Policies Towards Foreign Direct Investment

The Finnish government is open to foreign direct investment. There are no general regulatory limitations relating to acquisitions. A mixture of domestic and EU competition rules govern mergers and acquisitions. Finland does not preclude foreign investment, but some tax policies may make it unattractive to investors. Finnish tax authorities treat the movement of ownership of shares from a Finnish company to a foreign company as a taxable event, though Finland complies with EU directives that require it to allow such transactions based in other EU member states without taxing them.

Finland does not grant foreign-owned firms preferential treatment like tax holidays or other subsidies not available to all firms. Instead, Finland relies on policies that seek to offer both domestic and international firms better operating conditions, an educated labor force, and well-functioning infrastructure. Companies benefit from preferential trade arrangements through Finland’s membership in the EU and the World Trade Organization (WTO), in addition to the protection offered by Finland’s bilateral investment treaties with sixty-seven countries. The corporate income tax rate is 20 percent.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Regulation of the European Parliament and the Council on establishing a framework for the national security screening of high-risk foreign investments into the Union entered into force on April 10, 2019. At the moment, 14 Member States, including Finland, have national screening systems in place.

The law governing foreign investments is the Act on the Monitoring of Foreign Corporate Acquisitions in Finland (172/2012). The Ministry of Economic Affairs and Employment (TEM) monitors and confirms foreign corporate acquisitions. TEM decides whether an acquisition conflicts with “vital national interests” including securing national defense, as well as safeguarding public order and security. If TEM finds that a key national interest is jeopardized, it must refer the matter to the Council of State, which may refuse to approve the acquisition.

Amendments to national legislation (Act on the Screening of Foreign Corporate Acquisitions in Finland) are under review in a working group chaired by the Ministry of Economic Affairs and Employment, the Act is amended to meet EU FDI Screening Regulation which entered into force in March 2019. The amendments to the Act are expected to enter into force in October 2020.

In the civilian sector, TEM primarily monitors transactions related to Finnish enterprises considered critical to maintaining functions fundamental to society, such as energy, communications, or food supply. Monitoring only applies to foreign owners domiciled outside the EU and European Free Trade Association (EFTA).

For defense acquisitions, monitoring applies to all foreign owners, who must apply for prior approval. “Defense” includes all entities that supply or have supplied goods or services to the Finnish Ministry of Defense, the Finnish Defense Forces, the Finnish Border Guard, as well as entities dealing in dual-use goods. The substantive elements in evaluating the application are identical to those applied to other corporate acquisitions.

On February 26, 2019, the Finnish Parliament approved a law (HE 253/2018) that requires non-EU/ETA foreign individuals or entities to receive Defense Ministry permission before they purchase land in Finland. Even companies registered in Finland, but whose decision-making bodies are at least of one-tenth non-EU/ETA origin will have to seek a permit. The law, which took effect in the beginning of 2020, states that non-EU/ETA property purchasers can still buy residential housing and condominiums without restrictions.

Private ownership is normal in Finland, and in most fields of business participation by foreign companies or individuals is unrestricted. When the government privatizes state-owned enterprises, both private and foreign participation is allowed except in enterprises operating in sectors related to national security.

TEM is the authority responsible for monitoring and confirming corporate acquisitions. Filing an application/notification is voluntary, but the Ministry may request information connected to a foreigner’s corporate acquisition. The law does not specify a time limit for filing, and a foreign owner may file either before or after the transaction. A transaction is considered approved if the Ministry does not request additional information, initiate further proceedings within six weeks, or refuse to confirm the transaction within three months. The Ministry cannot render opinions before an application is filed. It is, however, possible for investors to contact the Ministry for guidance beforehand. There is no official template for the notification, but it must include information on the monitored entity’s pre-and post-transaction ownership structure and the acquiring entity’s ownership structure. If known, an acquiring entity must also state its intentions relating to the monitored entity. There are no fees.

Other Investment Policy Reviews

Finland has been a member of the WTO and the EU since 1995. The WTO conducted its Trade Policy Review of the European Union (including Finland) in May 2017: https://www.wto.org/english/tratop_e/tpr_e/tp457_e.htm .

The Research Institute of the Finnish Economy (ETLA) regularly publishes reviews of different sectors and factors that may affect investment: https://www.etla.fi/en/publication/dp1267-en .

