Foreign direct investments in Poland

These are the highlights if you want to know the essential of foreign direct investments in Poland.  This entry was drafted by EWRA Law Firm for “E-IURE COMPENDIUM” 2018. Link to e-IURE Network.

This collaboration is a brief step-by-step guidance. In no case it can be considered as legal advice. If you want -or need – legal advice, ask for a lawyer or a law firm. In that case “EWRA Law Firm” is an excellent option if you are looking for legal advice in Poland.

The main basis for doing business in Poland is the Act of 2 July 2004  on Freedom of Economic Activity In Poland, business activity can be carried out in forms similar to those existing in other European countries. Among the available activities can be distinguished:

1.1 trading companies, divided into:

1.1.1 capital company (company with limited liability and joint-stock);

1.1.2 A partnership (general partnership, partnership, limited partnership, joint stock partnership limited by shares);

1.2 branch of a foreign entrepreneur;

1.3 delegation of foreign entrepreneurs;

1.4 individual business activity (including within a civil partnership).

In Poland there is a principle on freedom of establishment. Means that everyone has
the right to take the business activities of their choice. This rule is not of absolute character, because the rules sometimes allow only some of the parties to carry out certain activities, or indicate additional restrictions as to the subject matter of your business.

Subject limitations

On the same basis as Polish citizens (and therefore for example in terms of the form
of business), the business activity may be taken and performed by physical persons, legal, and other organizational units having legal capacity of the Member States of the European Union, Norway, Iceland and Liechtenstein;
from States not party to the agreement on the European Economic Area, on the basis of the agreements concluded by those States with the European Union and its Member States, as well as other citizens of countries other than the afore mentioned, if you hold in Poland a permanent residence permit, residence permit a long-term resident of the European Union, a temporary residence permit (in certain circumstances, provided for in the law on aliens), refugee status, subsidiary protection, permission to stay humanitarian or consent for tolerated stay, a temporary residence permit and are unmarried, with Polish citizen residing in Poland, a temporary residence permit in order to carry out business activity, use temporary protection in Poland, in possession of a valid Card of the Pole.

Object limitations

In terms of object limitations, the most important are those imposing an obligation
on the entrepreneur to obtain a prior administrative decision authorizing him to undertake a given activity.

Licences are issued in the areas of business activity that have special importance due to the safety of the State or citizens or other important public interest. The requirement
to obtain a license concerns among others the activity of:

• 1. exploration, pre-production development stage of hydrocarbon and permanent minerals under mining ownership, mining exploration or recognition of the underground storage  complex of carbon dioxide, the extraction of minerals from deposits, underground tank-less storage of the substance, the underground storage of waste and underground storage of carbon dioxide;
  2. producing and trading of explosives, weapons and ammunition as well as products and technology for military or police purposes;
  3. manufacturing, processing, storage or handling, transmission, distribution and marketing of fuels and energy,
  4. protecting people and property;
  5. running a casino.

Another manifestation of the subject limitation of economic freedom is
the requirement for the entrepreneur to obtain an approval, license or consent (hereinafter collectively “permits”). The permit allows to take and execute
a specified business activity if the entrepreneur commits to the law requirements (eg. activities in the field of collective water supply or collective wastewater volume) .

The permit is granted to the entrepreneur after it had been determined that he
or she meets the conditions set out in the Act. These conditions may include, inter alia,
the protection of human life and health, safety and public order, a State secret
and the specification of the business activities covered by the permit.

Acquisition of real estate by foreigners

The acquisition of property right by a foreigner or the right of perpetual usufruct of real estate and the acquisition or placing of shares or stocks by a foreigner in commercial companies established in the territory of Poland which is the owner or user of perpetual real estate located in Poland requires the authorisation of the Minister of Internal Affairs.

The obligation to obtain permit exists, if by the acquisition of shares in a company,
the owner or perpetual user property, the foreigner takes control of it. The necessity
also exists when the company is already controlled, and shares or stocks are acquired
or included by the foreigner who is not a partner or a shareholder of the company.
In the case of a commercial company, such a company is considered to be controlled,
in which the foreigner or foreigners have directly or indirectly more than 50% of votes
at the meeting of shareholders or at a general meeting or have a dominant position according to provisions of The Commercial Companies Code.

Minister of Internal Affairs may grant a permit to foreigner in order to acquire real estate or the acquisition of shares, if there is no probability of threat of national security or public order, as well as when it shows, that the circumstances confirming his ties with the Republic of Poland.

Antitrust

When running a business activity in Poland, it is necessary to take into account
the applicable antitrust regulations, which may constitute some restrictions for foreign investments.

Intention of concentration should be  notified to the President of the Antimonopoly Office (the “UOKiK”), if the aggregate global turnover of the participating entrepreneurs
in the fiscal year preceding the year of notification filing year exceeds the equivalent
of 1 billion euros, or total turnover on the territory of Poland of entrepreneurs participating in the concentration in the fiscal year preceding the year of the declaration exceeds the equivalent of 50 million euro. The Act of February 16, 2007, on Competition and Consumer Protection predicts situations in which the requirement of notification is off, namely when the entrepreneur’s turnover, over which control is acquired has not exceeded,
on the territory of Poland, in any of the the two financial years preceding the declaration the equivalent of 10 million euro or the linking applies to entities belonging to the same group.

Exchange controls

Foreign exchange transactions with foreign entities are allowed in principle. Polish law imposes specific obligations on entities that make settlements in foreign currency. Restrictions on the freedom of making settlements in foreign currency is subject to among others exports, sending and forwarding by residents to third countries national or foreign means of payment for access to or extension of business activity in these countries,
the acquisition by residents, both directly or through other entities shares and shares
in companies established in the third countries, as well as the placement of shares and shares in such companies, the disposal by residents, both directly and through other entities in the third countries securities, opening by residents, both directly and through other entities, accounts in banks and branch offices of banks established in the third countries.

There are certain limitations to performing activities related to settlements in foreign currency with abroad. Namely, residents and non-residents exceeding the State border
are obliged to report in writing to the Customs authorities or the border guard authorities, imports into the country and exports abroad among others, national or foreign means
of payment, if their value exceeds the total of the equivalent of 10.000 euro. Residents and non-residents are required also to make money transfers abroad and in the country related to the foreign exchange trading through the authorized banks or national payment institutions or branches of EU institutions If the amount of the payment or the settlement exceeds the equivalent of 15.000 euro.

Withholding tax

Income disbursed in Poland on shares in the profits of legal entities, interest, licence fees and remuneration for the services of intangible assets are subject to withholding.

As a rule, the withholding tax rate on dividends is 19%, with double taxation treaties may provide for a lower rate (5%, 10%, 15%).

Interests and licence fees are subjected to 20% withholding tax in Poland, the agreement for the avoidance of double taxation may provide for a lower rate (5%, 10%, 15%). Interest and licence fees may be in some cases exempt from withholding tax in Poland,
if you are paid by a capital company located in Poland for the companies established
in the territory of another than Poland EU/EEA country or Switzerland. However,
it is necessary to hold a current certificate of tax residence of the recipient.

Payments for intangible services, such as consulting services, advertising, data processing, are subject to 20% withholding tax, subject to the provisions of agreements to avoid double taxation. It is possible not to charge 20% withholding tax, if the paying agent has a current certificate of fiscal residence.