Attitude toward Foreign Direct Investment
Poland welcomes foreign investment as a source of capital, growth, and jobs, and as a vehicle for technology transfer, research and development (R&D), and integration into global supply chains. By the end of 2014, according to IMF and National Bank of Poland data, Poland attracted an estimated USD 210 billion (cumulative) in foreign direct investment (FDI), principally from Western Europe and the United States. Foreign companies generally enjoy unrestricted access to the Polish market. However, Polish law limits foreign ownership of companies in selected strategic sectors, and limits foreign acquisition of real estate, especially agricultural and forest land.
The Polish government has continued to implement reforms aimed at improving the investment climate. Poland introduced changes to the real estate register administration, public procurement law and contract enforcement in 2016. New bankruptcy and restructuring frameworks entered into force which provides debtors more ways to restructure a company and limits their obligations towards creditors, making a firm’s exit from the market easier.
In 2015, Poland adopted another tranche of deregulation reforms. The reforms covered almost 250 professions and removed or partially abolished more than 70 barriers to business and professional operation. Poland also cut the average number of hours companies must spend to file valued added (VAT) and transport taxes.
Changes to the Civil Procedures Code in 2016 modernized the definition of what constitutes a document and liberalized requirements for concluding and terminating contracts. Poland introduced one-instance proceedings to repeal an arbitration award (instead of two-instance proceedings). Ongoing reform efforts should eliminate widespread inconsistencies in local tax rulings and address long standing complaints from foreign investors. Despite these reforms and others, many foreign investors complain of over-regulation, over-burdened courts and prosecutors, and burdensome bureaucratic processes.
Other Investment Policy Reviews
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Laws/Regulations on Foreign Direct Investment
Poland is a constitutional State and a member of the European Union. Foreign nationals can expect to obtain impartial proceedings in legal matters. Polish is the official language and must be used in all legal proceedings. It is possible to obtain an interpreter. The basic legal framework for establishing and operating companies in Poland, including companies with foreign investors, is found in the Commercial Companies Code. The code provides for establishment of joint-stock companies, limited liability companies, or partnerships (e.g., limited joint-stock partnerships, professional partnerships). These corporate forms are available to foreign investors who come from an EU or European Free Trade Area (EFTA) member state or from a country that offers reciprocity to Polish enterprises, including the United States.
With few exceptions, foreign investors are guaranteed national treatment. Companies that establish an EU subsidiary after May 1, 2004, and conduct, or plan to commence business operations in Poland must observe all EU regulations and may not be able to benefit from all privileges afforded to EU companies. Foreign investors without permanent residence and the right to work in Poland may be restricted from participating in day-to-day operations of a company. Parties can freely determine the content of contracts within the limits of European contract law. All parties must agree on essential terms, including the price and the subject matter of the contract. Written agreements, although not always mandatory, enable an investor to avoid future disputes. Civil Code is the law applicable to contracts. Post is not aware of executive or other interference in the court system that could affect foreign investors.
Recent and significant laws/regulations, and judicial decisions affecting incoming foreign investment through acquisitions, mergers, takeovers, purchases of securities (including debt, equity, hybrid and derivative securities) and other financial contracts, and Greenfield (start-up) investments are below:
Capital market laws:
- Act of July 21, 2006 on Financial Market Supervision
- Act on Capital Market Supervision, July 29, 2005
- Act on Trading in Financial Instruments, July 29, 2005
- Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organized Trading, and Public Companies, July 29, 2005
- Act on Investment Funds, May 27, 2004
- Act on Bonds, January 15, 2015
- Act on Commodity Exchanges, October 26, 2000
- Act on Control of Certain Investments, September 30, 2015
Useful websites (in English) to help navigate laws, rules, procedures and reporting requirements for foreign investors:
Business Registration
In Poland, business activity may be conducted in forms of a sole proprietor, civil law partnership, as well as commercial partnerships and companies regulated in provisions of the Commercial Partnerships and Companies Code.
Sole proprietor and civil law partnerships are registered in the Central Registration and Information on Business (CEIDG), which is housed by the Ministry of Economic Development: https://prod.ceidg.gov.pl/CEIDG.CMS.ENGINE/?D;f124ce8a-3e72-4588-8380-63e8ad33621f
Commercial companies are classified as partnerships (registered partnership, professional partnership, limited partnership, and limited joint-stock partnership) and companies (limited liability company and joint-stock company). A partnership or company is registered in the National Court Register (KRS) and kept by the competent district court for the registered office of the established partnership or company.
