DOING BUSINESS IN POLAND - WEBINAR

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DOING BUSINESS IN POLAND - WEBINAR Moderator: Maciej Jamka, Administrative Partner, Warsaw Speakers: Dominika Mizielińska, Corporate, Of Counsel Lech Najbauer, Antitrust, Competition & Trade

1 DOING BUSINESS IN POLAND - WEBINAR Moderator: Maciej Jamka, Administrative Partner, Warsaw Speakers: Dominika Mizielińska, Corporate, Of Counsel Lech Najbauer, Antitrust, Competition & Trade Regulation, Counsel Patrycja Zawirska, Labor, Employment & Workplace Safety, Of Counsel Oskar Tułodziecki, Intellectual Property, Partner Halina Więckowska, Real Estate, Partner Piotr Augustyniak, Tax, Partner February 2015 Copyright 2015 by K&L Gates LLP. All rights reserved.

SPEAKERS Maciej Jamka Advocate, Administrative

com Dominika Mizielińska Legal Advisor, Of Counsel,

Competition T +48.22.653.4216 lech.najbauer@klgates.

com Oskar Tułodziecki Legal Advisor, Partner,

2 SPEAKERS Maciej Jamka Advocate, Administrative Partner T maciej.jamka@klgates.com Dominika Mizielińska Legal Advisor, Of Counsel, Corporate T dominika.mizielinska@klgates.com Lech Najbauer Legal Advisor, Counsel, Competition T lech.najbauer@klgates.com dr Patrycja Zawirska Legal Advisor, Of Counsel, Employment T patrycja.zawirska@klgates.com Oskar Tułodziecki Legal Advisor, Partner, Intellectual Property T oskar.tulodziecki@klgates.com Halina Więckowska Legal Advisor, Partner, Real Estate T halina.wieckowska@klgates.com Piotr Augustyniak Tax Advisor, Partner, Tax T piotr.augustyniak@klgates.com klgates.com 3

3 WHY POLAND? klgates.com 4

4 POLISH PRODUCTS klgates.com 5

5 POLAND TODAY klgates.com 6

5 million (6th largest in EU) Polish Złoty 1 USD ~ 3.69 1 EUR ~ 4.

6 BASIC FACTS ABOUT POLAND Official Name Official language Capital Area Population Currency Time zone GNP Republic of Poland Polish Warsaw (population: million) sq km (6th largest in the EU) 38.5 million (6th largest in EU) Polish Złoty 1 USD ~ EUR ~ 4.18 (*as of February 2015) UTC +1 (Winter) UTC+2 (Summer) ca. PLN billion= ca EUR 391 billion (2012) (very close to Belgium) WARSAW klgates.com 7

POLAND TODAY Political Stability ruling party second term at power High position in the Corruption Perceptions Index 2012-38th place (Hungary 47th, Czech Republic 57th, Slovakia 61st)

7 POLAND TODAY Political Stability ruling party second term at power High position in the Corruption Perceptions Index th place (Hungary 47th, Czech Republic 57th, Slovakia 61st) Membership: EU, NATO, OECD, WTO, IMF, Schengen Zone Poland is knocking on the G20 s door GDP (PPP): 18th place (World Bank) Bond yields: 2 years 3% 4 years 3.5% 10 years 4% klgates.com 8

8 WHY IS POLAND A CRISIS-PROOF COUNTRY? Low GDP from exports dependence - only 45% (Czech Republic - 73%, Slovakia - 94%) Low inflation rate - 0.3% (August 2014) GDP growth in % klgates.com 9

