Transcript Slide 1

TAX ADVISORY SERVICES
September 2006
Spotlight on Poland: tax and investment
incentives for Chinese investors
Xiamen
Confucius said: In leading a state of a thousand chariots, respect the office and be trustworthy;
Economize in the use of resources and love the people, and employ the people when it is timely*
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* The Lun Yu (499 sayings), chapter 1 verse 5
Spotlight on Poland
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5th most attractive location for foreign investment in the world* and
ranked 5th globally on the FDI Confidence Index*
Central location in Europe with access to 750 million relatively
wealthy consumers (250 mln within 1,000 km radius)
Member of the European Union (since 2004) and WTO
Stable political, legal and business environment
Young, ambitious, hard-working and well-educated population
Abundant tax and business incentives for foreign investors
Tax-competitive location for business with preferences for foreign
direct investment (FDI)
Tax laws and regulatory environment harmonized with the European
Union
Recently gaining momentum and popularity with Asian investors
(LG-Philips LCD, Huawei)
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*Sources: Ernst & Young European Attractiveness Survey 2006; AT Kearney Report 2006
93 billion USD of FDI
Poland – macroeconomics
17 %
unemployment
rate
3.4 %
GDP
growth
5.2 %
GDP
growth
2%
Inflation
2%
Inflation
2005
I Q 2006
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Source: Central Statistical Office
2005
2005
Young, ambitious, hard-working and well-skilled population
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Eighth largest in Europe and the largest in Central Europe
(38 million)
26 million work force
6 million in graduate education
35% of population is under 25 and 50% is under 35
With high unemployment, a large pool of specialists and
college graduates is on offer at competitive cost
In 2004 Poles worked 600 hours more on average than the
French and Germans*
Poles according to foreign investors: hard-working, achievers,
positive attitude, willing to learn, creative, disciplined, loyal
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*Source: OECD Employment Outlook 2005
Poland: highlights of tax system
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Major taxes:
– Corporation tax (CIT) with one of the lowest rates in Europe of 19%
– Value Added Tax (VAT) with standard rate of 22%, fully harmonized
with the European Union VAT system
– Personal tax (PIT) with progressive rates from 19% to 40%
– Other taxes: social security, real estate tax, customs duty, excise
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Tax administration:
– Monthly or quarterly reporting for tax
– Binding rulings to protect companies against tax penalties
– Advance pricing agreements to guard prices against tax audit
assessment
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Poland: highlights of tax system
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International aspect:
– Broad treaty network to facilitate tax-efficient cross-border flow of dividends,
interest and royalties (10% under China-Poland treaty)
– Part of the EU taxation system
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Special features:
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Tax consolidation for corporate tax
Deductions and exemptions
Taxation of partnerships
Branch vs. subsidiary
Tax loss carry-forward (5 years)
Transfer pricing (OECD Guidelines are followed)
Interest and f/x loss deduction on cash basis rather than on accruals basis
Statute of limitations for tax liabilities is 5-6 years
Tax and investment incentives
Tax and investment incentives
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Special Economic Zones:
– Exemption from corporate tax equal to 30-50% of investment (increased by 15%
for SME’s)
– Exemption from real estate tax
– Competitive pricing of land (€ 1)
– In place until 2017
– Re-zoning possible to encompass investor-preferred location
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Grants and support programs:
– 2007-13 EU budgetary perspective – Poland to receive € 91 bln
– Cash grants available (training programs, new employment, innovative
investments)
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Shared Services Centers / Business Process Offshoring
– Poland ranks fifth in terms of offshoring environment*
– SSC’s can be located in Special Economic Zone to benefit from tax exemptions
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R&D Centers:
– Increased tax deductions related to innovative technologies
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Increased depreciation rates for high-tech capex
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*Source: Economist Intelligence Unit Report 2006
Shared Services Centres in Poland
transactions
services
… and more – about 50 SSC’s in 2006
human
resources
Olsztyn
accounting
global competence centre
Bydgoszcz
Warszawa
Poznań
accounting, taxes,
salaries, IT, legal
division
outsourcing of IT services,
accounting and finance
Łódź
accounting
and finance
Wrocław
accounting and
finance
human resources
outsourcing
of IT services
Kraków
Bielsko-Biała
accounting
and finance
back office support services
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Source: Ernst & Young
human
resources
accounting, payments
(salaries), taxes
accounting
outsourcing of IT
services, accounting
and finance
R & D Centres in Poland
software and
hardware research
centre dedicated to
Gdańsk
Development of software for telecommunication and IT
(functional and quality tests).
communications technology (system
architecture, software & hardware
development, network quality labs);
150 engineers.
Bydgoszcz
developing software system
solutions for digital TV, designing
highly advanced set-top boxes; 200
engineers.
Warszawa
Zielona Góra
Wrocław
Kraków
Software Development
Centre – development of
GSM, GPRS and UMTS
networks; further expansion
(from present 270 to 400
engineers).
Development and
integration of customized
IT solutions (special
competence for German
IT market); 140 IT
specialists to be employed
by 2006.
… and more – 36 centers in 2006
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Source: Ernst & Young
engineering systems and
automation, advanced
service and IT diagnostic
systems.
Enginering Design
Center (design of
jet engine,
including disks,
turbine blades,
airfoils,
combustors; 150
engineers.
software development in
automotive industry –
480 engineers.
software for digital
satellite, cable and
terrestrial TV (in the
future - software
development in DVD
devices and digital
cameras); 600
engineers.
software research centre,
380 software engineers.
Ernst & Young: one-stop shop for Chinese
investors in Poland
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E&Y’s one-stop shop <=> advisory services centrally managed by a dedicated
project leader – multidisciplinary professional advisory services through one
relationship and central project management
E&Y’s one-stop shop <=> multidisciplinary, pro-active, flexible, tailor-made:
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tax advisory
regulatory advisory
contacts with government and local authorities, grants & incentives negotiation support
IT systems
risk advisory and management
SOX 404 process implementation
accounting advisory and outsourcing
assistance in financing and hedging strategies and transactions
assistance in local sourcing
internal procedures and controls design and implementation
legal advisory (in cooperation with best-friend law firms)
Tzu Kung asked about the gentleman.
Confucius said: Action takes precedence over words*
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* The Lun Yu (499 sayings), chapter 2 verse 13
Contact
Radoslaw Szczech
Partner
Tel. +48 22 557 72 93
[email protected]
Address:
Ernst & Young sp. z o.o.
Rondo ONZ 1
00-124 Warszawa
www.ey.com/pl
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