Doing business in Małopolska

A guide to doing business and investing in Małopolska 2009 Edition

The information in this document is based on taxation law, legislative proposals and

current practice, up to and including measures passed and which have become law

as of October 2009. It is intended to provide a general guide only on the subject

in question and is necessarily in a condensed form.

We are fully aware of the fact that each of the topics discussed is very important

when deciding on whether to start an investment in a given country and region.

Neither PricewaterhouseCoopers nor the co-authors accept any responsibility for

losses arising from any action taken or not taken by anyone using this publication.

It should not be regarded as a basis for ascertaining tax liabilities in specific

circumstances. Professional advice should always be sought before acting on any

of the information contained in the document.

An introduction to the Administrative Divisions of Poland

Since 1999 the administrative division of Poland has been based on three levels

of subdivision. The territory of Poland is divided into voivodeships (provinces) of which

Małopolska is one. These are further divided into powiats (counties or districts),

which in turn are divided into gminas (communes or municipalities). These terms are

commonly left in their Polish-equivalent form so as to avoid confusion (e.g. a powiat

should not be considered the equivalent of a county in the United Kingdom).

In this document, the terms Małopolska and Małopolska Voivodeship refer to the

same administrative entity. Neither should be confused with the historic region

of Małopolska.

Prepared by: In the cooperation with:

Doing business in Małopolska

1

Contents

Doing business in Małopolska ............................................................................ 01

Contents ............................................................................................................03

Why Poland? .....................................................................................................04

Małopolska – an introduction ............................................................................06

Environment for inward investments .................................................................. 08

Incentives for inward investors ...........................................................................10

Establishing a business .......................................................................................12

Labour market ...................................................................................................14

Real-estate market .............................................................................................18

Accounting and auditing ...................................................................................20

Banking .............................................................................................................23

Tax system ..........................................................................................................24

The most attractive areas for investment............................................................. 26

UEFA EURO 2012 in Małopolska ........................................................................ 30

3

Why Poland?

Poland

Poland is one of the most-favoured investment locations

in Europe. Accession to the European Union has brought

greater stability, market access and financial assistance which,

together with a young, educated society, fast economic growth

and investment incentives constitute the key factors that make

Poland an attractive location for overseas investment. Nearly

17,000 companies with foreign participation do business

successfully not just in Poland but also from their Polish bases,

throughout Europe and worldwide.

Poland is seen as a low-risk country with plenty of opportunities.

It is also predicted that it will have the biggest increase in the

size of its labour force in the European Union over the next five

years. The EUR 90bn that is to be obtained from the EU in the

coming years will serve to accelerate the pace of development

and create additional opportunities for investors.

Furthermore, in the World Investment Prospects Survey 2009-

2011 (published by the United Nations), Poland is ranked

thirteenth among the ‘Top 15 countries for FDI by factors

favouring investment’ with high scores in such categories

as size of local market, access to international/regional markets

and market growth.

Solid fundamentals

Poland’s economic performance is based on four solid

fundamentals.

The first, and most important, fundamental is the process

of productivity catch-up. The current real productivity/average

labour cost ratio in Poland creates a significant comparative

advantage for the country as a location for production activities.

The favourable labour-productivity ratio is even more evident

in the case of newly constructed factories and service centres.

The second fundamental is the country’s human capital.

The share of young people in Poland’s total population

is considerably higher than in Western Europe, and the mortality

rate is lower. Moreover, Poland has a large pool of highly

skilled workers and one of the highest percentages of students

in tertiary education in Europe.

The third fundamental is currency. After many years

of stabilisation efforts undertaken by an independent central

bank, the country now enjoys inflation of less than 4%. Since

productivity growth is much more robust than among Poland’s

major trading partners, the currency has been under real

appreciation pressure over the last few years. In addition and

due to the growing credibility and prospects of Euro adoption,

interest rates have converged to a level not much higher than

in Western Europe.

Finally, the fourth fundamental is EU membership. The greatest

benefit of entry to the EU has been the wide range of business

opportunities. The European market is now fully open to Polish

products while, at the same time, investors are moving into

the country. The upgrade of the legal and regulatory system,

required for entry, has helped enhance the country’s image.

Last but not least, the significant EU development funds

available under the 7-year EU financial plan will help to resolve

the problem of Poland’s outdated infrastructure.

Quick facts about Poland

Population - 38m (2008)

Poland is one of the youngest nations in the EU – almost 50% of the population is less than 35 years old (2008)

Poland is located at the heart of Europe, close to the economic centre of the continent

It has a stable democracy and is a member of NATO, the European Union, WTO and OECD

It is attracting a lot of investors’ interest and capital

Poland’s economy is developing at a much faster pace than that of Western Europe countries

Economic growth in Poland is driven by a dynamic private sector

The Polish market is as large as the rest of the Central European market put together

The population is homogeneous and largely free of any ethnic tension

Poland offers a large, educated workforce at competitive prices

The currency is stable and inflation is low

55

Małopolska an introduction

Geographic and historic background

Małopolska (Lesser Poland Region) is one of 16 administrative

regions in Poland – the region is located in the southern part

of Poland with Kraków (Cracow) as its capital.