9 THE COUNTRIES THAT HAVE MADE UP THE LOSSES OF 2007 klgates.com 10

10 INTERNATIONAL RECOGNITION klgates.com 11

11 WORLD INVESTMENT PROSPECTS SURVEY klgates.com 12

12 SERVICES AND MANUFACTURING HUBS IN POLAND (1) klgates.com 13

13 SERVICES AND MANUFACTURING HUBS IN POLAND (2) klgates.com 14

14 FOREIGN LANGUAGE CAPABILITIES klgates.com 15

15 POLAND - POSITIVE INVESTMENT FACTORS klgates.com 16

16 WOULD YOU TAKE THE SAME DECISION ONCE AGAIN? klgates.com 17

17 2013 TOP 100 OUTSOURCING DESTINATIONS klgates.com 18

18 BEST EMERGING MARKETS 2014 klgates.com 19

19 INVESTMENT ATTRACTIVENESS AMONG CEE COUNTRIES (2014) klgates.com 20

20 Competition CORPORATE 21

21 MAIN LEGAL FORMS AVAILABLE FOR DOING BUSINESS IN POLAND FORMS AVAILABLE FOR INVESTORS OUTSIDE EU AND EFTA MEMBER COUNTRIES FORMS AVAILABLE FOR INVESTORS BASED NOT IN EU BASED AND EFTA IN EU MEMBER AND EFTA COUNTRIES MEMBER COUNTRIES Partnerships Limited joint-stock partnership (spółka komandytowo-akcyjna, S.K.A.) Limited partnership (spółka komandytowa, sp.k.) Registered partnership (spółka jawna, sp.j.) Professional partnership (spółka partnerska, sp.p.) Corporations Limited liability company (spółka z ograniczoną odpowiedzialnością, sp. z o.o.) Joint stock company (spółka akcyjna, S.A.) European company (spółka europejska, SE) Branch offices of a foreign company Representative offices of a foreign company Sole proprietorship European Economic Interest Grouping (europejskie zgrupowanie interesów gospodarczych, EZIG) klgates.com 22

22 SELECTED FEATURES OF CORPORATIONS Company can be founded by one or more individuals/legal entities Company has legal personality as well as legal and judicial capacities Company is liable for its debts and obligations with all of its assets but shareholders liability is limited to their contributions made to the company Minimum capitalization limited liability company PLN 5,000 joint stock company PLN 100,000 klgates.com 23

23 SELECTED FEATURES OF CORPORATIONS Company is represented by its management board. Shareholders can act through voting at the shareholders meeting or as members of the management board Limited liability companies are supervised by shareholders individually and / or by the supervisory board. Supervisory boards are mandatory in joint stock companies where individual shareholder control is excluded Management board and supervisory board are separate governing bodies Polish law does not know the concept of legal entities serving as directors. Management and supervisory board members must always be individuals. There is no obligation to have Polish citizens on Boards Joint stock companies can obtain the status of public companies and are eligible for listing on the stock exchange klgates.com 24

24 SELECTED FEATURES OF PARTNERSHIPS At least two founders are required Partnerships have no legal personality (however they do have legal capacity and judicial capacity) General partners in limited partnerships and limited jointstock partnerships have unlimited liability for the partnership s obligations. The limited partner in a limited partnership is liable up to the amount of the limited sum, while a shareholder in a limited joint-stock partnership is not liable for the partnership s obligations klgates.com 25

25 SELECTED FEATURES OF PARTNERSHIPS A limited partnership has no minimum share capital requirements. In limited joint-stock partnerships the minimum share capital is PLN 50,000 In general, partners are involved in running the affairs of the partnerships klgates.com 26

26 SELECTED FEATURES OF BRANCHES AND REPRESENTATIVE OFFICES (AGENCIES) Branch conducts business activity within the scope of activity of its founder Agency conducts business activity solely with respect to advertising and promotion of its activities Branches and agencies are not entities separate from foreign entrepreneurs and do not have legal personality, legal capacity and judicial capacity A foreign entrepreneur is a founder of a branch and agency No minimum capital is required Branches and agencies are represented by an authorized person(s) appointed by the founder A foreign entrepreneur is fully liable for the obligations of branch and agency klgates.com 27

27 REGISTRATIONS, PERMISSIONS Branches, partnerships and corporations must be registered in the commercial register kept by the district courts. Commercial register is accessible to the public (also on-line) Representative offices are registered in the register of foreign entrepreneurs agencies kept by the Minister of Economy Partnership may start operating once registered in the commercial register Corporations may start operating before they are entered into the commercial register Entering into register requires application. Any changes in data entered into register must be notified to the court and entered in the register In general doing business does not requires governments concessions as the number of business sectors in which entrepreneurs do need such concessions has been reduced to only six categories of exceptional public interest klgates.com 28

28 Competition COMPETITION 29

29 COMPETITION LAW IN POLAND Harmonized with EU law and recently amended Regulating three main sectors: Merger clearance Anticompetition behavior Consumer protection Polish authority (Competition and Consumer Protection Office, CCPO) cooperates with the EC CCPO decisions are appealable to the Polish anticompetition court klgates.com 30

30 MERGER CLEARANCE Thresholds lower than in the EU and Polish component required Some multinational or foreign M&A deals may require clearance in Poland Typical M&A deals reviewed by the CCPO: share acquisition asset transfer joint-venture (all types) Certain transactions may be exempted lower thresholds or intra-group M&As klgates.com 31

ANTI-COMPETITIVE BEHAVIORS Cartels, price fixing, market sharing, bid rigging, abuse of dominant position forbidden by law Transactions or acts breaching the