Business Facilitation

All businesses in Finland must be publicly registered at the Finnish Trade Register. Businesses must also notify the Register of any changes to registration information and most must submit their financial statements (annual accounts) to the register. The website is: https://www.prh.fi/en/kaupparekisteri.html . The Business Information System BIS (“YTJ” in Finnish, https://www.prh.fi/en/kaupparekisteri/rekisterointipalvelut/ytj.html ) is an online service enabling investors to start a business or organization, report changes, close down a business, or conduct searches.

Permits, licenses, and notifications required depend on whether the foreign entrepreneur originates from a Nordic country, the European Union, or elsewhere. The type of company also affects the permits required, which can include the registration of the right to residency, residence permits for an employee or self-employed person, and registration in the Finnish Population Information System. A foreigner may need a permit from the Finnish Patent and Registration Office to serve as a partner in a partnership or administrative body of a company. For more information: https://www.suomi.fi/company/responsibilities-and-obligations/permits-and-obligations . Improvements made in 2016 to the residence permit system for foreign specialists, defined as those with a specific field of expertise, a university degree, and who earn at least EUR 3,000 gross per month, should help attract experts to Finland. An online permit application (https://enterfinland.fi/eServices ) available since November 2016 has made it easier for family members to acquire a residence permit. In 2019, media reported that the average processing times for foreign specialist residency permits more than doubled (52 days) and in some instances even longer.

The practice of some trades in Finland requires only notification or registration with the authorities. Other trades, however, require a separate license; companies should confirm requirements with Finnish authorities. Entrepreneurs must take out pension insurance for their employees, and certain fields obligate additional insurance. All businesses have a statutory obligation to maintain financial accounts, and, with the exception of small companies, businesses must appoint an external auditor.

Finland ranks 20th according to the World Bank Group’s 2020 Doing Business Index; it ranked 31st on “Starting a Business” (http://www.doingbusiness.org/data/exploreeconomies/finland ). According to a 2016 study (FDI Attractiveness Scoreboard) by the European Commission, Finland is the most attractive EU country for FDI in terms of the political, regulatory and legal environment.

Gender inequality is low in Finland, which ranks third in the 2020 World Economic Forum Global Gender Gap Index. The employment gap between men and women aged 15-64 is the third lowest in the OECD. Finland is currently one of the top-ranked countries that have reached parity in educational attainment.

Outward Investment

Business Finland, part of the Team Finland network, helps Finnish SMEs go international, encourages foreign direct investment in Finland, and promotes tourism. Business Finland has a staff of around 600 persons and nearly 40 offices abroad. It operates16 regional offices in Finland and focuses on agricultural technology, clean technology, connectivity, e-commerce, education, ICT and digitalization, mining, and mobility as a service. While many of Business Finland’s programs are export-oriented, they also seek to offer business and network opportunities. More info here: https://www.businessfinland.fi/en/do-business-with-finland/home /. In 2018, the Ministry of Education and Culture launched the Team Finland Knowledge network to enhance international education and research cooperation and the export of Finnish educational expertise.

Investment Incentives

Foreign-owned companies are eligible for government incentives on an equal footing with Finnish-owned companies. Support is given in the form of grants, loans, tax benefits, equity participation, guarantees, and employee training. Assistance is administered through one of Finland’s Centers for Economic Development, Transport, and the Environment (ELY) that provide advisory, training, and expert services as well as grant funding for investment and development projects. Investment aid can be granted to companies in the regional development areas, especially small and medium enterprises (SMEs). Large companies may also qualify if they have a major employment impact in the region. Aid to business development can be granted to improve or facilitate the company’s establishment and operation, know-how, internationalization, product development or process enhancement. Subsidies for start-up companies are available for establishing and expanding business operations during the first 24 months. Transport aid may be granted for deliveries of goods produced to sparsely populated areas. Energy subsidies can be granted to companies for investments in energy efficiency and conservation. http://www.ely-keskus.fi/en/web/ely-en/business-and-industry;jsessionid=0B09A1B237B74FAC485AAD7C8E068DBF .

Tekes, the Finnish Funding Agency for Technology and Innovation, provides low-interest loans and grants to challenging and innovative projects potentially leading to global success stories. The organization offers funding for research and development work carried out by companies, research organizations, and public sector service providers in Finland. Besides funding technological breakthroughs, Tekes emphasizes also service-related, design, business, and social innovations. Startups and both SMEs and large companies can benefit from Tekes incentives.