Małopolska is divided into 19 districts and 3 municipal districts

(Kraków, Tarnów and Nowy Sącz). The region covers an area

of 15,000 km² (it is one of the smallest regions in Poland) and

is advantageously situated geographically.

Małopolska is favourably located. It benefits from being

connected to the A4 highway and is within easy access of the

Śląsk agglomeration and Poland’s southern border. These

factors, together with the large consumer market in the

region, make Małopolska a location with increasing investment

potential, which, in the future should attract many investment

projects.

Kraków (a capital of Małopolska) is located on the River Wisła

and is one of the oldest cities in Poland, dating back to the 10th

century. At present, it is the second-largest (after Warszawa)

city in the country. Kraków is the most frequently visited tourist

destination in Poland.

Population

In 2008 the population of the region was estimated to be 3.3m

(51.5% of the population consisted of women), with over

0.8m people living in Kraków (approx. 24.2% of the population

of Małopolska).

According to 2008 figures, Małopolska has the fourth-highest

population in Poland behind Mazowieckie Voivodeship (5.2m),

Śląskie Voivodeship (4.7m) and Wielkopolskie Voivodeship

(3.4m). Małopolska is the second most densely populated

region in the country after Świętokrzyskie Voivodeship.

In 2008 the two age groups accounting for the largest shares

of Małopolska’s population were 20-24 years old and 24-29

year old. In total, these age groups consisted of over 0.5m

people, i.e. 17% of the total population of Małopolska in 2008.

In Poland on the whole, these two groups consisted of approx.

6.4m people, i.e. 16.8% of the total population in 2008.

Furthermore, in Kraków 0.14m people were between 20 and

29 years old, i.e. 18.0% of the city’s total population in 2008.

Transportation

Poland has several international airports that, together, serve

over 20 million passengers every year. Kraków and other major

cities in Poland offer multiple direct flights to Warszawa and

to some West European hubs.

Kraków-Balice International Airport (www.krakowairport.pl/en)

is the second-largest airport in Poland. In 2005 the airport

served more than 1.5m passengers, in 2006, 2007 and 2008

these figures rose to 2.3m and 3.1m respectively. Currently

there are direct connections with 52 European cities.

A shortcoming of the Polish road network is the low proportion

of highways and dual carriageways in the network. With a total

length of almost 300,000 kilometres, Poland’s road network

is the fourth-largest in Europe, however, lack of investment

has delayed much-needed maintenance and repairs. One-third

of Polish roads are in need of a major overhaul.

Despite slow progress on this front in the past, there are hopes

for a dramatic improvement in the situation, especially in the

context of the Euro 2012 Championships.

Małopolska road network consists of the A4 Highway (Kraków-

Katowice), 958 km of national roads, 1,368 km of regional

roads, and 6,425 km of local powiat (or county) roads.

Poland has an extensive rail network comprising 24,000

kilometres, which is regarded as one of the most developed

in Central and Eastern Europe. However, the network is in need

of a major upgrade. The rail system is currently being modernised

with financial assistance from the European Union.

Kraków Railway Station (Kraków Główny) is one of the biggest

railway stations in Poland. Direct services to Warsaw, either

by Inter City (IC) or Express (Ex) trains depart every hour.

Furthermore, there are also indirect or direct connections

to many European capital cities e.g. Prague and Vienna.

Quality of life

The region has an exceptionally high number of higher-

education establishments (34 tertiary schools), some of which

are internationally renowned, such as the Jagiellonian University

in Kraków. Furthermore, the Research & Development sector

is highly developed in Małopolska in comparison with other

regions (the region employs more than 12,400 people in this

field, i.e. 12.7% of the total R&D employment in Poland) and

this is one of the main focuses of the local authorities.

Every year Małopolska hosts over 40 internationally renowned

cultural events, e.g. Cracow Film Festival, Cracow Jewish Cultural

Festival, Sacrum Profanum.

Małopolska has 8 sites on the UNESCO world cultural heritage

list, including the Old Town in Kraków and the Wieliczka Salt

Mine. Furthermore, there are 6 national parks, 84 nature

reserves and 11 landscape parks in the region.

7

Environments for inward investment

Poland’s accession to the EU triggered greater investment

confidence. Poland is one of the most attractive direct investment

locations in Europe. Stability, greater market access, fewer

barriers to trade and investment, liberalisation and deregulation

are the key contributory factors in this assessment.

Successful sectors

The Government of Poland has selectively targeted certain areas

of industry, in particular those that produce and manufacture

value-added products or provide value-added services. They

also offer the best growth potential and the best prospects for

Poland’s sustainable development.

