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Market Overview

Poland

Poland, strategically located in the heart of Europe, offers a dynamic and robust environment for business. The nation boasts a stable economy, a skilled workforce, and a welcoming attitude towards foreign investment. This article delves into the essential aspects of doing business in Poland, from its economic landscape and investment incentives to practical tips for navigating the Polish business environment. Economic Landscape of Poland A Growing Economy Poland has demonstrated impressive economic growth over the past few decades. The country's GDP has been steadily rising, positioning Poland as one of the fastest-growing economies in Europe. This growth is driven by various factors, including a large domestic market, robust export performance, and significant foreign direct investment (FDI). Poland's strategic location also makes it a gateway for accessing both Western and Eastern European markets. Key Industries Several industries stand out as particularly strong and promising in Poland: Manufacturing: Poland has a well-developed manufacturing sector, particularly in automotive, electronics, and machinery. Information Technology: The IT sector is booming, with numerous startups and established companies operating in software development, cybersecurity, and IT services. Renewable Energy: Poland is increasingly investing in renewable energy sources, such as wind and solar power, in response to the global shift towards sustainability. Logistics and Transportation: Given its central location in Europe, Poland is a critical logistics hub, with a well-developed infrastructure network. Food and Agriculture: The country has a rich agricultural tradition and is a significant exporter of food products.   Investment Incentives Government Support The Polish government is keen on attracting foreign investment and offers various incentives to facilitate this. These incentives are designed to support new businesses and foster economic growth. Special Economic Zones (SEZs): Poland has established numerous SEZs across the country. Businesses operating within these zones benefit from tax exemptions and other financial incentives. The zones are strategically located to maximise logistical advantages and are equipped with modern infrastructure. Investment Incentives: Various forms of support are available for foreign investors, including grants, tax reliefs, and subsidies. These incentives are often targeted at specific sectors that the government aims to develop further, such as high-tech industries and renewable energy. European Union Funds: Poland, as a member of the European Union, benefits from substantial EU funding. These funds are directed towards infrastructure development, innovation, and regional development, providing additional support for businesses. Legal and Regulatory Framework Poland has a transparent and business-friendly legal system. The country has implemented numerous reforms to simplify business operations and enhance the ease of doing business. Key aspects include: Company Formation: The process of establishing a company in Poland is straightforward. Investors can choose from various types of business entities, including: companies: a limited liability company (in Polish: spółka z ograniczoną odpowiedzialnością) and a joint-stock company (spółka akcyjna); partnerships: general partnership (spółka jawna), professional partnership (spółka partnerska), limited partnership (spółka komandytowa), partnership limited by shares (spółka komandytowo-akcyjna); civil law partnership (in Polish: spółka cywilna); one-person business activity (in Polish: jednoosobowa działalność gospodarcza). Taxation: Poland offers competitive corporate tax rates and has signed numerous double taxation treaties with other countries to avoid tax duplication for international businesses. Labour Law: The labour market in Poland is flexible, with regulations designed to protect both employers and employees. The workforce is highly skilled, particularly in technical and engineering fields.   Polish Regions: Opportunities and Characteristics Poland is divided into 16 administrative regions (known as voivodeships), each with its unique economic profile and investment opportunities. Here's an overview of some key regions: Warsaw (Masovian Voivodeship) While being the capital, Warsaw is the financial and economic heart of Poland. It is home to many international companies and offers a vibrant business environment with excellent infrastructure and a high-skilled workforce. Kraków (Lesser Poland Voivodeship) Kraków is known for its strong position in the IT and technology sector. The city boasts numerous tech parks and innovation hubs, making it an attractive destination for tech startups and established companies alike. Wrocław (Lower Silesian Voivodeship) Wrocław is a major industrial and academic centre. It has a thriving manufacturing sector and is home to many universities and research institutions, fostering a strong environment for innovation and development. Gdańsk (Pomeranian Voivodeship) Gdańsk, a key port city on the Baltic Sea, is crucial for maritime trade and logistics. The region also has a growing IT sector and offers significant opportunities in shipbuilding and marine industries. Poznań (Greater Poland Voivodeship) Poznań is known for its strong industrial base, particularly in automotive and machinery manufacturing. The city is also the venue for many international trade fairs, which increases its business potential.   Practical Tips for Doing Business in Poland Navigating the Legal and Regulatory Environment Business Registration: Registering a business in Poland involves several steps, including obtaining a REGON (business identification number), registering for VAT, and setting up a bank account. Engaging a local legal advisor can simplify this process. Employment Regulations: Understanding local employment laws is crucial. This includes knowledge of employment contracts, working hours, and employee rights. Offering competitive salaries and benefits can help attract and retain skilled workers. State Labour Inspectorate Action Plan for 2024 The Chief Labour Inspector has presented the State Labour Inspectorate’s action plan for 2024. As announced, the State Labour Inspectorate plans to carry out 60,000 inspections this year and will cover at least 35,000 entities with various forms of preventive measures. During inspections, the Inspectorate will check, among other things, compliance with regulations on remote work and regulations resulting from the implementation of the so-called work-life balance directives. In terms of occupational health and safety, the inspectorate plans to inspect renewable energy industries, heating plants and combined heat and power plants, as well as industries involved in the storage, sale and processing of metal scrap. More information: HR Newsletter by SK&S law firm, February 2024   Obligation to adapt workstations to new health and safety requirements In accordance with the November amendment to the Ordinance on occupational health and safety at workplaces equipped with screen monitors, employers have had to adapt workstations to the new requirements before 17 May 2024. Workstations of employees using laptops for at least half of the daily working hours must be supplemented with a desktop monitor or stand that allows the screen to be positioned so that its top edge is at eye level, and an additional keyboard and mouse. In addition, at the employee's request, workstations can be equipped with a footrest. The previous obligation to reimburse employees for corrective glasses has been expanded to include reimbursement for contact lenses.   Draft law on extending maternity leave In mid-April 2024, the Sejm received a bill to amend the Labour Code and certain other laws, according to which it is planned to extend maternity leave by the total duration of the child's hospitalisation after leaving the hospital or other treatment facility by mother, up to a maximum of 24 weeks. The draft stipulates that the right to extend maternity leave will also be transferable to the child's father. The amendment is intended to allow parents of premature babies an adequate period of care for a child who is hospitalised for the first weeks of life. Currently, the draft is at the consultation stage in the Sejm.   