How to set up your business in Poland „Anyone can run a small business and anyone can run a large business. The hard bit is getting from small to large.” Contents 1. The business plan and development strategies 05 Business plan 08 Development strategies 2. Structure – how to set up your business properly 11 Establishing companies, branch offices, agencies 11 The procedure of establishment of a company 15 Additional costs 16 Selected forms of companies 17 Limited partnership 18 Accountancy Bureau 19Bookkeeping 20Taxes 3. Cash – your business base 25 Acquiring capital 26 Banking relationships 27 NewConnect IPOs 28 Bond issue on WSE Catalyst 4. Responsibilities – how to avoid getting lost 31 Ongoing tax advice 32 Tax optimisation 33 Optimisation of structures and transactions 34 Tax Compliance 35 Transfer pricing 2 Introduction The journey of a thousand miles begins with a single step. Confucius Running a business is a journey. Certainly the most difficult moment of this journey comes with making the decision to start up and taking the first step in escalating the idea to reality. One of the first questions and doubts that come up at this initial stage is “Where should I start my business adventure in order to grow it in the most comfortable, stable and predictable conditions, surrounded by conducive macro economical indexes and supported by competent, hardworking and kind people.” Poland is definitely such a place. Stating a business in Poland opens up for entrepreneurs one of the largest European markets, where over 38 million potential clients live. Furthermore, Poland’s convenient location in the heart of Europe, with its welldeveloped transport connections, facilitates the establishment of business contacts with partners from all countries in Western and Eastern Europe. Poland is in a good economic situation and its huge progress in the years 1995-2011 is best illustrated by average GDP increase of 4,8% per year. The stable macroeconomic environment, strong economic foundation, large domestic demand and growth in foreign trade helped Poland not only to avoid a recession in 2009 but also to register the highest growth during the crisis among all EU countries. Foreign investors who plan to start up in Europe often choose Poland as a location for new investments. This information was confirmed in a survey by Bloomberg 2013 where Poland was considered to be the best country for doing business in Central Europe. In this guide we will provide you with detailed information on particular issues essential to starting and running a business in Poland. In this guide designed for start-ups and early stage companies, we focus on the four cornerstones of a successful start-up: 1. The business plan and development strategies 2. Structure – how to set up your business properly 3. Cash – your business base 4. Responsibilities – how to avoid getting lost Anna Pisarek Director – establishment of business 3 Business plan 1. The business plan and development strategies A reliable business plan as a tool to make a decision. • A business plan is an explanation for decision- makers on how the business idea fits into the economic realities and how the owners want to bring it into life. • A reliable business plan is a tool to support accurate business decisions which facilitates the understanding of conditions, both internal and those related to the environment around the company. As a decision support tool, a business plan, in addition to the descriptive element, should also contain the financial assumptions in an Excel file, which allows them to verify and analyze the impact of changes in the key assumptions on the expected results and the need for cash.   Why prepare a business plan? The best business plan answers the following questions: • What do you want to achieve? What is your unique selling point? Why would customers buy from you? • How do you intend to achieve your goals? What are the key milestones? What are the critical success factors/barriers to achieving your goal? What are you going to do about them? • What funding is required to achieve your goal? Which milestones will the first fundraising achieve? If you fail to plan, you plan to fail. The main elements of a business plan are: • Executive summary – an overall view of your business and its potential. • Background and description of the business – the rationale behind the business. • Management and organizational structure – how your company will be organized and managed. • Market research and the marketing plan – a comprehensive analysis of market potential and dynamics. • Pricing strategy – the price point chosen will affect the image of the product or service you are offering, what gross profit per product, and in total, is expected. • Channels of distribution – the geographic area – whether it is better to sell directly, through retail outlets or wholesalers. • Product/service promotion – advertising, personal selling and sales promotion. • Sales management – outline details of the sales team and track record; what selling methods will be employed; what are the sales volume and activity targets; how long is the sales process; what procedures are in place for handling customer complaints? • Sales forecasts – a sales forecast, on which monthly cashflows and budgets can be based, should be prepared. • The operation plan – this section should describe the type and function of the equipment you are buying so that the reader will have a clear image of your operational environment. • Forecast profit and loss account and cashflow – projected results for the business demonstrating initial capital required, break-even point, potential return on investment and over what period. SWOT analysis – critiques the business’ Strengths, Weaknesses, Opportunities and Threats using a balanced score card approach. Assessment of business profitability – ratio analysis, which shows the effectiveness of the market. Porter’s Five Forces – views the business from the position of suppliers, buyers, competitors, threat of substitute goods and threat of new entrants and is a particularly good way of portraying the business visually. At Grant Thornton, we understand that a business plan is an integral element of communication with investors and financial institutions in the process of seeking funding 5 1. The business plan and development strategies analysis of resources market offer environment analysis organization and its suppliers marketing strategies customers and competitors costs forecast analysis and financial planning sales forecast the efficiency of the company for the implementation of business ideas and therefore needs to provide its readers with reliable information on the proposed project. Review by an objective adviser on the surroundings conditions, the organization of the business and the current state of its finance can assess the reliability of forecasts and diagnose the key risks to the success of the business. As a result, the beneficiaries are both the co-financing institution and the company itself. We value close cooperation with you, the client. We believe that the combination of client knowledge of the business with our experience and independent approach allows us to create the best solutions. That’s why we offer services