52ND UIA CONGRESS

Bucharest - Romania October 29-November 2, 2008

FOREIGN INVESTMENT COMMISSION

Date of the session: Thursday, October 30, 2008

FOREIGN INVESTMENT REGULATIONS AND TAX INCENTIVES IN THE EASTERN EUROPEAN COUNTRIES

DOING BUSINESS IN POLAND, LEGAL FRAMEWORK

Robert Małecki Karniol Małecki i Wspólnicy Law Firm,

ul. Świętojerska 5/7, 00-236 Warsaw tel. 48 22 828 14 60, fax 48 22 827 04 63

skm@skm.plrmalecki@skm.pl© UIA 2008

Quotation from the Constitution of the 3rd May 1791, chapter IV.

In order to increase the number of national population in a most efficient manner, the absolute freedom for all is hereby declared, including for those who arrived at our land for the first time and also for those who came back to their home country after a long absence. The said freedom should manifest in the absolute liberty to carry out one’s own industry, to settle, to be employed on the basis of a free agreement. The said freedom should also manifest in the creation a possibility to live at any place, in the city or in the countryside within the Republic of Poland.

Quotation from the Constitution of the 2nd April 1997, chapter I. Article 20

A social market economy, based on the freedom of economic activity, private ownership, and solidarity, dialogue and cooperation between social partners, shall be the basis of the economic system of the Republic of Poland.

Dicere est argentum, tacere aurum

Intellectual an Industrial Property Law Financial Law

Commercial and Civil Law

Press Law and Moral Rights

Labour Law Competition Law

Insurance LawCorporate Law

territory 312 685 km2

population 38,1 millions

unemployment rate 8,9 % (September 2008)

GDP growth rate 6,5% in 2007

avarage monthly pay in sector of business

entities

3172 PLN = 857 Euro

(September 2008)

inflation rate 4,4 % (Septemeber 2008)

number of students 1,9 millions (November 2007)

currency PLN, exchange rate: 1 USD = 2,9 PLN

1 Euro = 3,7 PLN

(October 2008)

BASIC INFORMATION ABOUT POLAND

EU 2004

WTO 1995

OECD 1996

IMF 1986

UN 1945

NATO 1999

OSCE 1973

Council of Europe 1991

POLISH MEMBERSHIP IN INTERNATIONAL ORGANIZATION

The basic Acts regulating business activity in Poland

Constitution of The Republic of Poland of 2nd April 1997

the Act of 2nd July 2004 on Freedom of Business Activity

the Commercial Companies Code of 15th September 2000

the Act on the National Court Register of 20th August 1997

BUSINESS ENTITIES

IN POLAND

SOLE TRADER

PARTNERSHIPS COMPANIESCOOPERATIVESFOUNDATIONS

OTHERS

LIMITED LIABILITY COMPANY

GENERAL PROFESSIONAL LIMITEDLIMITED BY

SHARES

JOINT STOCK

COMPANY

BUSINESS ENTITIES IN POLAND

Limited Liability Company Joint Stock Company

Public or private always a private company may be a private or public company

Number of founders 1 or more (sole trader can not be a LLC having only one shareholder)

1 or more

Legal personality acquired after entry into register of business entities

acquired after entry into register of business entities

Minimum share capital 50.000 PLN – share capital

50 PLN – nominal value of one share

500.000 PLN – share capital

0.01 PLN – nominal value of one share/stock

Supplementary or reserve capital

no obligation to create any obligation to create supplementary capital

Liability of the Management Board

members of the Management Board are liable personally for any breach of civil,criminal,tax law

members of the Management Board are liable personally for any breach of civil,criminal,tax law

PARTNERSHIPS – COMMON CHARACTERISTIC

Lack of legal personality

Subsidiary liability of partners

Lack of compulsory minimum capital (exception – Partnership limited by shares)

Transfer of partners rights

PARTICULAR PARTNERSHIPS

GENERAL – partners are liable for the partnerships obligation personally

PROFESSIONAL – may be created only for those professions listed in CCC or other act e.g. advocates, legal advisers, doctors etc.

LIMITED – liability of at least one partner is the same as in GENERAL one and the liability of at least one other partner is limited up to the amount determined in partnership agreement.

LIMITED BY SHARES – designed for entities which wish to obtain capital by issuing shares

LIMITATIONS ON THE FREEDOM OF BUSINESS ACTIVITY

Concessions – an individual administrative act under which competent body permits the commencement and performance of a business activity in a particular field

Business activities which require concessions (six activities):The exploration for and identification of mineral resources, their extractionThe production and marketing of explosives, weapons and ammunitionThe production, transformation, storage, transmission, distribution and marketing of fuels and energyThe provisions of protection and security for individuals and propertyThe broadcasting of radio and television programsAir transport

Permits – is required for more then 27 areas of business activity

Permit differs from a concession because the competent authority can not refuse to issuean authorization if the applicant meets all the necessary legal requirements

CONDUCT OF BUSINESS ACTIVITY IN POLAND BY FOREIGN BUSINESS ENTITIES

Foreign entities which may start up and carry on their business activity in Poland in all forms available to Polish citizens :

Citizens of the member states of EU and EFTA

Legal persons having their registered offices in EU or EFTA

Organizational units without legal personality but having legal capacity of EU or EFTA

Citizens of other countries than described above who meet certain requirements definedin Act on Freedom of Business Activity (e.g. permission for settlement, refugee status, etc.)

CONDUCT OF BUSINESS ACTIVITY IN POLAND BY FOREIGN BUSINESS ENTITIES

Other foreign entities may carry on or start up their business activity in Poland only in form of:

Limited partnership

Partnership limited by shares

Limited liability company

Joint Stock Company

unless any international agreement provides otherwise

AQUISITION OF REAL ESTATES BY FOREIGNERS

As a general rule such acquisition requires obtaining an authorization of Minister of Internal Affairs and is subject to the Minister of National Defense having no objections thereto.

Such authorization applies to:

(1) natural persons not having Polish nationality(2) legal persons not having their registered office in Poland (3) partnerships of persons indicated in point (1) and (2) having their registered office

outside Poland and established under the laws of a foreign country(4) legal persons and commercial partnerships with their registered office in Poland, controlled

directly or indirectly by foreigners described in points (1), (2) and (3)

However foreigners being citizens or business entities of the European Economic Area member countries or Swiss Confederation do not need authorization for acquiring real estates in Poland except agricultural land dedicated for agricultural use during transitory term.

INVESTMENT INCENTIVES IN POLAND

Special Economic Zones

Investment incentives in communes

Availability of funding through EU structural funds

Industrial and Technological Parks

INVESTMENT INCENTIVES IN SPECIAL ECONOMIC ZONES (SEZ)

SEZ – non residential part of Poland within which a business activity on preferential conditions may be conducted

Investment incentives:

Exemption from PIT or CIT, on conditions determined in the PIT and CIT Act

Ability to benefit from using an managing the assets provided within the area of SEZ

Promotional activities concerning initiating and running a business activity performed by the administrator of SEZ

Ability to manage the production devices, equipment and assets in manner facilitating the conduct of business activity within SEZ

Why to invest in Poland?

At least 8 reasons ……………

Strong economy

Constant economic growth

High educated employees

Strategic localization

EU funds

Investment incentives

Large domestic market

Beautiful country

„The nature gave us a pair of eyes, pair of ears but only one tongue. All to observe and listen morethan to speak”

Robert MałeckiKarniol Małecki & Wspólnicy Law Firm