Legal aspects

Business entities

A business entity may take one of the following forms:
1. a sole trader,
2. a legal person, including limited liability companies,
3. an organisational unit without legal personality, including partnerships as general
partnerships, professional partnerships, limited partnerships and partnerships
limited by shares.

Registration of business entities

Commercial companies, partnerships and branches of foreign business entities are registered in the Register of Business Entities which is a part of the National Court Register.

Sole traders are registered in the Register of Business Activity maintained by territorially competent communes.

Representative offices of foreign business entities are registered in the register of representative offices of foreign business entities held by the Minister of the Economy.

Conduct of a business activity by foreign business entities.

Business entities from the member states of the European Union (EU), the European Free Trade Association (EFTA), the European Economic Area (EEA) as well as the states that are not members of the EEA, but due to conventions signed with the European Community are granted the freedom of economical activity, may start and conduct business activity in Poland in all forms available for Polish business entities. The same rule applies to foreigners other than mentioned above who obtained permission for settlement in Poland, a residence permit for EU long-term residents, or other permissions for residence in Poland provided by Polish Law.

Business entities from the member states of the EU, the EFTA, the EEA and the states that signed with the European Community and its member states conventions regulating freedom of service can benefit from freedom of rendering services on the same basis as the EU nationals.

Any other foreign persons may establish and conduct a business activity in Poland only in the form of a limited partnership, a partnership limited by shares or a limited liability company, unless any international agreement provides otherwise. Such foreign business entities can also join such partnerships or companies, and acquire or hold shares in them.

Conduct of a business activity by foreign business entities

Business entities from the member states of the European Union (EU), the European Free Trade Association (EFTA), the European Economic Area (EEA) as well as the states that are not members of the EEA, but due to conventions signed with the European Community are granted the freedom of economical activity, may start and conduct business activity in Poland in all forms available for Polish business entities.
The same rule applies to foreigners other than mentioned above who obtained
permission for settlement in Poland, a residence permit for EU long-term residents, or other permissions for residence in Poland provided by Polish Law.
Business entities from the member states of the EU, the EFTA, the EEA and the states that signed with the European Community and its member states conventions regulating freedom of service can benefit from freedom of rendering services on the same basis as the EU nationals.
Any other foreign persons may establish and conduct a business activity in Poland only in the form of a limited partnership, a partnership limited by shares or a limited liability company, unless any international agreement provides otherwise. Such foreign business entities can also join such partnerships or companies, and acquire or hold shares in them.

Companies

Foreign business entities conduct their business activity in Poland mainly in the form of limited liability companies. The Commercial Companies Code (hereinafter called CCC) provides for two forms of limited liability companies - spółka z ograniczoną odpowiedzialnością (abbr. sp. z o.o.) and spółka akcyjna (abbr. S.A.).

Partnerships

Partnerships which are: general partnerships, limited partnerships or partnerships limited by shares and professional partnerships, have the following common characteristics:
• Lack of legal personality
Partnerships have no legal personality separate from that of the individual partners. However, partnerships are in a position to acquire rights on their own behalf, including ownership of real estate as well as other rights in property, and to enter into contractual obligations, sue and be sued.
• Subsidiary liability of the partners
A creditor of the partnership may recover the partnership’s debts from a partner’s personal assets provided that enforcement proceedings against the partnership’s assets have proved ineffective. However, this rule does not apply to a partnership’s obligations, which arose before its entry into the Register of Business Entities, which may be enforced against the partner’s personal assets regardless of the result of enforcement against the partnership’s assets.
• Lack of compulsory minimum capital
There is no requirement for a minimum capital to establish a partnership, as it does in the case of companies. The exception to this rule is a partnership limited by shares where the minimum share capital shall amount to PLN 50,000.
• Transfer of partners’ rights
The rights and obligations of a partner in the partnership are transferable to a third party if it is expressly provided in the partnership articles or if all the other partners agree to.

General partnership (spółka jawna, abbr. sp. j.) - partners are liable for the partnership’s obligations personally, without limit, jointly and severally with the other partners and the partnership.

Professional partnership (spółka partnerska, abbr. sp. p.) - may be created only for professions listed in the CCC or other statute e.g. advocates, legal advisers, notaries, doctors, architects, psychologists. In a professional partnership a partner is not liable for obligations that arise from the performance of the professional activity of the partnership by other partners.

Limited partnership (spółka komandytowa, abbr. sp. k.) - liability of at least one partner (komplementariusz) is unlimited and the liability of at least one other partner (komandytariusz) is limited up to the amount determined in the partnership articles (so-called ‘commandite sum’/suma komandytowa).