Forms and Agencies a business will need to file with in order to register in the KRS:
- Central Statistical Office
http://bip.stat.gov.pl/en/regon/subjects-and-data-included-in-the-register/
- ZUS - Social Insurance Agency
http://www.zus.pl/files/46_13%20PUE%20-%20wer%20ang.pdf
- Ministry of Finance
http://www.mf.gov.pl/web/bip/wyniki-wyszukiwania/?q=business%20registration
Both registers are available in English and foreign companies may use them.
Poland’s Single Point of Contact site for business registration and information is: http://www.businessinpoland.gov.pl and an online guide to choose a type of business registration is: https://www.biznes.gov.pl/poradnik/-/scenariusz/REJESTRACJA_DZIALALNOSCI_GOSPODARCZEJ
Local corporate lawyers say starting a business remains costly in terms of time and money, though registration in the National Court Register averages less than two weeks according to the Ministry of Justice and four weeks according to the World Bank’s 2016 Doing Business Report.
There are a variety of Polish agencies involved in investment promotion:
The Polish Information and Foreign Investment Agency (PAIiIZ) is the main institution responsible for investment promotion and facilitation of foreign investment. This Agency will become part of the Polish Development Fund (Polski Fundusz Rozwoju) to be established in 2016. PAIiIZ services are available to all investors. http://www.paiz.gov.pl/en
The Economic Development Ministry has two departments separate from PaIiIZ involved in investment promotion and facilitation: the Large Investment Support Department and the International Relations Departments https://www.mr.gov.pl/en/
The Foreign Affairs Ministry (MFA) promotes Poland’s foreign relations including economic relations http://www.msz.gov.pl/en/ministry_of_foreign_affairs, and along with the Polish Chamber of Commerce (KIG), organizes missions of Polish firms abroad and hosts foreign trade missions to Poland http://en.kig.pl/.
Small and medium-sized enterprises (SMEs) are defined by EU recommendation 2003/361. Factors determining if an enterprise is a SME are: staff headcount and either turnover or balance sheet total. These ceilings apply to figures for individual firms only. A firm that is part of a larger group may need to include the larger group’s staff headcount/turnover/balance sheet data as well.
Industrial Promotion
Poland’s Plan for Responsible Development identifies eight industries for development and incentives: aviation, defense, automotive parts manufacturing, ship building, information technology, chemical, furniture manufacturing and food processing. The Ministry of Economic Development expects to release program details in late 2016. Poland encourages energy sector development through the Energy Policy of Poland until 2050. Large priority sector investments may qualify for the “Program for Supporting Investment of Considerable Importance for the Polish Economy for 2011-2020” which provides grants to large investments that create jobs in sectors including automotive, electronics, aviation, biotechnology, R&D, agriculture and food processing, and services (finance, information and communication, professional business services). Companies can learn more at: http://www.paiz.gov.pl/governmental_grants#
U.S. Companies may apply for European funds through a Polish subsidiary or partner. EU Funds support investment in: e-administration, e-economy (Digital Poland Operational Plan); R&D support (Smart Growth Operational Plan); transport infrastructure, water and waste management and renewable energy systems (Infrastructure & Environment Operational Plan); Eastern region development (Eastern Poland Operational Plan); and support for education and training (Knowledge, Education and Development Operational Plan) and 16 Regional Operational Programs (for each voivodship).
Limits on Foreign Control and Right to Private Ownership and Establishment
Foreign and domestic entities can establish and own business enterprises and engage in most forms of remunerative activity per the Law on Freedom of Economic Activity. Forms of business activity are described in the Commercial Companies Code.
Poland places limits on foreign ownership and foreign equity for a limited number of sectors. Polish law limits non-EU citizens to 49 percent ownership of a company’s capital shares in the air transport, radio and television broadcasting, and airport and seaport operations sectors.
Licenses and concessions for defense production and management of seaports are granted on the basis of national treatment for investors from OECD countries. Pursuant to the Broadcasting Law, a TV broadcasting company may only receive a license if the voting share of foreign owners does not exceed 49 percent and if the majority of the members of the management and supervisory boards are Polish citizens and hold permanent residence in Poland. In the insurance sector, at least two management board members, including the chair, must speak Polish.
The Law on Freedom of Economic Activity (LFEA) requires companies to obtain government concessions, licenses, or permits to conduct business in certain sectors, such as broadcasting, aviation, energy, weapons/military equipment, mining, and private security services. The LFEA also requires a permit from the Treasury Ministry for certain major capital transactions (i.e., to establish a company when a wholly or partially Polish-owned enterprise is contributed in-kind to a company with foreign ownership). A detailed description of business activities that require concessions and licenses can be found here: http://www.paiz.gov.pl/prawo/formy_prowadzenia_dzialalnosci_gospodarczej#
Polish law restricts foreign investment in land and real estate. Since Poland's EU accession in 2004, foreign citizens from EU member states, Iceland, Liechtenstein, Norway, and Switzerland do not need permission to purchase non-agricultural real estate, or to acquire or receive shares in a company owning non-agricultural real estate in Poland. Land usage types such as technology and industrial parks, business and logistic centers, transport, housing plots, farmland in special economic zones, household gardens and plots up to 2 hectare are exempt from agricultural land purchase restrictions. New laws to restrict farm land and forest purchases came into force April 30, 2016; significantly restricting direct and indirect trade in these properties. It is too early to predict how strictly these laws will be interpreted and their impact on foreign investors. Agricultural land purchases will be limited primarily to private farmers. Foreigners can (and do) lease agricultural land.
