| WHY
POLAND?
LOCATION
 The British
historian Norman Davies entitled his history about Poland
The Heart of Europe. This perfectly describes Poland's
location; it is a bridge between the west and the east,
the north and south of the continent. After 1 May 2004, Poland's eastern
borders have become a part of the EU's external border
and now the country is a launch pad to the Eastern markets.
Investments in Poland give companies the opportunity of direct
access both to the markets of the European Union, as well
as the remaining markets of the CEE. Thanks to locating capital
in Poland investors gain easy access to 500 million population
in Western Europe and 250 million in Eastern Europe. Undertaking
business activity in Poland gives the opportunity of using
Polish experience in commercial relations with the former
Eastern block, as well as Russian Federation states.
PEOPLE
The structure of Polish society is one of the key factors that
make Poland an attractive place for FDI. In 2003 PAIiIZ (Polish
Information and Foreign Investment Agency) commissioned a
survey among foreign investors who between them employ
over one million Polish workers.
Foreign investors rate highly the skills and commitment of
Polish employees. In many cases the Polish subsidiaries of
foreign companies were judged to be the most effective units
worldwide according to their management.
Market size is one of the most important reasons why
foreign investors decide to locate in Poland. With its
population of almost 40 million Poland is the largest market
in Central Europe and the eighth largest in the continent,
as well as 30th in the world. Its population makes
Poland a market larger than the combined markets of all
the other nine accession countries that entered the EU
together with Poland in May 2004.
Source:
Eurostat
The majority of Poles live in town and cities and 42% of
them in the 42 largest agglomerations of more than 100,000
inhabitants.
POLAND
FOR INVESTORS
In 1989 Poland initiated wide-ranging political and economic transformation which
culminated in its entry into the European Union on
1 May 2004. As a part of the Single European Market,
Poland is still undergoing economic and social changes. With
year-on-year economic growth at 6.9% (Q1 2004), a young, well-educated
and ambitious labor force, location at the very heart of the
continent, low corporate income tax (19%), Poland has
become an exciting place for investors from around the world. Indeed, the
latest AT Kearney's Foreign Direct Investment Confidence
Index ranks Poland fourth in the world and first in Europe
as a destination for FDI.
Poland's economic growth, at 6.9% in the first quarter of
2004, is much stronger than in the Euro zone (1.3%) and
higher than an average of 25 EU members (1.6%). Poland's growth
has been driven to a significant extent by export growth,
industrial production and investment. Employment is slowly
rising. Set out below is more detailed information on
particular indicators.
Gross
Domestic Product
Poland's economy was also one of the fastest growing in Q1 2004
in comparison to other European countries.
Poland's GDP at current market prices was estimated at
$207 billion in 2003, (or $5,400 per capita). In terms
of Purchasing Power Parity, this equates to $10,900 per
capita, having grown from $4,400 in 1990.
Consumer
Price Index
Consumer price inflation has been dropping since the beginning
of transformation. Average annual inflation in 2003 was 0.8%
(1.9% in 2002). According to the Economist Intelligence Unit
forecast, CPI in 2004 will reach the level of 2.0%.
Yearly
FDI inflows according to
NBP, PAIiIZ, UNCTAD and Economist Intelligence Unit
(1995-2002, $m).
| |
1996 |
1997 |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
| NBP
(balance of payments on cash basis) |
4,498 |
4,908 |
6,365 |
7,270 |
9,341 |
5,713 |
4,131 |
4,225 |
| PAIiIZ |
5,197 |
5,678 |
9,574 |
7,891 |
10,601 |
7,147 |
6,064 |
6,420 |
| UNCTAD |
4,498 |
4,908 |
6,365 |
7,270 |
9,341 |
5,713 |
4,119 |
4,225 |
| Economist
Intelligence Unit |
4,500 |
4,900 |
6,400 |
7,300 |
9,300 |
5,700 |
4,100 |
4,200 |
United Nations Conference on Trade and Development (UNCTAD)
POLISH
LAW
The principal legal act governing business activity n Poland
is the Act of 2 July 2004 - Economic Freedom Act. It
regulates undertaking , running and closing business on the
territory of Poland, as well as tasks of the public administration
within this regard.
Foreign persons1
from the European Union 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.
