Foreign investment regulations
 
A company with foreign share holding formed in Poland is under the Polish law and treated in the same manner as a company with Polish share holding. Full repatriation of after-tax profits and capital is allowed, and companies with 100% foreign participation are permitted.
 
Capital introduced into Poland by foreign investors may be freely withdrawn. Full repatriation of profits and divided payments is allowed without obtaining a permit. Companies must account for withholding tax to the Polish Tax authorities on any distributed dividends unless a treaty provided otherwise. To avoid double taxation, Poland has devised tax treaties with more than 60 countries.
 
Bankruptcy laws, competition laws and protection of intellectual property are established according to Western standards.
 
Except for strategically sensitive industries, all Polish industries are open to private enterprise and foreign investment.
 
Corporate income tax
 
All business entities and organizations are required to pay corporate income tax. Corporate income of legal entities is taxed at 34%. The government plans to bring tax down to 28% by the year 2000 and 22% by the end of 2003. Losses incurred in an accounting period can be carried forward in five equal parts over the next five years. In addition, there are various relieves from income tax.
 
Corporate taxpayers having their seat or the location of their board of directors in Poland are liable to tax on their whole income, irrespective of the place where it has been earned.
 
Expatriate taxation
 
The income tax law applies to all persons residing in Poland or persons whose temporary stay in a given tax year exceeds 184 days. These individuals are taxed on their world wide income. This does not apply to persons who arrive in Poland for a temporary stay in order to take employment at foreign subsidiaries, "foreign small business enterprises", Polish companies with some overseas participation, or branches and representative offices of foreign enterprises and banks. These individuals as well as non residents who work in Poland for less than 183 days in a given tax year are taxed only on income earned or arising from a source in Poland.
 
Tax treaties
 
Poland has entered into bilateral treaties with over 60 other countries and is continuing an active policy of developing a wide treaty network as the number of its trading partners increases. The Australia is good example of this country. The tax treaties take precedence over domestic legislation.
 
These international treaties aim at ensuring that income and gains are not taxed twice, or if they are, that the total tax imposed on the two countries does not exceed the higher of the two rates by means of a credit. Tax treaties substantially decrease withholding taxes on interest, dividends and royalties.
 
Investment incentives to encourage foreign direct investment
 
Eligibility for investment incentives is left to the discretion of the Ministry of Finance. Furthermore, foreign investors can qualify for special investment relieves. To qualify for investment relief, companies must show profits of 8% of total revenues (4% in the case of food processing, construction, fishery and tourism and 2% recycling of waste).
 
Companies commencing activity, and investing at least Euro 2 million, may deduct the investment expenses from their revenue in a given year and in the next 3 years up to 10 % of income per year.
 
If the profits of a company derived from export constitute more than 50% of the total revenue, or revenue from export in the tax year in which the taxpayer acquired the right to apply to deduction exceeds the equivalent of Euro 8 million, investment expenses may be deducted up to 30% of income.
 
Other possibilities to obtain investment relief are granted for investments connected with the implementation of licenses, patents and results of domestic research and development projects. Up to 30% of income per year can be deducted in forthcoming cases.
 
Special economic zones
 
Special Economic Zones offer exceptionally attractive investment opportunities for companies interested in starting operations in Poland.
 
Companies setting up business in these zones will be eligible to a very attractive incentive package including:

• total exemption from corporate income tax for a period of 10 years
• exemption from 50% of corporate income tax for another period of 10 years
• free repatriation of company profits
• accelerated depreciation

These incentives are granted to investments above a certain volume in terms of invested capital or job creation. For smaller investments, the corporate income is tax exempt until the entire invested amount is deducted. Additional tax credits may be enjoyed when companies located in the special zone who are producing products destined for export are not subject to export duties.
 
Currently there are now 15 developed Special Economic Zones and 2 industrial parks.
 
The full text of the new Law on economic activity in Poland you can download from the website of the Polish Embassy in Australia, Economic and Commercial Division.
 
Real Estate
 
Real estate is understood as land, buildings affixed to land, and apartments. The following legal forms regulate the use of real estate in Poland:

• ownership;
• perpetual lease (usufruct), granted for 99 years or less, relates to land owned by the State Treasury and communal land. Perpetual leasehold entitles the holder to use and administer the object of the lease. The leaseholder is charged an annual fee. He is also entitled to sell the right of perpetual usufruct. Buildings constructed by a perpetual leaseholder on land used by him are his sole property;
• tenancies and leases - obligations of parties arise out of agreements between the owners and interested parties.

