ofindustrial property rights, including the Parisand Madrid Conventions.2.6.1. CopyrightCopyright in Poland is protected on the basisof the Polish Copyright Act of 1994, theBerne Convention on the Protection ofLiterary and Artistic Works and EuropeanUnion law. Polish law protects any manifestationof creative activity of an individualnature that is established in any form, irrespectiveof its value, designation or mannerof expression (work).There are no specific prerequisites for protection,specifically, registration is not required.Copyright protection exists from the time ofthe creation of a work.Works in the following areas of intellectualproperty are protected:• those expressed in words, mathematicalsymbols, graphic signs (literary, journalistic,scientific and cartographic as well as computerprograms);• graphic;• photographic;• industrial design;• architectural and urban planning;62

• musical and textual, as well as purely musical;• stage, stage and musical, choreography andpantomime;• audiovisual (including films).Also, databases are protected under copyrightif they can be considered as works.Apart from protection as a “work“, databaseprotection is governed by theProtection of Databases Act (sui generis protection)from 27 July 2007, which implementsDirective 96/9/EC of the EuropeanParliament and of the Council of 11 March1996 on the legal protection of databases.The regulation on sui generis protectionincludes databases regarded as a work andother databases that fulfill the specialrequirements of the act.A database that is subject to the sui generisright is defined as a collection of any data,other materials, or elements:• arranged in a systematic, or methodical,manner;• accessible in any manner, including electronicmeans;• that requires essential capital contributionfor the creation of it, verification, or presentationof the content of it.Copyrights include both proprietary andmoral rights.The copyright to works belongs to the authoror to the assignee(s). The author as the creatorof a work acquires commercial and moralrights to the work (copyright). The moral rightsto a work cannot be transferred, assigned orlicensed, and always remain with the author.Rights to a database belong to the producerdefined as being a natural or legal person thathas paid the costs for the creation of the database.The producer has an exclusive right touse the data collected in the database. Theprotection period of a database is 15 years.An author’s moral rights include the right to:• claim the authorship of the work;• have the work appear under the author’sname or pseudonym, or to make anonymouswork available to the public;• insist on compliance with the inviolability ofthe content and form of the work, and onthe proper use of it;• decide to make the work available to thepublic for the first time;• oversee the manner in which the work isused.The moral rights to a work cannot be eithertransferred, assigned or licensed, and alwaysremain with the author.Commercial copyrights can be transferred bypurchase (full rights) or by license (the rightto use a specific work can be granted).A contract of copyright must:• define whether the rights are transferred ora license is granted;• indicate the area of commercial use.In general, an author’s proprietary rightsexpire after 70 years:• from the death of the author;• for works whose author is not known -from the date of initial dissemination;• for works for which the author’s proprietaryrights are, under statutory law, heldby a person other than the author - fromthe date of dissemination of the work and,if the works were not disseminated, fromthe date of their creation;• for audio-visual works - from the death ofthe last of the following persons: the maindirector, the author of the screenplay, theHow to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 63

scriptwriter or the composer of the soundtrackwritten for an audio-visual work.Producers of copies of literary, musical, artistic,photographic or cartographic workswhere the commercial rights to which haveexpired must pay to the relevant fund(Fundusz Pomocy TwórczoÊci) a sum rangingfrom 5% to 8% of gross proceeds from thesale of the said works. This provision appliesto editions of works published in Poland.Producers and importers of tape and videorecorders and other similar devices, reprographicdevices, as well as blank media usedfor recording works with the help of suchdevices for personal use must pay fees to collectivemanagement organisations acting tothe benefit of authors, artistic performers,producers of phonograms, videograms andpublishers, the amount of which is no higherthan 3% of the amount due for the sale ofsuch devices and media (including CDs).Gains from copyright infringement may beconfiscated. Polish law stipulates penalties forthe violation of copyrights in the form offines, limitation of freedom or imprisonmentof up to five years.Barring several exceptions, reproduction,transmission and performance in the mediaor for non-commercial purposes is restricted.Copyright protection1. The creator can require the infringer of thecreator’s commercial rights to:• cease the infringement;• eliminate the consequences thereof;• compensate the incurred loss;• relinquish the illegally obtained benefits.2. Apart from the claims mentioned in point1, the owner of rights can request theinfringer:• to publish a single or multiple announcementin the press;• to pay an appropriate sum of money into aspecial fund (Fundusz Pomocy TwórczoÊci)which cannot be less than twice the amountof the probable profits achieved by theinfringer.2.6.2. PatentsThe legal protection of industrial propertyapplies for the following periods (providedthat fees are paid regularly):• patents - 20 years;• utility models - 10 years;• industrial designs - 25 years;• trademarks - 10 years;• geographical indications - without restriction;• topographies of integrated circuits - 10years.A patent grants the exclusive right of use ofan invention in Poland to the patent holderand to licensees who are granted a license bythe patent holder. This exclusive right maynot be abused by applying monopolistic practices.Marking the product with its patent numberis common practice, but is not obligatory.The Patent Office will grant a patent afterexamining whether the invention is new,involves an inventive step and is subject toindustrial application. An invention is to beconsidered as:• new when it does not form part of thestate of the art;• inventive when, with regard to the state ofthe art, it is not obvious to a person skilledin the art;• capable of industrial application, if bymeans of that invention a product can bemanufactured, or a process can be used, ina technical sense, in any type of industryincluding in agriculture.64

Patents are not granted for:• discoveries, scientific theories and mathematicalmethods;• aesthetic creations;• schemes, rules and methods for performingmental acts, doing business or playinggames;• creations, whose incapability of exploitationmay be proved under the generally acceptedand recognised principles of science;• software for computers (this is protected bycopyright law);• presentations of information;• inventions whose exploitation would becontrary to public order or morality; theexploitation shall not be deemed to be socontrary merely because it is prohibited bylaw;• new strains of plants, breeds of animals,biological processes of plant cultivation oranimal breeding; this provision does notapply to microbiological processes or theproducts thereof; (new types of plants canbe, however, protected in Poland in accordancewith the International Conventionfor the Protection of New Varieties ofPlants);• methods for treatment of the human oranimal body by surgery or therapy or diagnosticmethods applied on human or animalbodies; this provision shall not apply toproducts, and in particular to substances orcompositions applied in diagnostics or treatment.2.6.3. TrademarksThe registration and protection of trademarksin Poland is regulated in the IndustrialProperty Law Act dated June 30, 2000(Journal of Laws 2003, No. 119, item 1117 asamended). Any sign capable of being representedgraphically can be a trademark, providedthat such a sign is capable of distinguishingthe goods of one entity from thoseof another. The following, specifically, can beconsidered to be trademarks: words, designs,ornaments, combinations of colours, threedimensionalshape of goods, the packagingof them as well as melodies or other sounds.An exclusive right is obtained by registrationof a trademark, and applies from the time ofthe given application. It is valid for 10 yearsfrom the date of an application and it is possibleto extend protection for further 10-yearperiods without limitation of renewal.The registration and protection oftrademarks in Poland is regulated inthe Industrial Property Law Actdated June 30, 2000.From March 26, 2008, the following official feesapply in trademark registration proceedings:• filing an application up to three classes - 550PLN;• each additional class over three classes - 120PLN;• payment of fees for a ten-year protectionperiod:a) for every class up to three classes - 400 PLN;b) for every next class over three classes - 450PLN;• payment of the publication fee - 90 PLN.Anyone not having a place of residence or aregistered office in Poland can only actthrough a patent agent in the registrationproceedings in the Patent Office.Community Trademarks are also protected asregistered trademarks in Poland.How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 65

2.7. Competition law2.7.1. Protection of competition andconsumersPolish law creates conditions for the developmentand protection of competition, and protectsthe interests of undertakings and consumers.• signing of an agreement subject to theacceptance or fulfilment of another activityby the other party, which is neither substantiallynor customarily related to the subjectof the agreement;• restriction of access to the market or theelimination from the market of entrepreneurswho are not party to the agreement;or• collusion in the terms and conditions of abid submitted by companies taking part in atender, in particular, with regard to thescope of work or the price.Practices restricting competition are prohibitedunder the Protection of Competition andConsumers Act of 16th February 2007 (whichreplaced the previous act of 15th December2000). Such practices include:1. entering into an agreement (with a competitoror a supplier/distributor) thatresults in:• direct or indirect fixing of prices or otherconditions of purchase or sale of products;• restriction or control of production or supply,as well as technical development orinvestments;• dividing up supply or purchase markets;• application of onerous or non-homogeneouscontractual terms in similar transactionswith third parties, thus creating differentconditions of competition for these parties;2. abuse of a dominant position, in particularby:• directly or indirectly imposing unfair prices,including predatory or glaringly low prices;• significantly delayed payment terms orother conditions of purchase or sale ofproducts;• limiting production, supply or technicaldevelopment to the detriment of contractorsor consumers;• imposing onerous or non-homogeneouscontractual terms in similar transactionswith third parties, thus creating diversifiedconditions of competition for these parties;• making the conclusion of an agreementsubject to the acceptance or fulfilment ofanother activity by the other party, which isneither substantially nor customarily relatedto the subject of the agreement;• counteracting the formation of the conditionsrequired for the emergence or developmentof competition;• imposing onerous contractual conditions byan enterprise through which it gains unjustifiedprofits;• creation of onerous conditions of redressfor consumers; or• dividing up the market by territorial, productor entity-related criteria.In this respect, it is important to rememberthat under the Act, there is a presumption66

(which may be rebutted) that an enterprisehas a dominant position when it holds a marketshare exceeding 40% of the relevant market.The body responsible for promoting and protectingcompetition in Poland is theChairman of the Office for Competition andConsumer Protection. The Chairman of theOffice may take action to prevent practicesrestricting competition that take place inPoland or have an impact on the Polish market.He/she can, in particular, order the cessationof such practices, and the introduction ofnew clauses or amendments to existing contracts.Moreover, certain transactions (such as: mergers;takeovers of the whole or part of theassets of another company; the acquisition ofdirect or indirect control over a company );must be notified to the Chairman of theOffice before the transaction is executed. Thetransaction cannot be completed before thereceipt of the Chairman’s clearance decision.The conditions for such notification are: thatthe aggregate worldwide turnover of theenterprises taking part in the planned transaction(and their groups) exceed the equivalentof EUR 1 billion or their aggregate turnoverachieved in Poland exceeds the equivalent ofEUR 50 million in the year preceding the notification,none of the Act’s exemptions are metand the transaction has, or may have, animpact in Poland. The Chairman of the Officemay prohibit a concentration if it could resultin a significant restriction of competition inthe market, in particular, by the creation orstrengthening of a dominant position.Foreign investors establishing businesses inPoland, acquiring shares in existing companiesor acquiring companies through privatisationshould ensure that these proceduresare approved by the Chairman of the Office ifsuch transactions are required to be notifiedpursuant to the requirements of the Act.With regard to fines, if the Chairman of theOffice finds that an undertaking is restrictingcompetition he can impose a financial penaltyupon the undertaking of no more than10% of the revenue earned in the accountingyear preceding the year in which the penaltyis imposed, the Chairman may also order thedissolution, closure or demerger of thatundertaking.The Chairman of the Office can also imposefinancial penalties on parties for not complyingwith decisions that he has issued.2.7.2. Prevention of unfair competitionThe Prevention of Unfair Competition Act of16th April 1993 regulates the prevention andsuppression of unfair competition in commerce.Polish law states that an act of unfair competitionis any activity in breach of the law orgood practice that threatens or violates theinterests of another enterprise or customer.The following activities are considered to beacts of unfair competition (the list is notexhaustive):• misleading name of an enterprise;• false or fraudulent marking of the geographicalorigin of goods or services;• misleading marking of goods or services;• violation of business secrets;• inciting the termination or non-performanceof a contract;• imitation of products;• making allegations or praising productsunfairly;• impeding market access;• bribery of a public official;• unfair or illicit advertising;• sale of goods or services granting a freebonus that is made up of goods or servicesthat differ from those which are soldHow to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 67

(except products of small value, samples ofgoods or goods won in promotions or lotteries);• in promotional lotteries - composing offersin such a way that the consumer is sure ofwinning if he orders the goods or servicescontained in the promotion, or pays anamount in advance to the offering party;• the organisation of pyramid selling systems;• for discount store networks - the introductionof own brand goods into trading foran amount exceeding 20% of the value ofturnover;• business activities involving the managementof a property erected in a group withthe participation of consumers and aimedat financing purchasing rights, chattels, realestate or services to the benefit of participantsof the group (consortium system).An enterprise whose interest is threatened orinfringed by an act of unfair competition canrequest:• the cessation of the prohibited practices;• the elimination of the effects of prohibitedpractices;• the publication of a single or repeated representationof appropriate content andform,• rectifying damages, in accordance with thegeneral regulations;• the handover of unjustified benefits, inaccordance with the general regulations;• the award of an appropriate sum of moneyfor a defined social goal related to the supportof Polish culture or related to the protectionof national heritage - where the actof unfair competition has been deliberate.At the request of the aggrieved enterprise,the court may adjudicate on infringing productsand specifically order their destruction.2.7.3. State aid regulationsState aid disrupts the market by supportingcertain firms or products to the detriment ofother firms or products. Consequently, stateaid that distorts competition in the singlemarket is prohibited by the Treaty establishingthe European Community (EC).The EC Treaty, however, foresees exceptionsto the ban on state aid where the proposedaid may have a beneficial impact in overallEU terms. In particular, it allows for:• aid to remedy the damage caused by naturaldisasters or exceptional occurrences;• aid designed to:• promote the economic development ofareas where the standard of living is abnormallylow and where there is serious underemployment;• promote the execution of an importantproject of common European interest or toremedy a serious disturbance in the economyof a Member State;• facilitate the development of certain activitiesor of certain economic areas, wheresuch aid does not adversely affect tradingconditions to an extent that is contrary tothe common interest (from Article 87 (3)EC).State aid may take a variety of forms such as,for instance:• cash grants;• interest relief;• tax relief;• state guarantees or holdings;• provision of goods and services on preferentialterms by the state directly or indirectly.The European Commission has exclusive competencefor scrutinising aid measures of EU states.As with any other Member State, Poland isrequired to notify the European Commission ofan envisaged aid scheme or individual measurein advance for prior clearance. The Commissionalso has the power to require that aid granted68

y Member States which is incompatible withthe single market is repaid with interest by therecipients.The amount of regional state aid (the aid fornew investment or for creation of new jobsrelated to an investment) that is admissible toa single enterprise may not exceed the maximumintensity of aid determined for eachgiven region of Poland.The maximum intensity of aid allowedamounts to:• 50% in the territories of the following tenprovinces: Lubelskie, Podkarpackie,Warmiƒsko-Mazurskie, Podlaskie,Âwi´tokrzyskie, Opolskie, Ma∏opolskie,Lubuskie, ¸ódzkie and Kujawsko-Pomorskie;(for the period 2007 - 2013);• 40% in the territories of the five provinces:Pomorskie, Zachodniopomorskie,DolnoÊlàskie, Wielkopolskie, and Âlàskie (forthe period 2007 - 2013), and, for the periodfrom 1st January 2007 until 31st December2010 in the territory of Mazowieckieprovince, excluding the city of Warsaw;• 30% for the city of Warsaw (for the period2007 - 2013), and during the period from1st January 2011 until 31st December 2013for the entire Mazowieckie province.The maximum intensity of aid for newly createdsmall enterprises in the territory of theMazowieckie province will amount to 35% ofthe expenditures born during the first threeyears from the creation of an enterprise, and25% of the expenditures born during the followingtwo years. For the remaining provinces,for newly created small enterprises, the maximumintensity of aid of 40% and 30%, respectively,will apply.Newly created small enterprises will includeany microenterprises and small enterprisesthat were established less than five years ago.The level of intensity means that enterprisesmay obtain support up to a level that does notexceed a given percentage of their investmentcosts or of the two-year labour costs of newlyemployed workers in the case of aid for thecreation of new jobs. For small enterprises, theintensity of regional investment aid may beincreased by 20% and for medium-sized enterprisesthe intensity may be increased by 10%.Large investment - with eligible expenditureabove EUR 50 million are subject to detailedadditional rules.The amount of regional state aidthat is admissible to a single enterprisemay not exceed the maximumintensity of aid determined for eachgiven region of Poland.There are several block exemption regulationsin force, including regarding aid toSMEs, aid for training, aid for employment,regional aid and de minimis aid (as a generalrule - up to EUR 200,000 over a three-yearrolling period (EUR 100,000 in the road transportsector)). State aid granted in compliancewith block exemptions is subject to limitedinformation requirements to the Commission.2.8. Product certificationSince joining the EU, products manufacturedin Poland, or imported into Poland, mustcomply with safety standards that are commonto all European countries. Productsmust comply with general safety standardsand, in the case of many types of products,with more detailed safety standards indicatedin respective legal acts concerning suchproducts.How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 69

Depending on the product, assessment ofconformity with safety standards may requirethe participation of an authorised researchestablishment (with some types of products, acertificate of conformity issued by such anauthorised body may be required). For manyproducts, a conformity assessment can be preparedby the manufacturer himself, at hisown risk. After a successful conformity assessment,many products need to be markedwith a “CE” mark.Listed below are the most important types ofproducts subject to more detailed safetystandards in Poland (depending on circumstances,some may require a certificate issuedby an authorised body):• lifts;• noise-emitting equipment for outdoor use;• recreational craft (boats);• machinery;• explosives for civil use;• non-automatic weighing instruments;• low voltage electrical equipment;• simple pressure vessels;• refrigerators and freezers;• hot water boilers;• ballast for fluorescent lighting;• personal protective equipment;• equipment for use in explosive environments;• pressure equipment;• gas appliances;• medical devices;• in vitro diagnostic medical devices;• cableway installations for the carriage ofpersons;• radio and telecommunications terminalequipment;• construction products;• toys;• packaging;• high speed rail systems;• rail equipment;• airplanes;• materials that come into contact with food;• bio-components;• electric equipment;• lighters;• liquid bio-fuels.2.9. Regulations for entering into contractsPolish contract law is based on the rule of theautonomy of the parties will subjected to themandatory provisions of the Polish Civil Code.The Civil Code regulates particular types ofcontracts; and general provisions of the CivilCode must be applied to contracts not directlyregulated by it. Different regulations applyto relations between entrepreneurs as professionals,than for those with consumers.Consumers are afforded a high level of protection,i.e. the Civil Code includes a list ofabusive contractual clauses.Disputes resulting from the performance ofcontracts may be resolved by civil courts, andin business relations by commercial courts, inaccordance with Polish Civil Procedure Code.Disputes can also be resolved through arbitrationor mediation.Judgments of European Union MemberStates courts are enforced in Poland underthe Council Regulation (EC) No 44/2001 of 22December 2000 on jurisdiction and the recognitionand enforcement of judgments in civiland commercial matters. Under thisRegulation, Polish judgments may also beenforced in any Member State of theEuropean Union.70

Judgments of the courts of third countries areexecuted either under the Convention onJurisdiction and the Enforcement ofJudgments in Civil and Commercial Matters,concluded in Lugano on 16 September 1988(“Lugano Convention”) to which Poland is aparty, or under the provisions of the CivilProcedure Code, depending on whether thejudgment was issued in a signatory country ofthe Lugano Convention. Judgments of courtsof countries that are not signatories to theLugano Convention are enforced in Polandunder the reciprocity rule.Enforcement of foreign arbitral awards inPoland is based on the New York Conventionon the Recognition and Enforcement ofForeign Arbitral Awards of 10 June 1958 (“NYConvention”) and the Polish Civil ProcedureCode.2.10. Regulations governing mergers andacquisitionsMergers of companies are regulated by theCode of Commercial Partnerships andCompanies. The Code provides for two methodsof company mergers:• Acquisition - The transfer of all assets of acompany into another, in exchange forshares, other securities or cash. The purchasingcompany acquires all the rights to thetarget company from the moment of itsdeletion from the National Court Register.• Merger - The establishment of a new limitedliability or joint-stock company. Assets ofthe merging companies are transferred intothe new entity in exchange for its shares.The management bodies of the mergingcompanies are obliged to draw up a charterfor the new company. Once the new companyis entered into the appropriate register,the separate legal existence of themerging companies ends.Companies may merge with other companiesand partnerships. However, a partnershipmay not acquire a company (limited liabilityor joint-stock). Partnerships can merge witheach other only by establishing a new company.All partnerships and companies can beconverted into another partnership or company.The merger of companies may result in theneed to apply to the Office for Competitionand Consumer Protection for a permit and ifthe merger involves a public company, certainobligations resulting from regulations on capitalmarkets need to be satisfied. The mostfrequent method of acquiring control over acompany is the purchase of its shares2.11. Bankruptcy and restructuringThe Bankruptcy and Restructuring Act 2003regulates the bankruptcy of entrepreneurs aswell as settlement and restructuring proceedingsaimed at preventing bankruptcy. Anentrepreneur can be considered insolventwhen he is permanently unable to meet hisfinancial obligations towards his creditors, orwhen the assets of an enterprise operating asa corporate entity, or of a general partnership,professional partnership, limited partnershipor a limited joint-stock partnership inliquidation are insufficient to meet theirdebts, even if the entity in question still paysall of its liabilities.Bankruptcy proceedings are required to conductthe bankruptcy process which is aimedat repaying all liabilities and liquidating thedebtor’s assets or executing settlements withcreditors. Bankruptcy proceedings are conductedunder the supervision of the OfficialReceiver from the Commercial Division of theDistrict Court.A declaration of bankruptcy may be filed byany of the company’s creditors or thedebtor’s governing body. After the companyis declared insolvent, its corporate authoritieslose their administrative rights over the companyand its assets.How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 71

