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Legal aspects of doing business in Poland
Krzysztof Wierzbowski, Managing Partner 18 marca
2014
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Table of contents

• Introduction
• The rule of economic freedom
• Prospects for foreign investments in Poland
• Concessions in Poland
• Legal forms of doing business in Poland
• Forms of business activity permitted under Polish
  law
• The most common legal forms of doing business in
  Poland among foreign investors
• a representative office
• a branch office
• a limited liability company / a joint stock
  company
• European Company (Societas Europea)
• Other issue of importance
• Special Economic Zones (SEZ)

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Introduction

• The rule of economic freedom
• Since Poland's accession to the European Union on
  1 May 2004, all foreign persons (corporate and
  individual) from EU countries, as well as persons
  belonging to the European Economic Area (EEA),
  are allowed to establish and conduct a business
  activity under the same rules as Polish
  entrepreneurs.
• Pursuant to Article 50 of the TFEU, each
  entrepreneur within the European Community has
  the right to choose from among the various forms
  of business activity the one he finds most
  suitable for his business. With this regard, the
  Member States are obliged to realise the rule of
  economic freedom.

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Prospects for foreign investments in Poland
According to the World Investment Report
published by UN agencies on Trade and
Development (UNCTAD) in 2013, in next two years
Poland will be 4th in Europe and 14th most
attractive economy in the world.
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Concessions in Poland

• Currently there are only a few types of business
  activities that require concessions. Concessions
  are granted for an indefinite period of time by
  the competent Minister, in principle.
• However, concessions granted for conducting
  certain business activities are for fixed
  term(3-50 years). There is a stamp duty imposed
  on obtaining a concession, value of which vary
  depending on type of concession.

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Concessions in Poland

• Types of businesses activities requiring a
  concession
• mining industry
• production and trade in explosives, weapon,
  ammunition and products/technology for police
  and army
• production, processing, storage, distribution and
  trade of fuel and energy
• private security services
• dissemination of radio and TV programmes
• air transport
• operation of gambling houses

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Forms of business activity permitted under
Polish law

• a sole proprietorship (subject to notification in
  the Central Registration and Information on
  Business)
• a partnership
• a registered partnership
• a limited partnership
• a limited joint-stock partnership
• a professional partnership
• a limited liability company
• a joint-stock company
• a branch office
• a representative office

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Legal forms of doing business in Poland

• The most important factors determining the choice
  of the legal form of business are the scope and
  nature of business to be conducted in Poland,
  requirements for initial share capital and its
  further increase, scope of shareholders
  liability, legal formalities and costs related to
  establishing and conducting a business operation
  in Poland.
• Poland still has rather formalised rules for
  establishing a business. The process of setting
  up a company may be long (up to 1 month), but
  things are improving in this respect.
• In recent years the process of setting up a sole
  proprietorship has been simplified significantly.
  Currently, own business may be established via
  Internet.

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Legal forms of doing business in Poland

• The most common legal forms of doing business in
  Poland among foreign investors
• a representative office
• a branch office
• a limited liability company
• a joint stock company

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A representative office

• The scope of the representative offices activity
  is limited exclusively to marketing and
  promotional activities, no trading or
  manufacturing is allowed.
• Representative offices are obliged to keep books
  and records according to Polish accounting and
  tax law requirements.
• Representative office must be entered into the
  Register of Foreign Company Representative
  Offices maintained by the Minister of Economy.
• The official cost of registering a representative
  office by the Minister of Economy is PLN 1,000
  (approx. EUR 240)
• Timing up to two weeks after submitting a
  complete applicationto the Minister of Economy

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A branch office

• A branch office is treated as a part of the
  parent company. It may be engaged in almost any
  kind of business activity, provided that it is
  identical (or narrower) than the one conducted by
  its parent company.
• A foreign entrepreneur is obliged to nominate his
  representative in the branch who deals with
  internal affairs, i.e. between an entrepreneur
  and his branch. Hence, in order to represent a
  foreign entrepreneur before third parties,
  separate power of attorney is required.
• A branch office may commence its business
  activity after being registered in the National
  Court Register, obtaining a statistical number
  and registering for tax purposes.

