ΠΡΕΣΒΕΙΑ ΤΗΣ ΕΛΛΑΔΟΣ ΣΤΗΝ ΒΑΡΣΟΒΙΑ ΓΡΑΦΕΙΟ ΣΥΜΒΟΥΛΟΥ ΟΙΚΟΝΟΜΙΚΩΝ & ΕΜΠΟΡΙΚΩΝ ΥΠΟΘΕΣΕΩΝ

ΠΡΕΣΒΕΙΑ ΤΗΣ ΕΛΛΑΔΟΣ ΣΤΗΝ ΒΑΡΣΟΒΙΑ ΓΡΑΦΕΙΟ ΣΥΜΒΟΥΛΟΥ ΟΙΚΟΝΟΜΙΚΩΝ & ΕΜΠΟΡΙΚΩΝ ΥΠΟΘΕΣΕΩΝ Tel. 0048 22 622 94 60 Fax. 0048 22 622 94 64, Ε-mail: ecocom-warsaw@mfa.gr Warsaw, 18 th March 2011 GENERAL INFORMATION ON BUSINESS ACTIVITY IN POLAND CONTENTS A. General Information (p.2) B. Setting up a company (p.2) C. Forms of business activity (p.2) 1. Limited Partnership 2. Limited joint-stock partnership 3. Limited Liability Company 4. Joint- Stock Company 5. Brand Office 6. Representative Office D. Forms of individual business activity (p.7) 1. Smaller forms of conducting business activity a. registered partnership b. Professional partnership c. Limited partnership d. Limited joint-stock partnership 2. Civil partnership E. Other forms of business activity (p.9) F. Taxation/ overview (p.9) 1. Business taxation 2. Personal Taxation G. Employment of foreigners in Poland (p. 10) 1. Fundamental definitions 2. Principles concerning the performance of work by foreigners 3. Grounds for issuing work permits to foreigners 4. Terms & Conditions for the issuance of a work permit 5. simplified procedures for the issuance of work permits 6. Term of a work permit 7. Exemptions H. Labour regulations (p. 15) 1. Types of employment contract 2. Ways of ending a work relation 3. Termination of an agreement 4. Working Hours 5. Vacation 6. The minimum gross wage

2 A. General information The principal legal act governing business activity in Poland is the Economic Freedom Act of 2 July 2004. It regulates undertaking, running and closing businesses on the territory of Poland, as well as tasks of the public administration within this regard. Following the article 43 of the EC Treaty each entrepreneur within the European Community has a right to choose from various forms of conducting business activity, which he finds most suitable for his business. With this regard Member States are obliged to realise the freedom of business activity. According to the regulations of the European Community, there exists a division of entrepreneurial freedom into primary and secondary one, which has to be enforced and respected by all member states. The primary entrepreneurial freedom envisages: the right of entrepreneurs from the Member States to carry out the self-employment, the right of entrepreneurs to incorporate and to conduct business activity, the right to purchase shares of enterprises. On the other hand secondary entrepreneurial freedom creates an opportunity to geographically expand conducting of business activity in the form of self-reliant subsidiaries, such as branch offices, agencies, which are organisationally dependent on their parent company. B.Setting up a Company / General procedure 1. Registration of the Company in the National Court Register 2. Application of the Company to the National Statistical Office for a Statistical Identification Number (REGON)

3. Application of the Company to the Tax Office for a Taxpayer Identification Number (NIP) 4. Opening of an account at a polish Bank 5. Notification to the Social Insurance Institution (ZUS) and Labour Inspectorate A Company comes into existence upon registration in the National Court Register 3 C. Forms of business activities Polish law offers various forms of conducting business activity, which enables entrepreneurs to choose between individual conducting of business activity, civil partnership, and other forms - not having legal personality. The most important factors determining the final choice of the form of conducting business activity include requirements concerning initial capital, scope of shareholders liability or formalities prior to commencing business activity. Foreign persons (Within the meaning of the law, a foreign person is: a natural person residing abroad, without Polish citizenship, a legal person with a seat -registered office- abroad, an organisational unit with a seat abroad, which is not a legal entity, but has a legal capacity). from the EU and European Free Trade Agreement zones belonging to the European Economic Area may undertake and run business on the basis of the same rules applicable to Polish entrepreneurs. to undertake and run business activity only in the following forms: limited partnership, limited joint-stock partnership, limited liability company, joint-stock company, branch office, and representative offices 1. Limited Partnership Established for the purpose of conducting business under its own business name. Must be established and conducted by at least two individuals or legal persons or organisational units without legal personality which was granted a legal capacity on the basis of a specified act (for example partnerships). Legal Personality : None. Personal partnership. Limited partnership possess a legal capacity and may in its own name acquire rights, including ownership of immovable property and other rights in rem, incur obligations, sue and be sued. Liability : At least one partner is liable to the creditors for the debts and obligations of the partnership without limitation (the general partner) and at least one partner has a limited liability. However, if a business name of a limited partnership includes a name or a business name of a limited partner, this partner is liable for obligations of a partnership without any limitation. In the same way is liable limited partner performing an act in law in the name of partnership without disclosing his power of attorney or when he acts without authorization or beyond the scope of authorization. Establishment Process : At least one partner is liable to the creditors for the debts and obligations of the partnership without limitation (the general partner) and at least one partner has a limited liability. However, if a business name of a limited partnership includes a name or a business name of a limited partner, this partner is liable for obligations of a partnership without any limitation. In the same way is liable limited partner performing an act in law in the name of partnership without disclosing his power of attorney or when he acts without authorization or beyond the scope of authorization.