The targeted sectors are:

internationally traded services, including financial services��

call centres, shared services centres, information ��

technology centres

electronics��

automotive��

biotechnology��

research and development��

aviation��

Economists have assessed that investments related to Poland’s

hosting of the UEFA EURO 2012 Championship may result

in an additional growth in GDP of up to 1.5% in the years

2009-2012. Polish and foreign investors can therefore count

on unprecedented contracts related to infrastructure (roads, rail,

airports, stadiums, training centres), hotel, catering, transport

and advertising projects.

At the beginning of 2007 there were almost 18,500 companies

with foreign participation operating in Poland. One-third

of these companies were active in manufacturing, and one-

third operated in trade-related activities. The hotels and

restaurants business, transport and storage, construction and

financial intermediation sectors were also well represented. The

world’s top companies are present in all of the aforementioned

sectors. In 2005 and 2006 Poland became the manufacturing

hub for LCD screens in Europe. The offshoring sector is growing

at a fast pace and R&D-related activities are also popular.

As such, human capital in Poland continues to be discovered

and positively assessed. In these sectors companies are engaged

in activities ranging from accounting, finance and logistics

to networks and software research, engineering systems and

automation, pharmaceuticals and computer science in R&D.

In these sectors growth is primarily attributed to the quality and

availability of human capital at a competitive price.

Inward investments in Małopolska

In December 2007 there were 1,110 companies with foreign

capital share registered in Małopolska, a figure that equates

to 5.3% of all companies with foreign capital share registered

in Poland. Since 2006 the rate at which the number of companies

with foreign capital share increased in Małopolska was one

of the highest among all administrative regions in Poland.

Kraków attracted two-thirds of all inward investment

in Małopolska in 2007.

Kraków in 2007 was ranked second among the most popular

R&D and Business Process Outsourcing (BPO) locations in Poland

(Warszawa was ranked first). (Source: Foreign Investment

in Małopolska, 2007).

The three biggest investors in Małopolska in 2007 were:

Bayerische Hypo- und Vereinsbank AG, ArcelorMittal and Philip

Morris.

Among the biggest investors in Małopolska are:

ABB

ArcelorMittal

Bauer-Media

Bayerische Hypo- und Vereinsbank AG BP

Capgemini

Carlsberg

ČEZ

Coca-Cola

Delphi

Donnelly

F&P Holding

Fujitsu

Google

HCL

HGA Capital and ECE Projectmanagement

HSBC

IBM

International Paper

Lufthansa

Motorola

Nidec

Philip Morris

Pliva

Royal Canin

Sabre

Shell

UBS

Valeo

Woodward

9

Incentives for inward investors

Poland offers investors ready access to a market of over 450

million people in the European Union. The country’s central

location, its young and well-educated society, competitive

(inexpensive) labour costs and investment incentives make

Poland one of the prime locations in Europe.

State support

The incentives available to inward investors in Poland consist

of tax incentives and financial assistance. Bearing in mind that

Poland is a member of the EU, incentives must be in line with

the EU state-aid regulations. In general, the various combinations

of state aid on the territory of Poland cannot exceed 50% of the

investment value for large companies.

Tax incentives

Tax incentives are the most frequently used type of incentive

in Poland and they fall into two groups:

corporate income tax exemption��

local tax exemption��

Financial assistance

The Polish government offers cash grants to strategic investors.

Poland is particularly interested in attracting Shared Service

Centre, Information Technology and Research & Development

projects, and offers substantial cash incentives for this

purpose.

Allocation for this activity is EUR 1.0bn, of which EUR 240m

is to be distributed in 2009:

if an enterprise sets up a centre of any kind and employs ��

100 or more people, it is possible to receive a cash grant

of up to 30% of two years’ labour costs,

if an enterprise plans to invest more than EUR 40m (USD ��

50m) in innovative production and to employ more than

200 people, it is possible to receive a 25% return on the

investment - paid in cash.

Establishing a business

Since Poland is a member of the EU, the rules that apply

to Poles for setting up and operating a business also apply

to every foreign person from the European Union (EU) and the

European Free Trade Agreement (EFTA) zones (belonging to the

EEA European Economic Area).

The following legal forms of conducting business are available

in Poland to investors originating from EU and EFTA countries:

sole proprietorship (indywidualna działalność gospodarcza)��

civil partnership (spółka cywilna)��

registered partnership (spółka jawna)��

limited partnership (spółka komandytowa)��

professional partnership (spółka partnerska)��

limited joint-stock partnership (spółka komandytowo-��

akcyjna)

limited liability company (spółka z ograniczoną ��

odpowiedzialnością)

joint-stock company (spółka akcyjna)��

European Company (spółka europejska, Societas Europea)��

European Economic Interest Group (Europejskie ��

Zgrupowanie Interesów Gospodarczych)

The same rules apply to foreigners living outside the EU and

the EEA who:

have been granted a permit to settle in Poland��

have been granted consent to tolerated stay or refugee ��

status in the Republic of Poland or

enjoy temporary protection on Polish territory��

Unless international agreements state otherwise, foreign persons,

other than those indicated above, have the right to establish and

conduct business activities only in the form of:

limited partnership (spółka komandytowa)��

limited joint-stock partnership (spółka komandytowo-��

akcyjna)

limited liability company (spółka z ograniczoną ��

odpowiedzialnością)

joint-stock company (spółka akcyjna)��

Therefore a foreigner from outside the EU and EEA still has the

right to enter into these types of partnerships or companies

and acquire their shares. Additionally, foreign enterprises may

conduct business activities in the form of a branch office or they

may establish a representative office in Poland. Performing

certain types of business activities in Poland is limited/monitored/

regulated by state authorities and requires their written consent.

