Foreign Investment Department - PAIiIZRīga, August 27, 2008

Distribution channels and business opportunities in Poland

Business in Poland - introduction Basic principles for LatvianentrepreneursPolish-Latvian Economic CooperationForms of conducting businessForms of conducting business activityactivityTaxationTaxation ((entrepreneursentrepreneurs))Location for Your businessPurchasePurchase ofof realreal estateestate by by foreignersforeignersLabour CostsDistribution channelsInvestment Incentives in PolandAbout PAIiIZInformationPoland - strenghts

Warsaw

Business in Poland - introductionArea: 312 th. km2 - 9th in Europe, 63rd in

the world

Population: 38.5 million - 8th in Europe, 30th in theworld

Number of students: 2 million

Currency: Polish Zloty (EUR 1 ≈ PLN 3.2)

• Large domestic market

• Young and well-

educated workforce

• Central location in

Europe

• Perspectives for

dynamic economic

development

• International legal and

business standards

Equal treatment for domestic entrepreneurs & nationalsresiding or established in the territory of the European Economic Area (EEA)

Foreign investors from EU, EEA and EFTA member states are authorized toconduct economic activity under the same regulations as

Polish entrepreneurs

Basic principles for Latvian entrepreneurs

Polish-Latvian Economic Cooperation

Latvia – 21 on the list of Polishexport partners (0,78%, share)

Poland is 5th import partner of Latvia !!!(7% share)

Latvia 47 on the list of Polish import partners (0,1% share)

Export to Latvia

Source:Ministry of Economy - Poland

Import from Latvia

(2006)

(2006)

Polish-Latvian turnoveris growing !!!

Turnover (in mln EUR)

8,7 mln EUR – total worth of Polish FDI in Latvia in 2007 (Bank of Latvia)

1,4 mln EUR – total worth of Latvian FDI in Poland in 2007 (Bank of Latvia)

Foreign Direct Investments:

Source: Ministry of Economy - Poland

Forms of conducting businessForms of conducting business activity activity Companies:

– Limited Liability Company– Joint-stock Company

Partnerships:– Registered partnership (only EEA)– Professional partnership (only EEA)– Limited partnership– Limited joint-stock partnership– Civil partnership (only EEA)

Entry in the Business Activity Register (Private enterprise) (only EEA)

Representative OfficeBranch Office

Limited LiabilityCompany(Spółka Z.o.o.)

established by one or more individuals or legal persons/shareholders are not liable for the company’s obligations, they bear a risk up to the value of shares contributed/minimum capital: 50 000 PLN (15 600 EUR)

Registeredpartnership(Spółka jawna)

minimum of two individuals or legal persons/each partner is liable without limitation to the extent of his or her entire property/no minimum capital

Entry in theBusiness ActivityRegister (Wpis do ewidencji działalności gospodarczej)

Individual founder/ for small business/ entrepreneur is liable for his or her debts and obligations with his or her entire property/Entry in the Business Activity Register maintained by the head of a commune (wójt), the mayor of a town or the president of a cityno minimum capital

RepresentativeOffice(Przedstawicielstwo)

advertising and promoting the business/ entry in the Register of Representative Offices of Foreign Entrepreneurs (Ministry of Economy) Entry fee: 6 713 PLN (2 000 EUR)

Branch Office(Oddział)

Part of a foreign company. No own legal personality; May conductbusiness activities from the moment of entry into the National CourtRegister. 1000 PLN registration fee + 500 PLN publication cost inOfficial Commercial and Legal Gazette

Selected forms of conducting business (SME)

EstablishingEstablishing a business a business activityactivity-- stepstep--byby--stepstep

Signing the company’s Statut (only for limited liability company and joint-stock company) and arranging for an official adress of the company

Registration of the company in the National Court Register - KRS(registration should be effected the District Court which has jurisdiction over the district in which the company will have its official address); 14 days; PLN 1000 registration fee + 500 PLN publication cost in Official Commercial and Legal Gazette (Monitor Sądowyi Gospodarczy)

Application to the Central Statistical Office for Statistical Identification Number –REGON; 1 day; no charge

Application to the Tax Office for the Taxpayer Identification Number – NIP(Tax Office appropriate for the company’s official address) 3-4 weeks; 21 PLN (stamp duty for the NIP number certificate)