4 Taxation : PIT Declaration - Personal Income Tax, or CIT - Corporate Income Tax; each of the partners is paying taxes separately. At least one partner is liable to the creditors for the debts and obligations of the partnership without limitation (the general partner) and at least one partner has a limited liability. However, if a business name of a limited partnership includes a name or a business name of a limited partner, this partner is liable for obligations of a partnership without any limitation. In the same way is liable limited partner performing an act in law in the name of partnership without disclosing his power of attorney or when he acts without authorization or beyond the scope of authorization. Establishment process : The statutes of the partnership should be executed in a notarised form and signed by all general partners, whereupon the partnership should be entered into the National Court Register (Krajowy Rejestr Sądowy) Representation of a partnership : A partnership shall be represented by the general partners who were not deprived of the right to represent the partnership under the partnership deed or by valid court decision. A limited partner may represent the partnership only in the capacity of attorney. Partnership may be also represented by a proxy. 2. Limited joint-stock partnership Established for the purpose of operating a business under its name (usually a larger-scale business for example large family enterprises). Must be established and conducted by at least two individuals or legal persons or organisational units without legal personality which was granted a legal capacity on the basis of specified act. Minimum Capital 50.000 PLN (aproximately 12.500 Euro) Legal personality : None. Personal partnership - may in its own name acquire rights, including ownership of immovable property and other rights in rem, incur obligations, sue and be sued. Liability : At least one partner is liable to the creditors for the debts and obligations of the partnership without limitation (the general partner) and at least one shareholder is not liable for debts and obligations of a partnership. However, if a business name of a limited joint-stock partnership includes name or a business name of a shareholder, this shareholder is liable for obligations of a partnership without any limitation.in the same way is liable limited partner performing an act in law in the name of partnership without disclosing his power of attorney or when he acts without authorization or beyond the scope of authorization. Taxation : PIT declaration - Personal Income Tax, or CIT - Corporate Income Tax; each partner is paying taxes separately. Establishment process : The deeds of the partnership should be executed in a notarised form and signed by all general partners, whereupon the partnership should be entered into the National Court Register (Krajowy Rejestr Sądowy). Representation/organs of a partnership : Limited joint-stock partnership shall be represented by the general partners who were not deprived of the right to represent the partnership under the partnership deed or by valid court decision. A shareholder may represent the partnership only in the capacity of attorney. Limited joint-stock partnership may be also represented by a proxy. In limited joint-stock partnership a Supervisory Board may be optionally appointed. If a number of shareholders exceeds 25 the Supervisory Board shall be compulsory 3. Limited liability company May be established by one or more individuals or legal persons or legal persons or organisational unit without legal personality which was granted a legal capacity on the basis of a specified act (for

5 example partnerships). However, it may not be established solely by another single-member limited liability company. Minimum capital : 5,000 PLN (aprox. 1250 Euro) A limited liability company is a legal entity. The Company is liable for its debts and obligations with its whole property without any limitations. The shareholders are not liable for the company s obligations, they bear a risk up to the value of shares contributed. Where execution against the company has proved ineffective the members of the management board shall be liable jointly and severally for the obligations of the company. A member of the management board may extricate himself from the liability by showing that a petition for declaration of bankruptcy was filed or arrangement proceedings were instituted in due time, or that a failure to file a petition for declaration of bankruptcy or institute arrangement proceedings was not due to his fault or that the creditor suffered no damage even though no petition for bankruptcy was filed or no arrangement proceedings were instituted. Superior authority of a company is Shareholders Meeting. Company is represented by a Management Board (consisting at least of one person) according to principles laid down in a company deed or a company charter. A company may be also represented by proxy.in limited liability company a Supervisory Board may be optionally appointed. In limited liability companies whose initial capital exceeds PLN 500.000 and the number of share holders exceeds twenty five the Supervisory Board or audit commission shall be compulsory. General characteristics A limited liability company as a legal person is obliged to pay income tax in the amount of 19%.A limited liability company is a capital company and may conduct any activity which is allowed by Polish law. A limited liability company has a legal personality and is liable for its obligations. The shareholders are not liable for the company s obligations. The procedure of establishment consists the following steps: 1) preparation of the Articles of Association, 2) adopting articles of association in the form of a notarial deed, 3) submitting application to the National Register Court, 4) obtaining statistical number, 5) opening a bank account, 6) registration in tax office, 7) registration in Social Insurance Office, 8) other registration. The above procedure may also require obtaining licence for conducting given type of activity, if it is required by Polish law. Procedure of establishment takes around 4-6 weeks from the time that a Law Office receives all necessary documents. Taxation A limited liability company as a legal person is obliged to pay income tax in the amount of 19%. 4. Joint-stock company