9 steps to setting up a business in Poland

Step 1 Notarise company agreement

Time to complete: 1 day

Cost to complete: PLN 1,010 notary fee + 0.5% over PLN 60,000 + 22% on top of notary’s fee (VAT) + 0.5% of share

capital (civil law transaction tax)

Step 2 Register the company in the National Court Register (Krajowy Rejestr Sądowy)

Time to complete: 14 days

Cost to complete: PLN 1,000 (registration fee) + PLN 500 (announcement fee)

Step 3 Apply for a REGON identification number


Cost to complete: no charge

Step 4 Open a bank account


Cost to complete: no charge (depending on the bank)

Step 5 Obtain Tax Identification Number (NIP)

Time to complete: 3 - 4 weeks


Step 6 Register for VAT


Cost to complete: PLN 152

Step 7 Register with the Social Insurance Institution (Zakład Ubezpieczeń Społecznych)



Step 8 Register with the National Labour Inspectorate (Państwowa Inspekcja Pracy)



Step 9 Register with the Chief Sanitary Inspectorate (Państwowa Inspekcja Sanitarna)



13

Source: MARR, 2009

The average gross salary in Małopolska between January and

July 2008 was PLN 3,003.00 (EUR 715). In comparison with

2007, this represents an increase of 9.1%.

The highest average gross salaries for the period January-July

2008 were recorded in Mazowieckie Voivodeship (PLN 3,712.00

Labour market

Labour relations and social security

Extensive data show that Poland is a very attractive place for

locating high labour-dependent investments, due to:

the relatively low costs of labour and ��

a highly qualified workforce��

Compared to other EU countries, labour costs in Poland are

among the most competitive, as can be seen in the graph

on the right.

or EUR 884) and in Śląskie Voivodeship (PLN 3,618.00 or EUR

861). Małopolska had the fifth-highest gross salary in Poland

(the graph above presents the gross salary in Poland in detail).

Source: Eurostat, 2009

Working time and working time standards

Working time in Poland is equal to 8 hours a day (daily standard)

and 40 hours a week (weekly standard). The weekly standard

together with overtime cannot exceed 48 hours on average

during the accepted settlement period. This limitation does not

apply to employees who manage an establishment on behalf

of the employer. The duration of the settlement period is defined

by the employer via a collective bargaining agreement or in the

labour regulations. This period cannot exceed 4 months and

only in justified instances can it be extended to 12 months.

Remuneration

Remuneration for work should correspond to the type of work

carried out and the qualifications required to perform it.

The volume and quantity of services provided should also

be considered. Remuneration in Poland is paid based on the

amount of time worked (usually a month, but sometimes hours

or days) or work units, at least once a month and on a pre-

determined date. In 2009 the minimum remuneration legally

guaranteed is PLN 1,276.00 gross (Journal of Laws of 2008, No.

55, item 499). In 2010 this will increase to PLN 1,317.00 gross

(Journal of Laws of 2009, No. 48, item 709).

15

Source: Ministry of Labour and Social Policy, 2009

Foreign workers

Since Poland joined the EU in 2004, the legal requirements for

foreign employees who intend to commence work in Poland

differ, depending on whether the individual in question

is an EU national or a citizen of a third country. The procedures

to be followed when employing a foreign employee in Poland

are outlined in the table on the right:

Unemployment

Poland is one of the EU States in which the level of unemployment

is still relatively high, despite having declined recently. At the

end of June 2009, the number of unemployed registered with

labour offices was 1,658,700 (including 868,500 women).

At the same time, the unemployment rate in Poland was equal

to 10.7% of the labour force, whereas the unemployment rate

in Małopolska was 8.7%, which was one of the lowest rates

in the country. The graph below shows the unemployment rate

in Małopolska between July 2008 and June 2009.

EU Employees non-EU Employees

Registering the EU national’s residence in the Voivode’s Office (the governor of the voivodeship) pertinent to the actual place where the EU national will be staying in Poland in the three months following his/her arrival.

The process consists of 4 main stages:1) obtaining an opinion from the local labour

authorities and publicly advertising the vacancy – the main aim of these procedures is to verify whether there are any Poles who have the required skills and who may wish to take up the position offered by the employer

2) obtaining a preliminary work permit3) applying for a document legalizing the foreign

national’s stay in Poland (this can be either a work visa or a residence permit)

4) obtaining a final work permit (for a period of up to one year)

The entire process may, in practice, take up to three months.