31 ANTI-COMPETITIVE BEHAVIORS Cartels, price fixing, market sharing, bid rigging, abuse of dominant position forbidden by law Transactions or acts breaching the regulation are invalid by virtue of law Some vertical restraints may be exempted Severe penalties to businesses (recently extended to managers and key officers) klgates.com 32

32 CONSUMER PROTECTION Only aggregate consumer interests are protected by the CCPO actions Individual protection available from courts List of unlawful anti-consumer clauses in the publically accessible register Public warnings of anti-consumer behavior klgates.com 33

INVESTIGATION, LENIENCY AND PRIVATE ENFORCEMENT Dawn raids becoming more popular in Poland businesses should be prepared Severe penalties for interruption or

33 INVESTIGATION, LENIENCY AND PRIVATE ENFORCEMENT Dawn raids becoming more popular in Poland businesses should be prepared Severe penalties for interruption or disturbance of the investigation Several leniency types Investigation may end up with an infringement decision Private enforcement not very popular in Poland yet klgates.com 34

ANTI-CORRUPTION REGULATIONS Polish law provides for penalization of individuals as a rule Firms may also be held liable for corruption Broad range of penalties, from imprisonment (individuals)

34 ANTI-CORRUPTION REGULATIONS Polish law provides for penalization of individuals as a rule Firms may also be held liable for corruption Broad range of penalties, from imprisonment (individuals) through monetary punishment to advertisement banning (firms) Only bribery of public officer is penalized US or UK firms: corruption by Polish subsidiaries - FCPA or Bribery Act enforcement klgates.com 35

35 Competition EMPLOYMENT 36

36 EMPLOYMENT LAW IN POLAND rather formalistic and still paper based based on statutes (most importantly - on the Polish Labor Code) harmonized with the EU law klgates.com 37

EMPLOYMENT CONTRACTS main types: for an indefinite period of time fixed-term probationary (up to 3 months) contract for replacement of an absent employee (e.g.

37 EMPLOYMENT CONTRACTS main types: for an indefinite period of time fixed-term probationary (up to 3 months) contract for replacement of an absent employee (e.g. maternity leave) written form in Polish usual track: probation period and then indefinite contract civil contractors are not employees so they cannot be treated as employees klgates.com 38

38 TERMINATION OF EMPLOYMENT (1 of 2) contract for an indefinite period of time: notice period from 2 weeks up to 3 months (depending on seniority) notice of termination must indicate specific reasons for termination related to employees performance or restructuring (redundancy) obligatory consultation with trade unions (if present at the company) klgates.com 39

TERMINATION OF EMPLOYMENT (2 of 2) fixed-term contract may be terminated with notice (as a general rule) only if it is concluded for a period exceeding 6 months and the contract provides for such

39 TERMINATION OF EMPLOYMENT (2 of 2) fixed-term contract may be terminated with notice (as a general rule) only if it is concluded for a period exceeding 6 months and the contract provides for such option (the respective rules are to be changed in the near future) summary (disciplinary) dismissal is possible only in exceptional cases, in case of a serious breach of basic employment duties klgates.com 40

WORKING TIME typically 8 hours a day / average of 40 hours per week public holidays 13 days per year (including 2 always falling on Sunday) 20/26 days of paid annual leave (on top of public holidays)

40 WORKING TIME typically 8 hours a day / average of 40 hours per week public holidays 13 days per year (including 2 always falling on Sunday) 20/26 days of paid annual leave (on top of public holidays) overtime additional allowance (50% or 100%) or time off employer pays 33 days' sick pay in a calendar year (approx. 80% of remuneration) any further periods of sickness are financed by the state klgates.com 41

41 EMPLOYEE REPRESENTATION numerous consultation and information obligations towards employees representatives (trade unions, work councils and representatives appointed on an ad hoc basis) internal employment acts (employment regulations, remuneration policy) must be agreed with trade unions (if present at the company) trade unions - usually present at big, former stateowned companies relatively low union density approx. 10% (in 2013) of employees in Poland are union members - in %; EU average 23% klgates.com 42

42 EMPLOYMENT COSTS minimum monthly salary in 2014 PLN 1,680 gross (approx. EUR 395) reviewed annually from 2015 PLN 1,750 gross (approx. EUR 412) social costs (other than net salary i.e. taxes, social security dues, etc.) amount to 41% of total employment costs average net salary in private sector in 2Q PLN 2,810 (approx. EUR 670) total employment cost for the employer - PLN 4,753 (approx. EUR 1,130) klgates.com 43