6 Established for the purpose of operating business on a large scale. Capital may be obtained through issuance of shares. May be established by one or more persons; exception: it may not be established solely by a single-member limited liability company. Minimum capital : 100,000 PLN (aprox. 25.000 Euro) A joint-stock company is a legal entity. The Company is liable for its debts and obligations with its whole property without any limitations. The shareholders are not liable for the company s obligations, they bear a risk up to the value of shares taken up. Superior authority of a company is General Assembly. Joint-stock company is represented by a Management Board (consisting of at least one person) according to principles laid down in company s statute. In a joint-stock company, Supervisory Board must be obligatorily appointed. Joint-stock company may also be represented by a proxy. 5. Branch office According to the Economic Freedom Act, is a separate and self-reliant part of existing business activity, which is being run by an entrepreneur outside the seat of the enterprise or the main place of business activity. Foreign entrepreneur can incorporate the branch office on the basis of reciprocity (article 85 of the Act mentioned). The reciprocity rule states that a foreign person (entity) can institute and run business activity on the territory of Poland according to the same rules that a Polish entity has guaranteed in the other country. However one is obliged to run the activity only within the scope of foreign entrepreneur s activity. One of the requirements concerns entering information to the National Court Register, as well as e.g. indicating a person representing the foreign entrepreneur in the branch office, submitting a write-off of the incorporation deed as well as a write-off from the foreign entrepreneur s country Register. Furthermore, the entrepreneur is obliged to run accountancy in Polish and to report all legal and other changes to the Ministry of Economy. The Minister is empowered to ban the entrepreneur from business activity in case of extreme infringement of Polish law or failing to report legal and other changes concerning this branch office, or if entrepreneur s activity threatens public security and security, or in case of the necessity to protect state secret or other public interest. General characteristics A branch may be established in Poland by a foreigner entrepreneur who already is doing business outside the territory of Poland. The object of business of the branch should comply with the object of the original business of foreign entrepreneur, as conducted abroad. A branch has no legal personality. The mother company is liable for all obligations of a branch. A mother company is obliged to appoint a person who is authorized to represent the mother company in branch. Polish law imposes obligation on a branch such as maintaining a separate accountancy in Polish and in accordance with Polish law The procedure of establishment consists the following steps: 1) enter to the commercial register, The following documents needs to be collected for entering the branch to the commercial register: 2) statement on establishing the business unit in the territory of Poland by the foreign entrepreneur; 3) documents nominating the proxy of foreign entrepreneur, entitled to represent the entrepreneur in Poland; 4) documents confirming that the person representing the entrepreneur is authorized to sign the above documents;

7 5) if it is required by the internal regulations of the founder or by the law of the country of the founder s origin (i.e. Board s of director) needs to adopt a formal decision on establishing the branch in Poland; Some of documents issued abroad needs to be legalized by the Polish Counsel (not required when obtaining Apostille is possible). 6) Specimen signature of the Proxy made before a public notary, 7) Executing the office space lease contract (obtaining an official address), 8) obtaining statistical number, 9) opening a bank account, registration in tax office, 10) registration in Social Insurance Office, 11) other registration- if required Procedure of establishment will take up to 8 weeks from the time that the Law Office receives all necessary documents. The costs of establishment amounts 1 500 zloties (this is the costs of entry to the register) plus costs of sworn translations. Under the Polish law, the branch may undertake business actions only after being entered to the commercial register. Taxation The mother company will be a taxpayer in Poland as a foreign entity conducting its activity in the form of a branch. The subject of tax will be income reached by a branch in Poland. The income tax amounts 19%. However detailed issues concerning taxes may be regulated by the Law on Avoiding Double Taxation. 6. Representative Office can only concern advertisements and promotion of a foreign entrepreneur. It requires an entry to the Foreign Representative Offices Register held by the Minister of Economy. Again, the Economic Freedom Act specifies requirements concerning the content of a proper application form, documents needed and cases of imposing ban on running business activity of this representative office. General characteristic A Rep-Office is allowed only to conduct marketing and promotion activity of the mother company s activity or country, where a mother company has its registered seat. This means that Rep Office is not allowed to conduct business activity in Poland. Polish law imposes obligation on a Rep-Office such as maintaining a separate accountancy in Polish and in accordance with Polish law The procedure of establishment consists the following steps: 1) enter to the register maintained by the Minister of Economic in Poland 2) obtaining statistical number, 3) opening a bank account, 4) registration in tax office if a Rep-Office will conduct business activity relating to the marketing and promotion, 5) registration in Social Insurance Office, 6) other registration- if required Procedure of establishment will take about 4 weeks from the time that the Law Office receives all necessary documents.