Demographic capital, education and language

Investors who have already decided to settle in Poland agree

that the most impressive feature of the Polish market is the

number of young, highly qualified workers that are available.

As for Małopolska, the population continues to rise. What’s

more, the population structure in the region is characterised

by the share accounted for by young people being higher than

the national average (people aged 15 or under constituted

16.8% of the population in Małopolska while in Poland this age

group accounted for a 15.8% share of the population structure

in 2008).

Most people in the region have completed primary and

secondary education, however, more people in Małopolska finish

primary and secondary schools than in Poland on the whole (in

2006 in the region 63.1% of the population completed primary

and secondary education, in Poland this group constituted

62.6%). In 2006 14.1% of the population of Małopolska had

completed tertiary education, while overall in Poland, this figure

was 13.9%. In Kraków in 2006 this number was even higher

– 21.4%.

What is significant, Kraków is one of the largest academic centers

in Poland. In 2008 there were over 210,000 students studying,

i.e. 10.8% of the total number of students in Poland (the graph

on the right shows the number of students in Poland compared

with the biggest EU countries). Furthermore, in Kraków in 2008

there were 24 Higher-education establishments (34 in total

in Małopolska), whereas in Poland there were 448 Higher

Education Establishments in total. Some of the tertiary schools

in Kraków are well known abroad such as the Jagiellonian

University, the AGH University of Science and Technology and

the University of Economics – economic, technical and IT majors

are the most popular among students studying in Kraków.

Source: Eurostat, 2009

As to languages, English is the most popular foreign language

among young people and in the business community

in Małopolska. English is taught in primary, secondary and

tertiary schools – almost 70% of students in tertiary schools

know English. German (14% of students in tertiary schools),

Russian (8%) and French (5%) are other popular languages that

are taught and used by people in Małopolska.

17

Real-estate market

Office market

Kraków and its surroundings constitute one of the most

highly developed regional office markets in Poland. The total

office stock is approximately 234,000 m². In 2008 developers

delivered over 33,000 m² of office space. Furthermore, over

152,000 m² is currently under construction, of which 79%

should be completed in 2009. As a result, office stock in Kraków

should increase to 354,000 m² by the end of 2009.

Kraków and its surroundings currently have one of the lowest

vacancy rates in Poland - the availability of office space

for rent is limited and the new office buildings, which are

to be completed and delivered in 2009, are almost 100% pre-

leased.

Although Kraków and its surroundings are the most popular

locations for office-centre development, office buildings are

also starting to be developed in towns such as Zabierzów

(Kraków Business Park).

The monthly weighted average rent per square metre of available

office space at the end of 2008 amounted to 16 Euro per

square metre per month. In certain office buildings where space

is currently available, monthly rents vary between 14 and 19 Euro

per square metre.

Investments that are planned or under construction

in Małopolska:

Property Area Planned completion

Developer / Investor

TreiMorfa 60,000 m² 2012 Verity Development

B4B – Bonarka 4 Business 32,800 m² 2009 TriGranit

Nowe Miasto 30,000 m² - ECE

Enterprise Park 28,200 m² 2009 Quinlan Private Golub

Kraków Business Park 16,300 m² 2009 Kraków Business Park

Centrum Biurowe Kazimierz 15,400 m² 2009 GTC

Diamante Plaza 10,000 m² 2009 Aldesa

Centrum Biurowe Lubicz II 6,000 m² 2009 Polonia Property Fund

GTC Pascal 5,200 m² 2010 GTC

Quattro Business Park 48,000 m² 2010 - 2012 Grupa Buma

AVATAR 11,000 m² 2009 Echo - Investment

Centrum Biurowe Vinci 19,000 m² 2010 Vinci Office Center

MARR Business Park 9,700 m² 2011 MARR S.A.

Source: Real estate market, 2008, Knight Frank, MARR , 2009

Warehouse market

At the end of 2008 there was only 41,500 m² of total

warehouse stock in Kraków and its surroundings – this included

the Panattoni Park Kraków (in Skawina) project.

The warehouse pipeline in Kraków and its surroundings

is estimated at approx. 215,000 m².

In 2009 150,000 m² of warehouse stock is planned

to be completed and available at the Cracow Airport Logistics

Centre – Goodman Poland.

Monthly rates vary from 4 and 5 Euro per square metre.

Investments that are planned or currently under construction

in Kraków and its surroundings:



Cracow Airport Logistic Center 150 000 m² 2009 Goodman

Poland

MK Logistic 25,000 m² 2009 MK Logistic

MARR Business Park 14,600 m² 2010 MARR S.A.