Citizens from countries other than the EU, Iceland, Liechtenstein, Norway, and Switzerland are allowed to purchase an apartment, 0.4 hectares (4,000 square meters) of urban land without restriction, or up to one-half hectare of agricultural land with building restrictions and restrictions on eligibility for government support programs. In order to make large commercial real estate purchases, foreign citizens must obtain a permit from the Ministry of Interior (with the consent of the Defense and Agriculture Ministries), pursuant to the Act on Acquisition of Real Estate by Foreigners. A foreign business intending to buy real estate in Poland may apply for a provisional permit from the Ministry of Interior, which is valid for two years from the date of issue, during which time the company is expected to assemble documents demonstrating it is a viable business. Permits may be refused for reasons of social policy or public security.
U.S. energy and investment firms are deeply concerned about the recently passed “Law on Investments in Wind Power.” The law specifies a wind turbine site must be placed at a distance of ten times the total height of the installation as measured from ground level to the highest point, which, on average, will be a minimum distance of two kilometers from residences and environmentally protected areas, precluding most site development in Poland.
Privatization Program
After 26 years of privatization, the Polish government has completed the privatization of most of the state-backed enterprises it deems are not of strategic importance. With few exceptions, the Polish government invited foreign investors to participate in major privatization projects. In general, privatization bidding criteria has been clear and the process transparent. There are nearly 50 state-owned enterprises (SOEs) classified as strategically important, most in the energy, mining, and financial sectors. The government intends to keep majority share ownership of these firms, or to sell tranches of shares such that it maintains state control. The Ministry of Treasury and/or Ministry of Energy control the government’s shares in most strategic SOEs. The government is now focused on consolidating and improving the efficiency of the remaining state-controlled entities.
Screening of FDI
On September 30, 2015 the Act on the Control of Certain Investments entered into force, which provides for the screening of acquisitions in energy generation and distribution, petroleum production, processing and distribution; telecommunications; as well as the manufacturing and trade of explosives, weapons and ammunition.
Competition Law
Poland’s anti-trust authority, the Office of Competition and Consumer Protection (UOKiK), reviews investment and merger transactions for competition-related concerns. Its mandate covers transactions of a magnitude which could influence the Polish market. The Act on Competition and Consumer Protection empowers UOKiK to block any merger that would capture of 40 percent or more of market share. It does not oppose vertical mergers that would not have monopolistic consequences. UOKiK also imposes reporting requirements for acquisitions of existing companies. Participants in planned transactions must obtain UOKiK’s advance clearance if their turnover in the year preceding the application exceeded either EUR 1 billion globally or EUR 50 million in Poland. The law provides for a waiver of obligation to notify UOKiK in certain situations, if the annual turnover in Poland of the target enterprise was less than EUR 10 million in the two previous years, or if parties to the merger already belong to the same capital group. No merger filing is required if the target company’s sales in Poland were less than EUR 10 million during the previous two years. All multinational companies must notify UOKiK of a proposed merger if any party to it has subsidiaries, distribution networks or permanent sales in Poland. UOKiK’s website: https://uokik.gov.pl/.
Competition protection laws and regulations: (Links in English)
- Regulation Of The Council Of Ministers of March 30, 2011 on exemption of certain types of vertical agreements from the prohibition on competition restricting agreements
- Regulation of the Council of Ministers of October 8, 2010 on the exemption of certain vertical agreements in the motor vehicle sector from the prohibition of competition-restricting agreements (Journal of Laws of 2010, No. 198, item 1315)
- Regulation of the Council of Ministers of July 17, 2007 concerning the method of calculation of the turnover of undertakings participating in the concentration (Journal of Laws of 2007, No. 134, item 934 and 935)
- Regulation of the Council of Ministers of July 17, 2007 concerning notification of the intention of concentration of undertakings (Journal of Laws of 2007, No. 134, item 936 and 937)
- Regulation of the Council of Ministers of January 26, 2009 concerning mode of proceeding in cases of enterprises’ applications to the President of the Office of Competition and Consumer Protection for immunity from or reduction of fines (Journal of Laws of 2009, No. 20, item 109)