Partnership limited by shares (spółka komandytowo-akcyjna, abbr. S.K.A.) -
designed for entities which wish to obtain the capital by issuing shares. In this type of partnership, at least one partner has unlimited liability (komplementariusz) and at least one is a shareholder who is not liable for the obligations of the partnership beyond his shareholding.

Branches

A foreign business entity may also conduct a business activity in Poland through branches that are registered in the Register of Business Entities, which is a part of the National Court Register.

Representative offices

A representative office does not conduct a business activity other than marketing activity and promotions for the business entity it represents. The representative office should enter in the Register of Representative Offices of Foreign Business Entities conducted by the Minister of the Economy.

Limitations on the freedom of business activity

As a general rule, the establishment and pursuit of a business activity in Poland is free and open to everyone on an equal-rights basis. Nevertheless, regulations of law impose some limitations on the conduct of a business activity.
Several business activities require permits or are considered as regulated activities pursuit of which should be preceded by fulfilling of specific legal terms and conditions.

Moreover the following business activities require a licence:
1) the exploration for and identification of mineral resources, their extraction, the container-free storage of substances and the storing of mining production waste, including in underground mines,
2) the production and marketing of explosives, weapons and ammunition as well as products and technologies for the army and/or the police purposes ,
3) the production, transformation, storage, transmission, distribution and marketing of fuels and energy,
4) the provision of protection and security services for individuals and property,
5) the broadcasting of radio and television programmes,
6) air transport.

A business entity intending to start a business activity in a field subject to obtaining a licence may apply for a promise to issue such a licence (“promesa”). As a general rule, during the validity of such promise, granting of a licence for the performance of the business activity specified in the promise may not be refused.
The concession authority may withdraw a licence or modify its scope in certain circumstances identified in the statute.

ACQUISITION OF REAL ESTATE BY FOREIGNERS

The acquisition of real estate by foreigners is regulated by the Act of 24 March 1920 on the Purchase of Real Estate by Foreigners (Journal of Laws No. 167/04, Item. 1758) and regulations under that Act.

Acquisition of real estate by foreigners in Poland requires obtaining of an authorisation from the Minister of Internal Affairs and is subject to the Minister of National Defence having no objections thereto. In the case of agricultural real estate, the acquisition is subject to the Minister of Agriculture having no objections.

Requirement for an authorisation applies to: (1) natural persons not having Polish nationality, (2) legal persons not having their registered office in Poland, (3) partnerships of persons indicated in point (1) and (2) having their registered office outside Poland and established under the laws of a foreign country, (4) legal persons and commercial partnerships having their registered office in Poland, controlled directly or indirectly by foreigners described in points (1), (2) and (3).

As a rule, an authorisation is also needed when a foreigner wishes to take over or acquire shares in a company having its registered office in Poland and which company is the owner or perpetual usufructor of real estate in Poland, if as a result of such acquisition of shares, the company will be controlled by foreigners or if the company is already controlled by foreigners, but the shares are acquired by a foreigner not being an existing shareholder of the company.

However, foreigners being citizens or business entities of member states of the EEA or the Confederation of Switzerland do not need any authorisation for acquiring real estates in Poland except for the acquisition of:
a) second residence, within 5 years from Poland’s accession to the EU. The 5-yearterm expired on 1st May 2009.
b) agricultural land and forests, within twelve years from the date of accession to the EU. Nevertheless, this limitation shall not apply to nationals of a country being a member of the EEA or the Confederation of Switzerland who, for at least three years continuously, personally carried on an agricultural activity on the land leased and who have been legally resident in Poland during the same period. In some parts of Poland (mainly western Poland), the required period of residence and leasing of land is extended to seven years.

However the citizens or business entities from EEA can acquire or subscribe without any limitation for shares in companies being the owners or perpetual usufructors of the agricultural lands and/or forests.

EMPLOYMENT OF FOREIGN NATIONALS

Work Permit

Permission is required for foreigners who wish to work in Poland, with the following exceptions:

1) No work permit is required for foreigners being:
a) citizens of member states of European Union,
b) citizens of member states of EEA but not belonging to EU,
c) citizens of the Confederation of Switzerland,
d) citizens of countries not being members of the EEA, but entitled to benefit from the liberty of flow of persons on the basis of conventions concluded by those countries with the European Community and its members.
e) members of families of foreigners mentioned above.

2) Furthermore, the following persons do not require a work permit:
Foreigners who have obtained permission for settlement, a residence permit for European Communities long-term residents, approval for tolerated residence, or “refugee” status in Poland, benefiting from temporary protection in Poland or holding a stay permit for a definite period of time which has been granted in relation to the holding of a residence permit for an EU long-term resident granted by another Member State.

3) Citizens of countries neighbouring to the Republic of Poland, not being member states of European Union (citizens of Belarus, Russia, Ukraine) are allowed to work in Poland without a working permit for 6 months within 12 following months.