There are two types of bankruptcy that maybe declared: liquidation proceedings whichresult in the sale of all assets and the deletionof the company from the National CourtRegister or bankruptcy with the possibility ofentering into an agreement with the creditors.Each creditor of an insolvent company shouldlay claim to his liability in writing. When a listof liabilities has been completed, a plan isdrawn up for the distribution of the company’sassets. This specifies the sum to be distributed,the list of all liabilities and theamount due to each creditor. Liabilities arerepaid in the following order:• costs of legal bankruptcy proceedings, socialsecurity contributions, employee remuneration,the receiver’s fee and the costs of theproceedings;• taxes and other public duties, as well associal security contributions not belongingto the first category that are due for oneyear preceding the declaration of bankruptcy,together with interest and the costs ofenforcement proceedings;• other liabilities, unless they are satisfied inthe fourth (the lowest) category, contractualpenalties and the costs of litigation andenforcement proceedings;• interest on liabilities that have not beenpaid in the preceding categories, penaltiesand donations.Instead of liquidation, bankruptcy proceedingsmay be finalised by an arrangementbetween the company and its creditors.The Bankruptcy and Restructuring Act 2003also contains regulations on the restructuringprocess which may be initiated by a debtorbeing an entity registered in the NationalCourt Register and which is under threat ofinsolvency (i.e. it appears obvious that theentity is likely to become insolvent). Suchcompanies may initiate and conduct proceedingsaimed at reducing debts or repayingthem in installments, as well as securing thepayment of their debts. The procedure issupervised by a court appointed supervisorbut is carried out by the debtor, who has alarge amount of discretion in the wholeprocess.A revision (amendment) of the Bankruptcyand Restructuring Law Act 2003 is currentlybeing undertaken.2.12. Public procurement regulationsThe principles for concluding remuneratedcontracts between private entities and publicfinance sector entities or other entitiesfinanced from public resources are regulatedby the Public Procurement Act dated 20January 2004. From the point of view of itssubstantive scope, this act applies to supplyand construction work and also service contracts.The regulations of the act do not apply to,among other things, orders the value ofwhich does not exceed EUR 14,000, ordersconcerning the granting of subsidies frompublic resources on the basis of a legal act orelse acquisition of rights to real estate. In thescope in which the act is not applied, publiccontracts shall be concluded subject to thecase at hand or on the principle of freedomof contract, or as is the case of real estate, onthe basis of the regulations of separate acts.Principles concerning the conclusion of contractsin the act’s procedure envisage thateach set of proceedings should be conductedsubject to fair competition and the equaltreatment of contractors. Openness of procedureis also the rule, an exception to which isthe possibility of reserving non-disclosure ofbusiness secrets at the demand of participants.With the exception of the exclusionsenvisaged in the act, tender proceedings areconducted in written form and in the Polishlanguage. This means above all that the contractingparty draws up indispensable pro-72

ceedings documentation in Polish, i.e. anannouncement about the tender, specificationof significant terms and conditions ofthe order and minutes of proceedings. Anexception to the principle of conducting proceedingsin Polish is the possibility of the contractingparty also admitting both offers andalso other documents and statements to participationin the proceedings that are in alanguage universally used in internationaltrade or that is the language of the countryin which the order is being placed.The sources of information about plannedproceedings as regards public procurementare: the Public Procurement Bulletin (BiuletynZamówieƒ Publicznych - currently publishedon the website of the Public ProcurementOffice (Urzàd Zamówieƒ Publicznych), i.e.www.uzp.gov.pl) and the official Journal ofthe European Union, series OJ S (at present,announcements on public procurement areplaced on the website page http://ted.publications.eu.int).At the present moment, contractingparties do not have an obligation toplace announcements in the Official Journalof the European Union if the value of anorder for construction works does not exceedthe equivalent in PLN of the amount of EUR5,150,000 or, depending on the kind of entityplacing the order, EUR 130,000.Particular details concerning content and proceduresfor announcements depend on theprocedure in which the procurement order isgranted.It should be stressed at this point that the actenvisages the following procedures for thegranting of a public procurement order,which should in every case end with the conclusionof a contract between the contractingparty and the contractor:• unlimited tender;• limited tender;• negotiations with announcement;• competitive dialogue;• negotiations without announcement;• order without restrictions;• a price enquiry;• electronic bidding;The basic forms of procedure on the basis ofthe Act are the unlimited tender and the limitedtender, which means that it will be possibleto apply other procedures only in exceptionalsituations where additional statutoryprerequisites have arisen.The supplier or contractor taking part in atender is obliged (with some exceptions) topay a tender deposit of between 0.5% and3% of the value of the procurement. Thedeposit should be paid in cash, or in the formof a bank guarantee or surety, insuranceguarantee, bill of exchange guaranteed by abank and, with the consent of the contractingparty, in the form of endorsed cheques.Irrespective of the above, the contractingparty may also demand from contractors (andin cases indicated in the act it has such anobligation) the securing of contract performance,the purpose of which is to coverclaims in respect of non-performance orimproper performance of the contract. Thebasic forms of security are: money, bankguarantees and insurance guarantees. Withthe consent of the contracting party, securitymay also be provided by bills of exchangewith bank endorsement and through theinstitution of a pledge. The principle is thatsecurity is established in an amount from 2%to 10% of the total price given in the offer orthe maximum nominal value of the obligationof the contracting party arising out ofthe contract.The contracting party makes a pre-qualificationof offers on the basis of the price or theprice and other criteria indicated in the specificationof significant procurement terms andconditions. Other criteria might be, in particular,quality, functionality, technical parame-How to do Business. Investors’ Guide - Poland Establishing and doing business in Polands 73

ters, application of best available technologiesin the scope of environmental impact,usage costs, servicing and the order performancedeadline. A public procurement contractshould be concluded within a deadlineof not less than 7 days from the date of givingnotification of the selection of offer.Essentially, no changes can be performed inits content after the conclusion of the contract,unless the necessity of performingchanges arises out of circumstances thatcould not have been envisaged earlier or thechange of contract is advantageous to thecontracting party.Contracts for the performance of the substanceof public procurement are governedby the provisions of the Civil Code and theCivil Procedure Code, unless the Act on PublicProcurement Law provides otherwise.Suppliers and contractors submitting tenderproposals have the right to lodge protestsagainst the tender process.Protests may be filed within seven days of thedate on which the supplier or contractorlearned or could have learned of circumstancesgiving grounds for filing a protest.Protests are to be reviewed by the contractingparty. In the case of unfavourable considerationof the protest, contractors may file anappeal to the Chairman of the PublicProcurement Office (but only in situations inwhich the value of the order exceeds thethreshold of EUR 130,000 or EUR 206,000,depending on what type of entity the contractingparty is). An appeal is to be filedwithin five days from the moment of the resolutionof the protest or the expiry of thedeadline within which the protest should beconsidered. A public procurement contractcannot be concluded so long as appeal proceedingsor proceedings as a result of submissionof a protest are in progress.Public procurement regulationsThe Act on Public Procurement Law dated 20January 2004 was subject to its last significantamendment in 2007. At the present moment,successive changes are planned in the content ofthe act, and legislative work towards this is atthe governmental stage. Among other things,the planned changes cover the following:1. Changes concerning the procedures forgranting public procurement orders:• liquidation of the “price enquiry” as a procedurefor granting a public procurementorder;• simplification of the “electronic bidding”procedure, based on the introduction of theoption to file offers electronically withoutthe necessity of sending the offer with asecure electronic signature;2. Changes to the appeal procedure:• extension of the 7-day deadline for lodginga protest (calculated from the moment atwhich the contractor discovered or couldhave discovered about circumstances constitutingthe basis for filing a protest) to 10days;• extension of the 5-day period for lodgingan appeal against the adjudication of aprotest made by the contracting party to 10days;3. Changes concerning statutory definitions:• a change of the definition of “service”,based on reference regarding the meaningof this concept to the European Directives;4. Changes concerning the determination ofthe level of tender deposit and loss of thetender deposit:• the statutory amendment assumes replacementof the provision in accordance withwhich “the contracting party sets the levelof tender deposit within the range of 0.5%to 3% of the procurement order value”with a provision in accordance with which“the contracting party specifies the amountof the tender deposit in an amount nogreater than 4% of the procurement ordervalue”;74

• the amendment envisages the loss of thetender deposit by those contractors who donot follow the demands of the contractingparty upon being called on to supplementdocuments confirming the possibility of participatingin the proceedings;5. Changes concerning demanding documentsconfirming the possibility of participating in proceedingsin the procedure of art. 26 of the Act:• the amendment envisages the repeal of theprovision of the act in accordance withwhich the contracting party may withdrawfrom demanding documents confirmingthe possibility of participation in proceedingsin the case of procurement orders thesubject of which is banking or insurance services;6. Changes concerning the possibility of modifyinga contract concluded on the basis ofthe Act’s procedure:• the amendment envisages that after the conclusionof a contract on the basis of the Act’sprocedure it shall be impossible to modify thecontent of the contract, were this to lead toan increase in the size or scope of the procurementorder. Until now, such a modificationhas been possible if its basis was circumstancesthat were impossible to envisage atthe moment of the conclusion of the contract.2.13. CO 2 emission allowancesIssues regarding the acquisition and use ofCO 2 emission allowances are regulated by theGreenhouse Gases and Other SubstanceEmission Allowances Trading Act dated 22December 2004.Those running installations emitting carbondioxide into the atmosphere as a result oftheir activity may perform emissions onlywithin limits corresponding to the quantitiesof emission allowances held by them, where1 CO 2 emission allowance corresponds to theright to emit 1 Mg of carbon dioxide. Typesof installations covered by the system ofemission allowances trading are specified in aregulation of the Environmental ProtectionMinister.CO2 emission allowances (European UnionAllowances - EUA) for the years 2008-2012(the so-called second settlement period orphase two) are granted to those runninginstallations in the National Allocation Plan(Krajowy Plan Rozdzia∏u Uprawnieƒ doEmisji), which has been adopted by theCouncil of Ministers in the form of a regulation.When an installation starts operating withinthe course of a settlement period, emissionallowances are granted to the entity runningthe installation in a permit for participationin the emission trading scheme issued by aprovincial chief executive (marsza∏ekwojewództwa), county chief executive(starosta) or provincial governor (wojewoda)(depending on the kind and scale of activitybeing conducted by the installation).As a result of the decision of the EuropeanCommission dated 26 March 2007, issued inassociation with the assessment of theNational Allocation Plan proposed by Poland,How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 75

the entire annual quantity of emissionallowances for Poland for the years 2008-2012 was restricted from 284,648,332 to208,515,395 allowances, i.e. by around 27%.As a result, the number of allowances intendedfor new installations has also decreased.The National Allocation Plan should havebeen published by 30 September 2007, but asof the end of February 2008 it had nonethelessnot yet been adopted by the Council ofMinisters.The entity running the installation shouldhave an account at the National EmissionAllowances Register, which is conducted bythe National Emission Allowances TradingAdministrator, in which emission allowancesare entered.An entity running an installation is requiredto present an auditor-verified annual reporton emissions actually made as at 31December of a given year of a settlementperiod by 31 March of the following year.The National Emission Allowances TradingAdministrator performs entries into theNational Emission Allowances Register on thebasis of a report prepared in this way, discontinuingthe number of emission allowancescorresponding to the actual level of emissionsin the given year of the settlement period.Both emission allowances (EUA units) and certifiedemission reductions (CER units), as wellas emission reduction units (ERU) arising fromprojects implemented as part of the CleanDevelopment Mechanism (CDM) and jointimplementation (JI) specified in the KyotoProtocol, can be used for the settlement ofactual annual emissions from an installation.In accordance with the draft NationalAllocation Plan for the years 2008-2012, however,the number of CER and ERU units madeuse of for settlement of actual emissions cannotbe greater than 10% of the number ofemission allowances granted to the entityrunning the installation in the National Planfor the given year in the settlement period(which is in accordance with the provisions ofDirective 2003/87/EC establishing a schemefor greenhouse gas emission allowance tradingin the Community and amending CouncilDirective 96/61/EC).If it transpires from the annual report thatthe level of emissions has exceeded the numberof allowances held by the entity runningthe installation, then on application of theentity running the installation, a county chiefexecutive, provincial chief executive orprovincial governor (depending on the typeand scale of activity conducted by the installation)may, after having sought the opinionof the National Emission Allowances TradingAdministrator, issue consent to the exploitationof allowances granted for the successiveyears of the settlement period. In such a case,however, the entity running the installationmust undertake to appropriately reduce emissionsor to purchase additional allowances inthe successive year of the settlement period.Until the time that this obligation is met, theentity running the installation may not sellemission allowances granted to it in theNational Plan for the successive year of thesettlement period.In the event of not possessing a sufficientnumber of emission allowances and notobtaining consent for making use ofallowances granted for the successive years ofthe settlement period, the entity running theinstallation, irrespective of the requirementto make a settlement of emissions made, isrequired to pay a monetary penalty in theamount of EUR 100 for each allowance notpossessed, this penalty being imposed by theProvincial Environmental Protection Inspector(Wojewódzki Inspektor Ochrony Ârodowiska).76

The allowances held by the entity runningthe installation entitling emissions to bemade may be used only in the course of agiven settlement period. Allowances not usedby the end of the settlement period are subjectto annulment.An entity running a number of installationsmay transfer allowances between installationsto which it has legal title. The transferof allowances should be notified to theNational Emission Allowances Register within30 days of date of performance of transfer(whereas in case of transfer taking place after1 December of a given year of the settlementperiod, this should take place within 10 days).Furthermore, for the purpose of increasingthe efficiency of the use of emissionallowances, entities running installations ofone kind may form a so-called group ofinstallations, facilitating joint settlement ofemissions made. In such a case, those runninginstallations should appoint a manager towhose account emission allowances will begranted and who will be obliged to settleemissions made by particular installationsthat form the group. An application for thecreation of a group of installations should bedirected to the Environmental ProtectionMinister, who will, in case of a non-rejectionof the application by the EuropeanCommission within a period of 3 monthsfrom the date of its receipt, issue an opinionon the application and pass it to the respectiveprovincial governor. The provincial governortakes the decision on the creation of agroup of installations.The entity running an installation covered bya system that has been granted emissionallowances in the National Allowance Plan,issued by a county chief executive, provincialchief executive or provincial governor(depending on the type and scale of activityconducted by the installations), may makeuse of the allowances held or sell them afterhaving obtained the consent of the authorisingentity to participate in the communityemission trading scheme. Permits are issuedfor a period of 10 years.As part of the European Community, trade inCO2 emission allowances may take placebetween private individuals, corporate bodiesand non-incorporated organisational units. Acontract of sale for allowances should benotified to the National Emission AllowancesRegister by the entity running an installationsituated in Poland within a period of 3 workingdays from the date of its conclusion, otherwisebeing invalid.Work is in progress at the EnvironmentalProtection Ministry at present on the draft ofa new act regulating the trade in CO2 emissionsthat will fully implement communitydirectives. At present, it is not possible tospecify the deadline for the preparation ofthe project and initiation of the legislativeprocedure.How to do Business. Investors’ Guide - Poland Establishing and doing business in Poland 77

III. Investment incentives1. Foreign investment policyCompanies with a foreign shareholding generallyoperate their businesses on the sameprinciples as Polish firms - the rule of equaltreatment of all companies applies. Polandhas made significant progress in developingfurther improvements for foreign investments.The most significant issue in 2004 wasthe reduction in corporate income tax, whichis currently set at 19%. Strict banking regulationson the provision of loans have beenrelaxed and have therefore helped reducelending costs domestically, resulting in animprovement in the aggregate investmentperformance. Similarly, improvements inbankruptcy law and in the administration ofreal estate registers should help improve theability of banks to collect on collateral andtherefore, their willingness to lend.2. Grants and incentives in Polandin 2007-20132.1. Business opportunities - overviewInvestors may profit from various grants andincentives opportunities in Poland, regardlessof where the capital comes from, as long asthe direct beneficiary is a company registeredin Poland. All possible sources are, however,subject to general EU regulations on publicaid, most of all - regional aid applicable tothe majority of investment projects realisedby investors, based on the New Regional AidMap for Poland for 2007-2013. According tothe map, the aid intensities differ dependingon investment location and company’s size.Accordingly, the available levels of fundingare set at the level of 16 administrative unitsof Poland known as voivodeships. Presentedbelow are the appropriate state aid intensitylevels for each region of Poland in 2007-2013.In case of medium-sized enterprises and smallenterprises, these intensities are increased by10% and 20% respectively. The intensity cannotbe exceeded as regards given investment,so that a company is allowed to combine differentmeasures and sources, as long as thestate aid rules are respected.The state aid intensity for large investments,i.e. exceeding EUR 50 million is based on aseparate scale.The most popular aid measure among foreigninvestors, apart from EU structural funds andtax incentives in special economic zonesdescribed below, are governmental grants aspart of the Multi-Annual Support Program.Subsidization concerns a certain group ofindustries: biotechnology, telecommunication,aviation, automotive or electronic. Thegrant refers to:78

State aid intensity levels by region 2007-2013 (source: own study)GdaƒskZachodniopomorskieSzczecinGorzówWlkp.LubuskieZielonaGóra40%PoznaƒWielkopolskiePomorskie40%BydgoszczKujawsko-pomorskie50%40%Toruƒ¸ódêOlsztynWarmiƒsko-mazurskie50%Mazowieckie40% to 201030% from 2011Warszawa30%Bia∏ystokPodlaskie50%50%¸ódzkie50%Wroc∏awDolnoÊlàskie40%Opole40%OpolskieKatowice50%ÂlàskieLublinLubelskieKielce50%Âwi´tokrzyskie50%KrakówMa∏opolskie50%PodkarpackieRzeszów50%• cost of the investment (if the value of theinvestment exceeds PLN 160 million and atleast 50 new jobs are created);• two years costs of employment (if the valueof the investment exceeds PLN 40 millionand at least 250 new jobs are created).Other sectors are eligible, if the companyplans to invest over PLN 1 billion and createof over 500 new jobs. The level of financingand the final amount of grant is a result ofindividual negotiations, led by the investorwith the Polish government represented byPAIIZ (Polish Agency for Information andForeign Investments).A foreign investor is understood as an foreignentity planning to invest in Poland, havinga branch here or being a majority shareholderof a Polish company.How to do Business. Investors’ Guide - Poland Investment incentives 79

2.2. EU Structural Funds 2007-2013In the new programming period for EU funding(2007-2013) Poland is the largest beneficiaryof EU funds. The total budget set forPoland amounts to EUR 79.16 billion and isseveral times higher than the budget for previousyears (2004-2006).EU funds can be provided for several investmenttypes, such as innovative investments, establishmentor extension of shared-service centres,R&D, human resources development and trainingas well as environmental protectionGrant schemes are grouped according to specificareas of support and defined underOperational Programmes. The keyOperational Programmes that envisage supportto enterprises are the following:• Operational Programme InnovativeEconomy;• Operational Programme Infrastructure andEnvironment;• Operational Programme Human Capital;• 16 Regional Operational Programmes.a positive impact on the environment in existingenterprises (e.g. modernisation of existinginstallations resulting in a decrease of naturalresources used, implementation of BestAvailable Techniques, investments in watermains and sewer infrastructure, recycling andneutralisation of waste, including second-useand dangerous waste) as well as the constructionof environmentally-friendly infrastructureand projects in the area of energy security.The budget of OP Infrastructure andEnvironment amounts to EUR 37.6 billion.Enterprises also have a possibility of applyingfor a refund of training projects aimed atadaptability of enterprises and their employeesunder Operational Programme HumanCapital. Training projects eligible for fundingmight include training, post-graduate andMBA studies, e-learning, blended learningand advisory related to training and HR policy.The total budget of OP HC amounts toEUR 11.5 billion.Under Operational Programme InnovativeEconomy (OP IE), the main goal is the developmentof the Polish economy through innovativeenterprises. Therefore, those investorswho intend to start an investment resultingin a new product or process and introduceinnovative technological or organisationalsolutions are able to apply for an investmentgrant. Creation of shared-service centres asregards IT, finance, HR, logistics, etc., is alsopromoted if the creation of 200 new jobs isenvisaged and for R&D centres 10 new jobs isneeded. Special measures of support areaimed at supporting projects based on theimplementation of a new technology as wellas investment projects that will have a significanteffect on the Polish economy and R&Dactivities. The total budget of OP InnovativeEconomy amounts to EUR 9.7 billion.Among the priorities of OperationalProgramme Infrastructure and Environment,funding is available for investments that haveThere are 16 regional OperationalProgrammes for particular voivodeships,which include supporting projects aimed atincreasing entrepreneurship and innovation.Small and medium-sized enterprises are consideredas major beneficiaries of indirect anddirect support under 16 ROPs. Total budgetof 16 ROPs amounts to EUR 16.5 billion.80

In case of investments falling under state aidregulations, the maximum value of aid shouldnot exceed state aid intensity levels definedin a given region of Poland. The maximumgrant value of non-regional aid (e.g. traininggrants under OP HC) is defined in specificdocuments published by relevant authorities.In general, large enterprises can obtain grantsup to 80% of the value for training activities.However, it is possible to increase this measureto 100%. It is important to underline thatover 100 measures for entrepreneurs are providedfor within structural funds and operationalprograms, so that various companies invarious sectors can satisfy their multiple needsand in order to identify available opportunitiesfor specific companies, a detailed dedicatedanalysis should be conducted case by case.2.3. Special Economic Zones (SEZ)Special Economic Zones (SEZ) are designatedareas in the territory of Poland in which businessactivities (manufacturing and services) canbe conducted on preferential terms. The zonesare not exterritorial by nature, but they enjoyspecial relief in taxation and have the infrastructurenecessary for starting a business.Entities that are willing to take advantage ofthe incentives have to obtain special permissionfor conducting business activities in the SEZ.The managing authorities of the SEZ issue apermit based on the result of a tender or negotiationsfor conducting business in the Zone.The incentives for investors in the SEZ are asfollows:• Large enterprises can obtain regional aid, asdefined by the regulations on state aidthrough exemption from corporate incometax (CIT) or personal income tax (PIT) up tothe amount of state aid limit for a givenprovince in Poland (for details see commentson Regional Aid Map in point 2.1above). In general, in case of large enterprises,tax exemption may reach up to 50%of eligible costs in most provinces in Poland(40% in certain western provinces).• The state aid limit is increased by 10% formedium-sized enterprises and by 20% forsmall enterprises which means that in thearea of 50% state aid intensity, these companiescan obtain an incentive in the formof unpaid income tax up to 60% and 70%of eligible costs respectively.Special Economic Zones in PolandZoneSEZ Euro-Park MielecKatowicka SEZSuwalska SEZLegnicka SEZWa∏brzyska SEZ¸ódzka SEZKamiennogórska SEZKostrzyƒsko-S∏ubicka SEZS∏upska SEZSEZ StarachowiceTarnobrzeska SEZWarmiƒsko-Mazurska SEZPomorska SEZKrakowski Park Technologiczny (Cracow)Websitewww.europark.com.plwww.ksse.com.plwww.ssse.com.plwww.strefa-legnica.comwww.invest-park.com.plwww.sse.lodz.plwww.ssemp.plwww.kssse.plwww.sse.slupsk.plwww.sse.com.plwww.tsse.plwww.wmsse.com.plwww.strefa.gda.plwww.sse.krakow.plHow to do Business. Investors’ Guide - Poland Investment incentives 81