related to the business plan, which aims to determine the profitability of the business investment. The assessment is based on a business plan, with the financial section presented using 6 the discounted cash flow model. It may be expanded to include additional market analyses, a market strategy framework, extended SWOT analysis and elementary assessment of business profitability. Project scope is tailored to the client’s individual needs. It most often comprises the following elements: • Evaluation of the company’s current situation (finance, product, market) • Description of the investment project • Collecting all the data necessary to develop the cash flow model, and all other information important to the project (market environment – legal limitations, competitors, potential customers) • Building the business plan including the financial model • Project viability assessment • Sensitivity analysis • Formulating recommendations The work is realized in several stages: • Overview of principles and concepts of the business and the scope of information available to the company. • Environment analysis (customers and competitors) and the description of resources (organization and its suppliers). • Construction of profit – cost assumptions, capital expenditure and working capital elements that determine the demand for financing. • The development of business plan documentation and discussing conclusions. As a result, the client receives a report in the form of a business plan, containing financial simulations, as well as assumptions, sensitivity analysis and investment project assessment. 7 1. The business plan and development strategies Development strategies Grant Thornton offers a development strategy service that involves supporting groups of companies by identifying areas with potential for boosting the bottom line. Grant Thornton advisers take into account various ways of realising synergies, particularly through centralisation and outsourcing of some functions. We recommend best practices in business operations. By combining knowledge on the functioning of processes inside businesses with long-term experience in defining business strategies and professional analytical skills, we can develop several variants of optimisation activities and assess their economic viability. As a result of our work, the company’s management can make decisions which will have a positive impact on business value. Depending on the size and nature of the group of companies, the scope of works differs. Companies heading into the future should know their goals and priorities, the chances of success and the obstacles to their achievement. It most often comprises the following stages: • Getting to know the basics of the group’s operations • Determining the scope of the project • Collecting analytical data, e.g. through visiting businesses comprising the group • Data analysis • Developing and pricing potential scenarios • Verifying the preliminary findings in a series of meetings with management staff • Formulating conclusions and recommendations Moreover, we can actively participate in restructuring chosen processes or assist by providing ongoing monitoring of the implementation of recommended changes. 8 9 Establishing companies, branch offices, agencies 2. Structure – how to set up your business properly The gap between success and failure is quite small – small things matter A good start is half the work! In the business start-up environment, it is easier and relatively inexpensive to get the corporate and tax structure right at the start. The alternative is to reverse out of an existing structure at a later date which causes expense, disruption to the business and is generally a wasteful use of an enterprise’s resources and time when both of these are in short supply. We recommend focusing on the things and structure that matter right at the start, e.g. the possible exits, expansion opportunities and tax optimization strategy in order to avoid expense at a later date. The goal of the service is to provide comprehensive support in the process of establishing companies, as well as branch offices and agencies of international entities. Tasks covered by the service include many variants of the clients’ circumstances in the context of international tax law. The extensive experience and knowledge of Grant Thornton advisers guarantee efficient registration of an entity meeting the client’s real needs. 11 Stages of registering the LTD in NCR: 2. Structure – how to set up your business properly The procedure of establishment of a company No. signing the lease contract establishment of a bank account application to National Court Registrer – one-stop shops – 2 Statement by all board members that contributions to the share capital were fully paid by all the partners Signed by all members of LTD management board 1 3 List of partners Signed by all members of LTD management board 1 4 Signature pattern of each member of the board Form of a notarial deed 1 from each member 5 The statement of no criminal record and not performing a public function from board members Individual signature by LTD board member 1 from each member 6 The statement of the names and addresses of the members of the Board Signed by all members of LTD management board or proxy 1 7 A statement that not every/one member has a Social Security Number If the LTD is a sole shareholder company; Signed by all members of LTD management board or proxy 1 8 Statement of the address (and registered office) of only member of LTD If the LTD is a sole shareholder company; Signed by all members of LTD management board or proxy 1 9 Statement of the LTD address and registered office Signed by all members of LTD management board or proxy 1 10 ID card/passport certified by a notary with an apostille and translated into Polish by a certified translator If member is a foreign person 1 from each member 11 The statement of no criminal record If member is a foreign person obtaining the certificate, bearing the apostille clause and translated by a certified translator will speed up registration in the NCR 1 from each member 12 The power of attorney with proof of payment PLN 17 If the application is rendered by proxy; stamp duty paid according to the seat of the submission 1 for each place of submission (min. 4) 13 Application forms for NCR Signed by the members of the Board in accordance with the principle of representation or proxy 1 for each form Registrer, Central Statistical Office, Tax Office, Social Insurance Office Version 2 the articles of association a notarial deed signing the lease contract establishment of a bank account application to the Central Statistical Office application to the Tax Office application to National Court assigning Tax register assigning REGON Identification number number registration form to Social Insurance Office registering for the VAT Stages of establishing a limited liability company: No. Specification Comments Number of copies 1 The Articles of association – a notarial deed signed by all company partners Sole shareholder company cannot be set up by another sole shareholder company 3 2 The power of attorney from the shareholders in the form of a notarial deed If the articles of association are signed by proxy stated by partners 2 (number of copies from each of the partners) 3 Transcript from the trade register attributed to a partner, translated into Polish by a certified translator and bearing the apostille clause If the partner is foreign legal person 3 4 Current copy from NCR (National Court Register) If the partner isa legal person from Poland Notary will download printout from NCR service 5 Appointment of the Board of Ltd. Management may be indicated in the text of the articles of association or in the notarial deed agreement covering the articles of association, but separate from the articles. 