The same rules also apply to foreigners living outside the
EEA who:
- received
a permit to settle on the Polish territory,
- a
consent for tolerated stay or a status of refugee granted
in the Republic of Poland
- enjoy
temporary protection within this territory.
Other foreign persons have the right, unless international
agreements state otherwise, to undertake and run business activity
only in the following forms:
- limited
partnership,
- limited
joint-stock partnership,
- limited
liability company,
- joint-stock
company.
They have also the right to enter these kind of partnerships
or companies and purchase their shares.
Furthermore foreign entrepreneurs2
may run business activity in the form of branch office,
and also set up representative offices on the territory
of Poland.
1Within
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 organizational unit
with a seat abroad, which is not a legal entity,
but has a legal capacity.
2According to the law a foreign
entrepreneur is a foreign person running a
business activity abroad.
PURCHASE
OF REAL ESTATE BY FOREIGNERS
Purchasing property by foreigners is governed by
the provisions of the Act of 24 March 1920 on Purchase of Real
Estate by Foreigners with further amendments.
'Foreigner' within the meaning of the Act is:
- an
individual who is not a Polish national,
- a
corporate entity having a registered place of business
abroad,
- a
partnership of persons referred to above, which does not
have a legal personality, has a registered place of business
abroad and is incorporated under laws of foreign countries,
- a
corporate entity which has a registered place of business
in the Republic of Poland and is controlled directly or
indirectly by persons or partnerships referred to above.
The general rule is that foreigners require a permit from the
Minister of Internal Affairs and Administration to buy real
estate.
Cases where a permit is required
A permit is required in each case of real estate purchase, i.e.
acquisition of ownership title or perpetual usufruct right to
real estate on the basis of a legal transaction.
The following require a permit:
- purchase
of real estate;
- purchase
or taking up of shares in a commercial company which has
a registered place of business in the Republic of Poland
and is the legal owner or perpetual usufruct of the real
estate.
A permit is required if, by purchasing shares in a company which
is the legal owner or perpetual usufruct of real estate, a foreigner
will take control of that company, or if shares in an already-controlled
company are acquired or taken up by a foreigner who is not the
company’s shareholder. A controlled company is a company in
which a foreigner or foreigners holds or hold, directly or indirectly,
more than 50% of votes at the meeting of partners or the general
meeting of shareholders or has or have a dominating position
within the meaning of the Code of Commercial Partnerships and
Companies.
The Minister of Internal Affairs and Administration may grant
the foreigner a permit to purchase real estate or shares in
a company owning real estate if there is no probability of threat
to national security, public safety or public order and if the
foreigner can demonstrate the existence of circumstances confirming
his ties with Poland.
The provisions of the Act do not apply to company transformations
or transfer of ownership of real estate by intestate succession.
No legal acts or entries of ownership titles or perpetual usufruct
rights may be made without a permit from the Minister of Internal
Affairs and Administration. If special conditions are specified
in the permit, evidence must be produced, in the form of official
documents, that those conditions have been complied with.
If effected in breach of the provisions of the Act, the purchase
of real estate or shares by a foreigner is null and void.
Issuance of permits to entrepreneurs from the European Economic
Area (EU plus Iceland, Norway and Lichtenstein)
On 1 May 2004, the general rule whereby a permit is required
for purchase by foreigners of real estate or shares in companies
which are legal owners or perpetual usufructs of real estate
ceased to apply to nationals and entrepreneurs residing or established
in the territory of the European Economic Area (EEA).
However, the Act provides for a number of derogations in this
respect. EEA nationals and entrepreneurs must obtain a permit
in the following cases:
- to
purchase agricultural and forest land - for 12 years
after Poland became a member of the EU (i.e. until 2 May
2016),
- to
purchase a second home (i.e. the real estate which is intended
to be developed for residential or recreational purposes
and which will not be used by a foreigner as the habitual
residence) - for five years after Poland became a member
of the EU (i.e. until 1 May 2009).