Works on law implementing EU directive on adequate minimum wages According to press reports, the Ministry of Family, Labour and Social Policy is working on a law implementing the directive on adequate minimum wages. The directive indicates that a minimum wage is considered adequate if it is fair in relation to the distribution of wages in a member state and ensures a decent standard of living for full-time employees. The directive was adopted in 2022, and member states have until 15 November 2024 to implement it. As announced by the Ministry of Labour and Social Policy, there are plans to change the concept of minimum wage so that it applies only to the basic wage, i.e. salary without bonuses and allowances. Employers must be prepared for many changes in this regard. We are left waiting for the publication of the draft law. More information: HR Newsletter by SK&S law firm, May 2024   Draft law on collective bargaining agreements and collective agreements At the end of June 2024, a draft law on collective bargaining and collective agreements has been published on the website of the Government Legislation Centre. The draft law assumes: Expansion of the catalogue of matters regulated by collective bargaining agreements; Introduction of a specific duration for collective bargaining agreements: (i) 5 years for a company collective bargaining agreement, and (ii) 10 years for a multi-employer collective bargaining agreement; Introduction of electronic notification to the National Register of Collective Bargaining Agreements to simplify registration; Support for a mediator in the course of negotiating the agreement; Introduction of a fine or restriction of liberty for non-compliance with the provisions of the Law, including for failure to comply with information or registration obligations. As we read on the Council of Ministers' website, the aim of introducing the regulation is to revitalise the negotiations and increase the use of collective agreements, as well as to balance the expectations of trade unions representing employees and employers and their organisations. Adoption of the draft law by the Council of Ministers is planned for the third quarter of 2024.   Determining trade unions headcount By 10 July 2024, company trade union organisations must have submitted information to employers on the number of their members as of 30 June 2024. Should the employer doubt the number of trade union members, the employer may raise an objection in writing within 30 days from the date the information is submitted. If the above obligation is not fulfilled, the trade union loses its power to represent employees in terms of both collective and individual interests. This means that if the employer have not obtained the information on the number of members by 10 July, the employer is able to take actions on its own – actions which normally require cooperation with the trade union. More information: HR Newsletter by SK&S law firm, July 2024   The implementation date of the Law on the Protection of Whistleblowers The Law on the Protection of Whistleblowers of 14 June 2024 has been published, which means that it will enter into force (with certain exceptions) on 25 September 2024. The Polish Parliament (Sejm) adopted the Law on the Protection of Whistleblowers, which aims to protect all whistleblowers regardless of the basis and form of their work. The new regulations implement a directive of the European Parliament and the EU Council, which should have been introduced by Poland more than two years ago. The Act is now proceeded through the Senate, after which it will await the President's signature and its publication in the Journal of Laws. The Act will enter into force three months after its promulgation, which could be in the last quarter of 2024.   Who is affected (by implementation of an internal notification procedure): Entrepreneurs with at least 50 employees in gainful employment (irrespective of the basis of employment) will be required to implement a whistleblowing and follow-up procedure (hereafter: ‘internal notification procedure’). What does it apply to: A breach of the law, under the Act, is an act or omission that is unlawful or intended to circumvent the law relating to, inter alia, labour law, corruption, public procurement, environmental protection, consumer protection, security of information and communication networks and systems, protection of privacy and personal data; and constitutional freedoms and rights of man and citizen. Capital groups Private entities belonging to a capital group will be able to establish a common procedure for internal reporting, provided that the activities performed comply with the Whistleblower Protection Act. More information: SK&S Report on the Law on Protection of Whistleblowers, May 2024 Compliance and Reporting: Ensure compliance with Polish accounting standards and tax regulations. Regularly updating financial records and timely tax filings are essential to avoid legal issues. Tax law in Poland is intricate and frequently changes. To minimise tax risks and avoid disputes, taxpayers should establish internal procedures, including vetting business partners before engaging in transactions. It's crucial for taxpayers to stay updated on legislative changes. For instance, starting from 1 July 2024, VAT taxpayers in Poland must use the structured invoice system within the National e-Invoice System (KSeF). The above system is mandatory for taxpayers established or having its fixed establishment in Poland in B2B transactions. "Active" taxpayers must have implemented KSeF from 1 July 2024; "Exempt" taxpayers must implement the National e-Invoice System from 1 January 2025. What is important, the mere VAT registration in Poland does not create a fixed establishment and therefore does not trigger obligation to implement KSeF. Rules to apply to issuing structured e-invoices The structured e-invoices should document both domestic (Polish) supplies of goods and services, and international transactions (including IC supply of goods, exportation of goods and services). Reporting more information compared to standard invoices. Necessity to get the access to KSeF: – using a qualified electronic signature or stamp; – with the use of a trusted signature (ePUAP); – using a token generated by KSeF; – based on the taxpayer notification to use KSeF. Obligation to notify the tax office of persons authorised to access KSeF and authorised to access issued invoices. In the interim period (until the end of June 2024) the acceptance of the invoice recipient has been required. In case of non-acceptance, the invoice can be sent in an agreed format. Invoices prepared in the financial and accounting system and then sent to KSeF through an app interface (facilitation for micro-entrepreneurs using the MF e-Mikrofirma application). More information: Article on e-Invoices by SK&S law firm, October 2023   Investment Opportunities and Risks Emerging Sectors: Identify emerging sectors and niches within the Polish market. Sectors such as renewable energy, IT, and biotechnology offer significant growth potential. Market Research: Conduct thorough market research to understand local consumer behaviour, market trends, and competitive landscape. This can help tailor products and services to meet local demands. Risk Management: Assess potential risks, including economic fluctuations, regulatory changes, and geopolitical factors. Developing a robust risk management strategy is essential for long-term success.   Future Outlook Poland's business environment continues to evolve, with ongoing investments in infrastructure, innovation, and sustainable development. The government's commitment to economic growth, combined with the country's strategic location and experienced workforce, positions Poland as an attractive destination for international business.   