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A branch office

• Official costs approximately EUR 143, including
  the PLN 500 (approx. EUR 119) court fee for
  entering the branch office into the National
  Court Register and the cost of publishing an
  announcement in the official gazette PLN 100
  (approx. EUR 24).
• Timing the registration of a branch office in
  the National Court Register takes up to three
  weeks from the date on which the complete
  application is submitted.

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A limited liability company / a joint stock
company

• The Companies Code attributes corporate identity
  to both of these types of companies. In
  principle, shareholders are not liable for the
  companys obligations, and their risk is limited
  to the value of contributed shares.
• One of the key requirements is a PLN 5,000
  (approx. EUR 1,195) contribution as initial share
  capital for setting up a limited liability
  company and a PLN 100,000 (approx. EUR 23,890)
  contribution as initial share capital for setting
  up a joint-stock company.
• A limited liability company gives shareholders
  biggest influence on a management board (for
  example a right to an individual control).
• Generally a joint-stock company is a form for a
  biggest business with numerous of shareholders.

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A limited liability company / a joint stock
company

• A company is registered in the National Court
  Register upon a written application accompanied
  by documents such as a notarial deed on
  establishing a company in Poland and specimen
  signature of the Management Board members of the
  Polish company. A company shall submit an
  application to a relevant tax office for a NIP
  (tax identification number) and an application to
  statistical office for a REGON (Polish National
  Business Registry Number). All applications are
  submitted in the National Court Register.
• A company must be registered within 6 months
  since the conclusion of articles of association.

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A limited liability company / a joint stock
company

• Official costs a notarys fee (on the notarial
  deed establishing the company) the exact amount
  depends on the value of the initial share
  capital, but must not be higher than PLN 10,000
  (approx. EUR 2,390) and a National Court
  Register fee of PLN 600 (approx. EUR 143) that
  includes the register fee itself and a
  publication fee on the entry into the register in
  the official gazette.
• Timing registering a company in the National
  Court Register takes up on average to three weeks
  from the date on which the complete court
  application is submitted.

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Pan-European enterprises

• In connection with Polands EU membership, it is
  also possible to operate as a European Economic
  Interest Grouping (EEIG), a European Company (SE)
  and a European Cooperative Society (SCE).
• Poland has enacted a Law on the EEIG and SE as
  well as a Law on the SCE incorporating a EEIG
  and a SE has been permitted since 19 May 2005,
  while a SCE since 18 August 2006. Pan-European
  enterprises established in Poland (having its
  registered seat in Poland) are registered in the
  National Court Register (a SCE and a SE) and/or
  in Business Activity Register (a EEIG).
• In setting up a Pan-European enterprise, rules
  set out in relevant EU laws must be observed.
  Among other requirements, these stipulate a
  minimum initial share capital value of EUR
  120,000 (a SE) and EUR 30,000 (a SCE).

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Other issue of importance Special Economic
Zones (SEZ)

• There are currently 14 SEZs in Poland. In
  principle they will be active until 31 December
  2026 (the deadline imposed by the Regulation of
  the Council of Ministers of 23 July 2013).
• A Special Economic Zone is a designated area in
  which manufacturing or distribution activities
  can be conducted on preferential terms. The
  purpose of SEZs is to support regional
  development.

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Special Economic Zones (SEZ)

• The main incentive for investing in one of the
  SEZs is tax exemption (CIT or PIT) up to 50 of
  the investments value, applicable for the
  entrepreneur that in one of the two consecutive
  years employed on average more than 250 employees
  and showed annual net sales of goods/services/high
  er than the zloty equivalent of EUR 50,000,000
  or a balance sheet asset value that exceeded the
  zloty equivalent of EUR 43,000,000 at the end of
  either of the two most recent years.

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Special Economic Zones (SEZ)

• For small and medium-sized entrepreneur, the tax
  exemption is increased by 20 and 10, up to 70
  and 60 of the investments value respectively
  
• A small entrepreneur is defined as an
  entrepreneur that in one of the two most recent
  financial years employed an average of fewer than
  50 employees and showed annual net sales of
  goods/services no higher than the zloty
  equivalent of EUR 10,000,000, or a balance sheet
  asset value that did not exceed the zloty
  equivalent of EUR 10,000,000 at the end of either
  of two most recent years.
• A medium entrepreneur is defined as an
  entrepreneur that in at least one of the two most
  recent financial years employed an average of
  fewer than 250 employees and showed annual net
  sales of goods/services not greater than the
  zloty equivalent of EUR 50,000,000, or a balance
  sheet asset value that did not exceed the zloty
  equivalent of EUR 43,000,000 at the end of either
  of the two recent years.