8 The costs of establishment amounts 6 713 zloties (this is the costs of entry to the register) plus costs of sworn translations. Taxation The Rep-Office will be obliged to pay an income taxes, only if it conducts business activity in the scope of marketing and promotion in the amount of 19% (as a general rule). D. Forms of Individual business activity Among the least complicated forms of conducting business activity, which are permitted to each Polish entrepreneur and (according to the article 13 of the Economic Freedom Act) to foreign persons from the European Union Member States and European Free Trade Association (EFTA) member states - parties to the European Economic Area Agreement and foreign persons from states which are not members of the treaty on European Economic Area, which may enjoy economic freedom on the basis of agreements concluded by those states with European Community and its Member States, one can name individual conducting of business activity and civil partnership. 1. Smaller forms of conducting business activity permitted by the Code of Commercial Partnerships and Companies Planning larger scope of activities, it is reasonable to choose one of the forms stipulated in the Code of Commercial Partnership and Companies (KSH). At first one should point at the partnerships, which do not have legal personality, but they can on their behalf purchase rights, including ownership of property and other rights in rem, incur obligations, as well as sue and be sued. In case of partnerships, each of the partners pays taxes based on the personal income tax rates. The above mentioned Code enforces: a. Registered partnership is the basic form of the partnership. No initial capital is required likewise in case of professional and limited partnership. Its crucial feature as well as the decisive factor related to accepting this form of conducting business activity is the scope of partners liability. They bear a subsidiary and unlimited liability for the obligations of the partnership, which means that partnership s creditor can carry out the execution from the partners' assets in each case the execution from the partnership proves to be in vain. All of them require registering with the National Code Register and paying a fee of PLN 750 (plus additional cost of PLN 500 related to posting an advertisment in the Monitor Sądowy i Gospodarczy), as well as covering additional expenses related to preparing company's deed (apart from registered partnership). b. Professional partnership, contrary to other forms of business activity, is designated only for a limited number of professions, so-called 'free professions' - final enumeration is provided in the article 88 of the Code: advocate, pharmacist, architect, construction engineer, expert auditor, insurance broker, tax consultant, accountant, physician, dental surgeon, veterinary surgeon, notary, nurse, midwife, legal counsel, patent gent, property expert, sworn translator, stockbroker, investment adviser. Limited access to that form of activity is compensated in suitable legal provisions governing liability. The partner in this kind of partnership is not liable for obligations of the partnership arising from

9 activities related to carrying out the profession by another partner, as well as losses incurred by the partnership due to acts or omissions of a person being under supervision of another partner and being bound with the employment agreement or other legal relation with the partnership. c. Limited partnership, is designated for legal and natural persons. It enables significant limitation of liability as at least one of the partners - general partner is liable for all obligations of the partnership without any limitations, whereas limited partners liability is restrained up to the limited amount - limited partner share. However, if a business name of a limited partnership includes name or a business name of a limited partner, this partner is liable for obligations of a partnership without any limitation. d. One of the more complicated forms of conducting business activity is a limited joint-stock partnership, which (despite being a partnership) requires a minimum contribution of PLN 50,000. The scope of the liability is regulated in a way similar to limited partnership, i.e. at least one of the partners - general partner bears unlimited liability for partnership s obligations, whereas the shareholder is completely absolved from liability. However, if a business name of a limited jointstock partnership includes name or a business name of a shareholder, this shareholder is liable for obligations of a partnership without any limitation. 2. Civil partnership Operation of a small business. Must be established by at least two natural or legal persons or organisational unit without legal personality which was granted a legal capacity on the basis of a specified act. Legal personality: None. It is the partners, not the partnership itself, who are the operator. A civil partnership is set up according to the general principles of the Civil Law. Liability : Each partner is jointly liable for the debts and obligations of the partnership without limit to the extent of his or her entire property. Taxation : PIT Declaration - Personal Income Tax or CIT - Corporate Income Tax dependent on partner s status. Each of the partners pays taxes separately. Establishment process : The entrepreneurs should previously register in the Business Activity Register (each of them individually) and subsequently conclude a civil partnership agreement in writing. An economic activity in a way of civil partnership may by exercised by persons entitled to exercise business activity on the territory of Poland in the form of an individual entrepreneur. Each partner has right to represent a company. They do not require neither initial capital outlays nor high costs related to setting up business activity. Entry in the Business Activity Register (Ewidencja działalności gospodarczej), requiring only to fill one form, is free of charge. However, one must be aware of the fact that these forms of conducting business activity impose unlimited liability of entrepreneurs for their enterprises' obligations. E. Other forms of business activity It has to be mentioned that in relation to EU membership, the choice of forms of running business activity is extended by European Economic Interest Grouping and European Company. EEIG do not require any initial capital and gathers entities from EU countries, not in order to make a profit but for the purpose of their promotion, which is different from a classic form of running business activity. However, setting up a European Company can be limited only to large entities due to the requirement

