Doing business in Małopolska

1 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:

3 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

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.

5 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

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.

7 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. Quality of life The region has an exceptionally high number of highereducation 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. 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.

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 onethird 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.

9 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

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 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. local tax exemption

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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 komandytowoakcyjna) 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 komandytowoakcyjna) 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.

13 9 steps to setting up a business in Poland Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Step 8 Step 9 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) 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) Apply for a REGON identification number Time to complete: 1 day Cost to complete: no charge Open a bank account Time to complete: 1 day Cost to complete: no charge (depending on the bank) Obtain Tax Identification Number (NIP) Time to complete: 3-4 weeks Cost to complete: no charge Register for VAT Time to complete: 1 day Cost to complete: PLN 152 Register with the Social Insurance Institution (Zakład Ubezpieczeń Społecznych) Time to complete: 1 day Cost to complete: no charge Register with the National Labour Inspectorate (Państwowa Inspekcja Pracy) Time to complete: 1 day Cost to complete: no charge Register with the Chief Sanitary Inspectorate (Państwowa Inspekcja Sanitarna) Time to complete: 1 day Cost to complete: no charge

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. Source: Eurostat, 2009 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%. 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). The highest average gross salaries for the period January-July 2008 were recorded in Mazowieckie Voivodeship (PLN 3,712.00

15 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 predetermined 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).

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. 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: 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. non-eu Employees 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 permit 3) 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.

17 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%. 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. 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.

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% preleased. 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 TreiMorfa 60,000 m² 2012 Developer / Investor Verity Development B4B Bonarka 4 Business 32,800 m² 2009 TriGranit Nowe Miasto 30,000 m² - ECE Enterprise Park 28,200 m² 2009 Kraków Business Park 16,300 m² 2009 Centrum Biurowe Kazimierz Quinlan Private Golub Kraków Business Park 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 Centrum Biurowe Vinci 19,000 m² 2010 Echo - Investment Vinci Office Center MARR Business Park 9,700 m² 2011 MARR S.A. Source: Real estate market, 2008, Knight Frank, MARR, 2009

19 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. 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: Property Cracow Airport Logistic Center Area Planned completion 150 000 m² 2009 Developer / Investor Goodman Poland MK Logistic 25,000 m² 2009 MK Logistic Investments that are planned or currently under construction in Małopolska: Property Area Planned completion Developer / Investor MARR Business Park 14,600 m² 2010 MARR S.A. Source: Real estate market, 2008, Knight Frank MARR, 2009 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

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.

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23 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%.

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

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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 mediumsized 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 hightechnology 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%.

27 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.

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 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 Strefa Aktywności Gospodarczej Bukowno / City of Bukowno

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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. 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 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.

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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).