Trends to Watch 1. Digital Transformation: The acceleration of digital transformation across various sectors presents new opportunities for businesses, particularly in IT, fintech, AI and e-commerce.   Artificial Intelligence in compliance with the law Our experience shows that clients are increasingly interested in applying solutions based on artificial intelligence (AI) to streamline their work and gain a competitive advantage. However, plans to implement AI are accompanied by concerns regarding legal compliance, especially given that EU regulations that explicitly address the issue of artificial intelligence are not finalised yet. Currently, there is no universally applicable legislation imposing specific obligations in connection to AI. However, this lack of regulation is not expected to last long. The finalisation of the basic act – the Regulation of the European Parliament and of the Council laying down harmonised rules on artificial intelligence (artificial intelligence act) and amending certain union legislative acts ("AI Act") – is scheduled still for this year. The Commission, the Parliament and the Council are currently negotiating the final wording of the AI Act in the course of a so-called "trilogue". The regulation will primarily impose obligations on providers of AI systems, as well as on entities using AI systems which are under their control.   The most common doubts about AI Notwithstanding the regulations which specifically concern AI, using AI should also be analysed in light of the regulations which are already in place. The most frequently raised questions concern the following issues: determining who is entitled to the rights to AI-generated materials (completions) and determining the rules for using such materials, including identifying consequences of combining such completions with the client’s own solutions; determining the entity liable for intellectual property rights violations which are a result of using AI solutions and using completions/materials created by generative AI (e.g. determining which entity is responsible for claims of copyright infringement of entities whose materials were used to train models); potential access of the AI system provider to data which is entered into the model, particularly in the course of analysing and filtering content to verify if the system is used properly (e.g. if it is used for a dangerous purpose); using client data to further train the models of the provider; GDPR compliance, in particular with regard to respecting the rights of data subjects and implementing the requirements related to automated data processing (including profiling), as well as the problem of providing false personal data in the output generated by AI solutions.   Implementing AI is already possible Despite many valid points regarding the risks of using AI, what is common for new technologies, it should not be assumed, without further analysis, that implementing such systems in an organisation is currently not possible, particularly given the still-ongoing work on the AI Act. The regulations which are in force in Poland do not generally prohibit the use of such solutions. However, it is important to approach this topic thoroughly, including by properly defining the rights and obligations of the user and the AI solution provider, defining the ways in which AI solutions can be used in the organisation as well as adjusting internal procedures. Many entities are already using this technology in their daily work, showing many interesting applications of AI (e.g. efficient document review, performing summaries and analysis of large amounts of text) and how many further benefits it can bring. More information: Article on AI regulations by SK&S law firm, September 2023   2. Green Economy: Poland's shift towards a green economy, driven by EU regulations and global sustainability goals, opens avenues for investment in renewable energy, green technologies, and sustainable practices.   A tool to achieve the EU's climate and emissions reduction targets. The Industrial Emissions Directive (IED) On 12 April, the EU Council adopted the revised Industrial Emissions Directive (IED). The revised Directive is another tool to achieve the EU's climate and emissions reduction targets set out in the European Green Deal. The new rules aim to increase the effectiveness of legal mechanisms to reduce emissions and introduce stricter environmental requirements. For plant operators, the revision of the Directive may pose a significant challenge due to the requirement to significantly reduce emissions and the potential costs of retrofitting plants. Previously, the scope of the Directive covered power plants, refineries, waste treatment plants and large intensive livestock farms. Following the amendments, the scope of the Directive will be extended to include: large-scale battery production facilities, more types of large intensive pig and poultry farms and metal ore mining activities. The amended Directive provides for a derogation from the requirement for integrated permits and the possibility of including poultry or pig installations in the notification system. Under the new legislation, integrated permits for industrial installations will be issued electronically through an electronic permitting system. The electronic system should be in place by 2035 at the latest. Large installations operate on the basis of a permit issued by national authorities based on a standard – Best Available Techniques (BAT). The permit defines the allowable polluting emissions from the installation, based on BAT conclusions. In practice, national authorities have usually set the maximum permissible emission standards as set out in the BAT conclusions. The new legislation introduces a change in this respect and requires national authorities to consider whether the emission level provided by the applicant (usually the maximum possible) could be more stringent. This could lead to a more stringent emission limit value. The revised Directive also introduces a new concept of environmental performance limit values to be set by the competent authorities in the permit for the construction and operation of the installation. Permits issued before the entry into force of the provisions of the amended Directive will have to be updated within 4 years of the publication of decisions on BAT conclusions published after the entry into force of the amended Directive. The Directive has not yet been published in the Official Journal of the EU (publication is expected in the near future), the legislation will enter into force on the 20th day after publication. Member States will have 22 months to transpose the provisions into national law. More information: Article on the Industrial Emissions Directive by SK&S law firm, June 2024   Integration of multiple renewable energy sources (RES) installations at a single connection point (cable pooling) As of 1 October 2023, the Act of 17 August 2023 amending the Renewable Energy Sources Act and certain other acts (Journal of Laws 2023, item 1762) came into force ("Amendment"). The said Amendment set out the new framework for the cable-pooling that would allow generators to connect several renewable energy sources installations (RES) to the electricity grid at a single connection point with a rated voltage higher than 1 kV. More information: Article on the Renewable Energy Sources (RES) Act by SK&S law firm, September 2023   3. Infrastructure Development: Continued investment in infrastructure, including transportation, logistics, and telecommunications, will enhance Poland's connectivity and business potential. In the realm of logistics, Poland's strategic location at the crossroads of major European trade routes has positioned it as a critical hub for warehousing and distribution. Investments in rail freight corridors and multimodal logistics centres are further strengthening its role in international supply chains. The expansion and modernisation of seaports, particularly in Gdańsk and Gdynia, are boosting Poland's capacity to handle increasing volumes of maritime trade. Their role is growing not only in terms of trade and goods transport. The Baltic Region is also becoming an increasingly important gateway for Poland in energy matters. Telecommunications infrastructure is also seeing robust development, with efforts to expand broadband access and improve digital connectivity. The rollout of 5G networks is expected to enhance technological innovation and support the growth of the digital economy.   