A company can use guarantees from the state-owned financing company Finnvera: https://www.finnvera.fi/eng/start/applying-for-financing/when-setting-up-a-business?source=3165 . Finnvera offers services to businesses in most sectors and is also Finland’s official Export Credit Agency (ECA). Business Finland helps foreign investors set up a business in Finland. Its services are free of charge, and range from data collection and matchmaking to location management: https://www.investinfinland.fi/our-services . Support for innovative business ventures can also be obtained from the Foundation for Finnish Inventions: http://www.wipo.int/sme/en/best_practices/finland.htm .

Foreign Trade Zones/Free Ports/Trade Facilitation

Free trade zone area regulations have been harmonized in the EU by the Community Customs Code. The European Union Customs Code UCC, its Delegated Act and Implementing Act entered into force on May 1, 2016, and will be implemented gradually; the free zone of control type II was abolished and the operator authorizations were changed into customs warehouse authorizations on Customs’ initiative. The Code also allows the processing of non-Union goods without import duties and other charges. New regulations for customs declarations have been applied to customs warehousing since June 1, 2019. According to the current schedule, new declarations will be introduced for import and temporary storage at the end of 2020, and for export and transit in 2021–2023.

Performance and Data Localization Requirements

There are no performance requirements or commitments imposed on foreign investment in Finland. However, to conduct business in Finland, some residency requirements must be met. The Limited Liability Companies (LLC) Act of Finland is at: http://finlex.fi/en/laki/kaannokset/2006/en20060624 . A LLC must be reported for registration within three months from the signing of the memorandum of association: https://www.prh.fi/en/kaupparekisteri/yrityksen_perustaminen/osakeyhtio.html . There is no forced localization policy for foreign investments in Finland.

Finland participates actively in the development of the EU’s Digital Single Market and, aside from privacy issues, encourages a light regulatory approach in this area. Since May 2018, data transfers from Finland to non-EU countries must abide by EU General Data Protection Regulation (GDPR) (EU) 2016/679. Finland supports the EU Commission’s view on promoting European digitalization and creating a single market for data. In March 2020, the Ministry of Transport and Communications appointed a data economy implementation and monitoring group, with task of continue exerting influence and to coordinate the work of different administrative sectors. The working group is also tasked with exerting influence both internationally and at the EU level. The objective is for Finland’s view on the principles and development of the data economy will be noted internationally.

Personal data may be transferred across borders per the Finnish Personal Data Act (PDA, at: http://finlex.fi/en/laki/kaannokset/1999/en19990523 ), which states that personal data may be transferred outside the European Union or the European Economic Area only if the country in question guarantees an adequate level of data protection. Office of the Data Protection Ombudsman legislation is at: https://tietosuoja.fi/en/organisations .

The Government promotes Corporate Social Responsibility (CSR) through the Ministry of Employment and the Economy CSR Guidelines (https://tem.fi/en/key-guidelines-on-csr ). The Committee on Corporate Social Responsibility acts as the Finnish National Contact Point (NCP) for the effective implementation of the OECD Guidelines for Multinational Enterprises (MNEs), together with the Ministry of Economic Affairs and Employment: https://tem.fi/en/handling-specific-instances-of-the-oecd-guidelines-for-multinational-enterprises .

The government’s SOE policy establishes CSR as a core value of SOEs. Finnish companies perceive that the central component of responsible business conduct or corporate responsibility is to conduct due diligence to ensure compliance with law and regulations. There are no national codes for CSR in Finland; rather, Finnish companies and public authorities have promoted global CSR codes, such as the OECD Guidelines for Multinational Enterprises; the UN Global Compact for Business and Human Rights; ILO principles; EMAS; ISO standards; and the Global Reporting Initiative (GRI).

The Directive of the European Parliament and the Council on the disclosure of non-financial information has been implemented via amendments to the Finnish Accounting Act, requiring affected organizations to make the first report in 2018. The obligation to report non-financial information and corporate responsibility reports will apply to large public interest entities with more than 500 employees. There are 150 Finnish companies that publish annual CSR reports that were not previously obligated to do so.

Importing tin, tantalum, tungsten and gold from conflict zones into the EU requires new procedures from businesses as of January 2021. Tukes, the Finnish Safety and Chemicals Agency, is the competent authority to carry out checks to ensure compliance with the requirements relating to the import of conflict minerals in Finland. The checks will begin in 2022. For more information: https://tukes.fi/en/industry/conflict-minerals .