• Eligible costs consist of either investmentcosts (material and immaterial assets) ortwo years of labour costs including thesocial insurance contributions of newemployees.In order to take advantage of thesefavourable terms, the investment should be ofat least EUR 100,000, should be maintainedfor at least five years (3 years for SMEs) andnewly created jobs resulting from the investmentshould be maintained for at least 5years (3 years for SMEs). Entrepreneurs doingbusiness within the SEZ are obliged to informthe Office for Competition and ConsumerProtection about the state aid received.There are fourteen Special Economic Zones inPoland. Each SEZ consists of a number of subzoneswhich means that areas of SEZs inPoland are presently scattered across thecountry, thus giving a prospective investor achoice of several possible locations.3. Duty-free zonesDuty-free zones are separate parts of the EUCustoms Zones in which goods are treated bythe customs authorities as if they remainedoutside the zone. Both Community and non-Community goods may enter duty-free zones.Polish and other EU companies are permittedto manage businesses in these zones. Severalduty-free zones have been established inPoland and are situated primarily on the maincommunication routes (such as airports andborder-crossings) located in: Warsaw, Gdaƒsk,Gliwice, Terespol, Szczecin, ÂwinoujÊcie,Mszczonów. Duty free goods are only availableto travellers departing to non-EU countries.4. Customs (bonded) warehousesA customs (bonded) warehouse is a storagefacility for goods that are not subject toeither customs duty or the regulationsapplied to imported or exported productsduring the storage period. A bonded warehousecan be open to the general public orprivate entities (with a limitation to authorisedentities).The requirements that must be satisfied to beable to operate a bonded warehouse include:• a written application submitted to the headof the local Customs Office and an authorisationissued by this authority;• the submission of collateral for potentialcustoms liabilities;• no arrears in customs duty or taxes;• a positive bank reference on the company’sfinancial standing.5. Support for hiring theunemployedEntrepreneurs can obtain support from localauthorities for hiring and training unemployedpeople put forward by local labourauthorities.The main forms of assistance are:• financial support for equipping the workplace(up to a limit of five times the averagemonthly salary in Poland);• reimbursement of social security contributions(up to 300% of the minimum monthlysalary in Poland);• training programs for the unemployedorganised by the local authorities areagreed with entrepreneurs.Applications for the above privileges shouldbe filed with the local Labour Offices withjurisdiction over the area in which theemployer has his registered office.82

6. Exemptions from local taxesPartial or full exemption from real estate taxis possible. This exemption is of a generalnature (for a group of entrepreneurs meetingcertain conditions). A resolution of aMunicipal Council deciding on exemptionsshould meet the requirements of the aid programmesspecified in the regulations on stateaid.Partial or full exemption from road vehicletax is also possible. This tax, however, appliesto trucks and buses only; passenger cars arenot subject to road vehicle tax.7. OECD guidelines formultinational enterprisesThe OECD Guidelines for MultinationalEnterprises are recommendations on responsiblebusiness conduct addressed by governmentsto multinational enterprises. TheGuidelines apply to businesses operating in orfrom OECD adhering countries and a fewother countries that have adopted theGuidelines - almost 40 countries in total. TheGuidelines have been developed in consultationwith the business community, labourrepresentatives and non-governmentalorganisations. The basic premise of theGuidelines is that principles agreed in suchforums and internationally can help preventconflicts and can build an atmosphere of confidencebetween multinational enterprisesand the societies in which they operate.The text of the Guidelines contains recommendationson applying good corporate governancepractices regarding human rights,the elimination of child labour and forcedlabour as well as the prevention of corruption.Companies are also advised to ensuredisclosure of regular, reliable and relevantinformation in a timely and regular manneron their activities, structure, financial situationand performance. When dealing withconsumers, enterprises are recommended toact in accordance with fair business, marketingand advertising practices and ensure thesafety and quality of the goods or servicesthey supply.The environment section encourages multinationalenterprises to raise their environmentalperformance through improved internal environmentalmanagement and better contingencyplanning for environmental impacts.Enterprises are recommended to take actionsprotecting the environment, public healthand safety, and generally to conduct theiractivities in a manner contributing to thewider goal of sustainable development.Companies are recommended to take intoaccount the established policies in the countriesin which they operate and consider theviews of other stakeholders, encouragehuman capital formation, in particular by creatingemployment opportunities and facilitatingtraining opportunities for employees,develop ties with local universities, publicresearch institutions and participate in cooperativeresearch projects with local industryor industry associations. Last but not least,the Guidelines recommend companies toencourage their business partners, includingsuppliers and subcontractors, to apply principlesof corporate conduct that are compatiblewith the Guidelines.While many businesses have developed theirown codes of conduct in recent years, theOECD Guidelines constitute the only multilaterallyendorsed and comprehensive code thatgovernments are committed to promoting.Observance of the Guidelines by enterprises isvoluntary and not legally enforceable.However, any case of a breach of theGuidelines may be submitted to OECDNational Contact Points (NCPs). NCPs areresponsible not only for promoting theGuidelines and handling enquiries but alsofor helping to resolve issues that arise in so-How to do Business. Investors’ Guide - Poland Investment incentives 83

called specific instances and acting as a forumfor discussion of all matters relating to theGuidelines. The Polish OECD National ContactPoint is located at the Polish Information andForeign Investment Agency (Polska AgencjaInformacji i Inwestycji Zagranicznych S.A.,PAIiIZ S.A.).The complete text of the Guidelines can befound on the OECD and the PAIiIZ websites(www.paiz.gov.pl).84

In Poland

IV. Poland in Brief1. Key facts about Poland1.1. Geographic location and climateThe Republic of Poland is the 9th largestcountry in Europe by geographical area, withan area of approximately 312,679 sq. km,stretching 649 km from north to south and689 from west to east. It is often referred toas being located in the centre of Europebecause of its proximity to both western andeastern markets. Poland shares borders withGermany to the West, the Czech Republic andSlovakia to the South, the Ukraine, Belarusand Lithuania to the East and Russia to theNorth.Poland’s national borders have a total lengthof 3,511 km. The borders with non-EU countries(Ukraine, Belarus and Russia) constitutethe eastern border of the EU and have a totallength of 1,163 km.Poland’s largest rivers are the Vistula (1047km in length), the Oder, the Warta and theBug, all of which contribute to the country’swater supply. The Oder is the natural borderwith Germany. Both the Vistula and the Oderrivers flow northwards across the country intothe Baltic Sea. Forests, which cover nearly30% of the country, provide raw materialsfor Poland’s well-developed timber productsindustry.Geographically, Poland is relatively diversified,despite the fact that 75% of the countryis less than 200 m above sea level. The BalticSea coastline forms most of the northern borderand provides over 500 km of sandybeaches, bays, steep cliffs and dunes. Thecoast is a popular destination for holidaymakers,both local and from abroad. Another destinationthat is popular with tourists is theextensive Mazurian lake district in the northeasternpart of the country, with more postglaciallakes than any country in Europeexcept Finland.Moving southward, the majority of the western,central and eastern regions of Poland arelowlands. The Sudety and Carpathian mountainranges form Poland’s natural southernborder. The highest point in Poland is theRysy peak (2,499 m) in the Polish Tatra partof the Carpathian mountain range.Because of its geographic location, Polandgenerally has a moderate continental climate,86

ut is prone to unpredictable temperaturefluctuations from season to season and fromyear to year. The winter months (fromDecember to March) are generally cold, withsnow throughout the country and temperaturesfrom 0°C (32°F) to a minimum of -20°C(-4°F). The depth and durability of snow alsovaries. In the lowlands, it rarely exceeds 20cm, as it melts several times during the winter.In the mountains, snow covers may keepfor 200 days, depending on altitude, and mayreach a depth of up to two meters.From July to September, summers are mostlysunny and warm, with temperatures up to35 o C (95 o F) anticipated in the holiday monthof August. The warmest regions in Poland arethe Silesian Lowlands and the western part ofthe Sandomierz Valley. Average annual temperaturesare lowest in the north-eastern partof the country.Precipitation varies with altitude and rangesfrom 500 mm a year in the lowlands to 1,070mm in the mountains. The average rainfallamounts to 600 mm per year.Republic of Poland administrative divisions since 1999(source: www.poland.gov.pl)Poland is in the Central European time zoneand is one hour ahead of GMT. It switches todaylight saving time between March andOctober.Up to 1998, Poland had 49 provinces, knownas voivodeships. This changed on the 1st ofJanuary 1999, and today, there are 16provinces, 379 boroughs, or poviats (of which65 are cities with poviat status) and 2,478municipalities (gmina). The capital of Polandis Warsaw, with 1.7 million inhabitants (as of30.06.2006), located in the centre of thecountry on the Vistula river. Other large citiesinclude Katowice, Kraków, ¸ódê, Wroc∏awand Poznaƒ. The major seaport cities areGdaƒsk, Gdynia, Szczecin and ÂwinoujÊcie.How to do Business. Investors’ Guide - Poland Poland in Brief 87

1.2. Population and languageThe population of Poland is approximately 38.1million, which represents about 5.3% of thetotal population of Europe. This makes Polandthe 8th largest country in Europe and the 32ndlargest in the world by size of population. Over98% of the population are ethnic Poles.Germans constitute the largest ethnic minority,followed by the Ukrainians and Belarusians.The majority of the population lives in cities,with 29% of all citizens living in one of the39 largest cities having a population of over100,000 inhabitants.Poland’s workforce is one of the youngest inEurope, with the population of working ageexceeding 24.481 million in 2006. The retirementage is 65 years for men and 60 years forwomen.The majority of Poles (almost 90%) areRoman Catholics. The official language isPolish, but most educated Poles speak one ormore foreign languages. The most commonlyspoken foreign languages are English,German and Russian.Population statistics (source: Central Statistical Office)Females Males Urban areas Rural areas1990 (38.2 million) 51.3 % 48.7 % 61.8 % 38.2 %2006 (38.116 million) 51.7 % 48.3 % 61.2 % 38.8 %Population of working and non-working age, in % (source: Central Statistical Office)1990 2000 2005 2006 2007Pre-working age 29.60 24.1 20.6 20.1 19.6Working age 57.50 61.2 64 64.2 64.4Post-working age 12.90 14.70 15.4 15.7 1688

1.3. Political systemThe Republic of Poland is a democratic stateof law, implementing the principles of socialjustice. Poland’s supreme law is theConstitution which was passed on the 2nd ofApril 1997 and ratified in a national referendum.The system of government of the Republic ofPoland is based on the separation of and balancebetween the legislative, executive andjudicial powers. Legislative power is vested ina bicameral Parliament, composed of theSejm (lower house) and the Senate (upperhouse); executive power is vested in thePresident of the Republic of Poland and theCouncil of Ministers, while judicial power isvested in the courts and tribunals.1.3.1. The PresidentThe President of Poland is elected through ageneral election. The President is elected fora 5-year term and can remain in office for amaximum of two terms. He is the Head ofState and the Commander-in-Chief of thearmed forces. As the representative of thestate in foreign affairs, the President may ratifyand renounce international agreements.The President has the duty to sign statutesapproved by Parliament, but also has theright to veto these acts. Such a veto can beoverruled by a 2/3 majority vote in the Sejm.He also has the power to dissolve Parliamentwhen it is incapable of performing the tasksof government or cannot agree to approve adraft of the State Budget. The Presidentappoints the Prime Minister and other cabinetministers.1.3.2. The ParliamentLegislative power is vested in a bicameralParliament. The upper house, the Senate,consists of 100 senators elected by theirrespective electorates for a 4-year term ofoffice.The Sejm, or the lower house, consists of 460deputies. They are elected through a generalelection for a 4-year term of office.The legislative procedure starts with theSejm. A bill passed by the Sejm is submittedto the Senate, which may approve it, adoptamendments or reject it. However, theSenate’s veto may be overruled by anabsolute majority vote in the lower house.The Sejm and the Senate sitting in joint sessions,which are presided over by the Marshalof the Sejm, constitute the NationalAssembly. The National Assembly’s tasks areto adopt the Constitution, receive the oathfrom the President and resolve to presscharges against the President, thus makinghim accountable to the State Tribunal.1.3.3. The Council of MinistersThe Council of Ministers, as the executivebody, handles the state’s internal affairs andforeign policy, ensuring the implementationof statutes, management of the administration,approval of the draft of the StateBudget and maintenance of the state’s internaland external security. The Council ofMinisters consists of the Prime Minister andthe subordinate ministers. The PrimeMinister, who is appointed by the President,designates the membership of the government.The government is appointed by thePresident after its program has been acceptedby the Parliament.The government is accountable to theParliament for its activities throughout itsterm of office.The non-governmental state authorities,which control and enforce legal rights laiddown in the Constitution, are the SupremeChamber of Control, the Commissioner forCivil Rights Protection (Ombudsman) and theNational Broadcasting Council.How to do Business. Investors’ Guide - Poland Poland in Brief 89

1.3.3.1. The Supreme Chamber of ControlThe Supreme Chamber of Control (Najwy˝szaIzba Kontroli, NIK) is the chief state auditbody and is responsible solely to the Sejm.The Chamber audits the activities of the governmentadministration authorities, theNational Bank of Poland and other stateauthorities. It has the right to audit the activitiesof local government and other commercialentities regarding the management ofpublic finance.1.3.3.2. The Commissioner for Civil RightsProtection (Ombudsman)The office of the Commissioner for CivilRights Protection (Rzecznik PrawObywatelskich) has been introduced with theaim of safeguarding civic rights and freedomsthat are guaranteed by the Constitution, aswell as other normative acts. The Sejmappoints the Commissioner for a 5-year term.The Commissioner is independent andresponsible only to the Sejm, informing it ofhis activities.1.3.3.3. The National Broadcasting CouncilThe National Broadcasting Council (KrajowaRada Radiofonii i Telewizji, KRRiTV) safeguardsthe freedom of speech, the right toinformation and the public interest withregard to radio broadcasting and television.Two of the Council’s five members areappointed by the Sejm, one by the Senateand two by the President. The term of officeof the Council is six years. The Council specifiesthe conditions of the activities of radioand television broadcasters, supervises compliancewith regulations, issues licenses forradio and television broadcasting and establishessubscription and license fees.1.4. Central and local government administrationThe governing tasks in Poland are dividedbetween central and local administration.The central administration is comprised of theChancellery of the President, the Council ofMinisters, their respective ministries andstructures, such as committees, centres andcouncils that operate in accordance with theacts of Parliament.The responsibilities of the ministries are summarisedbelow:• Ministry of Economy: policy-making regardingthe economic development of the state;• Ministry of State Treasury: representing theState Treasury in the area of managing itsproperty, including, in particular, the commercialisationand privatisation of stateownedenterprises and national investmentfunds;• Ministry of Foreign Affairs: foreign policy;• Ministry of Interior and Administration:overseeing internal security and stateadministration;• Ministry of Finance: tax policy, State Budgetand public finance;• Ministry of Agriculture and RuralDevelopment: agricultural policy;• Ministry of Science and Higher Education:supervision of state policy in the area of scienceand tertiary education;• Ministry of Justice: maintenance and developmentof the basic guarantees of the ruleof law;• Ministry of National Defence: defence policy,matters connected with the fulfilment ofthe general duty of national military service;• Ministry of Infrastructure: infrastructurepolicy, transport and communications, maritimepolicy;90

• Ministry of Culture and National Heritage:supports the arts and culture, protectsPolish heritage, implements strategies topromote cultural and heritage attractions;• Ministry of the Environment: environmentalprotection;• Ministry of Health: administration of thehealth care system, provision of services tothe public through such programs as pharmaceuticalpolicy, community and publichealth, as well as health promotion and theprevention of diseases;• Ministry of Regional Development: regionalpolicy;• Ministry of National Education: policy fornational education;• Ministry of Sport and Tourism: promotionand development of sports and tourism;• Ministry of Labour and Social Policy: labourpolicy, social welfare.Under the new administrative division (introducedin 1999), the country is divided intoprovinces (voivodeships, województwa), boroughs(poviats, powiaty) and municipalities(gminas, gminy). Representatives of theCouncil of Ministers in the voivodeships arethe governors (voivodes, wojewodowie),who also act as supervisory authorities forlocal government units and represent theState Treasury. A voivode is appointed by thePrime Minister and is responsible for the executionof the government’s policy within avoivodeship. The voivode is the head of theVoivodeship Council, which defines policiesand controls the voivodeship authorities. Thevoivode is responsible for organising theCouncil’s activities and presides over its sessions.1.5. System of justiceThe bodies of judicial authority in Poland arecourts and tribunals which are separate andindependent of the other institutions ofpower. The system of justice is vested in theSupreme Court, the common courts, administrativeand military courts. Judges are independent,cannot be dismissed and are subjectonly to the Constitution and regulations.Supervision over the activities of commonand military courts is exercised by theSupreme Court which hears cases under particularregulations, provides for uniformityand accuracy of interpretations of the lawand issues opinions on bills.The Supreme Administrative Court exercisescontrol over the activities of public administrationand judges the conformity of resolutionsof local government authorities to theregulations and normative acts of local governmentadministration authorities.The Constitutional Tribunal judges the conformityof laws and international agreements,regulations issued by state authoritiesand of the objectives and activities of politicalparties with the Constitution. TheConstitutional Tribunal adjudicates on disputesover authority between central stateauthorities and its judgments are final.The most important state officials areaccountable to the State Tribunal for breachesof the Constitution or a regulation, committedby them within their office or withintheir responsibilities.How to do Business. Investors’ Guide - Poland Poland in Brief 91

2. Infrastructure2.1. Transport and communicationsPoland is located in the heart of Europe, withestablished road, rail, air and sea communicationroutes to all major European capitals.2.1.1. Road systemThe road network in Poland is continuouslyexpanding. In 2006, it consisted of 382,615km of roads, of which 255,542 km were hardsurfaceroads. It is therefore not surprisingthat road transport is the preferred methodof transporting goods (75.2% of total transportby weight) and passengers (73.4% oftotal transport). The average road density isestimated to be 81.7 km per 100 sq. km, withthe most complex road networks in urbanareas, where the density is over 150 km per100 sq. km. Areas with less developed roadsystems are the northern and north-easternregions of Poland.Car travel from WarsawDistance TimeGdaƒsk 340 km 4h 30Katowice 300 km 4h 00Kraków 300 km 4h 30¸ódê 130 km 2h 30Poznaƒ 310 km 4h 00Szczecin 524 km 8h 00Wroc∏aw 344 km 5h 30Olsztyn 213 km 3h 00Bydgoszcz 255 km 4h 00Lublin 161 km 2h 302.1.2. MotorwaysPoland had 699 km of motorways and 329 kmof expressways as of April 2008. Plans havealready been approved to extend the motorwaynetwork by building six main arteries ofa combined length of approximately 1,987km. The following motorways are currentlyunder construction:• A1 North – South, linking Gdaƒsk andGorzyczki (on the border with the CzechRepublic), of a total length of 568 km;• A2 West – Central East, from the Germanborder through Poznaƒ and Warsaw to theborder with Belarus, of a total length of615 km;• A4 West – South East, from the Germanborder through Wroc∏aw, Katowice andCracow to the Ukrainian border, of a totallength of 670 km;• A6 – from the German Border to Szczecin –Wielgowo, of a total length of 21 km –already completed;• A8 – Bypass of Wroc∏aw, from the West andNorth West of the city, a total length of 35 km;• A18 – from the German border toKrzy˝owa, of a total length of 78 km.92

2.1.3. RailwaysThe railway network covering Poland had atotal length of 20,176 km in 2006 and includedpredominantly standard gauge lines, ofwhich 58.8% are electrically powered. Theonly broad gauge however, is 400km longand connects Ukraine with Silesia, enablingthe fast transportation of natural resources.The average density of the rail network is 6.5km per 100 sq. km. Poland has one of thehighest densities of railway networks in theworld. The last remaining narrow gauge lineswith a total length of approximately 100 kmare located in south-eastern Poland, but aredue to be replaced. The total length of therail network in Poland has been steadilydeclining since the mid-1980s, as lines becameless economically viable. Railway transportcomprises 21.5% of total cargo transport calculatedin tonne-kilometres.Planned motorway network in Poland (January 2008; source: General Directorate for National Roads and Motorways)How to do Business. Investors’ Guide - Poland Poland in Brief 93

2.1.4. Air transportThe country’s main carrier is LOT PolishAirlines, which is a member of Star Alliance.Approximately 19.1 million passengers werecarried in 2007 (24.1% growth from 2006 and215.8% growth from 2004). The largest Polishairport is Warsaw – Frederic Chopin Airport(formerly Ok´cie Airport), which is the maindomestic and international airport. Otherdomestic airports (some of which have internationalconnections) include Kraków,Bydgoszcz, Gdaƒsk, Katowice, ¸ódê, Poznaƒ,Wroc∏aw, Szczecin, Rzeszów, Szczytno andZielona Góra. Low cost airlines, such as AerLingus, Centralwings, Germanwings, EasyJet,Jet Air, Norwegian,, Ryanair, Wizz Air are currentlyalso marketing their services.2.1.5. Waterways and maritime transportThe length of inland navigation routes is 3,660 km.Inland waterway transport accounts for 0.63% of allcargo carried. Inland waterways are a less popularmeans of transport than rail or road. The fleet comprises816 vessels for cargo transport (barges, pushersand tugs) and 118 passenger ships with a total of12,126 seats. The Oder, lower Vistula, Warta andNoteç, as well as the waters near Szczecin andGdaƒsk have good conditions for the use of inlandwaters. The most commonly carried goods are sand,gravel, coal, metal ores and fertilizers.The main commercial seaports are Gdaƒsk,Gdynia, Szczecin and ÂwinoujÊcie. The maritimetransport fleet consists of 121 vessels. Maritimetransport accounts for 0.68% of all cargo carried.Airports in Poland (source: P.P. “Porty Lotnicze”)GdaƒskSzczecinBydgoszczOverseas flightsEuropean flightsDomestic connectionsZielonaGóraPoznaƒWroc∏aw¸ódêWarszawaKatowiceKrakówRzeszów94