Challenges Ahead Regulatory Changes: Keeping abreast of regulatory changes at both national and EU levels is crucial for businesses to remain compliant and competitive. Economic Volatility: While Poland's economy is robust, businesses must be prepared for potential economic volatility, both domestically and globally. Talent Retention: Attracting and retaining top talent remains a challenge, particularly in high-demand sectors such as IT and engineering. Investing in employee development and offering competitive compensation can mitigate this risk.   Conclusion Poland offers a compelling environment for business, characterised by a growing economy, strategic location, and supportive government policies. By understanding the local business culture, navigating the regulatory landscape, and leveraging available resources, foreign investors can successfully establish and expand their businesses in Poland. As the country continues to develop and deploy innovation, the opportunities for investment and growth are boundless.   Reference: Polish Investment & Trade Agency (PAIH), Why Poland?: https://www.paih.gov.pl/en/why_poland/

Ethiopia

Country overview Name - Federal Democratic Republic of Ethiopia Capital city - Addis Ababa Population (2021) - 120,283 million (World Bank) Languages spoken (three most widely spoken) - Amharic, Afan Oromo, Somali Neighbouring countries - Somalia, Kenya, South Sudan, Sudan, Eritrea, Djibouti Economy GDP – USD111.27 billion (2022) (World Bank) Net inflow of FDI (2021) – USD 4.26 billion (World Investment Report) Top three exports by value (2022) – gold, coffee, live animals, oil seeds, flowers. (Trading Economics) Top three import sources (2022) – China, Saudi Arabia and United States. (Trading Economics) Top three export destinations (2022) – Switzerland, Somalia and China. (Trading Economics) Currency - Ethiopian Birr (ETB) – 1 USD = 545.8 ETB as at August 2, 2023   1. Current Economic Conditions 1 Recent legislation reforms Since 2018, Ethiopia has undergone several holistic policy and legislative reforms. In light of this, several laws that have aimed at easing doing business have been enacted. The enactment of the new Commercial Code; Movable Property Security Rights Proclamation; Public-Private-Partnership Proclamation; Capital Market Proclamation; the revision of different investment regulations and the Ethiopian Civil Societies Proclamation, as well as the ratification of the New York Convention are among many others.   1.1 New Capital Market Law The Ethiopian Government passed the Capital Markets Proclamation No. 1248/2021 to set up a local capital market with a clear set aim of developing the national economy through mobilizing capital, promoting financial innovation, and sharing investment risks. The Government has also set up a project team that has been working to draft proper directives for approval by the Board of Directors of the Capital Market Authority to supply detailed guidance and requirements to enable the effective implementation of the Capital Market Proclamation. Last January, the Ethiopia Capital Market Authority (ECMA) disclosed that it has finalized preparations to start operation within the coming two years.   1.2 Public Enterprises Privatization Law According to this 2020 Proclamation, privatization is a transaction that results in either the sale of assets or share capital of a public enterprise in full or in part to private ownership and control. The Proclamation considers extensively pre-privatization activities, public enterprise restructuring, and other activities before privatization. Essentially, the Proclamation provides for the procedure of conversion of a public enterprise to a share company, valuation of public enterprises, and issues relating to post-privatization   1.3 Telecom and Mobile Money Liberalization Under the new investment law, the telecom sector has been liberalized for foreign participation. Following such liberalization, the Ethiopian Communications Authority issued a bid for a license to engage in the telecom sector. Safaricom Consortium has won the bid and successfully launched in the Ethiopian market. Further, a second bid for a license to enter into the Ethiopian telecom market has been issued. The government has also decided to sell 49% of its stake in its ownership of Ethio- telecom, a government-owned telecom   1.4 New Investment Law On 30 January 2020, Ethiopia enacted a New Investment Proclamation. The major development in this new investment law is the shift from the positive listing of areas allowed for foreign investors to a negative listing which is broader. The government has also opened up previously closed sectors to foreign investment. In addition to this, these legislations lay down procedures for handling investors’ grievances and for resolving investor–state disputes, principally through domestic institutions.   1.5 Revision of the 1960 Commercial Code Revising the old Commercial Code that has been in effect since 1960 has brought one of the major legislative changes.  In this new Code liability limited partnership (LLP) has been recognized as one form of business organization.   1.6 Ratification of the 1958 New York Convention Ethiopia ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 2020. The Convention applies to arbitration agreements and arbitral awards made only after Ethiopia acceded to the Convention.   2. Business vehicles/structures for doing business Introduction Business can be set up in the form of sole proprietorship, business organisations incorporated in Ethiopia (a one member private limited company, a private limited company, a share company or partnerships), branch of a foreign company, public enterprises, and cooperative societies. Partnerships are associations of persons whose liability is unlimited (except limited partners in limited partnerships and partners of limited liability partnership). Limited liability companies could take the form of a one member private limited company, a share company or a private limited company.   Presence of Foreign Entities Incorporating a subsidiary company and opening a branch of a foreign company are the main vehicles for foreign entities to trade in Ethiopia. Foreign companies may also promote their business in Ethiopia by opening a commercial representative office. A branch of a foreign company is treated as an extension of its parent foreign company. In contrast, a subsidiary of a foreign company is treated as separate from its parent company. Foreign investors that come to operate in Ethiopia by winning international bids can also set up a project office to perform a specific contract.   Registration requirements and level of protection offered to share-holders of the various business vehicles Companies A one member private limited company is a limited liability business organisation incorporated by a unilateral declaration of a single shareholder. This form of legal entity was recognized for the first in 2021 by the Revised Commercial Code of Ethiopia. A share company and a private limited company are associations of capital formally established by the signing of a memorandum of association and articles of association. A private limited company and a share company require a minimum of two and five shareholders respectively. The maximum number of shareholders in a private limited company cannot exceed 50. Once shareholders have signed the memorandum and articles of association before a public notary and the same are deposited in the commercial register, the company becomes a legal person. After registration, obtaining a business license is necessary to start business operations. Companies are legal persons whose liabilities are met by their assets only. Shareholders of companies are liable only to the extent of their contributions. Private limited companies are not subject to detailed regulations when compared to a share company, which the law regulates strictly. A private limited company is more of a family company while a share company is a public company. A share company is required to have a board of directors and auditor/s and it should also conduct a general meeting of shareholders at least once a year. A private limited company is not required to have an auditor unless the number of its shareholders exceeds 10 or its total assets exceeds 10 million Ethiopian Birr. A private limited company cannot issue transferable securities like bonds, debentures, while a share company can issue transferable securities.   