Finland is committed to the implementation of the OECD Guidelines for Multinational Enterprises, the ILO Declaration on Fundamental Principles and Rights at Work, and the tripartite declaration of principles concerning multinational enterprises and social policy by the ILO.

Finland has joined the Extractive Industries Transparency Initiative (EITI), which supports improved governance in resource-rich countries. Finland is not a member of the Voluntary Principles on Security and Human Rights Initiative.

In October 2019, The Ministry of Economic Affairs and Employment commissioned a judicial analysis of regulation and legislation on corporate social responsibility. An analysis will be prepared of ways in which human rights and environmental due diligence could be incorporated into legislation affecting companies. The analysis will focus on establishing a method for nationally implementing corporate social responsibility legislation based on a due diligence obligation.

Labor and environmental laws and regulations are not waived to attract or retain investments and the Government published a guide to socially responsible public procurement in November 2017: http://julkaisut.valtioneuvosto.fi/handle/10024/160318 .

The Corporate Responsibility Network (FiBS) is the leading corporate responsibility network in Finland and has more than 300 members: https://www.fibsry.fi/briefly-in-english/ . The Human Rights Center (HRC), administratively linked to the Office of the Parliamentary Ombudsman, encourages foreign and local enterprises to follow the most important international norms: https://www.humanrightscentre.fi/monitoring/ .

The Securities Market Association, https://cgfinland.fi/en/ , developed and updated (2019) the Finnish Corporate Governance Code for companies listed on the Helsinki Stock Exchange: ﷟ https://business.nasdaq.com/list/Rules-and-Regulations/European-rules/nasdaq-helsinki/index.html .

The National Risk Assessment of 2018 does not list corruption as a risk in Finland, nor does the 2017 Security Strategy for Society and there is no dedicated national anti-corruption strategy. In April 2020, the Ministry of Justice appointed an anti-corruption working group to draft Finland’s Anti-Corruption Strategy 2020-2023. The term of the working group ends in March 2023.

Over the past decade, Finland has ranked in the top three on Transparency International’s (TI) Corruption Perceptions Index (CPI). In 2019, Finland was ranked third on the CPI.

Corruption in Finland is covered by the Criminal Code and penalties range from fines to imprisonment of up to four years. Both giving and accepting a bribe is considered criminal and Finland has statutory tax rules concerning non-deductibility of bribes. Finland does not have an authority specifically charged to prevent corruption. The Ministry of Justice coordinates anti-corruption matters, but Finland’s EU anti-corruption contact is the Ministry of the Interior. The National Bureau of Investigation also monitors corruption, while the tax administration has guidelines obliging tax officials to report suspected offences, including foreign bribery, and the Ministry of Finance has guidelines on hospitality, benefits, and gifts. The Ministry of Justice describes its anti-corruption efforts at https://oikeusministerio.fi/en/anti-corruption-activities .

The Ministry of Justice is maintaining an Anti-Corruption.fi website, https://korruptiontorjunta.fi/en/home , providing both ordinary citizens and professional operators with impartial and fact-based information on corruption and its prevention in Finland. The goal is a transparent, impartial and corruption-free culture and society.

The Act on a Candidate’s Election Funding (273/2009) delineates election funding and disclosure rules. The Act requires presidential candidates, Members of Parliament, and Deputy Members to declare total campaign financing, the financial value of each contribution, and donor names for donations exceeding EUR 1,500: https://www.finlex.fi/en/laki/kaannokset/2009/en20090273.pdf . The Act on Political Parties (10/1969) concerning the funding of political parties is at: https://www.finlex.fi/fi/laki/kaannokset/1969/en19690010.pdf . The National Audit Office of Finland keeps a register containing election-funding disclosures at: http://www.vaalirahoitusvalvonta.fi  (available in Finnish and Swedish). Election funding disclosures must be filed with the National Audit Office of Finland within two months of election results being confirmed.