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Special Economic Zones (SEZ)

• The tax exemption is calculated separately in
  case of large investment. To be classified as
  large the investment shall fulfil all
  following conditions
• the investment is undertaken within 3 years by
  one or several entrepreneurs,
• the fixed assets are combined in an economically
  indivisible way, and
• the costs eligible for the aid exceed the zloty
  equivalent of EUR 50,000,000.

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Special Economic Zones (SEZ)

• The following incentives are possible in a SEZ
• tax exemption (CIT or PIT)
• competitively priced plots of lands
• free assistance in handling formalities connected
  with the planned investment
• exemption from real estate tax

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Warsaw Stock Exchange
Dr Krzysztof Haladyj, Head of Banking
Finance 18 March 2014
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Warsaw Stock Exchange

• the largest stock trading market in CEE
• different platforms of trading
• Main Market
• NewConnect
• Catalyst
• experience with foreign issuers (46 out of 451
  listed)
• capitalisation of 866 billion PLN as of 5 March
  2014

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Benefits of IPO

• raising funds
• bringing liquidity to shares
• receiving market valuation
• marketing and promotion
• providing alternative options for motivating key
  employees
• bringing transparency to organisation

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Concerns related to IPO

• listing costs
• post-IPO costs related to a public company status
• disclosure obligations
• protection of minority shareholders
• responsibility towards investors

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Legal Environment

• Polish law
• Act on Public Offering
• Act on Trading in Financial Instruments
• EU law
• European Commission Regulation (EC) No. 809/2004
• Listing rules
• WSE Rules
• NDS Rules
• Estonian law
• Regulations on disclosure obligations

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IPO Process

• selecting advisors
• building up equity story
• preparation of financial statements
• legal, financial and business due dilligence
• drafting up the prospectus
• approval of prospectus in Estonia
• passporting prospectus th Poland
• role of Polish Commission, NDS and WSE
• admission to trading
• post-IPO

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Taxes in Poland
Karolina Stawowska, Tax Advisor, Partner 18 March
2014
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Taxes in Poland

• Corporate Income Tax 19
• Personal Income Tax 19, 18 - 32
• VAT 23, 8, 0
• Civil Law Activities Tax 1, 2
• There are also other taxes excise tax, gambling
  tax, real estate tax, stamp duty, donations and
  inheritance tax, etc.
• In comparison with Estonia, taxes may not be a
  convincing reason to invest in Poland ?

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Taxes in Poland

• Poland is a country where certain tax structuring
  / tax optimisation schemes are possible
• Wide treaty network
• Implemented EU Tax Directives

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Taxes in Poland

• Tax treatment of specific transaction can be at
  minimum cost secured (confirmed with tax
  authorities) in an individual binding tax
  interpretation
• General Tax Rulings are issued by the Ministry of
  Finance
• Advanced Pricing Agreements contract, usually
  for multiple years, between the taxpayer and tax
  authority specifying the pricing method that the
  taxpayer will apply to its related company
  transactions (proactive way or resolving
  potential tax disputes over transfer pricing).
  Fee approximately 1 of the transaction value
  but not more than approx. EUR 50,000

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Taxes in Poland

• Thin capitalization rules 31 debt to equity
  ratio but there are ways to help taxpayers on
  this issue
• Fees for management services generally tax
  deductible
• No CFC rules introduced so far

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Public procurement in Poland
Tomasz Zalewski, Head of Public Procurement 18
March 2014
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Public procurement volume in EU in 2013
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23 144 procurements in Poland in 2013
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Public procurement volume in Poland in 2012

• 188.478 tender notices published in 2012 within
  Poland (Tenders published in OJEU and the Public
  Procurement Bulletin)
• Market value over PLN 132,7 billion in 2012