Branch of Foreign Entities Foreign incorporated companies can register a branch in Ethiopia to undertake business activities. The requirements for registering a branch of a foreign company include the submission of: notarised and authenticated minutes of a resolution passed by an authorised organ of a foreign business organisation authorising the opening of a branch in Ethiopia Certificate of incorporation of a foreign parent company Copies of memorandum and articles of association or similar documents of the business organisation. There are four types of partnership recognised under Ethiopian law. These are limited liability partnership, general partnership, limited partnership and joint venture. Partnerships should be formed by a partnership agreement and registration is a prerequisite for a partnership to obtain legal personality. However, these requirements do not apply to joint ventures, which have no legal personality.   Sole Proprietor A sole proprietor is a person who conducts a business in his/her own name with unlimited liability. For a sole proprietor to operate a business, he/she has to obtain a commercial registration certificate and a business license.   Trade Representative Office (TRO) Foreign investors who are not interested in trading activities can register a commercial representative (liaison) office and appoint a commercial representative to undertake pro - motional activities in Ethiopia. Before starting its operation, the commercial representative should be registered with the Ministry of Trade and Regional Integration and get a certificate of commercial representative. To secure the certificate, among other things, a minimum of USD100,000 has to be brought into Ethiopia, which is expected to cover salaries and operational expenditures of the office for a year. After the issuance of a valid certificate, a commercial representative can promote the products and services of the principal foreign company, study projects that will enable the principal to make investments in Ethiopia and to promote export products of Ethiopia in the country of origin of the principal company.   Registration requirements Registration is a requirement for companies to do businesses in Ethiopia. Operating a business without obtaining a business license entails administrative and criminal liabilities.   Business rights and regulatory environment Licenses and regulatory Requirements to trade Various kinds of permits, registrations and licenses are required to operate business in Ethiopia. These include investment permit, business license, commercial and tax registrations. No person may carry out a commercial activity without obtaining a valid business license.   Anti-money laundering, anti-bribery and corruption The Prevention and Suppression of Money-Laundering and Financing of Terrorism Proclamation No. 780/2013, the Criminal Code of 2004, Prevention and Suppression of Terrorism Crimes Proclamation No.1176/2020, Corruption Crimes Proclamation No. 881/2015, Revised Anti-Corruption Special Procedure and Rules of Evidence (Amendment) Proclamation No. 882/2015, Financial Intelligence Centre Establishment Council of Ministers Regulation No. 171/2009, Revised Federal Ethics and Anti-Corruption Commission Establishment (Amendment) Proclamation No. 883/2015 and the National Payment System Proclamation No. 718/2011 are major laws that regulate crimes related to money laundering, bribery and corruption in Ethiopia.   Competition The Trade Competition and Consumers' Protection Proclamation No. 813/2013 aims to promote competitive practices in the local market, and eliminate or prevent anti-competitive and unfair trade practices. It also regulates anti-competitive practices such as price-fixing, collusive tendering, market and consumer segregation, refusals to deal to sell or render services, practices intended to eliminate competitors, and practices regarded as abuse of dominance.  The threshold for a merger notification is 30 million ETB. Regarding mergers, the law requires the consent of shareholders and the amendment of memorandum and articles of associations for mergers to take place. Two or more firms may merge, either by taking over or by the formation of a new firm. A decision to merge shall be taken by each of the firms concerned. Special meetings of shareholders of different classes or meetings of debenture holders shall approve the taking over or being taken over. The claims and liabilities of the firms that have been merged shall pass to the firm taking over as a result of the merger.   Consumer protection The Trade Competition and Consumers' Protection Proclamation No. 813/2013 established the Trade Competition and Consumer Protection Authority. However, Trade Competition and Consumer Protection Authority was dissolved and its mandates has been transferred to the Ministry of Trade and Regional Integration since September 2021. Under this Proclamation, consumers have the right to be provided with accurate information on the quality and type of goods or services, and to claim for remedies in relation to problems associated with such transactions.   Data protection and privacy Ethiopia does not have a comprehensive law, which is specifically designed to regulate privacy and data protection issues. However, there are a set of rules contained in various pieces of legislation that guarantee the right to privacy in an indirect fashion.   Environmental law The law provides that all investors have an obligation to observe social and environmental sustainability values including environmental protection standards and social inclusion objectives in carrying out their investment projects. The specific laws on environmental protection in Ethiopia are the Environmental Pollution Control Proclamation No. 300/2002 and the Environmental Impact Assessment Proclamation No. 299/2002. Proclamation No.300/2002 imposes obligations on companies to prevent environmental pollution in the course of their operations and penalizes failure to do so.   Intellectual property (IP) Ethiopia acceded to the Convention establishing the World Intellectual Property Organisation (WIPO) in 1998. The Ethiopian Constitution of 1995 provides the foundation for protection of intellectual property rights. Additionally, the Inventions, Minor Inventions and Industrial Designs Proclamation No. 123/1995, the Copyright and Neighbouring Rights Proclamation No. 410/2004 (as amended by Proclamation No. 872/2014) and Trademark Registration and Protection Proclamation No. 501/2006 are in place to protect intellectual property rights.   Land rights The Constitution of Ethiopia provides that ownership of land belongs to the state and the nations, nationalities and peoples of Ethiopia. The Constitution similarly provides that the Government will ensure the right of private investors to use land on a lease holding basis. The Urban Land Lease Proclamation of 2011 gives investors the right to use of land on leasehold for periods of 15 years up to 99 years. The land cannot be mortgaged or sold, but the lease value of the land and the fixed assets thereon may be mortgaged or transferred to third parties. Regional governments and municipal administrations are authorised to allocate rural and urban land on rent lease in accordance with their respective laws.   