10 of high level of initial capital - EUR 120,000, as well as the limited types of entities allowed to cooperate in this form. Regardless of the uppermentioned and specific features of these entities, the ability to set them up is the fullfilment of economic freedom, as well as helps to level development gaps between the economies of member states F. Taxation / Overview 1. Business Taxation The main taxes applicable to companies operating in Poland are the corporate income tax, the tax on civil law of transactions, stamp duty and the value added tax (VAT). There no excess profit or alternative minimum taxes. Business Taxation/ Main indicators In general corporate income tax is 19%, dividends paid by polish companies to nonresidents are subject to a 19% withholding tax 20% is imposed on royalties paid to nonresidents. VAT standard rate is 23% with preferential rates of 5% and 8% applying to some basic goods and services. 2. Personal Taxation Taxable income includes most cash and non-cash benefits earned from employment, self-employment or the use of property for business or rent. In general income is taxed at 18% on monthly instalments until cumulative income reaches 44.500 zloty (apr. 11.000 Euro) where upon the monthly rate increases to 30%. Income in excess of 85.500 zloty (apr. 21.000 Euro) is taxed at 32% G. Employment of foreigners in Poland Current law concerning the employment of foreigners in Poland divides foreigners into citizens of the Member States and other countries, imposing different means of treatment of each of these groups in respect to their provision of work. Various procedures shall apply for the hiring of a foreign correspondent, an academic teacher or e.g. the general director of a representative office in Poland. The criteria used in respect to EU citizens which defines the scope of freedom in providing work within Poland is citizenship, i.e. affiliation with a given country. On the other hand, generic criteria are used in respect to citizens of other countries. This is because policies regarding employment in various professions vary. In the case of certain professions, the securing of a permit is not required at all. On the other hand, simplified procedures consisting of the omission of certain requirements during proceedings associated with the securing of a permit, are applied. Recent changes regarding the principles of employment of foreigners in Poland strive towards opening up the labour market for foreigners, with such being demonstrated above all in the expansion of the group of persons that may perform work without a permit as well as the simplification of procedures associated with the securing of appropriate permits. Of significant importance in respect to the simplification of procedures associated with the employment of foreigners are changes that have come into effect effective 1 February 2009 and consisting of i.a. repealing of two-stage procedures for the securing of a work permit, i.e. repealing the obligation to obtain a promise for the issuance of a work permit as well as a limit on the number of required documents that are examined by State administrative bodies during the course of such procedures. 1. Fundamental definitions

11 A foreigner entitled to perform work in the Republic of Poland, as defined in the Act, is considered to be a person not being a Polish national and meeting premises laid out in Article 87 par. 1 of the Act. The performance of work by a foreigner on the other hand is considered to be the hiring, the performing of other paid for work or the holding of a function in the management boards of legal entities that have been entered into the commercial register pursuant to the provisions of the National Court Register or are commercial (capital) companies being organised. 2. Principles concerning the performance of work in the Republic of Poland by foreigners Pursuant to the provisions of Article 87 par. 1 of the Act, a foreigner is entitled to perform work in the Republic of Poland if at least one of the following criteria is met: holds the status of a refugee granted in the Republic of Poland; has been granted supplementary protection in the Republic of Poland; holds a permit allowing for settlement in the Republic of Poland; holds a long-term European Union resident permit in the Republic of Poland; holds approval for tolerated stay in the Republic of Poland; is taking advantage of temporary protection in the Republic of Poland; is the citizen of a Member State; is the citizen of a European Economic Area country not being a member of the European Union; is the citizen of a country not being a party to the European Economic Area agreement and entitled to take benefit of freedom of movement on the basis of an agreement between such country and the European Community and its Member States; is a family member of a foreigner referred to in items 7-9 or is the descendent of spouse of such foreigner, aged 21 or less or being dependant on such a foreigner or his/her spouse or is the ascendant of such a foreigner or his/her spouse and being dependant on such a foreigner or his/her spouse; is a person referred to in Article 19 pars. 2-3 of the Act of 14th July 2006 concerning the entry into the Republic of Poland, the stay and exit from the territory of the Republic of Poland by citizens of the Member States as well as their family members (Journal of Law No. 144 item 1043, of 2007 No. 120 item 818 and of 2008 No. 216 item 1367); holds a work and residency permit in the Republic of Poland: on the basis of a visa with the exception of a visa referred to in Article 26 pars. 1 item 1, 20, 25 and 26 of the Foreigners Act of 13th June 2003, or on the basis of Article 61 par. 3 or Article 71a par. 3 of the Foreigners Act of 13th June 2003 if, immediately prior to the filing of such an application, such person was entitled to perform work in the Republic of Poland, or on the basis of a fixed-term residency permit with the exception of a permit issued in conjunction with circumstances referred to in Article 53a par. 2 of the Foreigners Act of 13th June 2003, or on the basis of a visa issued by another Schengen country, or on the basis of a residency document issued by another Schengen country, or on the basis of visa-less travel if the provisions of the agreement concerning visa-less travel foresee the performance of work by foreigners.

