Juskaite Laura Posnick Samuel Gramozi Vetton

POLITICAL OUTLOOK

POLITICAL SYSTEM Parliamentary republic Government structure divided into executive, legislative and judicial branches

President as the Head of State o Represents the country on the International stage o 5-year term in office o May be re-elected for one additional term Council of Ministers o Collective executive decision-making body o Consists of the Prime Minister, the Deputy Prime Minister, and other ministers (15 key ministers) o Main functions EXECUTIVE BRANCH

LEGISLATIVE BRANCH Bicameral legislature: o The Sejm is elected in universal, equal, direct and proportional elections, conducted by secret ballot o The Senate is elected in universal and direct elections, by secret ballot 4-year term in office

CURRENT POLITICAL CLIMATE Multi-party system Major parties: Other parties: Civic PlatformDemocratic Left Alliance Law and Justice Polish People's Party United Poland Your Movement 2015 Election results o Presidential o Parliamentary

RELEVANT LAWS AND REGULATIONS The basic legal framework is found in: o the Commercial Companies Code (2001) o the Law on Freedom of Economic Activity (2004) With a few exceptions, foreign investors are guaranteed national treatment Reforms to improve the climate for foreign and domestic investment

MUNICIPAL LEVEL GOVERNMENT Poland is a unitary state composed of 2,479 municipalities (gminy), 380 counties (powiaty) and 16 regions (voivodship- województwo). The municipal councilThe county councilThe regional council Public transport Social services Housing Environment Culture Pre-school and primary education Road building and maintenance Secondary education Civil protection Environment Employment Health Economic development Higher education Environment Employment Social policy Regional road management

SUPRANATIONAL ORGANIZATIONAL MEMBERSHIPS The United Nations The European Union North Atlantic Treaty Organization General Agreement on Tariffs and Trade World Trade Organization (WTO) World Bank Group International Monetary Fund The Organization for Economic Cooperation and Development (OECD)

ECONOMIC OUTLOOK

GENERAL VIEW Growing information technology sector continues to attract foreign direct investment Foreign investors also cite Poland’s young, well-educated, skilled and relatively low-cost workforce as a major reason to invest Economy employs roughly 16 million people o Total unemployment around 10.1% (end of 2014)

ECONOMIC INDICATORS, AREAS OF ACTIVITY AND INFRASTRUCTURE Economic Indicators o GDP per capita: $13,360 (67% of EU average) o 3.4% GDP growth (through first half of 2015) The majority of the workforce is in the services sector o Other significant industries Infrastructure o Density of country’s transportation infrastructure is in line with EU average o However, degradation of railway transportation system

MAIN INDUSTRIAL AND BUSINESS ACTIVITIES IN LUBLIN Lublin is situated in east central Poland in the Lubelski voivodeship region Economy of the region is based on agriculture o Other significant sectors Academic centre with impressive scientific research facilities especially in the natural and medical sciences.

TAX LEGISLATION

CORPORATE TAXATION Classical Tax system Taxable Persons o Joint-stock companies (S.A.) o Limited liability companies (sp. z o.o.) Tax residents subject to unlimited tax liability o Legal (registered) seat; or o Place of management Permanent establishments subject to limited tax liability Social Security Tax: 35% of employee remuneration

CORPORATE TAX BASE AND VAT Corporate Tax base: o Corporate income pooled o Tax rate: 19% o Foreign-source income o Permanent establishment versus subsidiary VAT: o Rate: 23% o Registration threshold: PLN 170,000/yr (~ $37,685/yr) o Payment

WITHHOLDING TAXES Dividends: 19% Interest: 20% Royalties: 20% But, reduced by tax treaties

EURO-PARK MIELEC SPECIAL ECONOMIC ZONE (SEZ) Corporate Income Exemption Value of 50% of eligible investment costs Minimum investment: EUR 100,000 Operates until 31 Dec, 2020

DOMESTIC MEASURES FOR AVOIDING DOUBLE TAXATION Foreign Tax Credits Participation Exemption: Poland, EU Countries, Switzerland Underlying credit for corporate tax paid on dividends distributed by subsidiaries o 75% ownership o Tax treaty partners Controlled Foreign Company (CFC) Credit

TAX TREATY NETWORK Poland has around 80 tax treaties Treaties based on OECD Model o Exception: Royalties provision based on UN Model Generally reduce withholding taxes *No tax treaty with Brazil

TAX TREATY WITH THE UNITED STATES Recently updated: February 13, 2013 Royalties provision: permits taxation in both Contracting States Reduces withholding taxes o Dividends: 5% (with 10% ownership) or 15% (otherwise) o Interest: 5% o Royalties: 5% Other important provisions

EXIT TAXES No exit tax for change in place of management No exit tax for moving company or part of its business

ANTI-AVOIDANCE LEGISLATION Transfer Pricing Thin capitalization rules Controlled Foreign Company (CFC) rules General anti-avoidance

STRENGTHS AND OPPORTUNITIES Strengths o Political and economic stability o Grants and other incentives (SEZ) o Low labor costs and high-quality workforce o EU Member and extensive tax treaty network Opportunities o Both internal and external growth o Largely untapped IT market o Easy access to Western and Eastern markets o Availability of EU Directives

EURO-PARK MIELEC SPECIAL ECONOMIC ZONE (SEZ)

WEAKNESSES AND THREATS Weaknesses o Party in power less supportive of European integration o Poor communication infrastructure o Less than favorable tax rates o Withholding tax on royalties Threats o Potential rise of radical reformist party o Contraction of skilled workforce o More favorable tax rates in neighboring countries o New CFC and thin cap rules