Employment and labour relations Currently, the principal legislations that regulate private employment relationships in Ethiopia include the Labour Proclamation (Proc. No. 1156/2019), the 1960 Ethiopian Civil Code) and the Private Enterprise Employees Social Security Proclamation (Proc. No. 715/2011), as amended. These sets of law are complemented by different decisions of the Cassation Division of the Federal Supreme Court. Ethiopian labour law classifies employment relationships into managerial and non-managerial employment. The Labour Proclamation No. 1156/2019 governs non-managerial employees, and the Ethiopian Civil Code applies to managerial employees. The Proclamation defines ‘Managerial Employee’ as an employee who, by law or delegation, of the employer, is vested with powers to lay down and execute management policies, and depending on the type of activities of the undertaking, with or without the aforementioned powers, an employee who is vested with power to hire, transfer, suspend, layoff, dismiss, or assign employees, and includes a legal service head who recommend measures to be taken by the employer regarding such managerial issues, using his independent judgement, in the interest of employer.   Employment of foreign nationals Under Ethiopian law, employers can employ expatriates only for positions that could not be filled by Ethiopian nationals. Foreign employers may, however, employ expatriates for top management positions without any restriction.   Corporate governance Laws governing corporate governance The Ethiopian Commercial Code of 2021, the Banking Business Proclamation No. 592/2009, Bank Corporate Governance Directives No. SBB/62/2015, the Insurance Business Proclamation No. 746/2012 and the Commercial Registration and Business Licensing Proclamation No. 980/2016 are the principal sources on corporate governance.   Banking and finance The Commercial Code of 1960 (Book IV), the National Bank of Ethiopia Establishment Proclamation No. 591/2008, the Banking Business Proclamation No. 592/2008 (as amended), the Insurance Business Proclamation No. 746/2012, the Capital Goods Leasing Business Proclamation No. 103/1998 (as amended), the Registration and Supervision of Capital Goods and Capital Goods Leasing Agreement Regulation No. 309/2014, the Micro-Financing Business Proclamation No. 626/2009, and different directives of the National Bank of Ethiopia regulate the financial services sector in Ethiopia. Financial services are reserved for Ethiopian nationals and foreign nationals of Ethiopian origin. Foreign financial institutions are not allowed to operate in Ethiopia and foreign nationals and companies are prohibited from owning shares of local financial institutions. A foreign company may open a local bank account through its subsidiary or branch or representative offices duly registered in Ethiopia.   Foreign exchange regulations Ethiopia has a number of exchange control directives issued by the national bank of Ethiopia at various times. All capital brought in and invested in Ethiopia should be registered by the Ethiopian Investment Commission and the National Bank of Ethiopia. Technology transfer agreements should also be registered with the Ethiopian Investment Commission to avoid difficulties during repatriation. It is very important to comply with the requirements set forth above as subsequent requests for repatriation of profits and dividends and other payments depend in large part upon compliance with this requirement. Foreign investors having business in Ethiopia have the right to repatriation of profits and dividends accruing from their investments, principal and interest due on foreign loans, payments related to technology transfer, payments related to collaboration agreements, capital gains proceeds from transfer of shares or transfer of partial ownership to a domestic investor, proceeds from the sale or liquidation of the business and compensation paid to an investor under the investment laws.   Private equity The law requires that foreign investors should obtain approval from the Ethiopian Investment Commission in order to acquire shares of existing companies. The approval of the Ministry of Trade and Regional Integration (the successor of Trade Competition and Consumers Protection Authority on merger related issues) is also a requirement.   Tax, duties and tariffs The principal taxes currently in place are corporate income tax, value added tax (VAT), customs duties and excise taxes.  A number of final withholding taxes are imposed on income such as income from employment, dividend, and royalties. Ethiopia follows a classical corporate income taxation system in which tax is imposed both at corporate and shareholder level. Corporate income tax rate is 30% and dividend tax rate is 10%. All entities (except those currently enjoying income tax holidays) that carry on business or trade are subject to corporate tax. A business or a trade is defined as any industrial, commercial, professional or vocational activity or any other activity recognised as trade by the Commercial Code of Ethiopia and carried on by any person for profit. Partnerships are treated as entities for tax purposes and are therefore subject to corporate income tax. Distribution of dividends is subject to 10% withholding tax at the time of declaration of dividends by companies. Companies are liable for withholding of dividend tax regardless of whether they distribute dividends or not unless they transfer the dividends declared to increase their capital within the time limit set down in directives issued by the Tax Authorities. Interest on bank deposits is subject to 5% withholding tax, which is final. Interest paid on loan from foreign lender recognised as a financial institution by the National Bank of Ethiopia is subject to a 10% withholding tax, which again is final. The borrower in Ethiopia must withhold the 10% tax on a foreign loan in order to obtain deduction of the interest in Ethiopia. The withholding tax rates may be reduced by the provisions of an applicable double taxation treaty for non-resident shareholders but these reductions are subject to taxpayers meeting beneficial ownership limitations. Ethiopia has ratified double taxation treaties with countries like UK, France, Israel, Romania, Russia, Turkey, South Africa, Tunisia, Algeria, Yemen and Czech Republic. Capital gains tax applies to transfers of shares, bonds and buildings held for business purposes. The capital gains tax rate on transfer of shares or bonds is 30% of the gain. The capital gains tax on transfer of buildings held for businesses is 15% of the gain. VAT is chargeable on the supply of goods or services by registered suppliers. Suppliers are normally required to register for VAT if their annual turnover of supply exceeds one Million Ethiopian Birr. Some supplies are exempted from the VAT. These include financial services, educational, health and transportation services. Some supplies, most notably exports and international transport services, are zero-rated under the VAT regime of Ethiopia. Import duties are payable on imports by all persons and entities which have no duty-free privileges. The rate of customs duties ranges from 0% to 35%. Other taxes may also be imposed on imports: Excise duties on selected goods (e.g., tobacco); surtax on many imports; value added tax (15%) and an advance payment of corporate tax (3%). Most export products and services from Ethiopia are free from export tariffs. However, some exports from Ethiopia such as raw hides and skins are subject to export duties. Ethiopian investment and tax laws grant tax incentives in the form of duty free privileges for imports, income tax holidays, and in some cases income tax deductions. The tax incentives depend on the type, size and location of investments.    Charities and societies The major law that governs civil society organizations (CSOs) in Ethiopia is the Civil Society Organisations Proclamation No. 1113/2019 (the ‘Proclamation’). There are major aspects and significant developments of this law as compared to the previous law and regime which placed excessive restrictions.   