Bitstream Access (BSA), Wholesale LinesRental (WLR) or Local Loop Unbundling (LLU)that were imposed by the NRA.Additionally, cable TV providers in majorcities offer Triple-Play services, which includeTV, Internet access and fixed-line telephonyand they are becoming important marketplayers having 4.5 million subscribers.2.2. Telecommunications infrastructure2.2.1. Telecommunications systemsThe last decade has brought a substantialgrowth in the telecommunications sector,with an increase in the number of customers,especially in mobile telephony, and the introductionof many new services.Telecommunications used to be one of themost rapidly developing and most promisingsectors of the Polish industry but currentlyfurther growth seems to be slower (in monetaryterms) due to increased competition andthe falling prices of the services. However,the Polish market is by far the largest amongthe telecommunications markets of the EU’snew member countries.Telephone landlines are present in almost60% of households, while for the last twoyears this number has been dropping due tosubstitution from mobile telephony.Operators have also started to introducewireless technologies such as WiMax as a substituteto traditional landline telephony.The deregulation process has significantlyinfluenced the price level of fixed-line telephony.The dominating position of theincumbent operator, Telekomunikacja PolskaS.A. (TP S.A.), has been further weakened.Altnets have entered the fixed-line marketwithout the development of their own network,but using regulatory solutions likePoland is one of the major Europeanimporters of telecommunications equipmentand devices. Leaders of the local fixed linetelephone sets market are: Atlantel Doro,MaxCom, Mescomp, Phillips, Panasonic,Sagem, Siemens, Swissvoice, Topcom.2.2.1.1. Fixed line telephony systemsTelekomunikacja Polska S.A. decisively dominatedthe fixed line telephony market in2007. However, it lost market share in thevoice market due to the strong marketingactivities of alternative operators like NetiaS.A., Dialog S.A. and Tele2 Polska Sp. z o.o.,which have been able to target TP S.A.’s retailclients using WLR. However, the fixed-linesegment has been shrinking due to the substitutioneffect of mobile services and VoIP2.2.1.2. InternetAccording to data from the Office of ElectronicCommunications, the Polish Internet accessmarket was worth PLN 2.71 billion, which is 7%less than in 2006. However, lower turnover wascaused by discounts extensively offered bycompanies to attract new subscribers.Therefore, actual revenue growth will be visiblein 2008. Further growth of the market isexpected as in comparison with EU Poland stilllags behind despite 630,000 new subscribers in2007 (a 22% increase y-o-y). The main providerof Internet services, with a market share reachingalmost 43%, is Telekomunikacja Polska S.A.with its Neostrada service, a DSL-based solution.Due to regulatory pressures, alternativefixed-line operators such as Netia, Dialog, Tele2How to do Business. Investors’ Guide - Poland Poland in Brief 95

or GTS Energis have been able to offer theirservices to TP S.A.’s clients using the BSA solution.Altnets are convincing still more clients touse their services. In bigger cities, where thecable companies have their infrastructure,cable Internet access is an alternative to theDSL-based solution.The main mobile Internet access providers arethe mobile network operators: PTC, Polkomteland PTK Centertel. The widest mobile Internetcoverage is offered by PTC, which was thefirst to offer mobile Internet with its blueconnect service. The worst coverage is offeredby Polkomtel, which has postponed its investmentin EDGE technology. Mobile Internet isgenerally available in large and medium-sizedcities. The fourth operator – P4 is launching itsmobile Internet firstly in Warsaw.In June 2007, there were approximately 3.4million broadband Internet connections (22%growth in comparison to last year), whichgave Poland 9th position in Europe and 19thglobally. Over 22% of Polish households hadfast Internet access in mid-2007 (compared to16% a year earlier).In 2007, over 60% of households had computers,40% had access to broadbandInternet (15% had access to the Internet witha speed up to 1 Mb/s) and 20% used Internetbanking and shopping regularly.2.2.1.3. Mobile telephonyMobile telephony as a major segment of thetelecommunications market was still anengine of growth in 2007. The mobile telephonymarket has been booming since 1996.The penetration rate exceeds 100%, whatmeans that, statistically, every Pole uses amobile phone. However about 20% of thepopulation still does not possess a mobilephone and is not interested in doing so.Over half of mobile customers have prepaidaccounts and this share will be even higherdue to the launch of MVNOs, which at themoment offer only prepaid services. Evenfewer people are choosing postpaid offers.The third type of payment, typical for thePolish market is Mix that comprises theadvantages of prepaid and postpaid paymentforms and is quite popular among customers.Competition on the mobile market was strongin 2007. There are three incumbent operators:Polska Telefonia Cyfrowa (Era and Heyahbrands), Polkomtel (Plus and Sami Swoi brands)and PTK Centertel (Orange brand), which sharemore or less one third of the market each.Every operator’s network covers almost 100%of the country. The new 3G operator – P4 (Playbrand) entered the market in 2007 that is stilldeveloping its network and uses Polkomtel’s2G network based on a national roamingagreement. At the beginning of 2008, P4reported 1 million customers. P4 has aggressivestrategy targeted at young people.Due to regulatory pressures, the first MVNOsentered the market in 2006. At the momentthere are 8 virtual operators:• mBank mobile, established by the firstInternet bank and hosted on Polkomtel’snetwork;• Carrefour Mova, established by the retailerand hosted on Polkomtel’s network;• WPmobi, established by Wirtualna PolskaS.A., an Internet portal, hosted on PTKCentertel’s network;• myAvon, established by Avon Mobile Sp. zo.o., hosted on PTK Centertel’s network;• Mobilking, established by Penta investmentfund, hosted on PTC’s network;• MNI S.A., altnet, operates as an MVNE hostedon PTK Centertel’s network. Brands hostedon MNI’s platform: Snikers Mobile(Master Foods), Ezo Mobile (Ezo TV) andSimfonia;• Cyfrowy Polsat, established by a satellitecommercial television company, hosted nPTC’s network;96

• Aster, established by a cable television company,hosted on PTK Centertel’s network.Further virtual operators are expected toenter the market, which can strengthen thecompetition and lower the ARPU (averagerevenue per user). However, most of themhave not achieved the sales level they expected,mostly because of having limited salesnetworks and due to cutting promotionscompared to incumbent operators.The mobile offer of mobile network operatorsis available through a company’s outletslocated in the most prestigious locations andin shopping centres. Top-ups can be boughtin almost every newspapers kiosk, supermarketand ATM. The offer of MVNOs is availablerather through their web site and shipped bypost.Nokia is the most popular mobile handsetbrand in the Polish market. Other brandswith large market shares include LG,Motorola, RIM, Sagem, Samsung and SonyEricsson.2.3. Telecommunications density and connectionslease marketAt the end of 2005, Poland had 309 fixed-linetelephones per 1,000 inhabitants and by theend of 2006 there were 296 fixed lines per1,000 inhabitants. This downward trend isbeing maintained.Approximately 80.7% of the 11.284 milliontelephone lines in 2006 were installed incities. Private subscribers owned approximately72.4% of fixed-line network telephones.The number of mobile telephone owners isgrowing quickly (in 2007 there were 41 millionusers) and the number of subscribers oflandline telephones is falling, which causedan 11% drop in market value in 2007.Approximately 87% of subscribers are servedby TP S.A.).The value of the retail connections lease marketin 2007 reached PLN 370 million (overEUR 100 million). The greatest revenues wereachieved by TP S.A., Exatel S.A.,Telekomunikacja Kolejowa Sp. z o.o., NetiaS.A., Crowley Data Poland Sp. z o.o. and GTSEnergis Sp. z o.o. The biggest players in thewholesale market were TP S.A., Exatel S.A.,Telekomunikacja Kolejowa Sp. z o.o. andNetia S.A. 48.8% of the inter-operators marketbelonged to TP S.A. and 7.5% to GTSEnergis Sp. z o.o.2.4. Data transmission systemsand densityTelekomunikacja Polska S.A. offers packetswitched data transmission (POLPAK) forsmall and medium-sized companies. The networkcomprises 53 nodes and covers theentire country, offering connections to 140countries. It is suited to users who do notrequire continuous connectivity but periodicdata transmission. The system divides datainto packets and transmits them with athroughput of two megabits per second. Thenetwork tolerates poor quality access lines,which guarantees security of the transmitteddata.Larger companies may use POLPAK-T, basedon the Frame Relay/ATM system. Its majorfacilities are permanent virtual circuits andvirtual private networks. This facility is suitablefor companies with offices and brancheslocated in large Polish cities. The networkwas launched in 1996. Today, the services areoffered through the network of TeliaSoneraand OpenTransit (France Telecom) allowingfor multigigabite connections. TP S.A.’sNeostrada Internet DSL service which is beingcurrently offered uses a structure of POLPAK-T.How to do Business. Investors’ Guide - Poland Poland in Brief 97

3. Natural resources3.1. Coal and lignitePoland has significant reserves of coal andlignite. Natural coal reserves are estimated atapprox. 43 billion metric tonnes. Most domesticcoalmines are located in the Upper Silesia(Górny Âlàsk) region, which is the densestindustrial area in Poland.almost 10% lower than in the first half of2006 and it reached 27.9 million tonnes. It isexpected that the annual level of production(around 60 million tonnes) should be sustaineduntil 2021 and afterwards it willdecrease to a level of zero around 2040–45.3.2. Oil and gasSixty-six oil deposits were exploited in Polandby the end of 2005, of which two were offshore.Hard coal production in 2006 was about 97.6million metric tonnes, i.e. higher than domesticconsumption (83.7 million tonnes), withpart of the surplus exported (16.7 milliontonnes) and the remainder resulting inincreased stocks.Lignite reserves are estimated at approximately14 billion metric tonnes and are generallylocated at a depth of 100-200 metres,making extraction relatively easy. Polish lignitehas a relatively low calorific value and isless economically viable for transportationover long distances. Therefore, its consumersare most often coal-based power stationslocated near the mines. Lignite productionamounted to 62 million metric tonnes in2005. In the first half of 2007, production wasGeologically documented resources are estimatedat 21 million metric tonnes and aremostly located in south-eastern and northernPoland. The structure of the deposits and, insome cases, their location limits the opportunitiesto increase production. Therefore,Poland is forced to import both oil and petroleumproducts. 765,000 metric tonnes of oilwere produced in 2006 (expectations for year2007–700,000 metric tonnes), out of which248,000 metric tonnes was the oil from offshoreproduction. This production coveredonly around 3% of national demand.Processed fuels are sourced mainly fromPolish refineries because of barriers (bothlogistical and customs) on imported products.Imported products are used to a limitedextent near the borders with the CzechRepublic and Germany.Due to rapidly rising fuel prices there is agreat interest in developing infrastructure forproduction and use of “bio-diesel”.Poland is an importer of natural gas, theimports of which satisfy about 75% of thecountry’s demand. The production of gas in2006 reached 3.2 billion cubic meters. Thecountry has insufficient production of nitrifiednatural gas. Gas deposits are estimated at 143km3. Those located in south-eastern Polandare considered most attractive as this gas hasa high calorific value. Most of Poland’s gassupply is currently imported from Russia.98

3.3. Other depositsPoland also has small deposits of sulphur, saltand potassium salts. Metals mined includecopper, zinc, lead and iron.KGHM, a copper mining company located insouth-western Poland, is the world’s thirdlargest producer of copper and is listed onboth the Warsaw and London StockExchanges.Other abundant resources in Poland includelimestone, marble, dolomite, chalk, gypsumand quartz.3.4. Crops and livestockCereals, potatoes and sugar beet are themain crops in Polish agriculture. Poland is amajor producer of apples, cabbage, carrots,wheat and rye. The cattle livestock at the endof 2007 was estimated at over 5.4 millionheads and approximately 15.7 million pigswere bred for consumption.4. Energy sectorEnergy sales to household consumers aresubjected to tariff regulation and the sale ofenergy to industrial consumers is performedon a competitive basis. It is expected thatthe tariff obligation for household consumerswill be abolished in January 2009Share of the type of renewable energy source in total renewableenergy capacity installed by the end of 2007Installed power capacity [MW]17%In 2006, Polish power stations generated atotal of 161.7 TWh of electricity and nationalconsumption reached 136.7 TWh. Annual electricitygeneration was then approx. 4,200 kWhper inhabitant. The main materials used forgenerating electricity are hard coal and lignite.A small percentage of the total amountof electricity produced is obtained fromrenewable sources of energy (4.3 TWh in2006) with the dominant role going to hydroenergy. Poland has no nuclear power stations.According to European Commission projectsPoland should be striving to achieve a 15%share of renewable energy in total energysold to final consumers by 2020.3%19%61%The energy sector, formerly 100% stateowned,is currently being privatized. Theprocess includes power stations and electricitydistribution companies throughout thecountry.Bio-mass Bio-gas Wind WaterSource: The Polish Economic Chamber of Renewable EnergyHow to do Business. Investors’ Guide - Poland Poland in Brief 99

which might lead to price increases in thewhole sector.Other factors affecting the market in thecoming future will be a necessity to createnew production capacities, a low CO2 allocationquota and very strict EU requirementsregarding environmental protection, whichwill affect Polish energy production based oncoal. These factors are expected to lead to anincrease in energy prices in the coming years.5. IndustryIn 2006, industry accounted for 21.7% ofPoland’s GDP. Value added in industry accountedfor PLN 230.48 billion. The private sector’sshare in the generation of gross domestic productin 2006 accounted for 67.1%, which, inabsolute terms, amounted to PLN 712 billion.Figure below, illustrating the results of someindustries for 2006, shows that the productionof radio, TV and communications equipmentincreased over 44% in relation to 2005,office machines and computers over 28% andmotor vehicles and trailers by almost 23%.Poland is becoming the European centre ofmodern business process outsourcing (BPO)services. BPO centres in Poland are ownedmainly by large international companies andprovide services related to IT systems, financeand accounting, research and development,storage and warehouse logistics.Changes in industrial production sold in 2006 (constant prices, year 2005 = 100, in %)%130125120115110111.30% 112.80% 106.20%112.30%109.20%115.10%115.40% 114.30%121.30%10510096.30%9590Total (including mining)ManufacturingFood productsChemical productsRubber & plastic productsMetal productsOffice machinery & computersRadio, TV, communication eg.Medical, precision, optical inst.Motor veh., trailers & semi-trl.Source: Central Statistical Office (GUS)100

Poland is famous for aviation production andmaintenance. About 100 aviation companiesoperate in Poland, employing around 20,000people. The ‘Aviation Valley’ located in thesouth-eastern part of Poland contains agroup of manufacturers, scientific researchand training centres associated with avionics,including a university with a faculty ofmechanical engineering and aviation.Poland is also one of the leading producers ofyachts. About 4,600 boat building and servicingbusinesses were registered in 2006. Polishboat builders specialise in small and mediumsizeyachts of up to 8 meters in length. Polishyachts are known for their high quality laminates,precise outfitting, modern construction,precise handcrafting and attention todetail. They are mainly exported to Spain,Germany, France, the Netherlands, the UnitedKingdom, Russia, the USA, Japan andAustralia.healthy, organically grown and of high nutritionalvalue. Poland in 2006 was the largestproducer of apples in Europe and a leader inthe production of soft fruit, such as raspberries,blackcurrants, strawberries and cherries.6. TourismPoland was the 16th most frequently visitedcountry in the world and the most frequentlyvisited country in Central Europe (among newEU members) in 2006. More than 66 millionforeigners visited Poland in 2007 (just a slightincrease over 2006), of whom 16.3 millionwere tourists (3.8% increase on 2006), mainlyPoland offers the best location for companiesproducing components for the automotiveindustry. Polish specialties are tires, car seatsand upholstery, car electronics, electricalcables and car braking systems. The inflow offoreign investments into the automotive sectorin recent years has resulted in the rapiddevelopment of the number of subcontractors,which is currently estimated at over 650manufacturers. Many of these have the highestcertificate of quality – ISO/TS 16949.The largest white goods production centre inEurope is located in the Lódê SpecialEconomic Zone, where some of the world’sleading manufacturers have set up their factories:BSH Bosch and Siemens HausgeräteGmbH, Indesit Company, Whirlpool,Electrolux and the Fagor ElectrodomesticosGroup operate in the zone.Polish agricultural goods have an excellentreputation in Europe. They are consideredfrom Germany and the Czech Republic. Theyspent over USD 3 billion in 2005, USD 3.4 billionin 2006 and USD 3.8 billion in 2007.According to estimates of the Institute ofTourism, up to 2013 there will be a moderategrowth of the total foreign visits to Poland(about 2.9%) and the annual rate of growthof tourist visits should be around 4%.How to do Business. Investors’ Guide - Poland Poland in Brief 101

Over 93% of foreigners enter Poland throughroad border crossings. According to estimatesin 2007, some 3.8 million visitors declaredthat they came to Poland on holiday; 4.9 millioncame on business and 2.8 million came tovisit family and friends.Poland has a rich cultural heritage and adiverse landscape. Places of note includeWarsaw (the capital), the historical capitalKraków, Wroc∏aw, Gdaƒsk, Toruƒ, Wieliczkawith its salt mine, and the Masurian LakeDistrict. The geographical diversity caters forall tourism interests; from spectacular mountainranges to picturesque lakes and the seaside.7. Polish banking and financialinstitutionsThe banking system in Poland comprises thecentral bank (the National Bank of Poland,NBP), commercial banks (as well as branchesof credit institutions) and cooperative banks.The activities of banks in Poland used to besupervised by the Banking SupervisoryCommission, a separate body within theNational Bank of Poland subordinated directlyto the President of the NBP. However, onPoland’s hotel infrastructure is expanding,with 1,295 hotels, 109 motels, 242 boardinghouses, 655 other hotel facilities and 395youth hostels operating in 2006. The totalnumber of beds is approximately 574,600, ofwhich 133,800 were in hotels. Boarding housesoffered 11,100 beds, while motels offeredover 4,100. Almost 49,000 beds were offeredby training and recreational centres and136,200 by holiday centres. The catering networkhas expanded in line with the growth inthe accommodation infrastructure.Poland was ranked 7th in Europe in terms ofthe number of health spas. More than 321spas offer health facilities and treatments in75 places located in areas that are unique fortheir natural healing environments. Thelargest of these include Na∏´czów, KrynicaZdrój, Augustów, Ko∏obrzeg, Ciechocinek,Rabka, Duszniki Zdrój and Wieliczka – anunderground spa in a former salt mine.January 1st, 2008 the Polish FinancialSupervision Authority (Komisja NadzoruFinansowego, KNF) took over the supervisionof banking and electronic money institutions.Major tasks of the PFSA are: capital marketsupervision, insurance supervision, pensionscheme supervision, complementary supervisionof financial conglomerates whereof thesupervised entities constitute the part as wellas banking supervision and electronic moneyinstitutions supervision. The PFSA itself is besupervised by the President of the Council ofMinisters.102

7.1. The National Bank of PolandThe National Bank of Poland is the centralbank of the Republic of Poland. The basicduty of NBP, according to the PolishConstitution, the Act on the NBP and theBanking Act, is to stabilise the level of prices.According to the strategy of the MonetaryPolicy Council, the goal is to keep the inflationrate at the level of 2.5% (+/-1 percentagepoint). The NBP is held accountable notonly for price stability but also for the Polishzloty (PLN) exchange rate. Three basic functionsof the NBP are: being the exclusive issuinginstitution of the Polish currency, actingboth as the bank of the State and the bankof banks.The management authorities of the NBP arethe President of the NBP, the Monetary PolicyCouncil and the NBP Management Board. TheMonetary Policy Council lays down the foundationsfor monetary policy, sets interestrates and defines the level of obligatoryreserves for commercial banks. The NBPManagement Board is charged with implementingthis policy.7.2. Commercial banksBy the end of September 2007 in Polandthere were 646 banks: 51 commercial, 13branches of credit institutions and 582 cooperativebanks, with a share of 89.9%, 4.0%and 6.1% of the total banking sector’s assetsrespectively, whereas the total asset value ofthe Polish banking sector amounted to PLN800 billion. Polish investors controlled 11commercial banks (including the StateTreasury which controlled 4 banks) and allcooperative banks. Foreign investors exertedinfluence over 40 commercial banks and held(together with 13 branches of credit institutions)70.2% of the sector’s assets. The greatestproportion of foreign funding capital incommercial banks, at the end of September2007, came from Belgium (12.7%), Germany(9.5%), France (5.0%), followed by Austria(4.8%), USA (4.3%), Portugal (4.2%), Ireland(3.8%) and the Netherlands (3.8%). However,17.8% of the total assets of commercial banksbelonged to investors from Italy (4 banks),9.0% - Germany (9 banks), 8.2% - theNetherlands (4 banks), 7.7% - USA (5 banks),5.7% - Belgium (4 banks), 4.7% - Ireland (1bank), 3.9% - France (9 banks), 3.7% -Portugal (2 banks), 2.0% - Austria (3 banks),1.3% - Sweden (3 banks) and 1.0% - Spain (2banks).Since many of the international bankinggroups currently operate in the Polish market,foreign investors may find globallyknown banks in Poland. Furthermore, considerableprogress has been made in bankingservices in recent years. Polish banks haveadopted the most modern solutions andintroduced new services, also dedicated tosmall and medium enterprises and corporations.By the end of 2007 there were over 26 millionof payments cards (of all popular cardproviders like VISA, MasterCard, Diners Cluband American Express), of which almost 8 millionwere credit cards. The number of banksoffering credit cards for small and mediumenterprises has increased recently in Poland.There were 11,542 ATMs throughout thecountry and over 610 million ATMs transactionsat the total value almost 210 billionwere performed. The number of bankbranches in Poland increased up to 13,468.This growth has had a positive effect on theservice level offered to companies as well,since banks are opening branches dedicatedto small and medium enterprises and corporatecustomers.On 28th January 28, the Single Euro PaymentArea (SEPA) system started with over 4,100banks in 31 European countries. In Poland, 15banks (including the NBP) joined the projecton the starting date and two more joined inHow to do Business. Investors’ Guide - Poland Poland in Brief 103

March 2008. By 4th March 2008, over 2 milliontransactions had been performed usingthe SEPA system. SEPA’s goal is to allow customersto make non-cash euro payments toany beneficiary in the euro area as a “domestic”payment.According to Polish law, it is obligatory forevery company operating in Poland to havean account at a Polish bank. The accountmust be registered with the tax authorities.Registration documents should be presentedwhen opening an account on behalf of alegal person. Every bank account in Poland isprotected against unauthorised access by theSecrecy Act and the law of confidentiality.8. Stock exchange and capitalmarket regulationsMore than 350 companies are currently listedon the Warsaw Stock Exchange (Gie∏daPapierów WartoÊciowych, GPW, WSE). Mostsecurities and all treasury bonds and derivativesare quoted in the continuous tradingsystem. Only some securities are traded in thesingle price quotation system.The following trading systems exist on theWSE:• single price auction system;• continuous trading;• off-session block trades.The Warsaw Stock Exchange deals in:• stocks;• bonds;• subscription rights;• investment certificates;• futures;• warrants;• index-linked participation units.The stock exchange operates between 9.00a.m. and 4.35 p.m. local time, Monday toFriday.An interesting alternative to WSE isNewConnect which is organised and operatedby the WSE outside the regulated market.This new alternative trading system started in2007 and is aimed at investors who are lookingfor a potentially higher than usual returnon investment but with respectively largerrisk. The companies listed on NewConnectrepresent innovative sectors relying on intangibleassets e.g. informational technology,electronic media, biotechnology or alternativeenergy. NewConnect has less strict formaland information requirements than the WSE.8.1. Structure of the Warsaw StockExchangeThe Warsaw Stock Exchange was founded bythe State Treasury as a non-profit joint-stockcompany. The highest decision-making bodyof the Warsaw Stock Exchange is the GeneralMeeting of Shareholders. Its role is to makechanges to the Articles of Association and toelect members of the Supervisory Board. Itconsists of representatives of the StateTreasury, banks, brokerage houses and listedcompanies (WSE shareholders).104

The Warsaw Stock Exchange’s SupervisoryBoard formulates the rules of the WSE, controlsthe exchange’s operations, admits securities totrading and grants and recalls stock exchangemembership. It comprises 12 members appointedby the General Meeting of Shareholders.The Management Board coordinates the dayto-dayoperations of the WSE, sets the rulesfor the introduction of securities to exchangetrading and supervises the activities of brokersand brokerage firms in market transactions.The Management Board consists offour members acting under the supervision ofthe President who is elected by the GeneralMeeting of Shareholders for a 3-year term.8.2. Financial Supervision AuthorityThe tasks of the Polish Financial SupervisionAuthority (FSA) cover capital market supervision,insurance supervision, pension schemesupervision, banking supervision, electronicmoney institutions supervision and complementarysupervision of financial conglomerateswhere the supervised entities constitutea part. Moreover, the tasks of the FSA includethe following:• undertaking measures aimed at ensuringthe regular operation of the financialmarket;• undertaking measures aimed at the developmentof the financial market and its competitiveness;• undertaking educational and informationmeasures related to the operation of financialmarkets;• participating in the drafting of legal actsrelated to financial market supervision;• creating the opportunities for amicable andconciliatory settlement of disputes that mayarise between financial market actors, inparticular disputes resulting from contractualrelations between entities covered byPFSA supervision and recipients of servicesprovided by those entities;• carrying out other activities provided for byacts of law.The aim of financial market supervision is toensure the regular operation of this market,its stability, security and transparency, confidencein the financial market, as well asensuring that the interests of market actorsare protected.The FSA is the only administrative bodyauthorised to admit securities to public trading.An entity willing to publicly trade itsshares or bonds is obliged to prepare aprospectus that should include a detaileddescription of the stock and detailed informationabout the company, including its registeredoffice, the nature of its business, thestructure of equity, the Management Board,the management style, plans for the future,the last three annual reports and the latestaudited annual financial statements.The FSA ensures that a prospectus satisfiesthe specific conditions stipulated by the lawand grants permission for the stock to betraded. GDRs and ADRs also require theapproval of the FSA in order to be issued. TheFSA also exercises administrative supervisionover the activities of brokerage houses andgrants permits for each specific category ofbrokerage activities.8.3. Acquisition of material blocks of sharesSpecial requirements need to be satisfied toenable the specified limits of votes to beexceeded at the General Meeting ofShareholders:• 5%, 10%, 20%, 25%, 33%, 50% and 75% –obligatory notification of the FSA and thecompany itself, within four days from thedate that the limit is exceeded or from thedate on which the obligee learned of such achange or could have learned if reasonablecare had been taken.How to do Business. Investors’ Guide - Poland Poland in Brief 105