6 Resolution of the management board / meeting of shareholders consenting to participate in Ltd. The parent company articles of association may oblige the company to obtain the consent from an appropriate company unit that is supposed to be a partner. 12 Number of copies Proof of payment to NCR – (PLN 500 for Registration of the Company in the NCR and 100 PLN for publication in MSIG) registering for the VAT application to National Court Comments 1 Version 1 the articles of association – a notarial deed Specification 1 13 2. Structure – how to set up your business properly Additionally, according to the principle of one-stop shops: The scope of the Grant Thornton works consists of: No. Specification Comments Number of copies 1 Identification form NIP-2 with attachments 1 2 Document of authorization for the use of office premises – for example, the lease Transmitted to and for the purposes of the Tax Office 1 3 Agreement to a bank account / bank declaration / Extract accounts Transmitted to and for the purposes of the Tax Office 1 4 Application form RG-1 with attachment RG-RD 1 5 Application form to Social Insurance Office (ZUS-ZPA) 1 Steps after registration: No. 14 Specification Comments Number of copies 1 Form KRS-Z3 with KRS-ZY Updating the company data in NCR: NIP and REGON 1 2 Update form – NIP-2 Updating the company data in NIP for REGON; not covered by the rule 1 3 Update form – RG-1 Updating the company data in CSO for NIP; not covered by the rule of one-stop shops; as a rule, there is no need to submit, as the CSO by law should receive info from the Tax Office 1 4 Identification application VAT-R with stamp duty PLN 170 Not covered by the rule of one-stop shops 1 5 Share Register Registration of shareholders to Share register 1. Identifying all the actions necessary to be taken during the process of establishing a company in Poland 2. Preparation of a detailed schedule of establishing the company 3. Preparation of a list of documents and information to be received by Grant Thornton from the Principal 4. Preparation of a draft of the Articles of Association of the company and consulting it with the Principle 5. Preparation of necessary powers of attorney for the Grant Thornton staff members 6. Conclusion of the Articles of Association of the company in the form of notary deed 7. Preparation of documentation necessary to register the company in the National Court Register (resulting in assignment of the KRS number) 8. Preparation of an application to register the company for statistical purposes in the Statistical Office (resulting in assignment of the REGON number) 9. Preparation of an application to register the company for a tax identification number in the Tax Office (resulting in assignment of Tax Identification Number) 10.Preparation of an application to register the Company for employment purposes in the Social Insurance Office 11.Submission of aforesaid documents and monitoring of the process of registration of the company in aforesaid institutions 12.Registering the NIP (Tax Identification Number) and REGON (statistical number) in the National Court Register 13.Registering the company for the VAT 14.Consulting all legal and tax issues connected with the project Additional costs The additional costs of establishing a limited liability company in Poland are, in particular: • Registration of the company in the National Court Register – PLN 500 • Obligatory publication in Monitor Sądowy i Gospodarczy (Court and Business Gazette) – PLN 100 • Registration for VAT – PLN 170 • Necessary Certified translations – approx. PLN 80 – 100 per page • Stamp duties on power of attorney – PLN 17 per submitted copy of power of attorney 15 2. Structure – how to set up your business properly Selected forms of companies Selected Forms of Companies 16 Registered partnership Spółka komandytowa Limited liability company Limited partnership Limited liability company minimum capital – – PLN 5 000 minimum number of shareholders 2 2 1 (sole shareholder company) taxation of company profits – – 19% taxation of associates profits according to the 19% flat rate or by a progressive 18% and 32% according to the 19% flat rate or by a progressive 18% and 32% dividend taxed by 19% flat rate responsibility of shareholders solidarity and subsidiary of the company, the full responsibility of all partners the general partner is responsible in solidarity and subsidiary with company and without restriction; limited partner is responsible to the amount of partnership company representation each shareholder has the right to represent the company unless otherwise indicated in the contract general partner represents the company it is not a separate legal form, and its specificity is described in the following section lack of responsibility of partners, however liability may extend to the members of the Board members of the Board in accordance with the principle of representation as is set out in the articles of association Limited partnership A limited partnership enables you to combine the benefits of securing the partners’ personal assets (to a similar extent as in the case of a limited liability company) with cost-effective taxation (flat-rate tax of 19%), which makes it an optimal form of business activity for small and medium-sized enterprises. The appeal of limited partnerships is reflected in the growing number of entities operating within such a framework. Limited partnerships are established for new business undertakings. In the case of entities already in operation, it is possible to change their legal form to a limited partnership. Grant Thornton advisers provide comprehensive support in the process of designing an appropriate structure based on the limited partnership model, as well as in the process of changing the legal form. Our extensive experience based on numerous completed projects provides a foundation for making the right choice from among the available variants, and also facilitates implementation. The scope of services offered by Grant Thornton includes: Establishment of a limited partnership • comprehensive diagnosis of all material circumstances of the client’s situation in order to determine the optimal solution in terms of the ownership structure and implementation process • drafting and agreeing with the client the contents of the limited partnership operating agreement and, potentially, the general partner’s agreement • determining the principles of representation of the limited partnership (general partner’s responsibilities, scope of powers of attorney, signing powers) • defining the principles governing the transfer of funds to partners, taking into account their involvement in the activities