Mining and energy Ethiopian Constitution Provides for State form of land and resource tenure. The fast-growing mining sector, primarily as a result of the foreign direct investment, in Ethiopia, has necessitated the revision of antiquated mining laws that were in place. Currently, there are a number of laws that govern mining operations, petroleum operations, and transaction in precious minerals. The laws that currently regulate the industry include: Mining Operations Proclamation No. 678/2010; Mining Operation (Amendment) Proclamation No. 816/2013; Petroleum Operations Proclamation No. 295/1996; Mining Operations Regulation No. 423/2018 and Transaction of Precious Minerals Proclamation No. 651/2009. The laws regulate the requirements and procedures for acquiring the different licenses (Reconnaissance, Exploration and Mining) that are required to undertake various activities associated with mining and minerals. The rights and duties that these licenses carry are also dealt with under these laws. These laws task, among others, the FDRE Ministry of Mines and Petroleum and the respective regional bodies to license and supervise entities that are involved in the mining industry. Investments in the Ethiopian energy sector are regulated principally by the Energy Proclamation No. 810/2013 (as amended by Proclamation No 1085/2018), the Energy Regulation No. 447/ 2019, Geothermal Resources Development Proclamation No. 981/2016 (as amended by Proclamation No. 1204/2020) and Regulations No. 453/2019, EEA Directive No. 418/2020 and Ethiopian Energy Authority Establishment Regulation No. 308/2013. Pursuant to the Investment Proclamation No. 1180/2020, the business of generation of electricity as well as off- grid transmission and distribution are open to foreign investors either to carry out the investment in a solely foreign- owned entity or through a joint venture with a local company or the government.   Real estate and conveyancing Ethiopia's current investment policy not only encourages foreign investment in the real estate sector but it is 100% free and suitable for foreigners to enter into the sector. Nonetheless, there are no duty free privileges or any other incentives provided by the government to the sector.   Legal framework The 1960 Civil Code of Ethiopia, Urban Land Lease Holding Proclamation No. 721/2011, Investment Proclamation No. 1180/2020, Ethiopian Building Proclamation No. 624/2009, Building Regulation No. 243/2011 and the Building Directive, are the principal laws that govern land and real estate matters in Ethiopia. However, Real estate is one of the under regulated sectors in Ethiopia. Since there is no single law that specifically applies to the sector, there exists a huge gap in laws that govern the area. A draft proclamation that provides for Real Estate Development, marketing and valuation has been in the in the pipeline for quite some time now. The Urban Land Lease Holding Proclamation of 2011 gives investors the right to use of land on leasehold for periods of 15 years up to 99 years. The period of urban land lease is currently 99 years for residential purposes and 60 years for land acquired for commercial purposes. The land cannot be mortgaged or sold, but the lease value of the land and the fixed assets thereon may be mortgaged or transferred to third parties. Regional governments and municipal administrations are authorised to allocate rural and urban land to investors on lease in accordance with their respective laws.   Requirements An investor who wants to develop real estate in Ethiopia must first secure an investment permit from the Ethiopian Investment Commission provided that it fulfils all requirements such as proof of a minimum capital of USD200,000 for a wholly foreign owned investment and USD150,000 for a joint investment of foreign and domestic investors, and payment of registration and permit fees. Any foreign real estate developer may acquire land in Ethiopia through lease from the government or a private contract. An investor who acquires land under a lease has to enter into a land lease agreement with the Government. Once the necessary permits and certificates have been acquired, an investor must then apply for and be issued with a construction permit from the competent office, on presentation of documents such as the proposed building plan and a land lease certificate.   Exiting an investment Disposal of investment Shareholders can dispose their shares in companies through direct sale to willing third party purchasers. There is also a possibility under the Ethiopian Commercial Code for companies to redeem their own shares. Shareholders may also agree to contractually provide for call options in company bylaws or shareholders/investment agreement in accordance with which the sale or purchase of shares can be enforced under specified conditions.   Listing There is no stock exchange market in Ethiopia.  The Capital Market Proclamation No. 1248/2021 was came in to force in July 2021. This Proclamation established Ethiopian Capital Market Authority with a mandate to regulate secondary market in Ethiopia. There are ongoing activities to establish securities exchange in Ethiopia.   Stock acquisition, asset acquisition and business acquisition The Ethiopian Investment Commission must approve the acquisition of shares of existing companies by foreign investors and the Ethiopian Trade Competition, and Consumer Protection Authority should approve an acquisition of share interests in existing companies in Ethiopia.  Ministry of Revenue should issue tax clearance to the existing company before the acquisition of shares.   Investment protection In Ethiopia, no investment can be expropriated or nationalised by the government except for public interest and then, only in conformity with the requirements of the law. The Constitution of Ethiopia protects private property. The Investment Proclamation also provides investment guarantees against measures of expropriation and nationalisation. In the event of expropriation or nationalisation, adequate compensation has to be paid in advance. Ethiopia is a member of the World Bank affiliated Multilateral Investment Guarantee Agency (MIGA), which issues guarantees to investors against non-commercial risks such as expropriation. Moreover, Ethiopia has also concluded bilateral investment promotion and protection agreements with various countries. Ethiopia has also signed (but not ratified yet) the Convention on Settlement of Investment Disputes between States and nationals of other states. Ethiopia acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and the New York Convention entered into force in Ethiopia as of 22 November 2020.   Firm overview Mehrteab & Getu Advocates LLP (“MLA) is a leading full-service law firm in Addis Ababa. MLA is staffed with high-calibre lawyers who are accomplished in their fields of expertise as well as support staff which include legal assistants and other office personnel.   Practice areas Arbitration and litigation Aviation Banking and finance Charities and societies Contract negotiation and drafting Corporate and commercial Employment and immigration Hospitality and leisure Intellectual property Investment Mergers and acquisitions Mining and energy Private equity Real estate and conveyancing Sovereign debt Tax Website www.mehrteableul.com

Poland