Source: Real estate market, 2008, Knight FrankMARR, 2009

Retail market

At the end of 2008, the gross leasable area in Kraków

amounted to around 427,500 m² and constituted 9.4% of the

total leasable space in Poland’s eight major cities (Warszawa,

Trójmiasto, Poznań, Wrocław, Szczecin, Katowice, Łódź, and

Kraków).

In 2008 the saturation of retail space for lease in Kraków

was one of the lowest among the eight major regional cities

– saturation reached a level of 559 m² per 1,000 inhabitants.

The Bonarka City Center project in Kraków, which is currently

under construction but scheduled for completion before the

end of 2009, will deliver some 87,000 m² of retail space.

There is approximately 85,500 m² of leasable retail space,

which is currently at the planning stage. This includes three

investments scheduled for completion by the end of 2012.

Monthly rates for prime units (100-150 m²) in the best shopping

centres vary from 60 to 70 Euro per square metre.

Investments that are planned or currently under construction

in Małopolska:



Bonarka City Center 91,000 m² 2009 TriGranit

Serenada 43,000 m² 2012 Mayland Real Estate

Futura Park 31,500 m² 2012 Neinver

Galeria Sandecja 14,500 m² 2009 TK Development

Galeria Zasole 12,500 m² 2009 TK Development

Pasternik 11,000 m² 2012 Krakbud Sp. z o.o.

Source: Real estate market, 2008, Knight Frank

19

Accounting and auditing

The transformation of Poland’s economy, which started together

with the change in the country’s political system, required that

the principles of Polish accounting be adjusted to the needs

of a market economy.

The Ordinance of the Minister of Finance of 1991 concerning

the accounting principles was the turning point. From this

moment on, all enterprises conducting full accounting were

obliged to apply the principles set forth therein. Over time,

said principles were gradually adjusted to the provisions of the

IV Directive of the European Union, which listed, among other

things, one of the major accounting principles: a faithful and

honest presentation of an enterprise’s image. In Poland this

principle was adopted in 1994, when the Accounting Act (the

basic document which governs bookkeeping in Poland until the

present day) was passed.

The resolution has been amended many times since it was first

passed in order to adjust the requirements to international

standards and the expectations of the readers of financial

statements. Today, together with three Polish accounting

standards and a number of detailed ordinances indicating

specific provisions, it constitutes the entire accounting system

in Poland.

Banking

The Polish banking services market is fully developed and

investors can rely on receiving full support for their business

activities in Poland. At present, a large number of well

-established organisations operate on this market. These

include Polish banks, as well as some of the largest global banking

institutions. All in all, there are now 90 entities providing banking

services for the mass market and the corporate sector.

Currency and foreign exchange market

The currency effective in Poland is the zloty (zł or PLN), which

is divided into 100 grosz. Since 2000, and particularly since

Poland joined the European Union in 2004, a systematic rise has

been noted in the value of the zloty against foreign currencies.

This is a very significant trend: since 2000 the value of the zloty

against the dollar has increased by more than 40% and against

the euro by more than 20%.

2323

Tax system

Corporate tax

Poland operates a classic system of company taxation. Under

this system, tax payable on corporate dividends is independent

of the tax paid by the company that pays the dividend.

Shareholders are not entitled to a credit for tax paid at the

corporate level. The exception relates to the “underlying tax

credit” available, subject to a number of conditions, to Polish

companies holding at least 75% of shares in foreign companies

based outside the EU, Iceland, Liechtenstein, Norway and

Switzerland.

Corporate income tax in Poland

Polish corporate income tax (CIT) is collected at a flat rate

of 19%. The rate has been applicable since 1 January 2004

and is not likely to be changed in the coming years. Therefore,

Poland is among the most competitive (inexpensive) countries

in the EU with regard to taxation of business profits.

VAT Rates

The VAT rates are 22% (standard rate), 7%, 3%, 0% and

exemption. The standard 22% VAT rate applies in general

to the supply of all goods and services except for those that

are covered by special VAT provisions providing other rates

or treatments.

Information on the Tax Chambers and Tax Offices in Kraków

(including information on their territorial competence)

is available at www.iskrakow.krak.pl

The most attractive areas for investment

Special Economic Zones

Special Economic Zones (Specjalne Strefy Ekonomiczne, or SEZs)

are designated areas in selected regions of Poland intended for

the purpose of conducting business activities under preferential

conditions. The purpose of creating such privileged areas

is to accelerate the economic development of particular regions

by enhancing their attractiveness for new investment.

At present, there are 14 special economic zones operating

in Poland – one is in Małopolska (Kraków Technology Park).

The zones differ in size, location, and environment, as well

as in terms of development conditions or road, technical

and telecommunications infrastructure. Each of the zones

is managed by management authorities in the form

of a commercial company controlled by the State Treasury

or provincial local government. SEZs were established in 1996-

1998. Initially, this was for a term of 20 years, however, this has

since been extended until the end of 2020.

The principle underlying the zones’ operation is the possibility

of income tax exemption for enterprises undertaking new

investments in SEZ areas. The infrastructure that is prepared for

investment purposes in the zones may also serve as additional

encouragement for the enterprises.