Under a tenancy agreement, the lessee acquires the right to use real estate and realize gains (for example, crops in relation to the tenancy of a farm) out of its use during the validity of the agreement; he should pay instalments to the lesser.
 
A lease agreement is entered into between the owner or perpetual leaseholder of the property and its user. The user is entitled to use the property in exchange for rentals. If the apartments belong to the state or commune, they may also be rented by way of administrative decisions of authorized state or communal agencies.
 
Sale and Purchase of Real Estate
 
The legal form of the sale and purchase of property in Poland depends upon the status of the owners (legal or natural persons, the state or communes) and the buyers (national and foreigners). Foreigners are those natural persons without Polish nationality, legal persons domiciled abroad and companies domiciled in Poland but with foreign participation in the owners' equity in 50% or more of the capital.
 
If natural or legal persons own property, then the sale of the property or the associated perpetual lease and all tenancy and lease agreements fall under the regulations of the Civil Code.
 
Sale and perpetual lease agreements must be notarized.
 
The sale of property or perpetual leases belonging to the state or communes is made through bids. An authorized agency of the state or the commune makes a public announcement on the planned sale or release of the perpetual lease, the tenancy or lease of properties, six weeks prior to releasing detailed information, such as their square area, bid prices and rentals. Once the bidding formalities are over and the procedure is terminated, appropriate changes are made in Real Estate Registers.
 
The purchase of property or acquisition of perpetual lease rights, by foreigners requires a permit issued by the Minister if Interior and Administration.
 
Permits are issued upon the application of the interested parties describing the transaction and containing information as to the property, including inter-alia, its valuation and the reasons underlying its purchase. The permit designates the buyer, the object of the transaction, its proceeds and important terms.
 
Poland's legal framework does not provide for lease-purchase and similar contracts, but there are a variety of alternative forms to achieve this structure.
 
Companies with foreign capital participation should obtain a permit from the Minister of Treasury prior to signing an agreement on the lease and purchase of the property of a state-owned legal person for a period longer than six months within Polish territory.
 
A foreigner intending to purchase real estate may apply for a permit issuance promise. The promise is issued in the form of an administrative decision. It is valid for 6 months from the date of its issue. A promise should also be issued upon an application of a legal person having a seat in Poland and controlled by persons deemed by the law as foreigners. During the period of the promise's validity, the Minister may not refuse to issue a permit. However, this may be done, if facts relevant to the case have changed significantly. All provisions applicable to a permit also apply to the promise.
 
A permit from the Minister of Interior and Administration is required for purchase or receipt by a foreigner of 50% of shares or stocks in a commercial company, being an owner of perpetual usufructuary of a real estate, or purchase or receipt of shares/stocks in a controlled company by a foreigner not being its share (stock) holder. This does not apply to a situation when a company in question owns apartments.
 
The following fees are paid upon the purchase of a title to perpetual lease:
 
stamp fees - these are charged on the purchase of property or acquisition of a title to perpetual lease and amount to 5% of its value. In the case of lease and rent agreements these fees are charged at a rate of 1% of the agreement instalments, notary fees - the normal fee charged in notary offices depends on the property's value (generally 3% of the property's value).

Selected Terms & Conditions, including Tax Exemptions and Relief
 
Terms and conditions of investing in the Zones and tax relief for the investors have been defined by the Law of the 20th October, 1994 on Special Economic Zones (Journal of Laws No. 123, Item 600) and by the Decrees of the Council of Ministers of the 9th September, 1997 (Journal of Laws No. 135, Item 908 and 910). The preferences apply to entities having registered office in the Zone and conducting therein economic activity under permission. We present main guidlines - for binding information only the above Law and Decrees with subsequent amendments are valid.
 
Income resulting from economic activity under permission is free from corporate income tax for the period of 10 years from the date of starting the activity in the Zone, the exemption being applied to income being the equivalent of investment expenses incurred by the entity. Entities having incurred investment expenses exceeding 1 million ECU, are entitled to full exemption of corporate income tax for the above period. As an alternative, 10% of income per each 10 workers employed by the entity in a given month can be exempted from corporate income tax, within limit of 100% of monthly income. The above exemptions apply to the subsequent period with the reservation that their value may amount to maximum 50% of income in each financial year.
 