However, EEA foreigners will not be required to obtain a permit
during those transitory periods in the following cases:
- to purchase agricultural land situated in:
- the
following eight western and northern voivodships: Dolnool1skie,
Kujawsko-Pomorskie, Lubuskie, Opolskie, Pomorskie, Warminsko-Mazurskie,
Wielkopolskie, Zachodniopomorskie – after the end of the
seven year period since the execution of a lease contract
(date of execution must be certified), if during that period
they have pursued farming in person on the land concerned
and have legally resided in Poland,
- the
following eight central are eastern voivodships: Lubelskie,
Lódzkie, Ma3opolskie, Mazowieckie, Podkarpackie, Podlaskie,
Ol1skie, Owietokrzyskie – after the end of the three year
period since the execution of a lease contract (date of
execution must be certified), if during that period they
have pursued farming in person on the land concerned and
have legally resided in Poland,
- to purchase a second home:
- if
the purchaser has legally and continuously resided in Poland
for at least four years, or
- for
the purpose of pursuing business activities in the form
of tourist services.
Obtaining a permit
Permits are issued by the Director of the Department of Permits
and Licences of the Ministry of Internal Affairs and Administration
on authorisation from the Minister of Internal Affairs and Administration.
Permits are issued in the form of an administrative decision
on the basis of a foreigner’s application. The provisions of
the Administrative Procedure Code apply to proceedings connected
with the purchase of real estate.
A permit application for a permit should identify the applicant
and his legal status; the real estate to be purchased; the seller;
the legal form of real estate purchase, and should state
the purpose of the property purchase.
A foreigner seeking to obtain a permit must enclose, along
with the application, the documents supporting the circumstances
indicated in the application and his/her ties with Poland as
well as other documents demonstrating that the real estate will
be purchased in a proper manner.
The application must be in Polish and all annexes in foreign
languages must be translated into Polish by a certified translator.
The Minister of Internal Affairs and Administration should examine
the application within two months. The permit is only a prerequisite
for purchase and is not binding for the seller. The purchase
of real estate must be executed in a notarised form.
The permit is valid for two years from the date of issue. A
binding purchase agreement should be made and executed within
that time limit.
A foreigner who intends to purchase real estate may seek a promise
of permit issuance. An application for the permit promise, including
its annexes, must comply with all the requirements applicable
to a permit application.
The promise is valid for a year from the date of issue. The
permit cannot be refused while the promise is valid, unless
there have been changes in factual circumstances that are significant
for the determination of the case.
Exceptions from the obligation to obtain a permit
- purchase
by a controlled corporate entity, for its statutory purposes,
of undeveloped real estate in urban areas if their
total area in the entire country does not exceed 4,000 m2
- purchase
of independent residential premises
- purchase
of real estate by a foreigner who has been residing in Poland
for at least five years from the issuance of a permanent
residence permit;
- purchase
by a foreigner whose spouse is a Polish national and who
has resided in Poland for at least two years from the issuance
of a permanent residence permit, of real estate that will
become the joint property of both spouses;
- purchase
of real estate by a foreigner if, on the day of purchase,
the foreigner is entitled to statutory succession after
the assignor of the real estate, provided that the assignor
was its legal owner or perpetual usufruct for at least five
years;
- purchase
of real estate by a foreign bank, which is a mortgagee,
after an ineffective auction under enforcement proceedings;
- acquisition
or taking up by an indirectly or directly controlled bank
of shares in a company which has a registered place of business
in the Republic of Poland and is the legal owner or perpetual
usufruct of real estate in connection with enforcement of
the bank’s claims for banking services rendered.
Exemption from the obligation to obtain a permit does not apply
to real estate situated in the vicinity of state borders and
agricultural land of more than 1 hectare.
CONSTRUCTION
PROCESS
We would like to provide you with crucial, from the investors’
perspective, information regarding the construction process
in Poland. These issues are mainly regulated by the Act of
27 March 2003 on Master Planning (Journal of Laws No. 80,
Item 717, as amended), hereinafter referred to as the Master
Planning Law and the Act dated 7 July 1994 Construction
Law (Journal of Laws No. 89, Item 414, as amended), hereinafter
referred to as the Construction Law. To make the whole
thing easier and more useful, we would also like to draw your
attention to some practical issues related to the construction
process in Poland.
Prior to the purchase of real property for the purpose
of development, certain essential information must be checked,
including :
- whether
the real property is included in the local master plan;
- whether
the function of the property to be developed is agricultural,
industrial or construction; and
- whether
the seller of the real property holds an appropriate
legal title to it and whether other entities, in particular
state or local authorities, hold first refusal or other
rights regarding the real property to be purchased.