Also the same notification is required from ashareholder who:• holds over 10% of the total vote and hisshare has changed by at least 2% (stocks onthe official stock-exchange) or 5% (stockson a regulated market other than the officialstock-exchange);• holds over 33% of the total vote and hisshare has changed by at least 1%.Failure to comply with these requirementsmay result in a fine of up to PLN 1 million.Disclosure obligations will be changed due toimplementation of the Takeover Directiveand the Transparency Directive.There are also obligations to announce andcomplete a public call for subscription to sell,or convert, shares of a public company. Theacquisition of a number of shares in a publiccompany which increases a shareholder’sshare in the total vote by more than:• 10% within a period shorter than 60 days –if a shareholder holds less than 33% of thetotal vote at the company;• 5% within 12 months – if a shareholderholds 33% or more of the total vote at thecompany;– such acquisition may be effected only by apublic call to acquire or exchange the shares.Moreover, to acquire more than 33% of thetotal votes, a public call must be made forsubscription or conversion of shares of anamount allowing 66% of total votes to beattained. To acquire more than 66% of thetotal votes, a public call must be made forsubscription, or conversion, of all remainingshares.An investor who has purchased shares givinghim at least 90% of the votes at the GeneralMeeting of Shareholders has a right todemand that the other shareholders sell allthe shares held in the company (mandatorybuyout). On the other hand, any shareholderhas the right to demand that his shares beacquired by another shareholder who reachesor exceeds 90% of the votes in the company.The price of shares may not be lower thanthe average stock price for the previous sixmonths.8.4. Position of foreign investorsForeign investors are generally entitled totransfer all of their profits abroad.Furthermore, capital gains may be transferredabroad without the need to obtain specialpermission. Foreign investors are generallysubject to the same rules and regulations asPolish investors.8.5. Venture capital fundsVenture capital activities are conducted byinvestment funds, consulting companies,investment banks, special funds belonging tofinancial corporations and, recently, also bycompanies in the IT sector.Most of these are foreign companies or companieswith a foreign shareholder, which isdue to the lack of funding and experience inthis type of activity on the domestic market.Most companies established by venture capitalfunds operate in the IT and media sectors.106

9. Education9.1. The education systemFrom pre-school education, through primaryand lower secondary stage, Polish pupilsreach the stage of upper secondary education.Both state and private education institutionsexist in Poland. The latter began toappear after 1990. However, at the compulsoryeducation level, almost all pupils attendstate schools (99%). A private school mustreceive permission to operate from theMinistry of National Education. It acquireslegal status and is then registered by theMinister of National Education. A selection ofinternational schools is available in majorcities, where education is provided in Englishor other languages.9.1.1. Pre-primary educationThe first level of the education system is preprimaryeducation, for children agedbetween 3 and 6. Children aged 6 have oneyear of compulsory education as part of theso-called ‘0 grade’, which prepares childrenfor primary school education. In the first halfof 2008, the Ministry of National Educationstarted working on demographic and financialanalysis as well as on a draft act toreduce the school age by one year. Accordingto MNE’s plans, the first group of six yearoldswould start primary school with theirone year older peers on September 1, 2009.Implementation of the changes would takesix years.9.1.2. Compulsory full-time educationCompulsory education in Poland covers twotypes of schools: primary and lower secondaryschools. Primary school education lasts 6years, and its pupils are children agedbetween 7 and 13 (planned: 6 and 12). Lowersecondary school education lasts 3 years andis for children aged between 13 and 16(planned: 12 and 15). Age is the only criterionfor being accepted into primary school, and acertificate of having finished primary school isrequired for admittance to lower secondaryschool.Catchment areas apply – parents registertheir children with schools located nearest totheir homes. The school year is divided intotwo semesters and lasts approximately 185days, from September to June. School educationis generally spread over 5 days a week.Teachers examine the knowledge and skillsacquired by pupils at school in the form ofboth written and oral tests. Pupils not obtainingsatisfactory results must repeat a year.A new system of external examination ofpupils at the end of primary school and lowersecondary school was introduced in Poland,starting from the 2001/2002 school year.Pupils take a compulsory examination at theend of 6 years of primary school (at the ageof 13, planned - 12). Their next compulsoryfinal examination comes at the end of the 3-year lower secondary school (at the age of16, planned 15). Results are stated on thelower secondary school graduation certificate.9.1.3. Upper secondary and post-secondaryeducationThe following types of schools exist at this levelin Poland: general education upper secondaryschool (liceum ogólnokszta∏càce), with pupilsaged from 16 to 19 (planned: 15 to 18), specialisedupper secondary school (liceum profilowane),with pupils aged from 16 to 19How to do Business. Investors’ Guide - Poland Poland in Brief 107

(planned: 15 to 18), technical college (technikum),with pupils aged from 16 to 20 (planned:15 to 19), and basic vocational school (zasadniczaszko∏a zawodowa), with pupils aged from 16 to18-19 (planned: 15 to 17–18). Admittance tothese schools is conditional upon having a lowersecondary school graduation certificate.Moreover, two types of supplementary schoolshave been created for graduates of 2- or 3-yearbasic vocational schools: supplementary generaleducation secondary school (uzupe∏niajàceliceum ogólnokszta∏càce), with students agedfrom 18-19 to 20-21 (planned: 17-18 to 19-20)and supplementary technical college (technikumuzupe∏niajàce), with students aged from18-19 to 21-22 (planned: 17-18 to 20-21).Graduates of general education upper secondaryschools may continue studying in postsecondaryschools (szko∏a policealna), with studentsaged from 19-21 (planned: 18-20).Having completed this level of education, allschools (except basic vocational) organise finalexaminations (matura). A new, completely externalform of the final examinations was introducedas of the 2004/2005 academic year. The maturacertificate is required when applying for highereducation. Basic vocational schools issue a basicvocational school graduation certificate (whichallows pupils to enter the employment market).Post-secondary schools (szko∏y policealne)prepare their students for professional life. Atgraduation, students obtain the title of“skilled worker”, “technician” or an equivalentprofessional title.The introduction of an external standardisedvocational examination at the end of 2-3 yearbasic vocational school is being planned.There are almost 30 international schools inPoland (see appendix 2). Classes, in most ofthem, are held in English, but also in German,French and in some Japanese. Fifteen of theseinternational schools are located in Warsaw.The remainder are in Gdaƒsk, Gdynia, Kielce,Kraków, ¸ódê, Poznaƒ, Szczecin and Wroc∏aw.9.1.4. Higher educationAt this level of education, students maychoose between higher vocational courses(wy˝sze studia zawodowe), supplementarymaster’s degree courses (uzupe∏niajàce studiamagisterskie) and uniform master’s degreecourses (jednolite studia magisterskie).Upon graduating from a 3 or 4-year non-uni-Students of higher educationestablishments (2006/2007)No. ofField of educationstudents(in ‘000)Education science 236.7and teacher trainingArts 23.1Humanities 175.1Social and behavioural sciences 280.9Journalism and information 18.3Business and administration 437.8Law 59Life sciences 40.2Physical sciences 32.2Mathematics and statistics 16Computing 101.8Engineering and 139.9engineering tradesManufacturing and processing 60.6Architecture and building 58.7Agriculture, forestry and fishery 39.3Veterinary 4.4Health 102.8Social services 0.1Personal services 67.2Transport services 16Environmental protection 27.8Security services 3.4Total 1941.3Source: Central Statistical Office (GUS), StatisticalYearbook of the Republic of Poland 2007108

versity higher vocational school (wy˝sza szko∏azawodowa), students obtain a diploma oftheir vocational qualifications and the title ofbachelor (licencjat) or engineer, which allowsthem to enter the employment market orgives them the opportunity to continue theirstudies in a two-year master’s degree course.Upon graduating from a uniform master’sdegree course, which lasts between 4.5 and6 years, universities or other higher educationestablishments issue a higher educationgraduation diploma. Graduates receive thetitle of Master, Master of Education, Masterof Arts, Master of Engineering, Master ofEngineering in Architecture or Doctor,Doctor of Dentistry or Doctor of VeterinaryMedicine depending on the type of course.Graduates with such titles may apply fordoctoral studies.Poland holds second place in Europe in terms ofthe number of students. Almost 1.95 million peoplein Poland studied at higher and tertiary educationfacilities in the 2006/2007 academic year.Students account for nearly 55% of all citizensaged 19-24. Approximately one-third of studentsstudied at non-state schools. There were 950,368full-time students and 991,077 took eveningclasses and part-time courses. 393,968 graduatescompleted their studies in 2005/2006 at 448 tertiaryeducation establishments.29.0% of the higher education facilities arecurrently state-owned. Poland has 18 universities,22 technical universities, 95 economicsacademies, 9 medical academies and 9 agriculturalacademies.The main centres of tertiary education areWarsaw, Kraków, Poznaƒ, ¸ódê, Gdaƒsk,Toruƒ, Szczecin and Wroc∏aw.Polish students have a sound knowledge offoreign languages gained at secondaryschools. Almost all of them speak communicativeEnglish, with 55% achieving at least agood level. 13% have a good knowledge ofGerman, 17% of Polish students speakRussian, 10% – French and 5% – Spanish.9.1.5. Doctoral studiesThe Act On Academic Titles and AcademicDegrees regulating the awarding of academictitles and degrees establishes the followingacademic ranks (in ascending order):Graduates of higher education establishments(2005/2006)No. ofField of educationstudents(in ‘000)Education science 59.9and teacher trainingArts 3.7Humanities 33.1Social and behavioural 57.8sciencesJournalism and information 3.7Business and administration 106.9Law 8.2Life sciences 9.2Physical sciences 6.1Mathematics and statistics 3.3Computing 17.2Engineering and 21.3engineering tradesManufacturing and processing 8.7Architecture and building 8.3Agriculture, forestry and fishery 6.3Veterinary 0.6Health 19.0Social services 0Personal services 12.9Transport services 2.3Environmental protection 4.5Security services 0.9Total 393.9Source: Central Statistical Office, StatisticalYearbook of the Republic of Poland 2007How to do Business. Investors’ Guide - Poland Poland in Brief 109

• the academic degree of doktor (Ph.D.) of aparticular academic subject area within aparticular academic discipline;• the academic degree of doktor habilitowany(post-doctoral degree) of a particularacademic subject area within a particularacademic discipline;• the title of professor (profesor) of a particularacademic subject area.The title of professor is granted by thePresident of the Republic of Poland upon theresolution of the Central Commission issuedin response to a petition by an academiccouncil of sufficient standing to be entitledto award the degree.9.2. Special educationSpecial education is an integral part of thePolish education system. Most children withspecial educational needs are taught at specialschools or in special classes of generalaccess schools (1.4% of all pupils in compulsoryeducation). Pupils may be integrated intogeneral access schools based on positive recommendationsby the agencies responsiblefor diagnosing the type and level of disabilityand/or the wishes expressed by the child’sparents.9.3. TeachersTeachers in Poland must have a degree, andthe required level of education depends onthe level of school in which they wish toteach. For example, in order to teach in primaryand lower secondary schools, teachersmust hold a bachelor’s or master’s degree,but in upper secondary and post-secondaryschools, they must hold a master’s degree. Inaddition, every teacher must receive teachertraining.Expatriates, diplomats as well as Poles whohave returned from abroad have extensivepossibilities of providing their children withan appropriate level of education in numerousinternational schools in Poland. InWarsaw alone there are around twenty ofthem, some of them are organised byembassies and some have been establishedprivately. The history of the oldest internationalschool in Warsaw goes back to thebeginning of the 20th century (Lycee Francaisde Varsovie). International schools satisfy theprogram requirements of the Polish nationaleducation system providing at the same timeopportunity to prepare for the InternationalBaccalaureate Diploma. In the period of Mayand June, schools usually have “open door”time to enable parents to learn more aboutthe schools but of course, if needed, childrencan be enrolled in the program at almost anytime.9.4. Scientific and R&D institutionsThe State Committee for Scientific Research(Komitet Badaƒ Naukowych, KBN) is the maingovernmental administration authority forscientific policy. The committee plans thestate’s science policy, sets the direction of scientificresearch and development and proposesthe annual budget for scientificresearch and development.Scientific institutions also include tertiaryeducation establishments, R&D institutions,which report to the Chief Council of theResearch and Development Institute, Polishinternational research institutions and thePolish Academy of Sciences.The Polish Academy of Sciences (PolskaAkademia Nauk, PAN) is a state scientificinstitution that coordinates the cooperationof scientists with scientific bodies. The academy’scommittees are self-governed units representingtheir respective scientific disciplines.Activities in various scientific fields are conductedby specialised institutions, such as e.g.the Institute of Physics, Institute of Geneticsand Animal Breeding, Institute ofMathematics and Institute of Rural andAgriculture Development.110

Roughly 40 foreign investors have locatedtheir R&D centres in Poland. They chosePoland because of the availability of highlyqualified labour force, the presence of universities,as well as the support of authorities,both on the central and regional level. Theseforeign-owned R&D centres employ 4,500people.10. Human resources10.1. Employment and the Labour ForcePoland’s economically active population agedover 15 years of age in the 4th quarter of2007 was almost 17 million, which represented44.6% of the total population. 15.5 millionpeople were employed, of whom 72.5 %(11.24 million) worked in the private sector.Labour lawThe basic source of the labour law in Poland,that is also a base for creating formal structuresto protect good labour conditions, isthe Labour Code – the Act from 1974 (Journalof Laws 98.90.575 with amendments).Additionally, there are other acts, e.g.: theAct on Specific Rules of Ending anEmployment Contract Based on an Employer’sGrounds (Journal of Laws 02.112.980), the Acton Labour Unions (Journal of Laws 01.79.854with amendments), the Act on Employers’Organisations (Journal of Laws 91.55.235). Ontop of these, there are numerous executiveregulations and employer-labour union groupagreements which provide better than theminimum, guaranteed by the Labour Code,work conditions.Pursuant to Art. 18 (4) of the Labour Code,monitoring and reinforcing of the labour lawis made by the National Labour Inspectorate(Panstwowa Inspekcja Pracy, PIP,www.pip.gov.pl) and pursuant to Art. 18 (5)of the Labour Code the control can be performedalso by a community/social inspectionwhich shall act in cooperation with theNational Labour Inspectorate. Pursuant to Actof April 13, 2007 (Journal of Laws May 21,2007) on the National Labour Inspectorate,the National Labour Inspectorate is theauthority supervising and inspecting theobservance of labour law in Poland (workhealth, safety, legality). The National LabourInspectorate is subordinate to the LowerChamber of Parliament (Sejm) and its LabourProtection Council. Territorial authorities aregiven to 16 District Labour Inspectorates inPolish provinces and 42 sub-districts.Apart from the National Labour Inspectorate,there are also other institutions which payparticular attention to issues of health andsafety at work and some of them may organisecontrolling activities, too:• Chief Sanitary Inspectorate (G∏ównyInspektorat Sanitarny Paƒstwowej InspekcjiSanitarnej - PIS, www.gis.gov.pl);• State Mining Authority (Wy˝szy UrzàdGórniczy, www.wug.gov.pl);• National Atomic Energy Agency(Paƒstwowa Agencja Atomistyki,www.paa.gov.pl);How to do Business. Investors’ Guide - Poland Poland in Brief 111

• Office of Technical Inspection (UrzàdDozoru Technicznego, www.udt.gov.pl);• Central Institute for Labour Protection –National Research Institute (CentralnyInstytut Ochrony Pracy – Paƒstwowy InstytutBadawczy, www.ciop.waw.pl);• Institute of Occupational Medicine (InstytutMedycyny Pracy w ¸odzi, www.imp.lodz.pl).Disputes related to the labour law are usuallysettled in courts (courts for employmentcases). The Labour Code states, however, thatparties in a conflict should try to reach agreementbefore going to court. A worker maythen demand a hearing by a reconciliationcommission which is created by an employerand a trade union present in that particularcompany (if it does not exist then an employercreates such a commission after consultationswith employees). In a situation when anagreement is not reached, the case is sent tocourt by the commission or an employee canseparately complain to the court about aresulting agreement which hurts him/her.Employment courts operate as departmentsof district courts and there are no court feesin cases about employees’ rights.Trade unionsTrade unions in Poland can be created andoperate using as a base art. 59 of theConstitution and the Act on Trade Unions of23rd May 1991. Trade unions may gatherworkers of a company or a greater number ofthem. Companies’ trade unions may createfederations and they may join internationalemployees’ organisations.They represent workers individually and asgroups. On the state level they may expressopinions about legal acts, participate in agroup bargaining and sign group agreements.In Tripartite Commission for Socio-Economic issues and its branches they representemployees. They may appeal decisions ofthe Supremes Administrative Court (NaczelnySàd Administracyjny) and other organs actingin the area of the labour law and social insurance.In Poland there are three central confederationsof trade unions:• Niezale˝ny Samorzàdny Zwiàzek Zawodowy“SolidarnoÊç” (NSZZ “SolidarnoÊç”) createdin 1980 (www.solidarnosc.org.pl)- est.900,000 members;• Ogólnopolskie Porozumienie ZwiàzkówZawodowych (OPZZ) created in 1984(www.opzz.org.pl) – est. 800,000 members;• Forum Zwiàzków Zawodowych (FZZ) createdin 2002 – est. 400,000 members.Additionally, there are approx. 300 federationsof trade unions, about 273 employees’organisations which operate on the nationallevel, almost 24,000 local trade unions, out ofwhich 7000 are local and totally independentfrom bigger organisations.Farmers’ trade unions have a separate legalentity have:• Krajowy Zwiàzek Rolników, Kó∏ek iOrganizacji Rolniczych (www.kolkarolnicze.eu);• NSZZ Rolników Indywidualnych“SolidarnoÊç” (www.solidarnoscri.pl);• Zwiàzek Zawodowy Rolnictwa“Samoobrona” (www.samoobrona.org.pl).Currently in Poland, employees in the privatesector are mostly not unionised. The publicsector with over 3 million employees (datafrom the end of 2006) is estimated to bemore unionised. The phenomenon of thepowerful 10 million member Solidarity movementfrom the beginning of the 1980s haslong gone. Nowadays, trade unions are lookingfor ways to keep and attract new membersby, for example, introducing discountcards for its members.112

10.2. UnemploymentAccording to official statistics, in the 1st quarterof 2008, 1,361,000 people were registeredas unemployed, of whom 48.5% werewomen. Unemployment was estimated at8.2% of the economically active population.The highest rate of unemployment, 10.4%,was registered in the DolnoÊlàskie voivodeship,and the lowest rates were: 6.2% in theWielkopolskie voivodeship, 6.9% in Âlàskievoivodeship and 7.1% in Pomorskie andMa∏opolskie voivodeships. Almost 37% of theunemployed lived in rural areas. EU unemploymentrate for Poland in May 2008 was7.5%, comparing to 7.1% for EU (27).10.3. SalariesThe average gross monthly salary for employeesin the private sector in the 1st quarter of2008 was PLN 3,144.41 (PLN 3047.93 – withoutannual bonuses from profits) . This was11.4% higher than the year before. Sectorswith the highest average gross monthlysalaries (in PLN) are presented in the tablebelow.Private sectors paying the highest averagegross monthly salaries in the first quarter of2008, in PLNSectorSalaryFinance 5,868Mining 5,053Gas, electricity and water 4,089Transport, storage 3,257and communicationsSource: Central Statistical Office (GUS)Employment by sector, 20075%3%16%Agriculture, forestry, fishing8%IndustryConstruction7%Trade & repairHotels & restaurantsTransport, storage, communication8%2%22%Financial intermediationRE & business activitiesPublic administration & defence6%2%16%5%EducationHealth & social workOtherSource: Concise Statistical Yearbook of PolandHow to do Business. Investors’ Guide - Poland Poland in Brief 113

Sectors with the lowest average gross monthlysalaries (in PLN) were as follows:Economic sectors paying the lowest averagegross monthly salaries in the first quarter of2008, in PLNSectorSalaryTrade and repair 2,887Health and social work 2,848Manufacturing 2,816Hotels & Restaurants 2,225Source: Central Statistical Office (GUS)Average gross monthly salaries in PolandYear In PLN In USD1996 874.00 324.241997 1,061.93 323.681998 1,239.93 354.781999 1,697.12 427.762000 1,923.81 442.622001 2,061.85 513.792002 2,133.21 522.912003 2,201.21 579.332004 2,275.63 623.682005 2,401.21 742.542006 2,521.15 811.882007 2,739.18 989.16Source: Central Statistical Office (GUS)11. General macroeconomic indicatorsWith GDP growth of 6.6% in 2007, Poland’seconomy is much stronger than the Eurozone(2.6%), and its growth is higher than theaverage of the 27 EU Member States (2.9%).Poland’s growth has been driven to a significantextent by exports, industrial productionand investments. Employment is also rising.More detailed information on individual indicatorsis provided below.11.1. Gross Domestic ProductThe Polish economy expanded rapidly in themid- to late-1990s. After a slowdown, duemainly to global economic conditions, Polandhas almost regained the pace of growth fromthe second half of the 1990s. In 2007, GDPincreased by 6.6%.Economists forecast that GDP should grow by5.0 % in 2008.Poland’s GDP at current market prices wasestimated at, PLN 1,166.7 billion in 2007 (USD421.3 billion at exch. rate 2.76) (USD 11,050per capita).114

GDP growth in 1990-2007 (%)1052.63.85.2766.84.84.1 43.65.23.36.26.61.3 1.301990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007-5-7-10-11.6Source: The Economist 2004, Central Statistical Office (GUS)-1518,000GDP per capita in years 2007-2009 in EUR16,00015,90014,80014,00013,00012,40012,00011,80011,70010,70010,70010,0008,0006,0008,1005,60010,2009,8006,0004,9006,900PolandBulgariaCzech RepublicHungaryRomaniaSlovakia4,0003,8004,3002,000* forecast02007 2008* 2009*Source: UN Data, CentralStatistical Office (GUS), PAIiIZHow to do Business. Investors’ Guide - Poland Poland in Brief 115