TAXES AND EXPENSES RELATED TO THE PURSUIT OF A BUSINESS ACTIVITY IN POLAND

Taxes

Three major taxes, which have the greatest impact on business activity in Poland are personal income tax (PIT), corporate income tax (CIT) and value added tax (VAT).

Personal income tax

Natural persons residing in Poland are liable to tax on their entire income coming from Polish or foreign sources (unlimited tax liability). Natural persons not residing in Poland are liable to tax only on the income derived within Poland (limited tax liability) as the income from:
a) work performed within Poland on the basis of service contracts, employment and cooperative employment contracts or activities carried on personally regardless of the place of payment of the remuneration,
b) a business activity conducted within Poland,
c) real property located in Poland including sale of this real property.
Business entities or partners being natural persons of the partnership have the option to be taxed at a fixed tax rate of 19%.

Corporate income tax (CIT) - 19%

Companies (legal entities) having its registered office in Poland are subject to CIT. This tax is paid by legal entities including limited liability companies. It has to be mentioned that also non-residents performing business activity in Poland through permanent establishment are subject to taxation. Criteria, on basis of which performing of business activities of non-residents (legal entities) in Poland may be defined as a place of establishment in Poland are defined in Polish income tax regulations as relevant Double Taxation Treaty, concluded between Poland and non-residents’ country or origin - if such agreement is in force.

Dividends

The tax for dividends amounts to a fixed rate of 19%. Limited liability companies with registered offices in the member states of the EEA or the Confederation of Switzerland are exempt from this tax, if they fulfill certain conditions. This exemption applies also to the limited liability companies with their registered office in Poland.
In case of the entities, including the limited liability companies which are not exempt from the CIT, the international conventions on avoiding double taxation may apply.

Partnerships

Partnerships do not pay corporate income tax. The partners pay tax on income resulting from participation in a partnership. Partners may choose to be taxed at the fixed rate of 19%. Those companies are VAT payers.

Value added tax

(hereinafter called VAT)

The basic tax rate is 22%. However, the VAT Act provides for exceptions in which preferential 3 %, 7 % or 0% rates shall Apple.

INVESTMENT INCENTIVES IN POLAND

Special Economic Zones

(hereinafter called SEZ)

The issue is regulated by the Act on Special Economic Zones of 20tth October 1994 (Journal of Laws No. 42/07, Item 274,). At present, there are 14 SEZs in Poland. A business entity may conduct business activity in a SEZ upon the receipt of a permit, which is granted, withdrawn or amended by the Minister for Economy. The Minister of the Economy consults with the administrator governing the SEZ before such grant, withdrawal or amendment. The minimum amount of investment is 100,000 euro.
Business entities who conduct their business activity in a SEZ may be eligible for the incentives like exemption from PIT or CIT and property taxes.

Regional help

Business entities may apply for the regional help on conditions specified in the regulation of the Council of Ministers of 13th October 2006 concerning establishment of the regional help map (Journal of Law Nr 190/06, Item 1402). Depending on the province, the share of the regional help in covering cost qualified for this help are maximal 30%, 40% or 50%. This share can be increased for the medium enterprises
by 10% and for the small ones by 20%. Moreover, business entities may also apply for exemption from the property taxes and the means of transport taxes on conditions specified in the regulation of the Council of Ministers of 5th August 2008 concerning conditions of granting the exemptions from the property taxes and the means of transport taxes (Journal of Law Nr 146/08, Item 927). In addition, they can apply for relief in repayment of taxable liability on conditions specified in the regulation of the Council of Ministers of 17 June 2008 concerning granting the relief in repayment of taxable liability that are the regional help.

Technological credit

Micro, small and medium business entities may apply to the crediting bank for a technological credit for development of their innovative activities consisting in creation and introduction of a new technology to production and services. This credit is granted on conditions specified in the Act on some forms of support for the investment activities of 30th Mai 2008 (Journal of Law Nr 116/08, Item 730). The share of the business entity in the investment must be minimum 25%. This credit is to some extent repaid by the Technological Credit Fund in form of a technological bonus. This entity is then obliged to maintain for minimum 3 years the production or render services in this province, in which the investment was implemented. Otherwise it may lose the technological bonus and be forced to repay the credit by itself.

Help from European Union Funds

(hereinafter called EU Funds)

EU Funds for 2007-2013 are divided into four Operating Programs (Infrastructure and Environment, Human Capital, Innovative Economy and Development of East Poland), to which business entities may apply for financial support.

KARNIOL MAŁECKI I WSPÓLNICY Sp. k.
00-236 WARSZAWA, UL. ŚWIĘTOJERSKA 5/7
www.kmw-adwokaci.pl

March 2011