Finland does not regulate lobbying; there is no requirement for lobbyists to register or report contact with public officials. However, in March 2019, a parliamentary working group headed by the Speaker urged the establishment of a lobbying register to improve transparency regarding possible interest groups influences on members of Parliament. The working group said the registry would initially cover national-level decision making, later being extended to municipal and regional decision-making organs. The group is calling for the registry — already in use in the European Parliament — to be implemented during this government term. In accordance with the Government Program of Prime Minister Marin, an Act on a Transparency Register will be enacted in Finland on the basis of parliamentary preparation and in consultation with civil society. The purpose of the act is to improve the transparency of decision-making and, by doing this, to prevent undue influence and reinforce public confidence.

The ethical Guidelines of the Finnish Prosecution Service can be found from a new website that was opened on October 1, 2019. https://syyttajalaitos.fi/en/the-ethical-guidelines .

The following are ratified or in force in Finland: the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime; the Council of Europe Civil Law Convention on Corruption; the Criminal Law Convention on Corruption; the UN Convention against Transnational Organized Crime; and, the UN Anticorruption Convention. Finland is a member of the European Partners against Corruption (EPAC).

Finland is a signatory to the OECD Convention on Anti-Bribery, but Transparency International released a progress report in September 2018 rating Finland as having “little to no enforcement” and opining that the most significant deterioration of the level of enforcement had taken place in Finland: https://www.transparency.org/exporting_corruption/Finland .

In March 2019, the OECD Working Group on Bribery noted that Finland has shown limited progress in addressing the Working Group’s concerns. In 2017 the Working Group stated that Finland still faces issues related to “old-boys’ networks,” and noted several conflict of interest scandals in 2017 that involved issues concerning blurred lines between public and private interests, and public office holders who had not recused themselves from decisions affecting them. Nonetheless, in the latest report the Working Group notes that Finland has taken steps to amend its Criminal Code on sanctions and to develop guidance specifically targeting SMEs.

Other reforms are also ongoing and seem to be pointing to the right direction, including in relation to institutional arrangements: http://www.oecd.org/corruption/Finland-phase-4-follow-up-report-ENG.pdf .

In March 2018, in its fifth evaluation round the Council of Europe’s anticorruption body GRECO (Group of States against Corruption) issued recommendations to Finland for preventing corruption among ministers, senior government officials and members of law enforcement agencies (the police and the Border Guard). The report recommended that Finland adopt and implement a national anticorruption strategy and pay special attention to the risks related to privatization in the planned health, social services and regional government reform.

The National Bureau of Investigation is responsible for the investigation of organized and international crimes, including economic crime and corruption, and operates an anti-corruption unit to detect economic offences. The Ministry of Justice has set up a specialist network, the anti-corruption cooperation network, which meets a few times a year to discuss and exchange information. The committee drafted an anti-corruption strategy for Finland and submitted it to the Ministry of Justice in 2017. The government has not yet adopted the strategy. Finnish Defense Forces, the Prime Minister’s Office and the Finnish Center for Integrity in Sports joined the anti-corruption network in 2020.

In November 2018, the City of Helsinki announced plans for a new whistleblower hotline service to anonymously inform authorities about suspected corruption.

At the beginning of 2017, a new Public Procurement Act based on the new EU directives on public procurement entered into force. Under the new law, a foreign bribery conviction remains mandatory grounds for exclusion from public contracts.

Resources to Report Corruption

Markku Ranta-Aho
Head of Financial Crime Division
National Board of Investigation
P.O. Box 285, 01310 Vantaa, Finland
markku.ranta-aho@poliisi.fi

Jaakko Korhonen
Chairperson
Transparency Finland
info@transparency.fi

While instances of political violence in Finland are rare, extremism exists, and anti-immigration and anti-Semitic incidents do occur. In 2019, 15 anti-Semitic acts of vandalism against the Israeli Embassy over an 18-month period prompted an official demarche. The neo-Nazi Nordic Resistance Movement (NRM) is banned in Finland, as is its Facebook page, however the NRM website is accessible and features new content almost daily.

It is illegal in Finland to share violent content such as footage of Christchurch massacre, but it is still being disseminated and no one has been prosecuted. In August 2017, a stabbing attack took place in central Turku, in southwest Finland in which two pedestrians were killed and eight injured. Finnish authorities considered the attack a terrorist act and its perpetrator was convicted on terrorism charges, making it the first incident of its kind in Finland since the end of World War II.