11.2. Consumer Price IndexAverage annual inflation in May 2008 was4.4% (2.3% in May 2007).Consumer Price Index (%)Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007CPI average 14.9 11.8 7.3 10.1 5.5 1.9 0.8 3.5 2.1 1 2.5CPI year-end 13.2 8.6 9.8 8.5 3.6 0.8 1.7 4.4 0.7 1.4 4Source: Central Statistical OfficeAverage annual inflation in 1997-200716141210864201997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Source: Central Statistical Office116

11.3. Foreign tradeAccording to the National Bank of Polandquarterly data in USD, in 2007 Polish importsreached USD 162 billion and exports USD 138billion. Compared with 2006 imports grew by28.9% from USD 125 billion, while exportsincreased by 25.8% from USD 110 billion.Imports have been rising at a faster rate thanexports because of the decreasing competitivenessof Polish goods and the rapidincrease in domestic consumption.Poland trades primarily with developedcountries, to which over 83% of all exportedgoods are directed. In 2006, trade with theEU accounted for 77.4% of all Polish exportsand 62.3% of Polish imports. Germany isPoland’s largest trading partner accountingfor 27.2% of all Polish exports and 23.9% ofall imports.Goods sold to Poland’s 10 largest tradingpartners accounted for 69.04% of the Polishexports.Structure of Polish exports in 2006% USD millionPrepared food 4.2 4,678Mineral products 4.8 5,273Chemical products 5 5,542Plastics, rubber articles 6.2 6,774Wood and articles 2.7 2,907Pulp, paper and articles 2.9 3,178Textiles and articles 3.6 3,928Footwear, headgear 0.4 426Stone, ceramic products 2.3 2,475Metals and articles 13.1 14,372Machinery, electrical eq. 23.8 26,112Transport equipment 17.0 18,644Optical, measuring instr. 0.8 931Source: Central Statistical Office, StatisticalYearbook of the Republic of Poland 2007Poland’s main export partners in 2007 (in %)25.8366.861.545.94.73.8 5.5GermanyItalyFranceGreat BritainCzech RepublicThe NetherlandsRussiaUkraineUSAOtherSource: National Bank of PolandExchange rates of the Polish zloty (PLN)Currency 1998 1999 2000 2001 2002 2003 2004 2005 2006 20071 USD 3.4937 3.9675 4.3464 4.0939 4.0795 3.8889 3.6484 3.2338 3.1053 2.76921 EUR 3.9231 4.2270 4.0110 3.6685 3.8557 4.3978 4.5294 4.0254 3.8959 3.7845Source: National Bank of PolandHow to do Business. Investors’ Guide - Poland Poland in Brief 117

11.4. Local cost effectivenessAccording to a survey commissioned by thePolish Information and Foreign InvestmentAgency (PAIiIZ), two main reasons for enteringPoland cited most commonly by investorsare low labour costs and the highly skilledlabour force (77% and 74% of responses,respectively). The costs of conducting businessin Poland are significantly lower than inWestern Europe. The time required to establisha business is according to the WorldBank’s 2008 data 31 days in Poland.The graph below illustrates the average nominalgrowth in salaries in Poland, Slovakia,the Czech Republic and Hungary between2000 and 2005 and beyond as well as forecastingsome developments.Salaries in Poland have usually increased more slowly than in other CEE countries201816141210864202000 2001 2002 2003 2004 2005 2006 2007 2008Poland Czech Republic Slovakia HungarySource: EIU, Official countries’ statistics, estimates118

11.4.1. Labour costsSince 2001, salaries in Poland have beenincreasing very slowly because of high unemployment.As a result, the salary level in theCzech Republic and Hungary is now higherthan in Poland. The average monthly salary inPoland in 2007 was PLN 2888 (EUR 736). InMay 2008 in the private sector, average paywas PLN 3069 (EUR 890). According toCushman & Wakefield Cities Monitor 2007survey, Warsaw is one the best capital citiesin Europe in terms of staff costs.11.4.2. Cost of livingThe comparative price level in Poland has avalue of 65. That means that such an amountof specified monetary units is needed inPoland to buy the same representative basketof consumer goods and services as in otherlisted countries.Best cities in terms of staff costsScoreBucharest 1.38Warsaw 1.29Budapest 1.11Prague 1.01Lisbon 0.95Source: European Cities Monitor 2007,Cushman & WakefieldComparative price levels of private consumption in 2007 (ratios of PPP to exchange rates)IcelandDenmarkNorwaySwitzerlandIrelandSwedenUnited KingdomFinlandLuxemburgFranceBelgiumNetherlandsGermanyItalyAustriaSpainPortugalGreeceTurkeyHungaryCzech RepublicSlovak RepublicPoland7069676565919199132130129124124119118115114113112112142148160Source: OECD0 20 40 60 80 100 120 140 160 180How to do Business. Investors’ Guide - Poland Poland in Brief 119

11.4.3. Real estateRenting office space in large cities such asWarsaw, Kraków, Wroc∏aw and Poznaƒ costsbetween EUR 17 and EUR 30 per sq. m permonth. At the beginning of 2008, the averagecost of purchasing an apartment inWarsaw was EUR 2,917 per sq. m. and inKraków EUR 2,550 per sq. m. The averageprice of a square meter of land has a largespread (EUR 10–300), depending on locationand quality of the plot. In large cities such asWarsaw, it can be considerably higher, forexample in the centre of the city in one transactionit reached almost EUR 9,000 per sq. m.The average price of arable land in Q4 2007was EUR 3,040 per hectare.Best cities in terms of value for money ofoffice space2007 2006Amsterdam 12 19Barcelona 7 5Berlin 4 8Brussels 15 13Bucharest 2 2Budapest 5 6Copenhagen 29 31Dublin 12 11Geneva 31 33Helsinki 26 18Lisbon 3 2London 18 28Madrid 10 12Moscow 27 25Paris 16 17Prague 8 4Rome 29 30Vienna 28 26Warsaw 1 111.4.4. EnergyThe average price of electricity for industry isless than EUR 0.06 per kWh in Poland. Thetable below shows a comparison of pricesbetween selected EU countries.Defined for annual consumption of 2000MWh, maximum demand of 500 kWh andannual load of 4000 hours, electricity prices(without VAT) in EUR/kWh for industrial users(corresponding to prices applicable on 1January each year)2005 2006 2007Belgium 0.0695 0.0830 0.0880Bulgaria 0.0429 0.0460 0.0465Czech Republic 0.0601 0.0731 0.0783Denmark 0.0646 0.0724 0.0638Germany 0.0780 0.0871 0.0946Ireland 0.0896 0.0998 0.1125Spain 0.0686 0.0721 0.0810France 0.0533 0.0533 0.0541Italy 0.0843 0.0934 0.1027Lithuania 0.0498 0.0498 0.0548Hungary 0.0701 0.0753 0.0812Netherlands 0.0806 0.0855 0.0920Poland 0.0506 0.0543 0.0541Portugal 0.0713 0.0817 0.0860Romania 0.0769 0.0773 0.0842Slovakia 0.0703 0.0773 0.0932Finland 0.0527 0.0517 0.0542Sweden 0.0462 0.0587 0.0626United Kingdom 0.0570 0.0799 0.0950Source: EUROSTATSource: Cushman & Wakefield, European CitiesMonitor 2007120

Defined for annual consumption of 41 860GJ, load factor of 200 days (1,600 hours), naturalgas prices (without VAT) in EUR/GJ forindustrial users (corresponding to pricesapplicable on 1 January each year)2005 2006 2007Belgium 5.2700 7.0600 6.8900Bulgaria 3.7773 4.5020 5.2173Czech Republic 5.1086 7.3407 6.5632Denmark 6.0077 6.1651 5.7688Germany 7.7600 10.4700 12.1500Spain 4.6832 7.2400 7.0736France 6.2200 8.0600 7.6300Italy 6.0940 7.0400 8.4580Lithuania 3.6058 4.4542 6.0208Hungary 5.8067 7.9531 9.4769Netherlands 6.3900 8.1400 8.4000Poland 5.3047 6.7668 7.5448Portugal 6.0300 7.6300 7.7600Romania 3.6785 6.2335 7.3193Slovakia 5.0813 7.6550 7.9998Finland 6.4300 7.3200 7.6100Sweden 8.0795 11.1480 11.0579United Kingdom 5.8110 8.9172 10.5515Source: EUROSTAT12. Poland in the internationalarenaAt midnight on 21st December 2007, enteredinto the Schengen area completing severalyears of preparatory work by the publicadministration, the Border Guard and thePolice. This is considered to be the mostimportant event since Poland’s accession tothe European Union. According to the schedule,Poland had time to adapt the country’sinternational airports to Schengen requirementsuntil the end of March 2008. Apartfrom Poland, there are eight other new membersof the area: Estonia, the Czech Republic,Lithuania, Hungary, Latvia, Malta, Slovakiaand Slovenia.Citizens of the enlarged Schengen area benefitfrom quicker and easier travel withoutborder checks. Lifting internal border controlswas possible after a process of ensuring thateach Member State was equipped to guardexternal borders and issue visas for the wholeSchengen area. The solidarity of theSchengen area countries was expressed bycreating the Schengen Facility which providednearly one billion EUR to new Member Statesto meet Schengen area membership criteria.The Schengen Information System sharesinformation on people who are wanted, missing,refused entry, as well as on lost andstolen property.12.1. Poland in the European UnionPoland’s geopolitical position induces it toactively participate in international politicalorganisations. Poland has been a member ofthe Council of Europe, the Central EuropeanInitiative and the Visegrad Group since 1991.In 1998, Poland presided over theOrganisation for Security and Cooperation inEurope (OSCE), and in 1999, it became amember of NATO.The rapid development of the country’s economywas confirmed by Poland’s accession intothe World Trade Organisation (WTO) in 1995and into the Organisation for EconomicCooperation and Development (OECD) in1996. In 1992, Poland became a foundingmember of the Central European Free TradeAgreement (CEFTA).On 19th September 1989, Poland signed thetrade and economic cooperation agreementwith the European Community. TheAssociation Agreement was signed on 16thDecember 1991. Poland joined the EU as afull member on 1st May 2004.How to do Business. Investors’ Guide - Poland Poland in Brief 121

12.1.1. Poland’s position in the EuropeanUnionThe Treaty of Accession was signed in Athenson 16th April 2003. The accession referendumtook place in Poland on 7th and 8th June2003. 77.45% of Poles voted in favour of EUmembership, with a turnout of 58.85%. 1stMay 2004 witnessed the enlargement of theEuropean Union from 15 to 25 member countries,with the 10 new Member States adding75 million more citizens to the 378 million citizensof the EU. On 1st January 2007, twomore states: Bulgaria and Romania joined theEU. Today, the European Union has 27Member States: Austria, Belgium, Bulgaria,the Czech Republic, Cyprus, Denmark,Estonia, Finland, France, Germany, Greece,Hungary, Ireland, Italy, Latvia, Lithuania,Luxembourg, Malta, the Netherlands, Poland,Portugal, Romania, Slovakia, Slovenia, Spain,Sweden and the UK.The enlargement is one of the most importantopportunities for the European Union.With the exception of Malta and Cyprus, thenew Member States are former communiststates that have barely a decade of experienceof being market economies and experiencingcapitalist freedoms. This not only representsa significant moment in the history ofthe EU, but also in the history of Poland.12.1.2. Membership criteriaPoland prepared itself methodically to meetthe political, economic and legal criteria ofEU membership. It has adopted and implementedthe body of EU legislation, whichcomprises more than 20,000 separate treaties,regulations and directives passed by theEuropean institutions, as well as judgmentspassed by the European Court of Justice.In terms of economic criteria, comprehensivereforms have been undertaken by the Polishauthorities to transform the economy. Thelegal criteria apply to the implementationand enforcement of Community law (AcquisCommunautaire). Poland has achieved a highlevel of alignment with the Acquis. There aremany areas of taxation that fall within thescope of this legislation, even though thenew states still have control over direct taxationand the definition of tax rates.Because of the harmonisation of Polish lawwith EU standards and increasingly extensiveintegration with the European economy,Poland has become an even more attractivetarget for foreign investors.12.1.3. Intra-Community tradeThe EU is Poland’s most important tradingpartner. In 2006, trade within the Communityaccounted for approximately 77.4% of Polishexports and 62.3 % of Polish imports. The volumeof trade between Poland and the otherEU Member States exceeded EUR 155 billionin 2007. That same year, the European UnionMember States accounted for 78.7% of Polishexports and 63.9% of imports. Six out ofPoland’s ten largest trading partners areMember States of the EU. In 2007, Germanyranked first among these, with a 25.8% shareof exports and 23.9% of imports.12.1.4. Financial assistanceAs a European Union Member State, Polandneeds to contribute to the general EU budgetbut simultaneously it receives back transfers,notably those under the CommonAgricultural Policy, the Common FisheriesPolicy and cohesion policy.Poland pays its contribution to the generalEU budget at the full amount, i.e. EUR 6 billionin 2004-2006. The first monthly paymentwas made from the Polish budget to the EUon 4th May 2004. In addition, Poland needsto contribute to separate specific budgetswithin the EU.At the same time, Poland is waiting for financialflows from the European Union. The generalEU budget envisaged that the commitmentsto Poland could reach EUR 19.3 billion122

in 2004-2006, while payments could amountto EUR 13.5 billion. In 2007-2013, Poland willreceive over EUR 67 billion from the EUthrough structural funds.Poland became eligible for structural funds asof 1st May 2004. The primary objective ofthese funds is to provide assistance in reducingthe development disparities betweenregions in order to strengthen economic andsocial cohesion.Poland was granted an additional EUR 280million for 2004-2006 to adjust to theSchengen standards of external border controls(eastern border and international airports).During the period 2004-2006, thewhole of the territory of Poland was set tobenefit under Objective 1 of the StructuralFund through seven development programs.The overall aim was to promote a knowledge-basedeconomy fuelled by an entrepreneurialspirit in order to favour rapid and sustainableeconomic growth as a means ofovercoming the major challenge of unemploymentand ensuring better social cohesion.Investments were concentrated in four priorityareas: growth and employment in the privatesector; human resources; infrastructureslinked to economic growth and quality of lifeand improvements to regional developmentconditions, including rural development.The programs under which this strategy wasimplemented are the following:Business competitivenessThe knowledge-based economy and theindustrial environment constitute the first priorityarea, which was aimed at giving Polishindustry access to information, R&D and technologicalinnovation, improving and rehabilitatingsites where companies could establishoperations and improving access to capitalfor SMEs. As a second priority, direct aid tocompanies in the private sector (meaningespecially new activities and SMEs) havemade companies more competitive on theinternational market, while creating majoremployment opportunities.Human resourcesFirst, the overall level of employment wassupposed to be increased through an activelabour market and social inclusion policy: preventionof unemployment and the occupationalintegration of young people, the longtermunemployed, disadvantaged groups andwomen. The modernisation of public employmentagencies was a key element in this priority.The second priority was to develop aknowledge-based society by improving accessto a better standard of education and placingan emphasis on equal opportunities and theneeds of companies in the face of marketfluctuations. Continuous training, distancelearning, cooperation between universitiesand companies, increased administrativecapacities, etc. were encouraged.TransportThe balanced development of various modesof transport was aimed at encouraging competitivealternatives to road transport andimprove environmental protection. Oneaspect was to respond to the urgent need tomodernise the rail network, while seaportsbenefited from measures to promote multimodaltransport.The second priority was to improve roadtransport safety – quality motorways, city ringroads and traffic management – and to makeit more efficient by means of shorter journeysand a more comprehensive network. TheTransport Program was designed to complementthe Cohesion Fund projects.Food sector and rural developmentThe initial priority applied to changes in primaryagricultural production and processingactivities: investments in viable farms, helpfor young farmers in setting up, adaptationHow to do Business. Investors’ Guide - Poland Poland in Brief 123

of the agro-foodstuff sector to Europeanstandards, training, agricultural advisory services,etc. The second priority was the sustainabledevelopment of rural areas throughmeasures related to agricultural re-parcelling,the management of agricultural water, thediversification of economic activities, ruralrenovation, collective equipment, culturaland natural heritage, etc.Aid was also allocated to local initiative projectsinspired by LEADER+ and to the restorationof forestry damaged by natural disasters.FisheriesFour priorities were set here: adjustment ofthe fishing effort to take account of fishstocks; fleet renovation and modernisation;protection of aquatic resources, developmentof an aqua-culture, improvements to portinstallations, processing and marketing activitiesand product quality; and aid for smallscalecoastal fishing, unemployed fishermenand producer groups, etc.Integrated regional programThe task was to create the conditions for sustainableregional competitiveness in each ofPoland’s 16 voivodeship by pursuing threepriorities: the development and modernizationof infrastructure contributing to regionalcompetitiveness (technical infrastructure,entrepreneurship development centre,regional transport, environment, social infrastructuresin the area of health, higher educationand tourism); the improvement ofhuman resources to meet the specific needsof the regional labour market, through studygrants and aid to farmers leaving agriculture,workers affected by restructuring, entrepreneurs,etc.; and local development in themost marginalised areas (including urbanareas in crisis), by supporting various localinfrastructures, micro businesses, the constructionor modernisation of educationalestablishments, tourism and cultural projects,etc.The Cohesion FundApart from the structural funds, Polandreceived additional aid from the CohesionFund for infrastructure projects in the area ofthe environment (drinking water, sewage,water resources and solid waste) and transport(roads, railways, airports and waterways).EU structural funds 2007-2013The EU funding scheme for years 2007-2013has been modified and new programs havebeen introduced. In 2004 prices, the totalbudgetary appropriations for this periodreach the amount of EUR 864 billion. The currentEU budget foresees: support for projectsimproving competitiveness and innovation,the research spending increased by 75 %, thepre-accession funds streamlined into oneinstrument, 40% increase in spending for educationand training and the environmentalinstruments combined in a single program.The funding for 2007-2013 has been structuredinto five categories:• pre-accession assistance (funding for candidateand potential candidate countries);• external assistance (funding for reforms innon-EU countries);• regional assistance (funding for economicgrowth and reducing development gapsbetween EU regions);• natural resources (funding for agriculture,rural development, environment and fisheries);• community programs (funding for R&D,competitiveness, innovation, media, education,health, youth, culture).Funding in the first two categories (pre-accessionassistance and external assistance) is notavailable for current EU Member States.In the regional assistance category, EUR 308billion (in 2004 prices) out of the EU budgetis available through so called cohesion instrumentsfor job creation and regional growth.124

82% of this sum goes towards the“Convergence” objective for the poorestmember states and regions, about 16% ofthe amount is for remaining regions and“Regional Competitiveness and Employment”objective and the rest is directed towards“European Territorial Cooperation” objective.60% out of the “Convergence” objectiveamount and 75% out of the “RegionalCompetitiveness and Employment” objectiveamount should be spent on projects supportingresearch and innovation, the informationsociety and sustainable development.In regional assistance category funding isavailable through:• European Regional Development Fund(ERDF) – focus on productive investment,infrastructure, technical assistance, otherservices to enterprises – available for all 27EU states;• European Social Fund (ESF) – focus onincreasing adaptability of employees andemployers, improving access to employmentand participation in the labour market,reinforcing social inclusion, helping disadvantagedpeople through better access tothe labour market – available for all 27 EUstates;• Cohesion Fund (CF, EUR 61.6 billion) – focuson transport and environmental protectioninfrastructures – available for the EU stateswith GNP per capita below 90% of EU-average.In this category there are also initiatives:• JEREMIE (Joint European Resource for Microto Medium Enterprises);• JESSICA (Joint European Support forSustainable Investment in City Areas);• JASPERS (Joint Assistance to SupportProjects in European Regions);• Regions for Economic Change.A significant part of the EU budget is directedtowards projects within the naturalresources category for attainment of thecommon agricultural, fisheries and environmentalpolicies. Funding is available through:• European Agricultural Guarantee Fund(EAGF);• European Agricultural Fund for RuralDevelopment (EAFRD);• European Fisheries Fund (EFF);,• LIFE+ (Financial Instrument for theEnvironment).The community programs category has over20 continued and new programs to support.For companies, NGOs, public bodies and universitiesoperating in Poland EU funding isavailable through such programs as:• Infrastructure and Environment OperatingProgram (almost EUR 28 billion from ERDFand CF). The goal of the program is toimprove investment attractiveness ofPoland through development of the technicalinfrastructure while protecting andimproving environment, health, culture andthe territorial cohesion.• Human Capital Operating Program (EUR 9,7billion from the EFS). The major goal of theprogram is to increase employment andsocial cohesion.• Innovative Economy Operating Program(EUR 8.3 billion from ERDF), The goal of theprogram is supporting innovation in business,business related institutions and R&Dcentres.• Development of the East of PolandOperating Program (EUR 2.2 billion fromERDF). The goal of the program is to speedup the process of development of the fiveeastern voivodeship.• Programs for Voivodeship (16 programs,EUR 15.9 billion). The goal of these programsis to support development and cohesionof all the 16 voivodeship.• Territorial Cooperation Programs (EUR557.7 million). The goal of these programsis to improve trans-border and regionalcooperation within EU.How to do Business. Investors’ Guide - Poland Poland in Brief 125

• Technical Assistance Operating Program(EUR 516.7 million). The goal of the programis to give technical support in implementationof operating programs.For the attainment of the common agricultural,fisheries and environmental policies fundingto Poland comes from EAFRD and EFF forsuch programs as:• Development of Rural Areas Program –(EUR 13.2 billion);• Balanced Development of the Fisheries andCoastal Areas (EUR 0.7 billion).12.2. Poland in the Single MarketUpon accession to the European Union,Poland became part of the Single EuropeanMarket, with the free movement of goods,services, people and capital.12.2.1. Freedom of movement of peopleThe following people have the right to enterand leave the territory of the Member Statessimply by producing an identity card or passport,without the need for an entry visa orequivalent:• nationals of a Member State who are establishedor who wish to establish themselvesin another Member State in order to pursueactivities as self-employed persons, or whowish to provide services in that state;• nationals of Member States wishing to goto another Member State as recipients ofservices;• the spouse and children under 21 years ofage of such nationals, irrespective of theirnationality;• the ascendant and descendant relatives ofsuch nationals and of the spouse of suchnationals, if the relatives are dependent onthese nationals, irrespective of their nationality.With respect to the principle of the freemovement of persons, the AcquisCommunautaire covers four areas:• Mutual recognition of professional qualifications– the European Community intendsto eliminate obstacles to the performanceof regulated professions, accepting theprinciple that a person fully qualified topractice a regulated profession in oneMember State should be entitled to do soanywhere within the European Community.• Citizens’ rights – including voting rights (i.e.rights of all European Union citizens to participateactively in the political life of theEuropean Union through European andmunicipal elections) and the right of residence(originally foreseen only for workers,but subsequently extended to cover nonactivepersons).• Free movement of workers – within thescope of which the Member States areobliged to ensure that all their legal provisions,in particular those related to criteriaon citizenship, residence or linguistic ability,are in full conformity with the AcquisCommunautaire.• Coordination of social security schemes –governed by regulations and thereforedirectly applicable to the Member States.The principles of such coordination consistof ensuring that those who exercise theirright to the freedom of movementthroughout the European Communityshould not be penalised as a result in termsof protection of their social security.Freedom of movement for workers, which isa fundamental aspect of the freedom ofmovement for persons and of the internalmarket, allows the nationals of any Member126

