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The Warsaw Voice » Other » September 2, 2009
Economic Forum in Krynica
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Time of Crisis or Time for Restructuring?
September 2, 2009   
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Everyone is telling us that Poland is in an economic crisis. In the same way as each of us is affected, some more and some less, so Poland is affected less than other countries. Some countries are affected directly and some indirectly. Poland I think is affected more indirectly than directly. Our conservative attitude to the problems other economies have has led us to be cautious and spendthrift with obvious consequences. Therefore, what happens in other countries is having an effect on our economy.

Other main economies have a crisis as there is no medium-term way out. This is because there is no reasonable restructuring available to them. Poland is different. I would say we are more in a restructuring mode than in a crisis. The Polish economy is holding despite the collapsing economies around us. I believe we have built our preventative barriers and are readjusting our activities to not only ride out the crisis of others, but to strengthen ourselves for the future. Short and medium term restructuring will do our firms and economy good.

One form of restructuring we should all do is related to taxation. EU directives have imposed on Poland, in principle, a fairer tax system (if a fairer tax system results from Polish regulators, then it is probably due to a mistake in the drafting).

Currently companies are probably at their lowest tax values for a few years. That is, the taxman is getting less from all types of tax generated from activities or transactions. What about taking advantage of the tax system and restructuring our companies to reduce future tax liabilities?

The larger corporations or groups can utilise the Closed Fund (FIS) structure and tax friendly EU States to reduce the effective monthly Corporate Income Tax cost and the tax on the eventual Capital Gain. As these tax efficient structures have an effective monthly and annual fixed cost they are not economically viable for smaller entities. However, if growth is forecast then it is better to set up the structures earlier than later. Perhaps there is no better opportunity than now.

Also the smaller companies have tax incentives in changing their structure. By using partnership-type companies and other types of Commercial Companies Code entities for your activities, you can reduce the effective level of tax paid out of personal income. Perhaps separating your assets from operations at this juncture will reduce risk in the future. Small companies (under a revenue of 1,200,000 euros) can write off against tax up to 50,000 euros of Fixed Asset purchases each year. Future expansion can be made in economic zones and there are EU funds available for certain sectors, for training, upgrading and so on. There are also tax efficient schemes for reevaluating intangible assets resulting in higher claimable depreciation changes. Tax savings improve cash flow and if reinvested increase future earnings.

Since our economy is in a restructuring phase, perhaps it is also appropriate to do this on the micro level. I have planted the seed, it is up to your advisor to tell you how to give it life, growth and a tax reduced bumper harvest.

Joe Smoczyński
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