All the information regarding the real property to be
purchased, including the above listed, stem from the following
documents:
- land-survey
plans, on the basis of which it may be checked whether
the property has access to public road, electrical and gas
installations, central heating, water supply and sewage
disposal systems;
- plans
specifying the division of the land into plots, with
an indication of the numbers and area of plots of which
the real estate to be purchased is comprised;
- a
current excerpt from the land and mortgage register
of the real estate to be purchased, after its number is
found and the competent department of land and mortgage
registers determined; it is also essential to read the information
contained in the land and mortgage register at the moment
of purchase transaction,
- notarial
deeds confirming the seller’s legal title to the real
property to be purchased.
If we assume that the property’s legal situation is clear
and that the real property may be used in the intended manner,
the construction process can be started. The construction process
includes, among other things, obtaining of a final building
permit issued on the basis of Construction Law and administrative
procedure regulations. The permit may be issued:
- directly
on the basis of the local master plan; or
- if
there is no such plan, on the basis of the decision on
planning conditions (planning decision) during its validity
period.
The construction process should end with obtaining of an occupancy
certificate, in the cases required by law. Sometimes, if
the investment is of a specific nature, atypically located or
has other specific features, certain additional decisions may
be required before the investment may be properly started or
completed.
Unfortunately, at the beginning of 2004, the majority
of master plans in Poland expired. Therefore,
until the competent authorities adopt new studies and master
plans, the investors must follow the procedure described in
Section 2 below. Therefore, the investor must obtain the Planning
Decision, without which the building permit may not be issued.
SPECIAL
ECONOMIC ZONES
A special economic zone (SEZ) is a designated area within
the territory of Poland in which business activities (manufacturing
or distribution) can be conducted on special, preferential
terms. Currently, there are 14 SEZs in Poland, their aim being
to support regional development.
Since 2001, new regulations on SEZs and public aid have been
in force. After January 1, 2001, entrepreneurs who have obtained
a permit to conduct activities in SEZs have been eligible
for income tax exemption, which is regarded as a form of public
aid.
Tax and Non-tax Reliefs (Incentives) in the SEZs
The following forms of tax relief and other incentives to
encourage investment are available in the SEZs:
- Income
tax exemption related to income from activities conducted
in Special Economic Zones under the permit
- Relief
in real estate tax (depending on a decision of the local
authorities)
- Relief
in tax on means of transport (depending on a decision of
the local authorities)
- Customs
duty reliefs
- Non-tax
incentives relating to employment of new employees
- Non-tax
incentives related to investment procedures in the SEZs.
Income Taxes in Poland
Corporate Income Tax
All legal entities and other organizations without legal personality
(except partnerships) that conduct business activities in Poland
are liable to corporate income tax (CIT); in 2004 – at a flat
rate of 19%.
Personal Income Tax
Polish personal income tax has three thresholds. The rates on
taxable personal income for 2004 are: 19%, 30% and 40%.
Poland has signed double taxation agreements with most countries.
Thus, nationals of those countries, coming to work in Poland,
may choose which tax system is the more advantageous under the
circumstances.
Obligations of Entrepreneurs Operating in the SEZs
In order to benefit from tax incentives, which are a form of
regional aid, entrepreneurs have to fulfill obligations resulting
from general provisions of the Polish law as well as the obligations
set out in the permit.
General Conditions for Receipt of Regional Aid
Respective regulations specify the following conditions for
SEZ entrepreneurs to be entitled to benefit from regional aid:
- Investment
of a minimum of EUR 100,000;
- Business
activities related to that investment conducted for at least
5 years from the date on which the aid was granted;
- The
newly created jobs maintained for at least 5 years (regional
aid for employment).
The
entrepreneur who conducts business activities in a SEZ under
a permit and who enjoys tax reliefs should submit regular
reports on received public aid to the President of the Office
for Competition and Consumer Protection.
If the entrepreneur is a foreign entity, as defined by the
Polish law, in order to purchase land in a SEZ he must obtain
a permit from the Minister of Interior and Administration.
WE WISH TO THANK FOR THE SOURCE INFORMATION TO THE CHAPTER
"WHY POLAND?"
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