Entities with granted permission, not covered by any income tax exemption may apply for:

• higher depreciation rates on specified fixed assets, or
• recognizing expenses on purchase of intangible and legal assets as costs of acquiring income.

The following activities do not require permission: construction, repairs, overhauls, trade, vehicle repair, financial agencies, estate agencies, health care, transport. These activities are not subject to any tax exemption or relief.
 
The procedures for issuing permission for conducting economic activity in the Zones are established by respective Orders of the Minister of Economy of 27th January 1998, which also institute the Managing Company - Special Economic Zone Żarnowiec-Tczew Co. Ltd. as administrator of the Zone.
 
The procedures for an investor interested to enter the Zone start with his or her letter of intent, initial application and finally a detailed business plan (all submitted in the Polish language). Detailed evaluation of the offer is performed taking into account size and scope of planned economic undertaking, participation in economic relations and cooperation with surrounding enterprises, influence on economic surrounding of the zone, environment protection, introduction of innovative technology. Payments for the real estate or other constituent of the real estate are settled. Final decisions are prepared after evaluating offers received through a tender or after conducting negotiations. The permission is finally issued by the Managing Company in consultation with and on behalf of Minister of Economy and respective contracts are signed with the investor.

Kostrzyn-Slubice Special Economic Zone
 
Collection of sites devoted to Kostrzyń-Słubice "zone." The Polish government created this special economic zone to foster development of new technologies, to stimulate more effective utilization of the region's potential and to fight unemployment. The web site's goal is to provide the most current information about the area and to encourage potential investors.

Zarnowiec-Tczew Special Economic Zone
 
Special Economic Zones ZARNOWIEC and TCZEW were established in 1997 by Government Decrees. These Zones cover areas of 197 and 102 ha respectively, situated near Baltic ports of GDANSK and GDYNIA. Transport facilities include: Northern Port open to vessels of more than 100,000 DWT displacement, ferry lines Gdynia - Karlskrona and Gdansk - Oxelosund, container terminal in Gdynia, oil and grain terminals in Gdansk and Gdynia ports, established shipping and forwarding services, quality control and classification expert firms. There are connections with other regions of Poland and with neighbour countries by a road, railway and air communication system.
 
Gdansk is an important academic centre providing the region with qualified technical and managerial staff. Labour market is well developed around industrial complexes of Gdansk, Gdynia and Kwidzyn. In other parts of the region, in direct vicinity of the Zones there are reserves of labour still available. The region is covered by a dense network of agencies and branch offices of all Polish banks, also several foreign banks have their branches in Gdansk.
 
Many foreign companies invested in the above region, among them International Paper Co and Pilips in Kwidzyn, Nestle, Rubbermaid and Scania CV AB in Slupsk, IKEA, Dr Oetker, Golden Vale plc in Gdansk, Kappa Packagings in Pruszcz Gdanski, Michel Marbot in Malbork.

DUTY FREE ZONE in MSZCZONOW (DFZ)
 
LEGAL STATUS
The Duty Free Zone (DFZ) in Mszczonow is a separate part of Polish customs territory, established on the basis of a decree of the Council of Ministers of the Republic of Poland. On that territory one can conduct any industrial, service and commercial activity, according to the provisions of the Polish Customs, except for the retail trade. The facilities and the area constituting the Duty Free Zone (DFZ) are owned and administered by the Company East-West Duty Free Centre (EWDFC) with its corporate seat in Mszczonow, at 6/10 Fabryczna Street.
 
LOCATION
The duty Free Zone is located in the geographical centre of Poland (30 kilometres from Warsaw) in the town of Mszczonow. It is situated next to expressway Warsaw-Katowice and TIR transit road from Western Europe to Russia, Ukraine, Belarus and other Eastern countries. A railway siding and a station in the town enables deliveries and distribution to and from DFZ by rail.
 
ACTIVITIES ALLOWED IN THE DUTY FREE ZONE
Polish and foreign enterprises may effect following activities in the Duty Free Zone:

1. Industrial production
2. Overhauls of machines, devices and appliances
3. Transport and forwarding services
4. Assembling of electronic and electric devices and appliances
5. Assembling of technical products
6. Enriching different products
7. Processing of agricultural and food products
8. Warehousing and distribution
9. Cold storing
10. Merchandise services
11. Commodity exchanges and auctions