43 MOST COMMON EMPLOYMENT-RELATED CLAIMS overtime bullying and harassment appeal against termination of employment bonus payment klgates.com 44

44 Competition INTELLECTUAL PROPERTY 45

45 INTELLECTUAL PROPERTY LAW - INTRODUCTION Patents Copyrights Trademarks Data protection Unfair competition klgates.com 46

PATENTS 2000 Industrial Property Law Act Novelty, inventive step and industrial applicability checked by the Polish Patent Office Separate protection

46 PATENTS 2000 Industrial Property Law Act Novelty, inventive step and industrial applicability checked by the Polish Patent Office Separate protection for utility models and industrial designs Priority checked on the first to file basis Works in the EU to create a unitary patent protection klgates.com 47

47 COPYRIGHTS 1994 Copyright Act Economic rights and moral rights No contractual freedom regarding assignment and licensing Copyright Reform EU Single EU European title klgates.com 48

48 TRADEMARKS Dual system: domestic trademarks and Community Trademarks The role of the Polish Patent Office Counterfeiting methods of combating Role of customs authorities klgates.com 49

DATA PROTECTION 1997 Personal Data Protection Act based on the EU personal data protection framework Multiple obligations of data controllers to

49 DATA PROTECTION 1997 Personal Data Protection Act based on the EU personal data protection framework Multiple obligations of data controllers to secure data Important rules regarding personal data transfers outside of Poland Works in the EU to create a unified data protection system klgates.com 50

50 UNFAIR COMPETITION Several types of market behavior prohibited Protection of trade secrets Restriction in advertising klgates.com 51

51 Competition REAL ESTATE 52

52 LEGAL TITLE Ownership - providing the broadest scope of rights to real estate Perpetual usufruct (użytkowanie wieczyste) limited in time - 99 years established by the State Treasury or local government units only subject to transfer on the same terms which apply to the transfer of ownership one-off fee payable upon the establishment and annual fees Leases and other forms of property use lease or tenancy agreement for a non-fixed or fixed term other rights to real estate such as usufruct or easements klgates.com 53

VERIFYING LEGAL TITLE Real estate due diligence

performcomprising ed prior to its acquisition,

Financial Other depending on the type of real

transaction Land and mortgage registry (public

53 VERIFYING LEGAL TITLE Real estate due diligence A comprehensive review process, to be performcomprising ed prior to its acquisition, the examination of a variety of issues: Legal Financial Other depending on the type of real estate to be acquired and purpose of the transaction Land and mortgage registry (public credibility) Construction, technical and environmental klgates.com 54

54 PERMITTING AND REGULATORY ASPECTS (1 of 2) Permit for acquisition of real estate by foreigners issued by the Polish Ministry of Internal Affairs required for the acquisition of an ownership or perpetual usufruct by certain foreigners and with regard to certain properties, as well as for acquisition of shares applies mainly to foreigners from outside the EEA and Switzerland; entity registered in Poland and EEA does not need a permit (except for agricultural land) Corporate requirements shareholder meeting s resolution (unless the articles of association or statutes state otherwise) klgates.com 55

PERMITTING AND REGULATORY ASPECTS (2 of 2) Statutory preemptive rights with respect to undeveloped real estate - local municipal authority with respect to real estate located within a special

55 PERMITTING AND REGULATORY ASPECTS (2 of 2) Statutory preemptive rights with respect to undeveloped real estate - local municipal authority with respect to real estate located within a special economic zone the manager of such zone with respect to certain agricultural properties - the tenant, or the Agency of Agricultural Properties Invalidity of the transaction if the requirements regarding the permit for the acquisition, pre-emptive rights or corporate resolution are not observed klgates.com 56

56 PLANNING AND ZONING Specify designation of the property, localization of investments and manner of property development LOCAL PLANNING ZONING DECISIONS multi-stage and time-consuming process involving numerous public bodies and public consultations zoning plan ( MPZP ) preceded by adoption of the zoning program MPZP becomes officially binding once published specify conditions for the development of the property for the areas where a MPZP has not been enacted issued by local municipal authorities as: decisions on development conditions (decyzja o warunkach zabudowy), or decisions on localization of a public purpose development (decyzja o ustaleniu lokalizacji inwestycji celu publicznego) klgates.com 57