of the limited partnership • comprehensive services related to the registration process of the limited partnership and general partner in the National Court Register, tax office, social insurance institution, statistical office, etc. Changing legal form to a limited partnership • identification of all material aspects of the change in legal form • recommendation regarding the approach to changing the legal form • preparation for the process of changing the legal form (identification of the necessary steps and obligations, determining how to interpret transactions taking place during the change process for tax purposes, including identification of potential risks) • development of a detailed schedule for the process and optimal delegation of tasks related to individual activities • drafting the necessary formal and legal documents relevant to the process (with content agreed with a notary public) • comprehensive services related to the registration process with the National Court Register, tax office, social insurance institution, statistical office, and other institutions • assistance in relations with business partners (including but not limited to banks and financial institutions, public administration bodies and registry courts) • consultations regarding how to reflect the change in legal form in accounting records. 17 2. Structure – how to set up your business properly Accountancy Bureau Your accountant knows almost as much as you do about your business. Therefore it is crucial for you to have confidence in the people you work with. In Poland, accounting is legally regulated in the Accounting Act of September 24, 1994. (Journal of Laws of 2002 No. 76, item. 694, as amended). Formal guidelines for company accounting are provided in the Act, for example; • accepted accounting principles (policies) • bookkeeping on the basis of accounting documentation • valuation of assets and liabilities and determination of profits or losses • preparation of financial statements • collection and storage of accounting and other documentation; and others. Supporting the accounting function in startups as well as micro and small enterprises, we fulfill your obligations related to bookkeeping, payroll calculation and accountancy and tax reporting. Our accountancy bureau provides comprehensive accounting services for businesses, including business registration, legal and tax assistance and bookkeeping in compliance with the Polish Accounting Act. We support our clients in daily settlements as well as in filling tax returns. 18 Bookkeeping The scope of services provided by Grant Thornton’s Accountancy Bureau include the following accounting and payroll services for SMEs: • Business registration • Legal and tax assistance during business registration • Business address rental • Bookkeeping services compliant with the Polish Accounting Act • Payroll calculation • Tax returns, statements for ZUS, GUS, NBP, PFRON and Intrastat • Basic HR administration • Administrative support: transfers, invoicing, business travel accounting • Financial statements • Standard reports We lift your burden of accounting duties, always ensuring effective and comprehensive accounting services. Cooperation with Grant Thornton will give you the time to grow your business and build confidence that your books are in order. Tax law and accounting law constitute two independent branches of Polish law, which due to a common area of regulation, include common solutions in some parts. Tax revenues, costs and income are calculated based on accounting records, but due to material differences between the tax law and balance sheet law, they are not equivalent to accounting revenues, cost and income. Accounting principles cover commercial companies and partnerships and all other legal entities, as well as individuals, civil partnerships of individuals, general partnerships of individuals and professional partnerships, if their net proceeds from sales of goods and services for the previous financial year amount to no less than EUR 1.200.000. • Undertakings are obliged to apply the accepted accounting principles, giving a true and fair view of their property and financial standing as well as financial results. • The manager of an undertaking bears responsibility for the performance of the accounting obligations. • Account books are kept inboth the Polish language and currency (not English). • The Financial statement consists of: a balance sheet; a profit and loss account; supplementary information, comprising an introduction to the financial statements as well as notes; statement of changes in equity and cash flow. • Account books should be opened within 15 days of the date operations commence, which is the date of the first event producing effects of a property-related or financial nature. • Account books should be closed no later than 3 months after the date ending a financial year. The Financial statement should be drawn up as of the account books closing date. • Submission of tax returns CIT-8 should be submitted to the tax office no later than 3 months after the date ending a financial year. • The Annual financial statement of an undertaking is subject to approval no later than 6 months from the balance sheet date. • The manager should submit the annual financial statement to the tax office within 10 days of the date of the approval of the annual statements. • The manager should submit the annual financial statement to the Court Register within 15 days of the date of the approval of the annual statements. • In some cases the manager should publish the annual financial statement in “Monitor Sądowy I Gospodarczy” within 15 days of the date of the approval of the annual statements. • Approved annual financial statements should be stored permanently. • Account books should be stored for at least 5 years. 19 2. Structure – how to set up your business properly Taxes The structure of the taxation system in Poland is similar to the majority of European countries and includes 10 tax titles. The majority of them are regulated by separate acts. The general material part and the procedure part of the tax law were set in the Act – Tax Code. Income taxes: • Corporate income tax (CIT) Taxpayers: legal persons, organizational units without legal personality, partners in partnerships who are legal persons, tax capital groups. Tax rates – the basic tax rate equals 19% of the tax base. Taxation period, tax payment the tax year is a calendar year. taxpayer shall calculate and pay tax monthly by the 20th day of the month following the month of earning the income. Tax losses – a loss incurred by a taxpayer during a tax year may be offset against the income generated in the following five tax years, provided that the amount of loss offset in any single year may not exceed 50% of that loss. • Personal income tax (PIT) – is a complex structure including different categories of revenues and income of taxpayers (including revenues from business activities, employment contracts, sale of property rights, dividends received, etc. Taxpayers – all natural persons achieving revenues from sources located on the territory of Poland are taxpayers of personal income tax. Tax rates – in the case of income achieved by natural persons conducting business