Notifying the Social Insurance Institution i.e. ZUS. 1 day, no chargeSuch an obligation arises after employment of the first employee

Receiving required permissions or licenses

Registration in the Tax Office as a VAT remitter 1 day; 170 PLN (stamp duty for the VAT registration)

Notifying the National Labour Inspectorate 1 day; no charge

Notifying the Chief Sanitary Inspectorate 1 day; no charge

Opening an account at a Polish bank (according to Polish law, every business entity must have an account at a Polish bank) 1 day

Nature of Procedure (2006) Duration in days

Notarize company agreement 1Deposit capital at the bank 1Apply for REGON number 1Register for tax number 24Register for VAT 1*Register at Register of Entrepreneurs 14*File amended application for "REGON" number 1

Register for National Work Inspection 1Register for national sanitary inspection 1Register for social security 1Total: 31* This procedure runs s imultaneous ly with previous procedures . Source:World Bank, Doing Business 2008

Short time needed to start a business

05

101520253035404550

Estonia Latvia Lithuania Russia Poland Spain

31 days

Efforts to implement‘one-stop shop’ policy

TaxationTaxation ((entrepreneursentrepreneurs))Corporate Income Tax (CIT) 19%

Personal Income Tax (PIT) 19% 30%40%

Value Added Tax (VAT)-basic rate – 22%-reduced rates – 7%, 3%-export rate – 0%

RET Max. tax limits in 2008 are: 19.01 PLN/sq.m. for buildings, 0.71 PLN/sq.m. for land and 2% of construction value. In each commune tax rates are set by local authoritiesRoad vehicle tax Imposed only on trucks and buses

15%19% 21% 22% 24% 25%

0%5%

10%15%20%25%30%

Lith

uani

a

Pol

and

Cze

chR

epub

lic

Est

onia

Rus

sia

Ukr

aine

Starting from January 1 2009 the tax rates will be as follows:18% up to income in amount of 85.528 PLN32% above 85.528 PLN

Location for Your business

0 50 100 150 200 250 500 1000 3000 5000

Population per 1 sq km by poviats Big cities & academic centres

Industry in Poland

coal miningenergymetallurgy machinerychemicalconstructionwood/wooden productsfood-stuffs

Population - 38,5 mln

42 cities of over 100 000 inhabitants

14 Special Economic Zones

PurchasePurchase ofof realreal estateestate by by foreignersforeignersType of real estate Entrepreneurs from European

Economic Area (EEA) countriesEntrepreneurs from outside of European Economic Area

Land for business activity

No permit required permit of the Ministry of Interior and Administration required (with exeptions)

Farmland and forests Permit required until 1st May 2016 (unless the person is a leaseholder for 3-7 years and personally conducts agricultural activities)

permit of the Ministry of Interior and Administration required

Second house Permit required until 1st May2009 (unless living in Poland for 4 years or owning "second house" for business activities in tourism)

permit of the Ministry of Interior and Administration required

Self-contained apartment No permit required no permit required

Taking over a company owning/leasing a real estate

No permit required permit of the Ministry of Interior and Administration required

Source: Central Statistical Office

Average wages in PLN (June 2008)

Mazovian (Warsaw) Wielkopolskie (West)Lubelskie (East)3934PLN

(1200 EUR)2713PLN(840 EUR)

2922PLN(913 EUR)

Regional breakdown (chosen voivodships)

National3215 PLN

(1000 EUR)

Labour Costs

Wages comparing with Western European standards createcompetitive advantage

Source: Eurostat

Average nominal wagegrowth (in %) - forecast

0

2

4

6

8

10

12

14

16

18

20

2000 2001 2002 2003 2004 2005 2006 2007 2008

PolandCzech RepublicSlovakiaHungary

Source: EIU

Wages in Poland grow slower than in neighbouring countries !!!

SocialSocial security systemsecurity system

Type of insurance % premium Breakdown of premium

Employer Employee

Retirement 19.52% of remuneration 9.76% of -remuneration

9.76% of remuneration

Disability 6% of remuneration 4.5% 1.5%

Accident - from 0.67% to 3.60% of remuneration depending on occupational risk in a given industry

0.67% - 3.60 %

Sickness 2.45% of remuneration - 2.45%

Additional contributions:Labour Fund 2.45% of remuneration 2.45% -

Guaranteed Employee Benefit Fund

0.10% of remuneration 0.10% -

Total Between 17.48% -20.41%

13,71%

Distribution channels

•Supermarkets, hypermarkets and discount chains have failed to assume a dominating role in the sector, but they have advantage in terms of logistics and know-how.