12 3. Grounds for issuing work permits to foreigners Principles and manner for issuing work permits to foreigners are regulated by the Act and its executive regulations. Pursuant to the Act, a work permit is required if the foreigner: performs work in the Republic of Poland on the basis of a contract with an entity whose registered office, place of residence or branch, plant or other form of organised activities are found within the Republic of Poland (type A permit); fills the function of a member of the Management Board of a legal entity entered into the commercial register or being a commercial company being organised within the Republic of Poland and for a period of no more than 6 months in total during a subsequent 12-month period (type B permit); performs work for a foreign employer and has been sent to the Republic of Poland for a period exceeding 30 days during a calendar year to work in a branch office or plant of the foreign entity, its affiliated entity or an entity tied by a long-term cooperation agreement with the foreign employer (type C permit); performs work for a foreign employer not having a branch office, plant or other organised form of business activities within the Republic of Poland and has been sent to Poland in order to perform services of a temporary or ad hoc nature (export service) (type D permit); performs work for a foreign employer and has been sent to the Republic of Poland for a period not exceeding 3 months within a subsequent 6-month period for purposes other then those indicated in item 2-4 above (type E permit). Work permits are issued exclusively upon the written request of the entity that wishes to employ a foreigner to perform work and are issued by the appropriate regional governor [wojewoda] who, in most cases, is the regional governor of the region in which the filing entity has its registered office or place of residence or is the location of the registered office of the entity that the foreigner is being sent to. 4. Terms and conditions for the issuance of a work permit An employer filing for the issuance of a work permit shall: in the case of a type A work permit - ensure remuneration for the foreigner that shall not be lower than that paid to employees carrying out similar work or working at a similar position; in the case of type C, D and E type work permits - ensure remuneration for the foreigner that shall not be more than 30% lower than the average monthly salary in the given province [województwo]; in the case of type B work permit - demonstrate an appropriate level of revenues in the tax year preceding the submission of the application as well as the appropriate level of employment; in the case of type A work permits - carrying out a so-called market demand test, i.e. obtain information from the county administrator [starosta] having jurisdiction over the registered office or place of residence of the entity wishing to hire a foreigner as to the inability to meet staffing requirements on the basis of the register of unemployed or seeking work registers or of an unsuccessful outcome of a recruitment process carried out for the employer. The above requirement means that the employer must strive towards maximum use of local resources by seeking out employees among Polish nationals.

13 The regional governor shall refuse to issue a work permit if the employer does not comply with requirements related to the presentation of the above information or other specific requirements foreseen for the obtainment of a work permit. Furthermore, an employer that has provided false testimony or concealed the truth, has filed false documents or is attempting to hire a foreigner whose qualifications do not reflect the nature of work being given to him/her in the case of a regulated profession, shall also be refused a work permit. Additionally, an employer that has been found guilty of the illegal employment of foreigners and has once again been found guilty of a similar offence within a two-year period, cannot count on obtaining a permit. Also foreigners whose stay in Poland is not tolerated cannot count on obtaining a work permit within the Republic of Poland. A work permit is issued to a given foreigner. Additionally, it defines the entity hiring the foreigner to carry out work as well as the position or nature of work that is to be carried out y the foreigner and the term of validity of the work permit. 5. Simplified procedures for the issuance of work permits The issuance of a work permit in respect to certain groups of foreigners does not require the carrying out of proceedings associated with the requirement to first seek out employees from among the local unemployed workforce or to meet other detailed terms associated with the issuance of such permits. The list of persons that shall obtain a work permit even if candidates for the given post may be found from among the local workforce is defined in the Act as well as the Regulation of the Minister of Labour and Social Policies dated 29 January 2009 regarding defining circumstances in which a work permit is issued to a foreigner regardless of detailed terms defined for the issuance of a work permit to a foreigner (Journal of Laws of 2009, No. 16 item 85 as amended). These include, i.a.: the family members of diplomatic and international organisation personnel as well as their private house servants, those authorised on the basis of legal acts issued by authorities appointed pursuant to the Agreement establishing an Association between the European Economic Community and Turkey. Furthermore, the following persons are exempt from having to obtain information from the county administrator [starosta] concerning the situation on the labour market: persons authorised to represent a foreign entrepreneur in his branch or representative office; persons being nationals of the Republic of Belorussia, the Republic of Georgia, the Republic of Moldavia, the Federation of Russia or the Ukraine and carrying out nursing-care work or working as household servants for natural persons; persons being nationals of the Republic of Belorussia, the Republic of Georgia, the Republic of Moldavia, the Federation of Russia or the Ukraine who, in the period directly preceding the filing of an application for the issuance of a work permit, have - for a period of no less than three months - carried out work for the same entity on the basis of a representation of intent to entrust such a person with the performance of work and registered with the appropriate county [powiat] labour office having jurisdiction over the registered office or place of residence of the entity (person) submitting such a representation; sports trainers or sportsmen; doctors and dental doctors undergoing training or carrying out a specialisation programme. 6. Term of a work permit A work permit is issued for a fixed period of time, however no more than 3 years and may be extended.