activities, such persons can select: taxation based on tax brackets progressive tax scale, differentiating the following income thresholds, i.e. 18% and 32%. opodatkowanie 19% stopą podatkową 20 Tax base Over PLN 85 528 Tax rate in 2013 Up to PLN 85 528 18% minus PLN 556.02 2.45 PLN 14 839.02+32% of surplus over PLN 85 528 taxation based on a 19% tax rate (however in the case of selecting flat-rate taxation, the taxpayer loses the right to taxation jointly with a spouse and the right to relief and deductions). It is only for natural persons conducting a business activity. Taxation period, tax payment the tax year is a calendar year. taxpayer shall calculate and pay tax monthly by the 20th day of the month following the month of earning the income. Tax regulations provide for the possibility to select a simplified taxation form including tax card and lump-sum tax on recorded revenues. Turnover taxes: • Tax on goods and services (Polish value added tax) Polish regulations generally stay in accordance with the Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax. Tax on goods and services is imposed on: supply of goods and provision of services against payment within the territory of the country; exports and imports of goods; intra-community acquisition of goods against payment within the territory of the country; intra-community supply of goods. Taxpayers – include legal persons, organizational units without legal personality and natural persons operating a sole proprietorship, irrespective of the purpose or effects of activities. • Registration for VAT purposes – before starting any VAT-able activity, taxpayers are obliged to submit a VAT-5 registration form to the head of a competent tax office. Small entrepreneurs (whose sales value for the previous tax year did not exceed PLN 50.000) or entities performing VAT-exempt activities can file the registration form, but are not obliged to do so. VAT rates – The base VAT rate is a 23% rate. Additionally, there are preferential 8%, 5%, 0% rates and the so-called exempt rate – “zw”. The tax base – in the case of intra-community acquisition of goods is the amount to be paid by the purchaser. The tax base includes: taxes, customs duties, charges and other similar duties related to acquisition of goods, except for VAT; additional costs, such as commission, packing, transport and insurance charged by the supplier to the entity making the intra-community acquisition. Documentation duties – taxpayers are obliged to submit VAT-7 returns by the 25th day of the next month or after informing the head of the competent tax office in the case of quarter periods – by the 25th day of the month following each quarter (except for small taxpayers, whose turnover did not exceed EUR 1.200.000, submitting quarterly VAT returns). Taxpayers making intra-community acquisitions or supplies of goods and services are obliged to submit summary information for monthly or quarterly periods, by the 15th day of the month following the month or quarter during which tax was chargeable. Additionally, taxpayers are obliged to draw up INTRASTAT information for monthly periods, by the 10th day of the month following the month during which the transactions took place. Excise duty – The Polish Excise Duty Act determines taxation of excise duty goods and passenger cars, organisation of excise duty goods turnover and marking goods with excise stamps. Other taxes have significantly less fiscal meaning: • Tax on civil law transactions – is levied on: sales agreements and agreements on the exchange of goods and property rights, loan agreements, donation agreements, annuity agreements and agreements on the dissolution of co-ownership, establishment of mortgages, establishment of usufruct for consideration and servitude for consideration, irregular deposit agreements, company deeds; amendments to the aforementioned agreements if they increase the tax base; decisions of courts and settlements if they have the same legal effects as civil law transactions subject to taxation. • Real estate tax – is imposed on land, buildings and their parts, structures or their parts related to conducting business activities. • Road vehicle tax – is levied on trucks, buses, truck- tractors and ballast tractors, trailers and semi-trailers with the weight and purpose defined in the Act. • Inheritance and donations tax • Agricultural and forestry tax • Gambling tax Social security contributions Social security contributions comprise employer and employee social security contributions. Employees (insured persons) are subject to the following mandatory social insurance schemes: • retirement pension insurance • disability pension insurance • sickness insurance • insurance in respect of accidents at work Contributions for the above-mentioned insurance schemes are deducted from the amount which is used as the basis for the calculation of contribution rates, i.e. revenue in the meaning of legal provisions on a natural person’s income tax, attained by an employee during a calendar month for work performed within the framework of an employment relationship. 21 2. Structure – how to set up your business properly Contributions are financed by the insured persons and the contribution payer: Social security contribution Contribution as a percentage of the calculation base Financing by Employer Pension 19.52 9.76 9.76 Disability 8.00 6.50 1.50 Sickness 2.45 Industrial injures 0.67 – 3.86 0.67 – 3.86 Total in 2013 30.64 – 33.83 16.93 – 20.12 2.45 Social security contributions for a retirement pension and disability pension are made by the employee and by the employer only up to an annual cumulative earnings limit. In 2013 the limit is PLN 111 390. The remaining social security contributions (2.45% to be paid by the employee and 0.67% - 3.86% to be paid by the employer) are made irrespective of the earnings amount. Moreover, there is a contribution to the Labour Fund and Guaranteed Employee Benefit Fund, which are to be financed by the employer. The contribution amounts to 2.45% and 0.10% of gross remuneration. People eligible for social insurance are subject to health insurance amounting to 9 %. The registration form (ZUS ZUA) is submitted by the contribution payer within 7 days of the commencement of social insurance liability to the relevant branch of ZUS. The monthly minimum wage in 2013 amounts to PLN 1 600. 