•Integration of small stores

FMCG

Household appliancesElectronics

Construction materialsFurniture

Press

Wholesale firms http://www.hurtownie.net.pl/http://www.hurtownie.pl

Source: E-commerce report 2007 Internet Standard, Sklepy24.pl (Media&Marketing Apr 16, 2008)

Goods sold in Polish Internet (% of respondents)

1,75 % e-trade's share in Polish retail trade market(0,68% in 2005)

E-TR@DE

Investment Incentives in Poland

• Corporate Income Tax exemptions in 14 Special Economic Zones until2017, min. worth of investment – 100 000 EUR

• Real Estate Tax exemptions

• Instruments of Labour Market

• EU Funds (67 billion EUR) 2007-13

Regional Aid Limits

May be combined together but cannot exceed certain limit !!!

Regional Aid Limits in Poland

30%-50% of eligible expenditures

Eligible exenditures:

•Cost of land, buildings, licences etc.

or

•Two year labour costs of new employedstaff

Micro and small entrepreneurs –additional20% of supportMedium entrepreneurs – additional 10% ofsupport

The investment or each newly created job must be maintained for at least 5 yearsfrom the date of its completion/creation (for MSP only 3 years !!!)

ServicesServices Promotion of PolandPromotion of Poland InformationInformation

•PM team with sectoralexpertise•Network of regionaloffices (Regional Investor Assistance Centres)•Co-operation withSEZ’s, central, localauthorities•Testimonial visits withinvestors•After care services

•PM team with sectoralexpertise•Network of regionaloffices (Regional Investor Assistance Centres)•Co-operation withSEZ’s, central, localauthorities•Testimonial visits withinvestors•After care services

•Co-operation withPolish Embassiesabroad•Point of contact for information and advice

•Co-operation withPolish Embassiesabroad•Point of contact for information and advice

•Investment climate•Incentives system•Statistics•Sectoral statistics•Potential cooperationpartners

•Investment climate•Incentives system•Statistics•Sectoral statistics•Potential cooperationpartners

Govermental agency formed in June 2003 as a successor of theformer investment promotion agency PAIZ

Operations

Area of services

About PAIiIZ

Short list Short list of countries, choice of

locations, detailed legal and financial analysis, investment incentives system’s analysis,

negotiations with central and local authorities, finding the potential

partners

Investment decision

Long list of countriesAnalysis of macroeconomic, social and

political conditions of the countries, general legal and financial analysis

including investment incentives system, fact finding missions

Considering of investmentStrategic corporate decision regarding new

investment, destination of investment

• Project Managers assistance• Site visits offered to investors• Providing macroeconomic and sectoral data, information on financial incentives offered by central and local governments, Special Economic Zones and EU funds

• Assistance in obtaining financial support from the state government• Co-operation with Special Economic Zones• Date base of suppliers and business partners• Network of Regional Investor AssistanceCenters• Real estate data base

• After-care services• Ombudsman for foreign investors

• Promotion of Poland through marketing campaigns, investment seminars, work-shops, study tours• Investment marketing, company visits• Co-operation with Polish Embassies abroad

Investment process Agency’s offer

InformationPolish Chamber of Exhibition Industryhttp://www.polfair.com.pl/

Embassy of the Republic of Poland in LatviaEconomic Sectionhttp://www.poltrade.lv/tfpp.php

Polish Export Promotion Portalhttp://www.eksporter.gov.pl/ppe/glowna

Polish Information and Foreign Investment Agency (Incentives)http://www.paiz.gov.pl

The Polish Agency for Enterprise Development (EU Funds) http://en.parp.gov.pl/

Wholesale Portal http://www.hurtownie.net.pl http://www.hurtownie.pl

Poland - strenghts

We invite you to our website

Marta KokoszkaProject Manager

marta.kokoszka@paiz.gov.plul. Bagatela 12

00 – 585 Warszawa