The Fund for Peace (FFP) ranked Finland as the most stable country in the world again in 2019 based on political, social, and economic indicators including public services, income distribution, human rights, and the rule of law. Marsh’s Political Risk Map 2020, exploring the changing risk environment, highlighting the implications for firms operating globally, rates Finland as a broadly stable country, scoring 78.8 (out of 100) in its Short-Term Political Risk Index (STPRI). Finland scores particularly well in the ‘security and external threats’ and ‘social stability’ sub-components of the scores, but its ‘policy-making process’ and ‘policy continuity’ scores are somewhat suppressed by the unwieldy nature of the five-party coalition that was formed after the April 2019 parliamentary elections.

Please note that the following tables include FDI statistics from three different sources, and therefore will not be identical. Table 2 uses BEA data when available, which measures the stock of FDI by the market value of the investment in the year the investment was made (often referred to as historical value). This approach tends to undervalue the present value of FDI stock because it does not account for inflation. BEA data is not available for all countries, particularly if only a few US firms have direct investments in a country. In such cases, Table 2 uses other sources that typically measure FDI stock in current value (or, historical values adjusted for inflation). Even when Table 2 uses BEA data, Table 3 uses the IMF’s Coordinated Direct Investment Survey (CDIS) to determine the top five sources of FDI in the country. The CDIS measures FDI stock in current value, which means that if the U.S. is one of the top five sources of inward investment, U.S. FDI into the country will be listed in this table. That value will come from the CDIS and therefore will not match the BEA data.

* Source for Host Country Data:

Policies Towards 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.  The government’s Strategy for Responsible Development identifies key goals for attracting investment, including improving the investment climate, a stable macroeconomic and regulatory environment, and high-quality corporate governance, including in state-controlled companies.  By the end of 2018, according to IMF and National Bank of Poland data, Poland attracted around USD 228.5 billion (cumulative) in foreign direct investment (FDI), principally from Western Europe and the United States.  In 2018, reinvested profits again dominated the net inflow of FDI to Poland.  The greatest reinvestment of profits occurred in services and manufacturing, reflecting the change of Poland’s economy to a more service-oriented and less capital-intensive structure.

Foreign companies generally enjoy unrestricted access to the Polish market.  However, Polish law limits foreign ownership of companies in selected strategic sectors, and limits acquisition of real estate, especially agricultural and forest land.  Additionally, the current government has expressed a desire to increase the percentage of domestic ownership in some industries such as banking and retail which have large holdings by foreign companies and has employed sectoral taxes and other measures to advance this aim.  In March 2018, Sunday trading ban legislation went into effect, which is gradually phasing out Sunday retail commerce in Poland, especially for large retailers.  In 2019, stores operated an average of one Sunday a month, and in 2020 a total ban will be in effect (with the exception of seven Sundays).  In 2019, the government introduced a draft bill requiring producers and importers of sugary and sweetened beverages to pay a fee.  Polish authorities have also publicly favored introducing a digital services tax.  Because no draft has been released, the details of such a tax are unknown, but it would presumably affect mainly foreign digital companies.

There is a variety of agencies involved in investment promotion:

• The Ministry of Development has two departments involved in investment promotion and facilitation: the Investment Development and the Trade and International Relations Departments.  The Deputy Minister supervising the Investment Development Department was appointed in 2019 to be ombudsman for foreign investors.   https://www.gov.pl/web/przedsiebiorczosc-technologia/ 
• The Ministry of Foreign Affairs (MFA) promotes Poland’s foreign relations including economic relations, and along with the Polish Chamber of Commerce (KIG), organizes missions of Polish firms abroad and hosts foreign trade missions to Poland.   https://www.msz.gov.pl/ ; https://kig.pl/ 
• The Polish Investment and Trade Agency (PAIH) is the main institution responsible for promotion and facilitation of foreign investment. The agency is responsible for promoting Polish exports, for inward foreign investment and for Polish investments abroad.  The agency operates as part of the Polish Development Fund, which integrates government development agencies.  PAIH coordinates all operational instruments, such as commercial diplomatic missions, commercial fairs and programs dedicated to specific markets and sectors.  The Agency has opened offices abroad including in the United States (San Francisco and Washington, D.C, Los Angeles, Chicago, Houston and New York).  PAIH’s services are available to all investors.  https://www.paih.gov.pl/en 

• The American Chamber of Commerce has established the American Investor Desk – an investor-dedicated know-how gateway providing comprehensive information on investing in Poland and investing in the USA https://amcham.pl/american-investor-desk 