22 Employee 13.71 3. Cash – your business base 3. Cash – your business base Acquiring capital The goal of the service is to support the client in raising the financing necessary for business development. Grant Thornton advisers determine capital needs and identify the available capital acquisition options, selecting those which best meet the client’s expectations and their business circumstances. We provide advisory services on acquiring financing from the following sources: • Handling issues of bonds, convertible bonds, senior bonds and floating securities on WSE CATALYST • Handling private placements and support in public share issues preceding flotation on NewConnect or the regulated WSE market • We represent our clients when seeking financing from venture capital / private equity / mezzanine funds • We support our clients in meetings with banks related to applications for investment loans or project finance Grant Thornton specialists have extensive experience in acquiring financing for businesses. The services we offer are comprehensive and 24 effective – thanks to our competence and in-depth knowledge of capital raising methods we help you achieve results which were hitherto beyond your reach. The service comprises the following stages: • Getting to know the business • Development of the project execution strategy, including choosing the method of capital acquisition • Development of the financial model • Development of business valuation (in the case of share issue) • Drawing up tender documents and distributing them to investors • Drafting appropriate investment agreements • Negotiations with institutions and investors • Closing the deal – recapitalization of the client’s business. With Grant Thornton service quality is guaranteed – we will do our best to obtain financing for you on the best terms possible. Moreover, our experts minimise the risk of project failure due to a lack of interest in the project among potential investors. And seen as our services are comprehensive, the costs of acquiring capital can be reduced. 25 NewConnect IPOs 3. Cash – your business base The current economy provides many opportunities to raise capital for development. The key to success is in selecting the option that is coherent with the plans and goals of the company, and the perfect execution of transactions. Banking relationships Banks are the traditional source of funding for established businesses. Where banks lend to new businesses, borrowers are required to provide significant collateral such as security over personal assets. Banks may also seek undertakings from borrowers such as bank covenants. Banks expect to understand the business, usually requesting a detailed business plan. At the moment obtaining bank finance is slow so it is critical the business plan ticks all the boxes. Banks are having a tough time too. They may be more cautious and concerned with bad debt, so will need greater persuasion to lend you money. In many areas, new lending will be severely restricted. The banks will focus increasingly on the quality of their loan book, and their key concern will be loan recoverability. That’s why you should treat your banker as a partner in the business. You need your banker to believe in you and your product as much as you do. You need to get them as excited as you are. This service is addressed to companies seeking bank financing for their operations and development. As part of the service, Grant Thornton advisers draw up a report describing your planned undertaking in the context of your company’s key business areas and the business sector in which it operates. The document is then 26 sent out to banks to determine project financing options and choose the best offer. Our experience enables us to draw up the report in such a way that it highlights the issues of importance to a financial institution and contains all the necessary information. Data provided in the form required by banks facilitate the bank analysts’ job, which in turn accelerates the process of obtaining financing for the company. The report developed by the Grant Thornton advisory team covers the following scope: • Description of the planned project • Company description – business profile • Company description – legal and organisational aspects • Analysis of the business sector • The company’s positioning in the sector • Financial forecasts developed by the company, covering the planned debt repayment period • Breakdown of banking products used by the company The basic version of the service does not include a verification of the company’s financial forecasts. By cooperating with Grant Thornton, you will receive a professionally written report and save time in obtaining bank financing. NewConnect is a platform for financing and secondary trading organized by the Warsaw Stock Exchange. It is based on the form of the Alternative Trading System (ATS), characterized by simplified requirements in comparison to admission to trading on a regulated market. Determining the interest in the company includes: • Development of the project execution strategy • Drawing up a questionnaire checking interest in the project, which is distributed to investors • Determining the investors’ interest in the company • Review meeting NewConnect is primarily dedicated to companies in the early stage of development, with a high potential of growth, seeking capital to raise from several hundred thousand PLN to several million PLN, representing the most innovative sectors of the economy. Raising funds through NewConnect is associated with a number of benefits: • simplified formalities and procedures for admission • low cost of debut and listing • relatively low cost of raising capital. Presence on the NewConnect market provides a range of benefits associated with being listed as a public company: excellent exposure to business partners, promotion and increased recognition of the company as well as increased credibility from banks and other counterparties perspective. In addition, the issuer receives another opportunity to obtain the financing needed for development by further share issuance. Negotiations and company recapitalisation include: • Development of the financial model • Company valuation • Drawing up tender documents • Contact with the interested investors • Road Show – presentation meetings • Negotiations with key investors concerning the investment contract • Company recapitalisation Formal activities include engaging an agent/sponsor of the issue, drawing up the Information Document and preparing applications to the Warsaw Stock Exchange, KDPW, KNF. As a result of these activities, the company is floated on NewConnect. To be able to realise the potential offered by a NewConnect IPO, it is necessary to adapt the company’s organisational structure to stock exchange requirements and to implement public company standards. Example schedule for the introduction of NewConect. Decision concerning the strategy of capital raising Meetings with investors and negotiations Fulfillment of formal procedures for NDS and WSE Surveys among investors – distribution of teaser Shares allotment and cash inflow to the company Debut/First day of tradin Distribution of offering materials to interested investors Preparation of registration document An initial public offering on NewConnect is a very important milestone in a company’s history, as it introduces the necessary financing for the business and helps realise planned investments and above-average growth rates. The key to success is not only convincing investors that the company’s development plans are sound, but also finding a compromise between the owners’ and investors’ expectations as to the value of the business. Floating a company on NewConnect takes from 4 to 6 months. The scope of services performed by Grant Thornton advisers includes determining the interest in the company, negotiations and recapitalisation as well as observing formalities. NewConnect Authorised Advisers from Grant Thornton provide support to companies in making the necessary adjustments. With our extensive experience we can provide a top-quality service, and cooperation with our NewConnect experts boosts your chances of success on the stock exchange. 