14 In the case of foreigners: holding a position in the Management Board of a legal entity that, as at the date of submission of the application, employed more than 25 persons, a work permit may be issued for a period of no more than 5 years, that have been sent out by a foreign employer to carry out the export of services, the regional governor [wojewoda] shall issue the work permit for the term of the assignment. A work permit shall remain valid if: the foreigner is entrusted, for a period not exceeding 30 days in a calendar year, to carry out work other than that defined in the work permit or is assigned to a different post, the registered office or place of residence, the name or legal form of the hiring entity changes, the employer, or its part thereof, is taken over by another employer, the place of employment, or its part thereof, is taken over by another employer, the person designated by the foreign employer to represent him before the regional governor [wojewoda] is changed, however under the condition that the regional governor that has issued the permit is immediately notified of such a change. Furthermore, a work permit may remain valid if: the foreigner, in agreement with the entity hiring him/her to work in the Republic of Poland, has not commenced work within three months of the initial date of validity of the work permit, the foreigner, in agreement with the entity hiring him/her to work in the Republic of Poland, has suspended the performance of such work for a period exceeding three months, if the cause of such delay or the suspension the performance of work is justified and the entity hiring the foreigner to carry out such work has informed the regional governor that issued such a permit in writing of such a situation. 7. Exemption from the obligation to obtain a work permit Provisions concerning the hiring of foreigners in the Republic of Poland in certain cases foresee an exemption from the obligation to obtain a work permit. Such, pursuant to the provisions of the Act, relate to i.a. foreigners: that are employed by employers having their registered office in one of the Member States or in a European Economic Area country not being a Member State that have been temporarily sent to Poland by their employer to provide services, who hold a fixed-term residency permit in conjunction with an intent to carry out work or to conduct commercial activities, who hold a fixed-term residency permit in conjunction with an intent to commence or continue their studies or vocational education, hold a fixed-term residency permit for reuniting with family, hold a valid Poles Card [Karta Polaka]. Additionally, the regulation of the Minister of Labour and Social Policies of 30th Aygyst 2006 concerning the carrying out of work by foreigners without the need to obtain a work permit (Journal of Law of 2006, No. 156 item 1116 as amended) lists categories of persons that an employer, due to the specific nature of tasks being carried out by them or their status, may hire without the need to obtain a work permit to work in Poland for such persons. These are, i.e.: persons who organise trainings, participate in professional internships or supervise the performance of European Union programmes or other international aid programmes,

15 teachers of foreign languages as well as persons leading classes in a foreign language and acting under contracts and international agreements, members of armed forces or of civilian staff who work in international military structures, permanent correspondents of foreign mass media, those giving occasional lectures, papers or presentations, athletes representing a Polish entity during the course of sports competitions, full-time students during the period July-September, students, who perform professional internship work to which they have been referred, persons delegated to work in culture institutions of foreign countries, citizens of the Republic of Belorussia, the Republic of Georgia, the Republic of Moldavia, the Federation of Russia or the Ukraine who work during a period not exceeding 6 months in 12 consecutive months on the basis of employer's declaration on the intention to employ such nationals registered in the district employment agency competent for the place of residence or registered office of the entity submitting such declaration. 8. Employer obligations towards foreigners The entity hiring a foreigner that requires a work permit is required to, i.a.: conclude an agreement with the foreigner in written form on terms and conditions defined in the application for the issuance of a work permit, present to the foreigner, prior to the signing of such an agreement, a translation of such into a language understood by the foreigner, present to the foreigner one copy of the work permit, inform the foreigner of actions being undertaken in conjunction with proceedings relating to the issuance or extension of a work permit as well as decisions concerning the issuance, refusal to issue or the revokement of such a permit, exercise due diligence in proceedings associated with the issuance of and extension of a work permit for the foreigner. H. Labour regulations 1.Types of employment contract An employment contract can be signed: for an indefinite term for a fixed term for the time it takes to complete a specific task to replace an employee - in the event of his or her justified absence from work; the employer can hire another worker under a fixed term employment contract for the period of absence All of these contracts can be preceded by an employment contract for a trial period of no more than three months. Once a third subsequent fixed-term contract is signed, it is deemed to have become an indefinite term contract. An employment contract is concluded in writing and should be signed no later than on the day the employee starts working. If no contract is signed, then the employee should be provided with written confirmation of the contract conditions on the day he starts work at the latest. Any changes in