The basic condition for tax exemptions in SEZs is that the

enterprise must make a new investment incurring a specific

amount of investment expenditure and creating new positions.

The amount of tax exemption is based on the value of the

investment expenditure incurred by the enterprise or on two

years’ labour costs of the staff employed by the enterprise

in relation to the investment made. The limit of public support

(including tax exemption) is calculated as a percentage of the

investment expenditure (or two years worth of labour costs,

should the latter be higher). Depending on the region, the limit

can vary from 30% to 50%. In the case of small- and medium-

sized companies, the percentage may be increased by 20%

or 10%, respectively.

The regulations establishing the SEZs include specific principles

regarding the definition of a new investment, the creation

of new positions and the conditions of the qualifying costs

in order to calculate the support limit. It is, however, worth

emphasising that the minimum value of an investment eligible

for public support in SEZ is EUR 100,000.

The formal basis for the tax exemptions granted on account

of carrying out business activities in SEZ is the receipt of a permit

to conduct business activities in SEZ. Such permits are granted

by the Minister of Economy through the entities managing

a particular Zone.

Kraków Technology Park (www.sse.krakow.pl) was established

in 1997 on 66ha of land. Having undergone several expansions

since its establishment, the special economic zone today

occupies 528.84 ha (within 17 regional districts) and is divided

into 19 sub-zones.

The goal of the Kraków Technology Park (KTP) is to focus on high-

technology industries, the printing and automotive sectors,

and to attract companies operating in the Business Process

Outsourcing sector to the Park. Motorola Polska Electronics Sp.

z o.o., Shell Polska Sp. z o.o., RR Donnelley Poland Sp. z o.o.

and Summit Packaging Polska SA are just a few examples of the

companies that currently do business in the KTP.

Enterprises are entitled to public aid when entering the zone

and after having successfully obtained a permit from the Kraków

Technology Park (permits are granted by tender or through

negotiations announced in the national press in the form

of a call for tender). Small firms in Małopolska receive public

aid that amounts to up to 70% of the investment expenditure,

medium-sized firms - 60%, and large ones - 50%.

Income tax relief (CIT relief) may be granted to companies that

meet two criteria:

an investment of at least EUR 100,000 within the KTP��

the establishment of a business that qualifies for public aid ��

In mid-October 2008 a technology incubator started operating

in the KTP. The incubator is located within the Special Economic

Zone in Czyżyny. The incubator was established in order

to promote academic entrepreneurship, to support knowledge

and the commercialisation of technology, and to support

innovative companies during the start-up process.

At present, the Special Economic Zone consists of the following

subzones: Kraków Śródmieście (Kraków city centre), Kraków

Nowa Huta, Kraków Podgórze, Zabierzów, Tarnów, Krosno,

Niepołomice, Nowy Sącz, Dobczyce, Andrychów, Gdów,

Oświęcim, Słomniki, Wolbrom.

Economic Activity Zones

The Economic Activity Zones are zones that are designated

for the purpose of investment. These zones are prepared

in accordance with the needs and requirements of potential

investors either by units of local government, organisational

units of units of local government having a legal personality,

higher-education institutions, business environment institutions

and enterprises.

So far, the establishment of such zones has had significant

positive effects. As such, local authorities in Małopolska

are continuing to consolidate new territories and focus

on developing the technological infrastructure required for the

creation of new Economic Activity Zones.

2727

There are currently twenty six Economic Activity Zones in Małopolska:

Bocheńska Strefa Aktywności Gospodarczej / �

City of Bochnia

Strefa Aktywności Gospodarczej w Gminie Bochnia / �

Commune of Bochnia

Miejska Strefa Aktywności Gospodarczej w Chełmku / �

City of Chełmek

Chrzanowsko – Trzebiński Park Przemysłowy / �

City of Chrzanów and City of Trzebinia

Strefa Przemysłowa “Zielonych Dobczyc” / City of Dobczyce �

Strefa Aktywności Gospodarczej w Limanowej / �

City of Limanowa

Strefa Aktywności Gospodarczej Myślenice / �

City of Myślenice

Niepołomicka Strefa Inwestycyjna / City of Niepołomice �

Strefa Inwestycyjna Niepołomice – Zagórze / �

City of Niepołomice

Miejska Strefa Aktywności Gospodarczej Nowe Dwory �

w Oświęcimiu / City of Oswięcim

Zielony Park Przemysłowy “Kryształowy” w Tarnowie / �

City of Tarnów

Wielicka Strefa Aktywności Gospodarczej / �

City of Wieliczka

Zielony Park Przemysłowy w Wojniczu / City of Wojnicz �

Strefa Aktywności Gospodarczej Bukowno / �

City of Bukowno

Strefa Aktywności Gospodarczej Dąbrowa Tarnowska �

– Żabno / Communes of Dąbrowa Tarnowska and Żabno

Koszycka Strefa Gospodarcza / Commune of Koszyce �

Strefa Aktywności Gospodarczej w Suchej Beskidzkiej / �

City of Sucha Beskidzka

Strefa Aktywności Gospodarczej w Nowym Sączu / �

City of Nowy Sącz

Strefa Aktywności Gospodarczej Książ Wielki / �

Commune of Książ Wielki

Strefa Aktywności Gospodarczej w Wolbromiu / �

City of Wolbrom

Strefa Aktywności Gospodarczej w Trzcianie / �

Commune of Trzciana

Nowobrzeski Obszar Gospodarczy / �

Commune of Nowe Brzesko

Strefa Aktywności Gospodarczej w Andrychowie / �

City of Andrychów

Strefa Aktywności Gospodarczej w Niszowej / �

Commune of Ryglice

Gorlicka Strefa Aktywności Gospodarczej / City of Gorlice �

Strefa Aktywności Gospodarczej w Szczurowej / �

City of Szczurowa

Source: MARR, 2009

UEFA EURO 2012 in Małopolska

On 18 April 2007, at a meeting in Cardiff, Wales, the Executive

Committee of the Union of European Football Associations

(UEFA), announced its decision to stage the 2012 European

Football Championships in Poland and Ukraine. Many view this

event as the third-largest sporting event in the world, preceded

only by the Olympic Games and the football World Cup Finals.

The finals of the European Football Championships are not only

about football matches. It was estimated that the UEFA EURO

2004 Championships in Portugal attracted over one million

football fans to the country. In subsequent years, Portugal saw

an annual growth of 5% in the tourism industry. Poland will

have similar opportunities.

A precondition, however, is to carry out the largest investment

programme in Poland since the collapse of the Berlin

wall. Economists have estimated that investments related

to Poland staging the UEFA EURO 2012 finals could equate

to an additional growth in GDP of up to 1.5% in the years

2009 -2012. It is worth noting that in 2006 Poland’s GDP grew

by over 6 percentage points.

This significant economic growth will be related primarily

to the substantial number of investment projects that are

to be implemented in Poland in the coming years and which

are necessary in order to successfully host the EURO 2012

Championships. Polish and foreign investors can expect

unprecedented contracts related to infrastructure (roads, rail,

airports, stadiums, training centres), hotel, catering, transport

and advertising projects. It is estimated that the infrastructure

investments associated with the organisation of the European

Football Championships 2012 will amount to approx. EUR 25bn.

Of vital importance from the investors’ standpoint is the receipt

of financial support for these investment projects from the

state budget, local government budgets, and the European

Union budget. In addition, the event opens up the opportunity

for cooperation with public-sector entities responsible for

preparations for EURO 2012 under public-private partnership

(PPP) schemes.

In order to facilitate the development of investment projects

related to the organisation of the European Football

Championships in 2012, the Polish government has drafted

a special Act. The Act introduces a special investment project

category (“EURO 2012 undertaking”) and the benefits of this

will include a significant reduction in waiting time for the

administrative decisions required to proceed with investment

projects, and also a facilitation of expropriation procedures.

Staging the EURO 2012 Championships in Poland and Ukraine

offers an unprecedented opportunity for investors to participate

in this project, which guarantees significant benefits both for

the public stakeholders (acting as employers for the investment

projects) as well as investors (acting as developers).

After being on a shortlist of host city candidates, Kraków was

ultimately not selected as a host city for EURO 2012, however,

certain investments have been started or are planned to begin.

These include:

reconstruction of the Wisła Kraków football club stadium��

construction of the Eastern and Northern city ringroad��

construction of a new terminal at Balice Airport��

hotel infrastructure investment��

The Invest in Małopolska project, delivered under Malopolska Regional Operational

Programme 2007-2013 (Measure 8.1 International promotion of Małopolska)

is a response to the need for measures stimulating Małopolska’s economic promotion

at the international level.

The project is implemented by Małopolska Regional Development Agency S.A.,

(Małopolska Agencja Rozwoju Regionalnego S.A.), which is the project leader,

the Marshal’s Office of the Małopolska Region and Krakow Technology Park Ltd

(Krakowski Park Technologiczny Sp. z o.o.). The goal of the project is to create

a strong international social and economic position for Małopolska, in particular

in terms of the region’s potential for investment.

The core target audience of the project includes: individuals, decision-making and

advisory bodies involved in the investment market and opinion-forming environments

(industry-specific media, industry associations and organisations, representatives

of foreign investment support institutions) operating on the national, European and

worldwide level.

The following activities are undertaken under the project:

direct contact with investors from such countries as Japan, South Korea, the �

USA, Israel, as well as countries in Western Europe;

preparation and distribution of information materials about Małopolska’s �

investment potential (real property, human resources, support of investments);

cooperation with investors within Małopolska; �

modern business communication methods (the Internet, sector-specific �

publications, tailor-made materials, etc).

Doing business in Małopolska

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