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Public procurement volume

• 86,87 of procurements in Poland proceeded in the
  open tender
• Negotiations without publication (including
  single source procedure) 9,22, negotiated
  procedure 0,99, restricted tender 2,53,
  competitive dialogue 0,10
• In 704 cases (2,93) contracts were awarded to
  foreign contractors

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Legal regulations

• Polish public procurement law Act dated
  24.01.2004 (PPL Act) and secondary regulations,
  implementing EU Directives 2004/17/EC (classic
  procurements), 2004/18/EC (sector procurements),
  2009/81/EC (Defence security procurements) and
  2007/66/EC (remedy directive) in case of
  procurements which value exceeds EUR 14,000
• Polish PPL act coherent with EU law and case law
  of the Court of Justice of the European Union
• PPL Act safeguards the principles of
  transparency, fair and open competition, equal
  treatment of bidders

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Where to look for tender notices

• BZP Public Procurement Bulletin in case of
  procurements which value is lower than EU
  thresholds
• OJEU- Official Journal of the European Union in
  case of procurements which value is equal or
  exceeds EU thresholds
• EU thresholds are
• finance sector EUR 134,000 for supplies and
  services and EUR 5,186,000 for construction
  works
• non-government sector EUR 207,000 for supplies
  and services and EUR 5,186,000 for construction
  works
• sector and defence security awarding entities
  414,000 for supplies and services and EUR
  5,186,000 for construction works

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How to compete for a public tender in Poland
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Main award procedures

• Technical dialogue pre-tender consultations
  (not obligatory)
• Open tender one stage
• Restricted tender two stages
• Negotiations with publication three stages

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Tender conditions to participate in bidding
process

• Legal capability entry in commercial register,
  concessions for performing activity in regulated
  markets
• Knowledge and experience connected and
  proportional conditions pertainig to the
  performance of similar to the tender object
  supplies, services or construction works
• Technical capability required for the
  performance of the contract
• Financial standing insurance, financial
  capability, sales

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Tender conditions to participate in bidding
process

• Awarding entities may demand documents provided
  in the Regulation of Prime Minister dated
  19.02.2013 on the type od documents which the
  awarding entity may demand from contractors and
  forms in which such documents may be submitted
• Contractors may rely on capability of their group
  or other contractors
• Contractors may form consortia and compete
  together for the award of the contract
• Rules of the Tender are provided in the tender
  notice and the Terms of Reference

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Subcontracting

• As a general rule subcontracting is allowed
• In some cases the awarding entity may reserve a
  part of the contract to be performed by the
  contractor himself, if it is appropriate to the
  nature of the contract
• Subcontractors may be changed during the
  performance of the contract, subject that if the
  contractor relied on the resources of the
  subcontractor during the tender procedure, the
  new subcontractor must meet the tender conditions
  as provided in ToR
• PPL and Civil Code regulations provide for
  provisions safeguarding the position of
  subcontractors

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Award criteria

• Lowest price 90
• Other award criteria
• Example 1 Guarantee period
• Example 2 Period of performance
• Example 3 Technical parameters
• Example 4 Cost efectivness

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Legal remedies

• Appeal to the National Appeals Chamber (limited
  in case of tenders which value is lower than EU
  thresholds)
• Limited time for filing appeals i.e. 10 days
  from the award of the contract
• NAC reviews the appeal within 15 days from
  receiving it (public hearing before NAC)
• Small costs of cases before NAC (court fee EUR
  4,000 in case of supplies and services or EUR
  5,000 in case of construction works of value
  equal or exceeding EU thresholds)
• Judgments of NAC are subject to review by circuit
  courts substantially bigger costs court fee
  5 of the contract value up to EUR 1,25 mln

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Feel free to contact us
Krzysztof Wierzbowski krzysztof.wierzbowski_at_eversh
eds.pl 48 22 50 50 722
Dr. Krzysztof Haladyj krzysztof.haladyj_at_eversheds.
pl 48 22 50 50 731
Karolina Stawowska karolina.stawowska_at_eversheds.pl
48 22 50 50 746
Tomasz Zalewski tomasz.zalewski_at_eversheds.pl 48
22 50 50 796
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www.eversheds.pl