State to work in another Member Stateunder the same conditions as nationals ofthat state. However, following the enlargementof the European Union on 1st May2004, the freedom of movement of workersfrom, to and between the new MemberStates has been somewhat restricted.The important components of the transitionarrangements related to the free movementof workers from Poland into the old MemberStates are based on the 2+3+2 scheme, i.e.:• During an initial two-year period, the EU-15Member States must apply their nationallaw or any bilateral agreements concludedwith the new Member States under theCommunity law. This means that, in mostcases, workers from the new Member Statesstill needed a work permit in order to gainaccess to the EU-15 labour market.• New Member States are able to impose reciprocalrestrictions on workers from the EU-15 Member States that have adopted suchmeasures.• In 2006, the Commission planned to drawup a report that the Council shall use toexamine the functioning of the transitionalprovisions. Moreover, each of the EU-15Member States needed to give theCommission formal notice of its intentioneither to apply the Community law in full,together with its principle of the freedomof movement for workers, or to maintainthe restrictive measures for a maximum ofthree more years.• In 2009, the EU-15 Member States will onlybe able to extend the restrictive measuresfor a period of two years, if they observe amajor disruption on their labour markets,or a threat of such disruption.• The end of the seven-year transitional periodwill bring about the complete freedomof movement for workers who areCommunity nationals in the enlargedEuropean Union.12.2.2. Freedom of movement of capitalFreedom of movement of capital constitutesone of the foundations of the common market.Article 56 of the EC Treaty prohibits anyrestrictions on the movement of capitalbetween Member States. This article is directlyapplicable and all the Member States enjoyfull freedom of capital movements and payments.The freedom of movement of capital includespayments and transfers of money across borders,as well as other transactions allowingthe transfer of ownership of assets and liabilities(such as investments in companies andreal estate or portfolio investments). In particular,it allows for the free transfer of profitsfrom one country to another and the rightto invest and purchase tangible and financialassets abroad without restriction.Poland was granted two transition periodsfor maintaining its national legislation withrespect to real estate acquisitions:• a five-year transition period for the acquisitionof “second houses” by foreigners;• a twelve-year period for the purchase ofagricultural land and forests.12.2.3. Freedom of movement of goodsArticles 28 to 30 of the EC Treaty establishthe principle of the free movement of goods.Member States may not maintain or imposebarriers to trade, except in special circumstances.The goods that may be legally soldon the market of one Member State may bealso sold in all other Member States.Therefore, the authorities of the destinationMember States will acknowledge the standardsto which the product conforms in theMember State of origin: this is referred to asthe principle of mutual recognition.Measures were adopted that provide for andgovern such aspects as basic technicalHow to do Business. Investors’ Guide - Poland Poland in Brief 127

standards, product certification and metrologicaldefinitions in order to ensure the free movementof goods within the European Union.Since there are goods for which common harmonizedstandards have been introduced onthe basis of directives, rules, etc., and goods forwhich there are no harmonized standards, theAcquis Communautaire is usually divided intoharmonised and non-harmonised areas withrespect to the free movement of goods.In accordance with the so-called ‘golden rule’of European legislation, the principle of thefree movement of goods applies in the eventthat there is no specific harmonization regulationin a given area. The new approach tothe European product law is based on theprinciple of self-certification and the presumptionof conformity to harmonised standards.The old approach directives still apply to certainproduct groups (e.g. pharmaceuticals,foodstuffs and motor vehicles).The European Union has accepted two transitionalarrangements for Poland:• for the renewal of marketing authorisationfor pharmaceuticals up to 31st December2008;• for the validity of licenses for medicaldevices issued under Polish legislation up to31st December 2005.Goods crossing the Community’s internal bordershave not been subject to controls since1st January 1993. The free movement ofgoods within the Community presupposes:• the prohibition of setting customs dutiesand charges with equivalent effectsbetween Member States;• the adoption of a common customs tarifffor trade between Member States and thirdcountries;• the prohibition of any quantitative restrictionsor measures having an equivalenteffect;• the prohibition of discrimination by statemonopolies.These general arrangements apply to allproducts but are covered by special rules forcertain products the movement, control ormarketing of which is (for various reasons)subject to specific procedures. Most of thespecial rules are for agricultural products (animals,meat, plants and seeds, etc.), wherethere is still a need to protect animal, plantand human health. In general, agriculturalproducts are still subject to the commonorganisations of the market, which werereformed in 1992 so as to eliminate allarrangements based on border controls (formilk, cereals and refined sugar, etc.).The abolition of controls at internal borderspresupposes that the external borders areadministered consistently and in the“Community spirit”. Officials responsible forconducting the controls are required to acton behalf of all national authorities and inthe interest of all firms and consumers in theCommunity. In 1994, the CommunityCustoms Code established a common legalframework for customs controls, supplementedby special measures in the fields of veterinarymedicine and plant health, culturalgoods, pharmaceuticals and psychotropicdrugs, international trade in protectedspecies and the battle against counterfeiting.12.2.4. Freedom of movement of servicesAccording to the provisions of the EuropeanAgreement on the movement of servicesbetween the Community and Poland, all partiesshall gradually introduce legal solutionsallowing economic agents from Poland or theCommunity to provide services without theneed to establish companies in the recipientcountry.Poland retained the right to protect its interestsin the area of purchasing national assetsthat are subject to privatisation up to the end128

of the transition period (2004). The mostimportant areas to be protected were:• ownership, usage, sale and lease of realestate;• transactional operations and agency servicesin real estate trading, as well as in thetrading of natural resources and relatedactivities;• legal services.The advantages and disadvantages ofPoland’s accession into the EU with respect tomarket services (transport, tourism, banking,distribution services, communications andothers), include the following aspects:• Poland’s inclusion among the EU MemberStates favourably affects the competitivenessof Polish service providers.• Sectors of the Polish economy that used tobe protected against free competition(telecommunications, banking and insuranceservices and air transportation) needto open up to international competition.Domestic companies that are financiallyweak may be edged out of the market byforeign competitors.• Access by Polish service companies to the EUservice market (e.g. export of constructionservices, which has been limited) creates theopportunity to leverage the relative costefficiencies of Polish firms (related to lowerlabour costs) even in the fields of professionalservices.Every Member State should grant the right ofpermanent residence to nationals of otherMember States who establish themselveswithin their territory in order to pursue activitiesas self-employed persons when therestrictions on these activities have beenabolished. A “residence permit for a nationalof a Member State of the EuropeanCommunities” is issued for this purpose.12.3. Poland and the Monetary UnionPoland is not a member of the Economic andMonetary Union (EMU). However, the accessionto the European Union paves the way forPoland to start preparations for accession tothe Eurozone, which is the next stage of economicintegration. The exact moment for theadoption of the euro has not yet been set.Membership of the EMU is conditional uponthe fulfilment of the Maastricht criteria ofeconomic convergence and after at least twoyears of participation in the Exchange RateMechanism. The Maastricht criteria includefiscal criteria, which apply to the general governmentdeficit and public debt, as well asmonetary criteria, which refer to price stability,the level of long-term interest rates andexchange rate stability.The Maastricht convergence criteria are notonly a formal requirement for Poland’s participationin the Eurozone, but also the basis fora sound macroeconomic stance, creating conditionsthat are conducive to long-term economicgrowth. Thus, meeting the criteriaboth opens the way to the euro and is beneficialto growth.Poland satisfied the inflation, long-terminterest rate and public debt criteria inHow to do Business. Investors’ Guide - Poland Poland in Brief 129

November 2003. The fulfilment of the generalgovernment deficit criterion requires theimplementation of comprehensive reformsreducing public spending and increasing theefficiency of management of public finance.The exchange rate criterion can only be fulfilledafter Poland has entered ERM II.Meeting this criterion will depend on theimplementation of a credible macroeconomicpolicy.The decision on the acceptance of Poland as amember of the common currency area will bemade by the ECOFIN Council and will bebased on the conclusions of ConvergenceReports prepared by the EuropeanCommission and the European Central Bank(ECB). These reports will contain an assessmentof the level to which the Polish economyis ready for membership of the monetaryunion.Participation in the EMU could have the followingimplications for Poland:• a reduction in the costs of economicexchange as a result of the use of the euroin all transactions;• a reduction in the costs of the internalfinancial management of enterprises;• a reduction in foreign exchange exposure,as well as the costs of conducting businessactivities and a reduction in the relatedreserve levels;• a reduction in the levels of interest rates;• strengthening of macroeconomic stability,as a result of keeping stricter discipline withnew monetary institutions;• an increase in stability, which will be relatedto the improvement in production conditions.Following accession to the Economic andMonetary Union, Polish manufacturers,investors, exporters and importers will avoidthe costs of hedging against exchange ratefluctuations, as they will no longer beexposed to foreign exchange risk. Small andmedium-sized enterprises will gain cheaperaccess to sources of information on conditionsprevailing on the market and the possibilitiesof development.Citizens will receive their income in euro,which will enable them to make their paymentsin Poland and abroad without the costof currency conversion.12.4. Other international organisations12.4.1. Poland in the EU – OECDThe Organisation for Economic Cooperationand Development was established by theParis Agreement on 14th December 1960. TheOECD groups 30 Member States and maintainsactive relations with 70 other countriesin order to develop democracy and marketeconomies.The OECD is primarily a coordinating andopinion-forming organisation which providesa forum for the exchange of information andexperience, as well as a centre for researchinto the economies of member countries. It isalso a primary forum for the discussion ofeconomic and social issues and is frequentlyconsulted by the UN, the WTO and G-7.Poland signed a draft agreement with OECDin June 1991 and officially became a memberof the Organisation on 22nd November 1996.Membership of the OECD makes it easier forPoland to gain access to preferential creditfacilities granted by international financialinstitutions. Poland also has unrestrictedaccess to information in the Organisation’snumerous databases, including publicationsand statistics. The OECD online database provideslarge volumes of information, togetherwith economic analyses on each membercountry, which are available to the public.Poland can also benefit from the joint programscreated by the OECD in cooperationwith such organisations as Sigma, which offer130

support in improving governance and managementin Central and Eastern Europeancountries, financed by the European Union. Inaddition, as a member of OECD, Poland takespart in the Environmental Action Program forCentral and Eastern Europe (EAP).12.4.2. WTOThe World Trade Organisation was establishedon 1st January 1995. It is an internationalorganisation which in July 2008 associated153 countries. The main aim of the WTOis to serve as a guardian of treaties and tradeagreements, monitoring national trade policiesand settling disputes among members.The WTO also offers aid to developing countries.The success of the WTO is reflected in thesecurity of trade and high quality of productsin the Member States. Customers are offereda wide range of quality products, which aretested by international centres, and exportershave the assurance that the markets of themember countries will remain open to them.By reducing tariffs, the WTO has eliminatedmany barriers between countries and people.The rules of the WTO (contained in agreementsand contracts) are the result of negotiationsamong the WTO members. The coredocument is the General Agreement onTariffs and Trade (GATT). GATT consists of 60agreements which were signed individually inspecific areas by each Member State.12.4.3. NATOThe North Atlantic Treaty Organization(NATO), a political and military organisation,emerged as a result of the signature of theTreaty of Washington on 4th April 1949. Thesignatory countries were: USA, Canada,Belgium, Denmark, France, Holland, Iceland,Luxemburg, Norway, Portugal, the UnitedKingdom and Italy. The Treaty of Washingtonbrought a common security system intobeing, which was based on partnershipbetween the 12 signatory countries. NATOcurrently consists of 26 countries. The NorthAtlantic Alliance was founded under a Treatybetween the Member States, which wasentered into freely by each of them after apublic debate and the due parliamentaryprocess. The Treaty upholds their individualrights, as well as their international obligations,in accordance with the Charter of theUnited Nations. It obligates each MemberState to share the risks and responsibilities, aswell as the benefits, of collective security andrequires that each of them undertakes not toenter into any other international commitmentthat might conflict with the Treaty.More than half a century has elapsed sincethe Alliance was established. For much of thistime, NATO’s central focus to provide for theimmediate defence and security of itsMember States. The Czech Republic, Hungaryand Poland are the first countries representingthe “old” Warsaw Pact, which joinedNATO on 12th March 1999. Bulgaria, Estonia,Latvia, Lithuania, Romania, Slovakia andSlovenia followed in 2004.How to do Business. Investors’ Guide - Poland Poland in Brief 131

V. Sources of information1. Polish Information and ForeignInvestment Agency (PAIiIZ)Foreign investors considering investing inPoland may take advantage of the assistanceof the Polish Information and ForeignInvestment Agency (“PAIiIZ”).PAIiIZ, a specialised investment agency, wasestablished in 2003 as a result of a merger ofthe Polish Agency for Foreign Investment andthe Polish Information Agency. PAIiIZ’s activitiesinclude: increasing the inflow of foreigndirect investments to Poland, encouraging foreignbusinesses to invest in Poland, advisoryservices at each stage of the investmentprocess, assistance in the interpretation of legalprocedures and regulations, the provision offull access to the economic and legal investmentenvironment, as well as assistance in theselection of attractive investment locations.PAIiIZ offers investors the services of its bestspecialists in investor support, regional cooperationand economic promotion. TheForeign Investment Department providesdirect assistance to businesses interested ininvesting in Poland. Project managers assistinvestors at each stage of the investmentplanning and execution process. The professionalassistance enables effective and fastimplementation of business strategies.The range of the Agency’s services includes:• the search for appropriate locations tomeet the criteria specified by investors;• the provision of the required statistical, economicand legal data for preparing feasibilitystudies and making final investment decisions;• the organisation of visits in Poland (assistingvisitors);• the preparation of individual investmentpackages in cooperation with the EuropeanCommission;• post-investment assistance (trouble-shootingat further stages of business activity inPoland).PAIiIZ operates in accordance with the “thirdgeneration agency” regulations, according tothe operational strategy adopted in 2008.The main aim of the model is to reachinvestors at the sector level in order to obtainmore information on various sector investmentneeds and to meet their specificrequirements. A detailed analysis of investmentstrategies of leading businesses in agiven branch enables the design of investmentproposals with the purpose of satisfyinginvestor needs.The sector strategy adopted by the agencyhas enabled the selection of strategic sectorsconsidered most important in the developmentof Polish economy. Investors representingsuch sectors are a priority to PAIiIZ.Strategic sectors have been selected using thefollowing criteria:1. increasing value added created by a givensector and comprising:• the introduction of advanced technologies;• manufacturing of modern and competitiveproducts;• the introduction of advanced services;• the development of modern infrastructure;2. job creation;3. involvement of local suppliers;4. increasing Poland’s export potential.Using the above preferences, the followingsections were distinguished within theForeign Investment Department:Manufacturing, Shared Services, Centres/BPO,Public Aid and Far East section. The agency’slegal section supports the department andtakes part in investment projects.The Economic Information Department isresponsible for developing and running theeconomic information system within theagency. The Department is also responsiblefor preparing economic and sector analysesfor internal use and according to the needs132

of investors. Databases of foreign companies,as well as of Polish suppliers, are also preparedby the department’s team.The main tasks of the Regional CooperationDepartment include the coordination ofcooperation between foreign investors andthe authorities of the region in which theinvestment is planned and support to localauthorities in the professional preparation ofinvestment proposals.The goal of the Regional CooperationDepartment is also to maintain and developfurther an effective nationwide network ofInvestor Assistance Centres (Centrum Obs∏ugiInwestorów, COI) – partners of PAIiIZ supportingthe investment process at a regional level.The network of COIs is being built in cooperationwith the authorities of the individualregions. The centres operate as “one-stopshops”. COIs offer investors comprehensiveservices at voivodeship level, including postinvestmentassistance. They provide continuouslyupdated investment proposal packages,as well as macroeconomic and legal informationand liaise between investors and localauthorities.comprehensive information on Poland, itsinvestment climate, economic and legal environmentand the procedures required tocomplete the investment. PAIiIZ offers accessto an investment locations database. Thisinformation is available through:www.paiz.gov.pl, in books and multimediapublications, such as “How To Do Business –Investors’ Guide Poland”, “Why Poland”,”Poland in Brief”, “Poland – what makes it aBusiness Hot Spot?”, The EconomicPromotion Department also organises investmentconferences and seminars, in Poland,visits for foreign journalists dealing with economicissues and, in cooperation, with thePolish media, provides information to themedia on the achievements of foreign,investors in Poland, thereby positively stimulatingsocial acceptance of foreign investments.The Regional Investor Assistance Centres havegradually been taking over the comprehensivesupport of smaller investment projectsfrom PAIiIZ, guiding investors through therespective procedures and offering themadvice.The Economic Promotion Department propagatesabroad the benefits of investing inPoland. The Department’s employees presentthe advantages of investing in Poland at fairsand exhibitions, participate in internationalconferences and seminars and organizeinvestment missions to strategic countries inorder to attract foreign direct investments toPoland.Foreign businesses interested in investing inPoland are offered an extensive range ofPolish Information and Foreign InvestmentAgency (PAIiIZ)(Polska Agencja Informacji i InwestycjiZagranicznych S.A.)ul. Bagatela 1200-585 Warsawtel. +48 22 334 98 00fax +48 22 334 99 99www.paiz.gov.plemail: post@paiz.gov.plHow to do Business. Investors’ Guide - Poland Sources of Information 133

2. Regional Investor AssistanceCentres – PAIiIZ’s partnersDolnoÊlàskie VoivodeshipWroc∏aw Regional Development AgencyInvestor Assistance Centreul. Kochanowskiego 1751-602 Wroc∏awContact persons:Ma∏gorzata Gajowskaemail: mgw@warr.plRobert Âliwiƒskiemail: rsl@warr.pltel. +48 71 348 30 18 ext. 104fax +48 71 348 30 17mobile: +48 605 232 033www.warr.plKujawsko-Pomorskie VoivodeshipKujawsko- Pomerania Voivodeship Marshal’sOfficeInvestor Assistance Centrepl. Teatralny 287-100 ToruƒContact persons:Cezar Buczyƒskiemail:c.buczynski@kujawsko-Pomerania.pltel. +48 56 621 84 87fax +48 56 621 83 02Anna Kowalskaemail:anna.kowalska@kujawsko-Pomerania.plPawe∏ Malagowskiemail:p.malagowski@kujawsko-Pomerania.pltel. +48 56 621 83 97www.kujawsko-Pomerania.pl/coi/Lubelskie VoivodeshipLubelskie Voivodeship Marshal’s OfficeInvestor Assistance Centreul. Graniczna 420-010 LublinContact persons:Kornelia Kaniaemail: kornelia.kania@lubelskie.plTadeusz Biskupskiemail: tadeusz.biskupski@lubelskie.plemail: coi@lubelskie.pltel. +48 81 537 16 20fax +48 81 537 16 37http://www.coi.lubelskie.plLubuskie VoivodeshipRegional Development Agency in ZielonaGóraInvestor Assistance Centre(within the Regional Development Agency)ul. Chopina 1465-001 Zielona GóraContact persons:Marzena Kubiakemail: marzena.kubiak@coi-lubuskie.pltel. +48 68 329 78 38Daniel Chaleckiemail: daniel.chalecki@coi-lubuskie.pltel. +48 68 329 78 39fax +48 68 325 38 88email: agencja@region.zgora.plhttp://www.coi-lubuskie.pl¸ódzkie Voivodeship¸ódzkie Voivodeship Marshal’s OfficePromotion and Foreign CooperationDepartmentInvestor Assistance CentreAl. Pi∏sudskiego 890-051 ¸ódêContact persons:Janusz Baranowskiemail: przeds@lodzkie.pltel. +48 42 663 35 77Jacek Wójcikemail: jacek.wojcik@lodzkie.pltel. +48 42 663 35 76mobile: +48 517 725 599Micha∏ Tomczykemail: michal.tomczyk@lodzkie.pltel. +48 42 663 35 77mobile: +48 665 123 888134

Secretariat:tel. +48 42 663 30 57http://www.lodzkie.pl, www.rce.lodzkie.plMa∏opolskie VoivodeshipLesser Poland Regional Development AgencyInvestor Assistance Centreul. Kordylewskiego 1131-542 KrakówContact persons:Jacek Adamczykemail: jacek.adamczyk@marr.pltel. +48 12 617 66 56Marek Martynowiczemail: marek.martynowicz@marr.plDawid Jarosz - directoremail: dawid.jarosz@marr.pltel. +48 12 617 66 53mobile: +48 602 396 153fax +48 12 617 66 66email: rcoi@marr.plhttp://www.marr.plMazowieckie VoivodeshipMazovia Development AgencyInvestor Assistance CentreUl. Smolna 1200-375 WarsawContact persons:Joanna J´drzejewska-Debortolitel. +48 22 597 97 71email: j.jedrzejewska@mazovia.plJustyna Mroczkowskaemail: j.mroczkowska@armsa.plEwelina G´bkaemail: e.gebka@armsa.plTomasz Szczypiƒskiemail: t.szczypinski@armsa.pltel. +48 22 597 97 70fax +48 22 843 83 31www.armsa.plOpolskie VoivodeshipOpole Centre Of Economy DevelopmentInvestor Assistance Centreul. Spychalskiego 1A45-716 OpoleContact persons:Arkadiusz WiÊniewskiemail: a.wisniewski@ocrg.opolskie.plMagdalena Karoƒskaemail: m.karonska@ocrg.opolskie.plPiotr Regeƒczukemail: p.regenczuk@ocrg.opolskie.plemail: coi@ocrg.opolskie.pltel. +48 77 403 36 01fax +48 77 403 36 09http://www.coi.opolskie.plhttp://www.ocrg.opolskie.plhttp://www.opolskie.plPodkarpackie VoivodeshipRzeszów Regional Development AgencyInvestor Assistance CentreRynek 535-064 RzeszówContact persons:Piotr Drausemail: dadamski@rarr.rzeszow.plKatarzyna Saneckaemail: ksanecka@rarr.rzeszow.plMa∏gorzata Patro - Zagajaemail: mzagaja@rarr.rzeszow.plAgata Gutowskaemail: agutowska@rarr.rzeszow.plMa∏gorzata Zajchowskaemail: mzajchowska@rarr.rzeszow.pltel./fax +48 17 852 43 76, 17 852 43 74email: coi@rarr.rzeszow.plhttp://www.coi.rzeszow.plHow to do Business. Investors’ Guide - Poland Sources of Information 135