57 DEVELOPMENT PROCESS BUILDING PERMIT to be obtained before construction works can be carried out issued on the basis of the MPZP or - in the absence thereof - a zoning decision obtained required for the construction, reconstruction, assembly, repair or demolition of a majority of constructions certain constructions do not require a building permit (notification to a competent authority is required instead) CONTRACTING BUILDING PROCESS contracts for construction works corresponding to EU standards and practices (including FIDIC) usually a complex works agreements (performed by a general contractor), or as contracts for specific task(s) specific regulations regarding joint and several liability of an investor and a general contractor for remuneration due to subcontractors the payment guarantee OCCUPANCY PERMIT to be obtained after completion of construction works for which a building permit was required klgates.com 58

58 COMMERCIALIZATION (1 of 2) Lease and tenancy agreements for a non-fixed or fixed term up to 30 years a lease agreement applies to e.g. lease of an office, apartment or premises within a shopping mall a tenancy agreement applies to e.g. agricultural land or the site for certain types of development klgates.com 59

59 COMMERCIALIZATION (2 of 2) Rent and security rent indexation pursuant to the Eurozone CPI index or inflation index of the Polish Statistical Office a percentage (turnover) rent for premises designated for commercial activity the landlord s right under the Civil Code to increase the amount of rent payment the security from the lessee in the form of a guarantee, deposit, surety, or voluntary submission to enforcement Condition of the premises, fit-out arrangements and other issues in commercial leases the budget provided by the landlord up to the agreed amount detailed provisions to be agreed, e.g. handover, maintenance and repairs, service fees, insurance, return of the premises and settlement of improvements klgates.com 60

60 NEW REGULATIONS IN PROCESS DEVELOPMENT RIGHT (PRAWO ZABUDOWY) NEW BUILDING CODE under binding regulations, a building is owned by the owner of the land the development right allows for construction on the land owned by another entity and for retention of the ownership of the building by the entity which has constructed it to be established for 30 up to 100 years transferrable and subject to disclosure in the land and mortgage register unifying the building law, zoning and related regulations in one legal act simplifying and shortening the administrative procedures no requirement to obtain a building permit in a wide scope of situations klgates.com 61

61 Competition TAX 62

62 TOPICS OVERVIEW Introduction to general rules of taxation in Poland Personal Income Tax Subsidiary vs branch vs representative Transfer tax EU Tax Law/Double Taxation Treaties Corporate Income Tax Taxation on profits Loss carry forward Taxation of dividends/wht Transfer pricing/cfc/ Thin capitalization regime Value added tax Procedural aspects (tax rulings) Tax incentives klgates.com 63

63 INTRODUCTION TO GENERAL RULES OF TAXATION IN POLAND Personal Income Tax Worldwide income Progressive rates of 18%-32% Deductions and Allowances Subsidiary (S) vs branch (B) vs representative (R) Depends on business activity (S) Taxed in Poland (B) Taxed but limited - (R)Not taxed in Poland klgates.com 64

INTRODUCTION TO GENERAL RULES OF TAXATION IN POLAND Corporate Income Tax Taxation on profits - business income, most passive income, capital gains - rate - 19% Loss carry forward - for the period of

64 INTRODUCTION TO GENERAL RULES OF TAXATION IN POLAND Corporate Income Tax Taxation on profits - business income, most passive income, capital gains - rate - 19% Loss carry forward - for the period of 5 years. Carryback of losses not permitted Taxation of dividends/wht standard rate 19%, subject to reduction (DTTs) and exemption (EU/EEA/Switzerland) Transfer pricing/cfc/thin capitalization regime klgates.com 65

65 INTRODUCTION TO GENERAL RULES OF TAXATION IN POLAND Value Added Tax Supply of goods and services, import/export/inter-community acquisition and supply of goods Standard (23%) and preferential (8%/5%) rates Transfer tax Certain type of transactions (e.g. sales, loans, exchanges of rights) generally not covered by VAT Rate 1%/2% EU Tax Law/Double Taxation Treaties (approx. 80 tax treaties concluded) klgates.com 66

INTRODUCTION TO GENERAL RULES OF TAXATION IN POLAND Procedural aspects (tax ruling) obtained within 3 months from submission (low fee) binding on tax

66 INTRODUCTION TO GENERAL RULES OF TAXATION IN POLAND Procedural aspects (tax ruling) obtained within 3 months from submission (low fee) binding on tax authorities Tax incentives Special Economic Zones Local incentives (property tax exemptions) Tax relief for new technologies R&D centres klgates.com 67

67 Competition THANK YOU 68

68 70

2018 TAX GUIDELINE. Poland.

2018 TAX GUIDELINE. Poland. 2018 TAX GUIDELINE Poland poland@accace.com www.accace.com www.accace.pl Contents General information about Poland 4 Legal forms of business 5 General rules on purchasing real estate by foreigners 5 Legal