27 3. Cash – your business base Bond issue on WSE Catalyst Catalyst is the first organized market of debt financial instruments in Poland. Issuance of corporate bonds on Catalyst enables us to broaden the horizons of investment. Catalyst debut is preceeded by the submission of an application for the introduction of financial instruments to the market. An attachment to the application should include: • Information document ( in case of private placement for alternative WSE market and/or BondSpot) • Information note (where other financial instruments of that issuer are already listed on a regulated or alternative market); • Prospectus or information memorandum (in case of public offering and in case of financial instrument introduction to the regulated market). Issuers have the possibility to receive authorization for the issue of bonds. As a result of authorization, each series of bonds, which do not necessarily have to be dematerialized, is registered in the publicly available information system of Catalyst. In the alternative trading system issuers of publicly listed debt instruments can cooperate with an Authorized Advisor which supports in complying with disclosure requirements and helps in preparation of the information document, which is the basis for the introduction of instruments to trading. The Public Offering Act defines two ways to conduct a bond issue: via public offering and through private placement. Private placement of bonds is defined as offering of bond securities to fewer than 99 investors identified by name. In this case, it is not required to prepare a prospectus or information memorandum. Bonds – are a debt security issued in series, in which the issuer states that he is indebted to the owner of the bond (bond holder) and is obliged to return the borrowed amount. Provision may be settled in cash or in kind. Issue Price – the price at which the issuer sells bonds in the primary market. Example schedule for implementation of the Catalyst through private offer. identification of interested investors decision concerning the strategy of capital raising surveys among investors – distribution of teaser 2 weeks 28 distribution of offering materials to interested investors negotiations and capital raising meetings with investors and negotiations bonds allotment and cash inflow to the Company 10 weeks formal requirements related to debut preparations of registration dokument fulfillment of formal procedures for NDS and WSE 6 weeks debut / first day of trading Debt securities are traded on two markets: retail and wholesale, managed respectively by Warsaw Stock Exchange and BondSpot. Each of these markets is further divided into two platforms: alternative and regulated markets. Each of the debt instruments can be listed on WSE platform and BondSpot. The goal of the service is to provide advice on raising debt capital in the form of bonds and assistance in introducing companies to the Catalyst market. As Catalyst Authorised Advisers, Grant Thornton specialists develop business and financial models presenting the company’s appeal to potential investors. We also take care of the formal aspect of the process, including drawing up the necessary documents and collateral arrangements. Thanks to the extensive experience and expertise of our advisers, the bond issue process and Catalyst début will be conducted in an effective manner. As part of the service, we also provide advisory services in seeking and acquiring investors. To make sure that all related activities present a consistent business vision, we coordinate the work of all the parties involved, including law firms. The service covers the following stages: • Development of the project execution strategy • Determining the conditions for acquiring debt capital • Negotiations with investors • Acquiring capital • Compliance with formal requirements connected with bond registration and listing • Début on the Catalyst market Competence and experience in Catalyst share issues allow Grant Thornton advisers to minimise the risk of failing to raise capital from investors and the risk of insufficient bond prices. 29 Ongoing tax advice 4.Responsibilities – how not to get lost in them „Why should I use the services of a tax consultant? After all, I employ a good accountant and pay him a lot of money, I always send him to training and subscribe to specialized press. For that, he should take care of my tax affairs. To such framed views of CEOs I always respond with an analogy: when I have an excellent family doctor, but I have a tooth ache, would I go to my doctor or to the dentist? The choice is simple. Similarly, it should be obvious that any accountant who deals with the company books and reporting, providing reports and management information, assessment of agreements, deployment of free cash, supervision of liquidity and many other critical issues, is unable to perform the function of a good tax advisor.” Our experience and commitment in getting to know the specifics of your business and your business goals guarantees our very high effectiveness in solving tax problems. We do not theorise in our opinions, we solve our clients’ problems. We settle more than a thousand diverse issues for our existing clients every year, which helps us build a very broad basis of experience and solutions that we can apply in future cases. We work in a comprehensive manner. We assess the consequences with regard to law and taxation (across all tax liabilities), as well as the balance sheet and business consequences. Grant Thornton’s ongoing tax advisory includes the following services: • Solving clients’ tax problems • Providing tax interpretation of business events, as they occur • Analysis of contracts with regard to their tax consequences • Drafting agreements with compliance to intended tax consequences • Development of tax optimisation strategies for implementing intended business operations • Support in implementing the proposed strategies for business operations by drawing up drafts of legal documents A taxpayer who has an agreement with an advisor feels safe and secure that the accounts are correct. It is one of the most important benefits of ongoing service We provide ongoing tax advisory on an as-needed consultation basis or through continuous cooperation. The service is priced and rendered on the basis of an analysis of the given actual state of affairs and documents (agreements, administrative decisions, etc.) submitted by the client. Client expectations are examined in each instance during an interview. Depending on the nature of the problem and your expectations, ongoing tax advisory can take the form of: • written tax opinions • memos sent by email • telephone consultations • consultation and training meetings • hotline 31 4. Responsibilities – how to avoid getting lost Tax optimisation Each business function or a specific undertaking may be realised within various legal and organisational frameworks. The adopted solution affects the amount of tax liability. The goal of tax optimisation services is to identify the legal and organisational frameworks which ensure the lowest possible level of taxation to the entrepreneur. Optimisation activities cover both the permanent elements