16 employment contract conditions should also be made in writing. The employer should include additional written information about certain engagement terms to the employment contract. Labour Code provisions set out the regulations that should be included in the employment contract and in the additional written information. 2. Ways of ending a work relationship An employment contract can be dissolved: with the agreement of the parties, by one of the parties giving notice (employer or employee) with a notice period, by one of the parties giving notice without a notice period. A contract concluded for a fixed term or for the time it takes to complete a specific task is dissolved at the end of the term or when the task is completed (although it can, in certain circumstances, be dissolved earlier). 3a. Termination with the agreement of the parties Any employment contract can be terminated with the agreement of the parties; at any time and on the initiative of either party; irrespective of the type of contract and possible special duration protection. If a contract is terminated in this way on the employer s initiative, he may sometimes be obliged to pay the employee severance pay (particularly in the case of terminations for reasons for which the employee is not responsible). 3b. Termination with notice A contract is terminated with notice when either the employer or employee notifies the other party that he intends to terminate the work relationship with notice. The employment contract is then terminated at the end of a specified period, i.e. at the end of the notice period. An employment contract can only be terminated by the employer if the conditions set out in the Labour Code have been met. One of these is that the employer has to give specific, genuine reasons for the termination. Notice periods The length of the notice period depends on the type of contract and the position held by the employee. During the notice period, the employee is entitled to receive his normal salary. Employment contract notice periods: a) Employment contract for a trial period o Three working days, if the contract is concluded for not more than two weeks o One week, if the contract is concluded for more than two weeks but less than three months o Two weeks, if the trial period is three month b) Employment contract for an indefinite term o Two weeks, if the employee has worked for the employer for not more than six months o One month, if the employee has worked for the employer for at least six months but less than three years o Three months, if the employee has worked for the employer for at least three years Replacement contract - three working days

17 Employment contract for a fixed term - two weeks, but on the condition that the contract was concluded for at least six months and the parties stated clearly in the contract that it could be terminated with notice Notice of changes Notice of changes to work conditions or pay make it possible for the employer to change - under rules specified in the Labour Code - engagement conditions in the employment contract to conditions less favourable to the employee. Employment contract notice provisions apply to notices of changes to work conditions or pay. This means, among other things, that the employer should give reasons for the change. A notice of change can also lead to the termination of the employment contract should the employee not accept the proposed new conditions. 3c. Protection against termination Under labour law, employers are prohibited from giving notice to certain employees and, in some cases, they are also prohibited from terminating an employment contract without notice. This protection covers employees who find themselves in a specific situation or who belong to a specific group, among others: employees who are on vacation, maternity leave or unpaid carer s leave employees who are on sick leave with a doctor s certificate employees approaching retirement age, i.e. who have less than four years before being entitled to a pension if the employment period allows them to attain this pension entitlement once they reach this age employees who are pregnant union activists 4. Working hours Working hours cannot exceed eight hours in any 24 or an average of 40 hours in an average five-day working week in a reference period applied by the employer of not more than four months. However, the Labour Code provides an exception to this rule, e.g. relating to work which, due to production technology, cannot be broken off (so-called 24-hour shift work); in this case, the number of working hours in any 24 can be extended. Overtime refers to hours which the employee works over and above normal working hours. Overtime is permitted: if rescue action is required to protect human life or health, to safeguard property or the environment or to carry out emergency repair work if the employer has special needs Overtime cannot exceed 150 hours in any one calendar year for each worker, unless a collective bargaining agreement, the employer s work regulations or the employment contract provide otherwise. Weekly working hours plus overtime cannot exceed an average of 48 hours in the reference to period applied by the employer. For overtime hours worked, the employee is entitled, in addition to his normal salary, to a supplement of: 100% of pay for working nights, Sundays and bank holidays, which are not, under his work schedule, the employee s working days, or days off given to the employee in lieu of Sundays or bank holidays worked in accordance with his work schedule