Podlaskie VoivodeshipPodlaskie Voivodeship Marshal’s OfficeInvestor Assistance Centreul. Kard. St. Wyszyƒskiego 115-888 Bia∏ystokContact persons:Borys Dàbrowskiemail: borys.dabrowski@wrotapodlasia.plAdam Borawskiemail: adam.borawski@wrotapodlasia.plJolanta Miczejkoemail: jolanta.miczejko@wrotapodlasia.plMagdalena Kosobudzkaemail:magdalena.kosobudzka@wrotapodlasia.pltel. +48 85 749 74 95fax +48 85 654 82 01http://www.wrotapodlasia.plPomorskie VoivodeshipPomerania Development AgencyRegional Investor Assistance Centreul. Piwna 36/3980-831 GdaƒskContact persons:Barbara Merchel - Czech, Manager of theRegional Investor Assistance Centreemail: barbara.merchel@arp.gda.pltel. +48 58 323 31 36Piotr Skibaemail: piotr.skiba@arp.gda.pltel. +48 58 323 32 63¸ukasz Michalskiemail: lukasz.michalski@arp.gda.pltel. +48 58 323 32 63Anna Dàbrowskaemail: anna.dabrowska@arp.gda.pltel. +48 58 323 32 42Marcin Piàtkowskiemail: marcin.piatkowski@arp.gda.pltel. +48 58 323 32 56fax +48 58 301 13 41, 58 323 32 78www.coi.arp.gda.plÂlàskie VoivodeshipSilesian Voivodeship Marshal’s OfficeInvestor Assistance Centreul. Ligonia 4640-037 KatowiceContact persons:Aleksandra Samira - Gajnyemail: asamira@silesia-region.plBogus∏awa Kruczekemail: bkruczek@silesia-region.plMarek Franczakemail: mfranczak@silesia-region.pltel. +48 32 20 78 477fax +48 32 256 32 44http://www.invest.visitsilesia.euÂwi´tokrzyskie VoivodeshipÂwi´tokrzyskie Voivodeship Marshal’s OfficeInvestor Assistance CentreAl. IX Wieków Kielc 3, bud C2, pokój nr 18(parter)25–516 KielceContact persons:Anna Chlewicka – Zwierzykemail: anna.chlewicka@sejmik.kielce.plPiotr ˚o∏àdekemail: piotr.zoladek@sejmik.kielce.pltel. +48 41 342 19 55fax +48 41 342 10 38email: coi@sejmik.kielce.plÂwi´tokrzyskie VoivodeshipKielce Town HallInvestor Assistance CentreRynek 125-303 KielceContact persons:Anita Pajàkemail: anita.pajak@um.kielce.pltel. +48 41 367 60 18fax +48 41 367 61 42tel. +48 41 367 63 55fax +48 41 367 61 42http://www.um.kielce.pl136

Warmiƒsko-Mazurskie VoivodeshipWarmia and Mazury Regional DevelopmentAgencyInvestor Assistance CentrePlac Genera∏a Józefa Bema 310-516 OlsztynContact persons:Cezary Stabry∏aemail: c.stabryla@wmarr.olsztyn.plPiotr Jodkoemail: p.jodko@wmarr.olsztyn.plAleksandra Gajewskaemail: a.gajewska@wmarr.olsztyn.pltel. +48 89 521 12 80fax +48 89 521 12 60http://www.wmarr.olsztyn.plWielkopolskie VoivodeshipGreater Poland Association of Gminas andPoviatsInvestor Assistance CentreAl. Niepodleg∏oÊci 16/1861-713 PoznaƒContact persons:¸ukasz Filipiakemail: filipiak@sgipw.wlkp.plTomasz Telesiƒskiemail: telesinski@sgipw.wlkp.plAnna Weso∏owskaemail: wesolowska@sgipw.wklp.pltel. +48 61 854 19 73, 61 854 14 72fax +48 61 851 53 95email: office@sgipw.wlkp.plhttp://www.sgipw.wlkp.plfax +48 61 656 53 66http://www.warp.org.plZachodniopomorskie VoivodeshipWestern Pomerania Voivodeship Marshal’sOfficeInvestor Assistance Centreul. Pi∏sudskiego 40/4270-952 SzczecinContact persons:Magdalena Woêniak - Urbaƒczykemail: m.wozniak@wzp.pltel. +48 91 446 71 56Jolanta Kielmaseemail: j.kielmas@wzp.pltel. +48 91 446 71 03Monika Narewiczemail: m.narewicz@wzp.pltel. +48 91 446 71 02Konrad Kaczmarekemail: k.kaczmarek@wzp.pltel. +48 91 446 71 04Piotr Biernackiemail: p.biernacki@wzp.pltel. +48 91 446 71 77Ma∏gorzata Radomskaemail: m.radomska@wzp.pltel. +48 91 446 71 05email: coi@wzp.pltel./fax +48 91 446 71 02http://www.um-Western Pomerania.plWielkopolska Agency for EnterpriseDevelopmentul. Piekary 1961-823 PoznaƒContact persons:Anna ¸uszczewskaemail: anna.luszczewska@warp.org.plJustyna Urbanowiczemail: justyna.urbanowicz@warp.org.pltel. +48 61 656 35 07, 61 656 35 06HoHow to do Business. Investors’ Guide - Poland Sources of Information 137

VI. AppendicesAppendix 1. Selection of foreign direct investment by countryInvestor name Country Country Activities (class)of registration of origin1 Amcor Ltd Australia Australia Manufacture of articles ofpaper and paperboard2 Erste Bank Austria Austria Activities auxiliary to financialintermediation, except insuranceand pension funding3 KBC Bank N.V. Belgium Belgium Insurance and pension funding,except compulsory social security;Monetary intermediation4 Bombardier Transportation Canada Canada Manufacture of other transportequipment n.e.c.5 Pratt & Whitney Canada Canada Canada Manufacture of aircraft andspacecraft6 Sino Frontier Properties Ltd. China China Building of complete constructionsor parts thereof;civil engineering7 Carlsberg Breweries A/S Denmark Denmark Manufacture of beverages8 Statoil Denmark Norway Retail sale of automotive fuel9 Stora Enso Oyj Finland Finland Manufacture of pulp, paperand paperboard; manufactureof articles of paper andpaperboard10 France Telecom France France Telecommunications11 Saint-Gobain France France Manufacture of other nonmetallicmineral products;manufacture of glass andglass products12 Sanofi-Synthelabo S.A. France France Manufacture of pharmaceuticals,medicinal chemicals andbotanical products13 Thomson Tubes France India Manufacture of televisionand Displays S.A.and radio receivers, sound orvideo recording or reproducingapparatus and associatedgoods138

Investor name Country Country Activities (class)of registration of origin14 Vivendi Universal France France Telecommunications; Legal,accounting, book-keepingand auditing activities; taxconsultancy; market researchand public opinion polling;business and managementconsultancy; holdings; Sale ofmotor vehicles15 BASF AG Germany Germany Manufacture of pharmaceuticals,medicinal chemicals andbotanical products16 Bayer AG Germany Germany Manufacture of chemicalsand chemical products17 British American Germany UK/USA Manufacture of tobaccoTobacco GmbHproducts18 DBT GmbH Germany Germany Manufacture of other specialpurpose machinery19 DeTeMobil Germany Germany Telecommunications20 Deutsche Bank AG Germany Germany Monetary intermediation21 IBM Central Holding GmbH Germany USA Manufacture of officemachinery and computers22 Metro Group AG Germany Germany Wholesale trade and commissiontrade, except of motorvehicles and motorcycles;retail trade, except of motorvehicles and motorcycles;repair of personal and householdgoods23 Robert Bosch GmbH Germany Germany Manufacture of parts andaccessories for motor vehiclesand their engines24 Volkswagen AG Germany Germany Insurance and pension funding,except compulsory socialsecurity; other financial intermediation;monetary intermediation;manufacture ofparts and accessories formotor vehicles and theirengines25 European Bank International International Monetary intermediationfor Reconstructionand Development (EBRD)How to do Business. Investors’ Guide - Poland Appendices 139

Investor name Country Country Activities (class)of registration of origin26 Fiat Italy Italy Insurance and pension funding,except compulsory socialsecurity; other financial intermediation;monetary intermediation;manufacture ofmotor vehicles27 Indesit Company Italy Italy Manufacture of domesticappliances n.e.c.28 Whirlpool Europe Srl Italy USA Manufacture of domesticappliances n.e.c.29 Bridgestone Corporation Japan Japan Manufacture of rubber products30 DENSO Japan Japan Manufacture of parts andaccessories for motor vehiclesand their engines31 Sharp Corporation Japan Japan Manufacture of televisionand radio receivers, sound orvideo recording or reproducingapparatus and associatedgoods32 Toyota Boshoku Japan Japan Manufacture of parts andaccessories for motor vehiclesand their engines33 Terravita Holding Lichtenstein Lichtenstein Manufacture of other foodEstablishmentproducts34 Arcelor Luxembourg Luxembourg Manufacture of basic ironand steel and of ferro-alloys35 Cemex Mexico Mexico Manufacture of cement, limeand plaster36 Hydro Central Europe B.V Norway Norway Manufacture of basic preciousand non-ferrous metals;wholesale of non-agriculturalintermediate products, wasteand scrap37 Jerónimo Martins Holding Portugal Portugal Retail sale in non-specializedstores38 OAO Gazprom Russia Russia Transport via pipelines140

Investor name Country Country Activities (class)of registration of origin39 Daewoo South Korea South Korea Insurance and pension funding,Electronics CO Ltdexcept compulsory social security;Manufacture of television and radioreceivers, sound or video recordingor reproducing apparatus and associatedgoods40 LG CHEM LTD South Korea South Korea Manufacture of electronic valves andtubes and other electronic components41 LG Electronics Inc South Korea South Korea Other retail sale of new goods in specializedstores; Manufacture of radio,television and communication equipmentand apparatus42 LG INNOTEK CO LTD South Korea South Korea Manufacture of electronic valves andtubes and other electronic components43 LG International South Korea South Korea Manufacture of basic chemicals44 LG PHILIPS South Korea South Korea Retail sale of electrical householdLCD CO LTDappliances and radio and televisiongoods45 Banco Santander Spain Spain Post and courier activitiesCentral Hispano46 Fagor Spain Spain Manufacture of domestic appliancesElectrodomesticosn.e.c.47 Electrolux AB Sweden Sweden Manufacture of domestic appliancesn.e.c.48 IKEA Sweden Sweden Other retail sale of new goods in specializedstores49 Skanska Kraft AB Sweden Sweden Building of complete constructions orparts thereof; civil engineering50 Vattenfall AB Sweden Sweden Production and distribution of electricity;Steam and hot water supply51 Nestlé S.A. Switzerland Switzerland Manufacture of other food products;Manufacture of beverages52 Basell Europe The Netherlands The Netherlands Manufacture of basic chemicalsHoldings NVHow to do Business. Investors’ Guide - Poland Appendices 141

Investor name Country Country Activities (class)of registration of origin53 BP The Netherlands United Kingdom Retail sale of automotive fuelInternational B.V.54 GTC The Netherlands The Netherlands Real estate activities with ownInternationalproperty55 ING Group NV The Netherlands The Netherlands Monetary intermediation;Insurance and pension funding,except compulsory social security56 LG PHILIPS. The Netherlands The Netherlands Manufacture of non-refractoryDISPLAYSceramic goods other than forHOLDING B.Vconstruction purposes; manufactureof refractory ceramicproducts57 Shell Gas The Netherlands The Netherlands Wholesale of non-agricultural(LPG) Holdingsintermediate products, wasteand scrap58 DONBAS ISD Ukraine Ukraine Manufacture of basic iron andsteel and of ferro-alloys59 Cadbury UK UK Manufacture of other foodproducts60 Gerber Foods UK UK Processing and preserving ofHoldings Ltdfruit and vegetables61 Glaxo SmithKline UK UK Manufacture of pharmaceuticals,medicinal chemicals andbotanical products62 NSK Europe UK Japan Manufacture of machinery forLimitedthe production and use ofmechanical power, except aircraft,vehicle and cycle engines63 Panasonic UK Japan Manufacture of accumulators,Europe LTDprimary cells and primary batteries64 Sumitomo Electric UK Japan Manufacture of electricalWiring Systemequipment n.e.c.Europe Ltd.65 Citigroup USA USA Monetary intermediation;other financial intermediation66 Colgate-Palmolive USA USA Manufacture of soap andAmerica INCdetergents, cleaning and polishingpreparations, perfumesand toilet preparations67 Delphi AutomotiveUSA USA Manufacture of parts andSystemsaccessories for motor vehiclesand their engines142

Investor name Country Country Activities (class)of registration of origin68 General Electric USA USA Monetary intermediation;Corporation (GE)manufacture of instruments andappliances for measuring, checking,testing, navigating andother purposes, except industrialprocess control equipment69 General Motors USA USA Manufacture of motor vehiclesCorporation70 Gillette USA USA Miscellaneous manufacturingn.e.c.71 Intel Europe Inc. USA USA Computer and related activities72 Motorola Inc. USA USA Manufacture of television andradio transmitters and apparatusfor line telephony and linetelegraphy73 TRW AUTO. USA USA Manufacture of parts andHOLDINGS INCaccessories for motor vehiclesand their enginesHow to do Business. Investors’ Guide - Poland Appendices 143

Appendix 2. International schoolsin PolandWroc∏aw (Lower Silesia)Wroc∏aw International Schoolul. Zieliƒskiego 38, 53-534 Wroc∏awtel. +48 71 782 26 26,email: wis@fem.org.plInternational School Ekolaul. Zieliƒskiego 56, 53-534 Wroc∏awtel./fax +48 71 361 43 70,email: ise@ekola.edu.plThe Polish German Primary School – CeKiRONul. Wejherowska 28, 54-239 Wroc∏awtel. +48 71 798 26 00, fax +48 71 798 26 01email: diakonia@diakonia.plKatowice (Upper Silesia)Complex of Silesian International Schoolsul. Wincentego Witosa 18, 40-832 Katowicetel. +48 32 254 91 94email: info@international.edu.pl¸ódêBritish International Schoolul. Sterlinga 26, 90-212 ¸ódêtel. +48 42 631 59 23, fax +48 42 631 59 23email: ipsit@ipt.plKraków (Lesser Poland)American International School of CracowLusina ul. Âw. Floriana 57, 30-698 Krakówtel./fax (8 am - 4 pm), tel. +48 12 270 14 09email: director@iskonline.orgBritish International School of Cracowul. Smoleƒsk 25, 31-108 Krakówtel. +48 12 292 64 78email: school@bisc.krakow.plWarsaw (Mazovia)International American School of Warsawul. Dembego 18, 02-796 Warsawtel. +48 22 649 14 40, 22 649 14 42fax +48 22 649 14 45Meridian International SchoolsPrimary Schoolul. Wawelska 66/74, 02-034 Warsawtel. +48 22 822 15 75, 22 822 16 07fax +48 22 822 20 13email: infoprimary@meridian.edu.plMiddle & High Schoolul. Radarowa 6, 02-137, Warsaw - W∏ochytel. +48 22 868 25 03, 22 868 25 06fax +48 22 868 25 09email: infomiddle@meridian.edu.pl,infohigh@meridian.edu.plThe British Schoolul. Limanowskiego 15,02-943 Warsawtel. +48 22 842 32 81fax +48 22 842 32 65email: british@thebritishschool.plLycee Francais de Varsovieul. Walecznych 4/6, 03-916 Warsawtel. +48 22 616 54 00fax +48 22 616 53 99email: info@lfv.plCanadian Primary School of Warsawul. Be∏ska 7, 02 - 638 Warsawtel. +48 22 646 92 89tel./fax +48 22 646 92 88International European School – Warsawul. Wiertnicza 75, 02-952 Warsawtel/fax +48 22 842 44 48email: ies@ies-warsaw.plEuropean Bilingual Preschoolul. Ch∏apowskiego 2, 02-787 Warsawtel./fax +48 22 644 15 14144

International Preschoolul. Zawrat 14, 02-669 Warsawtel./fax +48 22 843 09 64email: preschool@preschool.pl“In the hundred mile long forest” (W stumilowymlesie) day care centreul. Naprze∏aj 5a, 03-092 Warsawtel. +48 22 676 68 91email: kontakt@wstumilowymlesie.plWorld Hill Academyul. Okr´˝na 83, 02-933 Warsawtel. +48 22 858 31 91Ecole Antoine de Saint-Exuperyul. Nobla 16, 03-930 Warsawtel. +48 22 616-14-99email: info@saint-exupery.plHappy Montessori House - International Preschoolul. Rumiana 14, 02-956 Warsawtel. +48 22 427 37 67mobile +48 697 06 05 04email: hmh@hmh.com.pl“La Fontaine” French-Polish Kindergarten andPrimary Schoolul. Rolna 177, 02-729 Warsawtel. +48 22 843 42 41mobile +48 502 062 104, +48 602 221 521fax +48 22 843 42 41Gdaƒsk (Pomerania)High School No. 3ul. Topolowa 7, 80-255 Gdaƒsktel./fax 341-06-71email: sekretariat@topolowka.plBritish International Schoolul. Zielony Trójkàt 1, 80-869 Gdaƒsktel. +48 583 422 600,fax +48 583 422 601email: director@bis-gdansk.plGdynia (Pomerania)High School No. 3ul. Legionów 27, 81-405 Gdyniatel./fax +48 58 622 18 33email: lo3@lo3.gdynia.plThe American Elementary and Middle Schoolul. ¸owicka 41, 81-504 Gdyniatel. +048 58 664 69 71fax +048 58 664 74 14Warmia and MazuryThere are classes with foreign language studiesin certain schools (German, English,Ukrainian).Poznaƒ (Greater Poland)Poznan British International Schoolul. Darzyborska 1A, 61-303 Poznaƒtel. +48 61 8709 730fax +48 61 8768 799mobile +48 509 151 501email: office@pbis.edu.plInternational School of Poznaƒul. Taczanowskiego 18, 60-147 Poznaƒtel. +48 61 646 37 60-62fax +48 61 646 37 65email: info@isop.plThe First Private High School (I PrywatneLiceum Ogólnokszta∏càce)ul. Dàbrowskiego 262/280, 60-406 Poznaƒtel. +48 61 847 74 35tel/fax +48 61 847 74 56email: iplo@amu.edu.plSzczecin (Western Pomerania)Szczecin International Primary Schoolul. Mickiewicza 49, 70-385 Szczecintel. +48 91 424 03 00fax +48 91 424 03 01email: sis@sis.info.plHow to do Business. Investors’ Guide - Poland Appendices 145

About DeloitteDeloitte is one of the largest professional services companies in Central Europe. It providescomplex multidisciplinary services in auditing, tax, enterprise risk services and financial advisory,as well as management consulting services including strategy development, informationtechnology, human capital and actuarial services.With vast expertise in all industries, access to the best resources, methodologies and tools, aswell as local and international specialists, we can provide an unmatched range of services tailoredto the specific needs of every sector or company, no matter how complex the issue.We currently employ a staff of over 4000 in the 17 countries of Central Europe, with over 1100specialists in Poland alone, including 36 partners with comprehensive sector knowledge andexperience.In view of the globalisation of the economy, in order to meet the expectations of our clients,we offer comprehensive services, apply uniform standards and methodologies and ensure consistentproduct quality, regardless of the location and language of our operations. Our clientsare Polish enterprises, including listed companies, banks, government agencies and foreigncompanies doing business in Poland.Apart from the headquarters in Warsaw, we operate through seven branches – in Gdaƒsk,Katowice, Kraków, ¸ódê, Poznaƒ, Szczecin and Wroc∏aw.For further information, please refer to our website: www.deloitte.com/plDeloitteul. Pi´kna 1800-549 Warsaw, Polandtel.: +48 22 511 08 11fax: +48 22 511 08 13www.deloitte.com/pl146

About Wardynski & PartnersWardyƒski & Partners is one of the largest independent Polish law firms and has been in practicesince the 1980s. Over the years, the firm has grown organically and through a number ofmergers. The combined firm now has 21 partners and over a hundred associates.Our lawyers have expertise and experience in providing comprehensive legal advice to internationaland domestic clients in all aspects of business law.Wardyƒski & Partners is recognised, both locally and internationally, as the market leader in anumber of areas of practice, such as corporate and commercial law, project finance, M&A, disputeresolution and litigation, real estate & construction, infrastructure, banking and finance,intellectual property and trademarks and taxation. The firm is regularly ranked highly by independentPolish and international business and mainstream media.The firm is based in Warsaw with regional offices in Poznaƒ and Wroc∏aw, and has had officein Brussels since October 2001.Wardyƒski & Partners has a strong international presence as a result of its membership of anumber of international legal networks. These are close cross-border collaborations on a nonexclusivebasis between law firms around the world. These peer contacts have proved to be oftremendous practical benefit to both domestic and international clients.Wardyƒski & PartnersWARSAWAleje Ujazdowskie 1000-478 Warsawtel. +48 22 437 82 00, 22 537 82 00,fax +48 22 437 82 01, 22 537 82 01e-mail: warsaw@wardynski.com.plwww.wardynski.com.plwww.disputes.wardynski.com.plPOZNA¡WROC¸AWul. Marceliƒska 90 ul. Odrzaƒska 6/460-324 Poznaƒ 50-113 Wroc∏awtel. +48 61 860 22 60 tel. +48 608 200 704fax +48 61 860 22 61e-mail: wroclaw@wardynski.com.ple-mail: poznan@wardynski.com.plBRUSSELSAvenue d’Auderghem 36B-1040 Brussels, Belgiumtel. +32 2 230 3215fax +32 2 230 3347e-mail: brussels@wardynski.com.plHow to do Business. Investors’ Guide - Poland Appendices 147

© Copyright by PAIiIZ and Deloitte Advisory Sp. z o.o.Polish Information and Foreign Investment Agency (PAIiIZ)(Polska Agencja Informacji i Inwestycji Zagranicznych SA)ul. Bagatela 1200-585 Warsawtel.: +48 22 334 98 00fax: +48 22 334 99 99www.paiz.gov.ple-mail: post@paiz.gov.plDeloitteul. Pi´kna 1800-549 Warsaw, Polandtel.: +48 22 511 08 11fax: +48 22 511 08 13www.deloitte.com/plEditor of the edition: Stuart DowellGraphic design by: Darek BochniakISBN: 83-60049-48-3148

The Polish Information and Foreign Investment Agency (PAIiIZ) has been serving investors for 14 years. Its mission isto increase Foreign Direct Investment (FDI) by encouraging international companies to invest in Poland. We guideinvestors through all the necessary administrative and legal procedures along the way to setting up their business.PAIiIZ offers investors:- quick access to comprehensive information about the economic and legal environment,- assistance in finding appropriate partners and investment locations,- support at every phase of the investment process.Another one of PAIiIZ’s roles is the creation of a positive image of Poland and the promotion of its products andservices abroad by organizing conferences, visits for foreign journalists and trade missions.PAIiIZ also promotes Poland’s regions: we have established a network of Regional Investor Centres throughoutPoland, whose goal is to improve the quality of regional services for investors and to provide access to the most upto-dateinformation, such as the latest investment offers and regional macroeconomic data. These specializedoffices are staffed by PAIiIZ trained employees and financed from local funds.Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, eachof which is a legally separate and independent entity. Please see www.deloitte.com/pl/about for a detailed descriptionof the legal structure of Deloitte Touche Tohmatsu and its Member Firms.© 2008 PAIiIZ© 2008 Deloitte Advisory Sp. z o.o.