of business processes going on in an enterprise, such as goods supply, marketing activities, investments and renovations, payroll, and one-off activities, including e.g. investment undertakings, new methods of promotion or contracts with new business partners. The complete scope of the service comprises the following stages: • Diagnosis of current status – development of the AS IS model • Analysis of current status in terms of tax effectiveness • Developing optimisation solutions and consulting them with the client • Description of the target process model – the TO BE model • Scheduling the implementation of optimisation solutions • Supporting the client in the implementation of approved solutions As a result, Grant Thornton tax advisers provide you with a range of solutions, including optimisation activities defined in detail and scheduled, leading to complete implementation. If necessary, we offer support in developing any related documentation, regulations, agreements, procedures as prerequisites for the implementation of optimisation solutions. Grant Thornton advisers take into account the requirements of a given business sector and client expectations, while the solutions we propose are consistent with the client’s business model and goals. 32 Optimisation of structures and transactions The goal of tax optimisation services is to identify the legal and organisational frameworks which ensure the lowest possible level of taxation to the entrepreneur. The goal of our services related to tax optimisation of structures and transactions is to minimise tax liabilities while maintaining regulatory compliance, by means of solutions related to the legal form of business, shape of group structures and use of various legal institutions to achieve business goals. The extensive experience and knowledge of Grant Thornton advisers enable us to develop and successfully implement optimisation structures adapted to the client’s unique needs and specific business models. The solutions we propose combine increased tax efficiency of your business with tax security. The international network of Grant Thornton member firms covering more than 100 countries, including several countries with attractive tax regimes in place, enables our specialists to design and implement not only domestic but also transnational optimisation structures based on offshore tax jurisdictions. The continual changes in Polish tax law regulations do not just hinder the security of Polish taxpayers’ business activities, but also deliver new tools which, when used skilfully in tax planning, can help reduce taxes or extend tax due dates. Our specialists’ activities within the framework of tax optimisation of structures and transactions include: • Identifying the client’s tax optimisation needs both in terms of the structure of their business and individual transactions • Development and presentation of bespoke concepts for enhancing business tax efficiencies, taking into account such issues as the unique features of a given business, adopted business goals, boundary conditions specified by the client and applicable legal regulations, costs of implementing a structure/concluding a transaction • Detailed analysis of potential risks associated with implementing and functioning of the target structure and undertaking measures aimed at reducing or eliminating them, including obtaining private rulings from tax authorities • Preparatory activities preceding the implementation of a given solution • Comprehensive legal and tax services related to the optimisation structure implementation process, including: Establishment of new legal entities Business consolidation, transformation, division, liquidation Contributions of assets, enterprises and their organised parts Sale and other forms of share transfer Changes in equity • Process supervision and coordination of all entities involved in individual activities • Assistance in disclosing transactions for tax and financial reporting purposes 33 4. Responsibilities – how to avoid getting lost Tax Compliance The tax compliance service provided by Grant Thornton tax advisers aims to support you in drawing up tax returns. Depending on your needs, the scope of works may cover both reviewing pre-prepared tax calculations for compliance with bookkeeping records, or drawing up tax returns with an in-depth review of data used as the tax base. The tax compliance service is often combined with a tax review, including all factors affecting the determination of the amount of tax or selected areas of the client’s operations. The scope of service may cover the following taxes: Corporate Income Tax (CIT) • calculating the amount of CIT due and prepayments • verification of the client’s calculation of the amount of CIT due and amounts of prepayments • verification of procedures related to calculating CIT due and CIT prepayments • tax reviews of data underlying the tax base Withholding tax • comprehensive analysis of taxpayer’s proper compliance with their obligations • calculating withholding tax due • obtaining certificates of tax residence • drawing up tax returns Goods and services tax (VAT) • taxpayer registration • drawing up VAT returns, summary statements and INTRASTAT Expatriate accounting Grant Thornton also offers the international tax compliance service – tax reporting covering multiple tax jurisdictions. The service has been designed mainly with holding groups in mind. 34 Transfer pricing Transfer pricing services aim to eliminate or at least limit the tax risks related to transactions between related entities and optimisation of tax liabilities resulting from those transactions. Grant Thornton advisers take into account the requirements of a given business sector and client expectations, while the solutions we propose are consistent with the client’s business model and goals. The scope of services in the area of transfer pricing includes: • Analysis of tax risks related to transactions with related entities • Drawing up tax documentation required by the law for transactions between related entities • Developing transfer pricing policy and principles of accounting between related entities • Benchmarking • Assigning the profits to a permanent establishment of a foreign enterprise operating in Poland • Analysis and drawing up agreements between related entities (including cost sharing agreements) • Assistance in applying for advance pricing arrangements • Advisory services in tax proceedings concerning transfer pricing (including preparation of the argumentation and documents supporting the taxpayer’s position) • Transfer pricing trainings and workshops Our services are provided by specialists with broad knowledge and practical experience in transfer pricing issues. 35 Contact us Anna Pisarek Director – establishment of business T +48 32 721 3782 M+48 661 538 523 [email protected] www.GrantThornton.pl © 2013 Grant Thornton Frąckowiak sp. z o.o. sp. k. 61-131 Poznań, ul. abpa Antoniego Baraniaka 88 E NIP 778 14 76 013, REGON 301591100 Sąd Rejonowy Poznań – Nowe Miasto i Wilda w Poznaniu VIII Wydział Gospodarczy Krajowego Rejestru Sądowego, KRS 369868 Grant Thornton Frąckowiak jest firmą członkowską Grant Thornton International Ltd
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