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, Warsaw tel , fax © 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 Law Corporate Law

territory km2 population38,1 millions unemployment rate8,9 % (September 2008) GDP growth rate6,5% in 2007 avarage monthly pay in sector of business entities 3172 PLN = 857 Euro (September 2008) inflation rate4,4 % (Septemeber 2008) number of students1,9 millions (November 2007) currencyPLN, exchange rate: 1 USD = 2,9 PLN 1 Euro = 3,7 PLN (October 2008) BASIC INFORMATION ABOUT POLAND

EU2004 WTO1995 OECD1996 IMF1986 UN1945 NATO1999 OSCE1973 Council of Europe1991 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 GENERALPROFESSIONALLIMITED LIMITED BY SHARES COMPANIES LIMITED LIABILITY COMPANY JOINT STOCK COMPANY COOPERATIVES FOUNDATIONS OTHERS BUSINESS ENTITIES IN POLAND

Limited Liability CompanyJoint Stock Company Public or privatealways a private companymay be a private or public company Number of founders1 or more (sole trader can not be a LLC having only one shareholder) 1 or more Legal personalityacquired after entry into register of business entities Minimum share capital PLN – share capital 50 PLN – nominal value of one share PLN – share capital 0.01 PLN – nominal value of one share/stock Supplementary or reserve capital no obligation to create anyobligation 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

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 extraction  The production and marketing of explosives, weapons and ammunition  The production, transformation, storage, transmission, distribution and marketing of fuels and energy  The provisions of protection and security for individuals and property  The broadcasting of radio and television programs  Air 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 issue an 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 defined in 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 more than to speak” Robert Małecki Karniol Małecki & Wspólnicy Law Firm