Business environment Poland is an increasingly attractive market, having achieved a very stable economic growth and managing to quickly mitigate the impact of the COVID-19 pandemic. Moreover, the decline in FDI projects in Poland was one of the lowest. In comparison to other European countries, the COVID-19 pandemic influenced Polish GDP growth to a lesser extent than other European members, which led to the Polish economy recovering swiftly. Despite the war in Ukraine, Poland remains a stable investment location, being a member of the most strategic alliances, such as NATO, and economic– such as the UE. Its attractiveness in investors’ eyes is also influenced by the reliable banking sector and mature financial sector, well-developed infrastructure and the increasing value of foreign direct investments (FDI). Poland has an excellent central position, straddling Western and Eastern Europe. The key advantages of Poland as a business location is coastal access, allowing to become being the second most popular destination for offshore FDI projects. The central position also provides a crossroads for European trade and transport routes. In recent years, an additional advantage for the global trade come from significant numbers of well-developed logistic centres. There are many ways foreign investors may set up business, mainly depending on country of origin. The biggest advantage is granted to persons from Member States of the UE and the European Free Trade Association, who may start economic activity in the Polish territory under the same conditions as Poles. A popular form of conducting business by those from abroad is via establishing a branch of the company, which allows expanding its business activity and conducting it without establishing a separate legal entity under Polish law. For investors interested in becoming more closely associated with Poland, operating on a larger scale and conducting business in a more structured and formalized way, there are various forms of possible commercial companies. All types are available under the Commercial Companies Code and provide different options suitable for a wide range of business activity. These types of commercial companies are partnerships and corporations, which differ on personal and capital issues, such as responsibility. Economy Despite Poland being a stable investment location, the war in Ukraine, has brought many challenges for both the Polish economy and economies of countries worldwide. The ultimate results of the war are hard to currently predict, but regardless of the geopolitical and economic challenges (which have not significantly impacted the general investment situation) Poland remains a safe and stable place to do business. Poland is the fifth most populated country in the EU, the largest country in CEE, and the sixth largest economy in the EU. The economic growth is visible also by the increasing number of cities with more than 200k of residents, which is already at 14. The key financial stability agencies continue to rate Poland highly, with no changes compared to previous years, providing a stable outlook for the future. Poland is currently investing in numerous strategic projects, including energy and infrastructure. It is also the largest beneficiary of EU cohesion and funding for regional development. A crucial part of this funding is targeted towards R&D enterprises, innovation and environmental projects. One attractive form is a CIT exemption for investors under Polish Investment Zones and numerous government grants. There is a wide range of tax preferences provided for investors, such as relief for automation. Current opportunities & future prospects Poland is a very attractive investment location from the perspective of the demographics of society and the labor market, which continues to offer competitive labor costs, connected with the highly educated affordable skilled work force. Poland is the largest academic hub in the CEE region with more than 300 institutes of higher learning. Impressive are also numbers describing the volume of students: more than 1.2 mln in total and about 350 thousand graduates each year. 20% of these are graduates of engineering or technical faculties. At the same time, Poland is a very attractive place to live and work for skilled employes – the unemployment rate is about two times smaller than the average in the EU. Moreover, Polish people as a society are relatively young in comparison to other European countries. The structure of society and a high level of education makes Poles very open to using new technologies. One more important note regarding a relatively young society is an increasing awareness of the importance of subscribing to an meeting ESG standards. Among the most promising industries are: information and communications technology, electronics and business services. As an example, over the past 4 years the number of FinTechs in Poland has nearly doubled – rising to almost 300 in 2022. The following factors account for the successful growth in this area: the overall macroeconomic situation, the number of technical university graduates and highly-skilled experts, as well as high demand for technology-enabled financial services and, following the COVID-19 pandemic, the change of customer behaviors. Other prospective sectors are: aerospace, business services, home appliances, pharmaceutical and medical. Legal system The Polish legal system is based on both domestic regulations and EU law. Direct implementation of European law is broadly based, meaning that harmonization of Polish law with the EU legislation is a fact in many areas. The Polish legal system is not based on case law in contrast to the UK or the US legal system. However court judgments and decisions of judges adopted in previous cases have impact on dispute resolution, being an important component of the Polish legal system. What is also important is that the Polish legal system is quite stable, but is subject to change and development. The same concerns taxation in Poland. Due to the plethora of regulations, foreign investors should take care when choosing legal forms and structures for doing business in Poland, to ensure they select the one which is the most efficient and appropriate for them. Foreign investment restrictions The Polish business ecosystem is open for foreign investment, both in terms of the market availability as well as in terms of legal regulations. Nevertheless some restrictions must be taken into consideration by foreign investors, in particular related to the acquisition of real estate and certain other investments in specific areas under the regulation dated 24 July 2015 on control of investment. These restrictions concern in particular the following sectors: electricity generation; production of petrol or diesel oil; pipeline transport of crude oil, petrol or diesel oil; warehousing and storage of petrol, diesel, natural gas; underground storage of crude oil or natural gas; production of chemicals, fertilizers and chemical products; production and trade in explosives, weapons and ammunition as well as products and technology for military or police purposes; regasification or liquefaction of natural gas; reloading of crude oil and its products in seaports; distribution of natural gas or electricity; telecommunications activity; transmission of gaseous fuels; extraction and processing of metal ores used for the production of explosives, weapons and ammunition as well as products and technologies for military or police purposes; production of devices, instruments and medical devices; production of drugs and other pharmaceutical products; trade in gaseous fuels and gas with foreign countries; generation or transmission or distribution of heat; reloading in inland ports; processing of meat, milk, cereals, fruit and vegetables. Foreign investors contemplating acquisition of shares in companies conducting business activity in the above sectors, or acquisition of enterprises or organized parts of enterprises of such companies, are required to notify the Polish Antimonopoly Authority (UOKiK) on the investment. In some specific cases the UOKiK may block such transactions. Obtainment of UOKiK clearance is also required with respect to transactions exceeding certain value thresholds. Top tips to takeaway "What to know before Investing" Poland is an attractive market for foreign investments, and not only for macroeconomic reasons, but also the straightforward legal system which is harmonized with EU legislation in many areas. One of the greatest strengths of the Polish business landscape is its stock exchange and capital markets. The Warsaw Stock Exchange may be the primary or the secondary stock exchange market for foreign investors looking for growth of their capital. Planning business in Poland requires mapping of the Polish regulations with the specifics of Polish ecosystem. Due to the complexity of the domestic regulations, foreign investors are advised to hire professional legal and tax advisors who may assist them in optimum structuring of their expansion on the Polish market.   Authors: Paweł Mardas and Anna Szepietowska