Limits on Foreign Control and Right to Private Ownership and Establishment

Poland allows both foreign and domestic entities to establish and own business enterprises and engage in most forms of remunerative activity per the Entrepreneurs’ Law which went into effect on April 30, 2018.  Forms of business activity are described in the Commercial Companies Code.  Poland does place 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 television 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 2017, a team comprised of officials from the Ministry of Culture and National Heritage, the National Broadcasting Council (KRRiT) and the Office of Competition and Consumer Protection (UOKiK) was created in order to review and tighten restrictions on large media, and limit foreign ownership of the media.  While no legislation has been introduced, there is concern that possible future proposals may limit foreign ownership of media sector as suggested by governing party politicians.

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 Ministry of Development for certain major capital transactions (i.e., to establish a company when a wholly or partially Polish-owned enterprise has contributed in-kind to a company with foreign ownership by incorporating liabilities in equity, contributing assets, receivables, etc.).  A detailed description of business activities that require concessions and licenses can be found here:  https://www.paih.gov.pl/publications/how_to_do_business_in_Poland 

Polish law restricts foreign investment in certain land and real estate.  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 two hectares are exempt from agricultural land purchase restrictions.  Since May 2016, foreign citizens from European Economic Area member states, Iceland, Liechtenstein, and Norway, as well as Switzerland, do not need permission to purchase any type of real estate including agricultural land.  Investors from outside of the EEA or Switzerland need to obtain a permit from the Ministry of Internal Affairs and Administration (with the consent of the Defense and Agriculture Ministries), pursuant to the Act on Acquisition of Real Estate by Foreigners, prior to the acquisition of real estate or shares which give control of a company holding or leasing real estate.  The permit is valid for two years from the day of issuance, and the ministry can issue a preliminary document valid for one year.  Permits may be refused for reasons of social policy or public security.  The exceptions to this rule include purchases of an apartment or garage, up to 0.4 hectares of undeveloped urban land, and “other cases provided for by law” (generally: proving a particularly close connection with Poland).  Laws to restrict farmland and forest purchases (with subsequent amendments) came into force April 30, 2016 and are addressed in more detail in Section 6: Real Property.

Since September 2015, the Act on the Control of Certain Investments has provided for the national security-related screening of acquisitions in high-risk sectors including: energy generation and distribution; petroleum production, processing and distribution; telecommunications; media and mining; and manufacturing and trade of explosives, weapons and ammunition.  Poland maintains a list of strategic companies which can be amended at any time, but is updated at least once a year, usually in late December.  The national security review mechanism does not appear to constitute a de facto barrier for investment and does not unduly target U.S. investment.  According to the Act, prior to the acquisition of shares of strategic companies (including the acquisition of proprietary interests in entities and/or their enterprises) the purchaser (foreign or local) must notify the controlling government body and receive approval.  The obligation to inform the controlling government body applies to transactions involving the acquisition of a “material stake” in companies subject to special protection.  The Act stipulates that failure to notify carries a fine of up to PLN 100,000,000 (approx. USD 25,000,000) or a penalty of imprisonment between six months and five years (or both penalties together) for a person acting on behalf of a legal person or organizational unit that acquires a material stake without prior notification.

The governing Law and Justice party formed a new treasury ministry to consolidate the government’s control over state-owned enterprises.  The government dissolved Poland’s energy ministry, transferring that agency’s mandate to the new State Assets Ministry.  The Deputy Prime Minister and Minister of State Assets announced that he would seek to consolidate state-owned companies with similar profiles, including merging Poland’s largest state-owned firm Orlen with state-owned Energa.  At the same time, the government is working on changing the rules of governing state-owned companies to have better control over the firms’ activities.  A new government plenipotentiary for the reform of ownership oversight will be appointed.

As part of the COVID-19 anti-crisis shield, the Ministry of Development plans to offer two-year takeover protection for Polish firms with a minimum of EUR 10 million (almost $10 million) in turnover.  The bill creates “a temporary complex framework of control over actions which could threaten the safety, order, and public health by entities from outside the EU and EEA,” according to authors of an impact study.  Qualifications are extended for public firms, or firms from a variety of specified fields.  The State Assets Ministry is preparing similar and more permanent measures.

Other Investment Policy Reviews

The 2018 OECD Economic Survey of Poland can be found here:

http://www.oecd.org/eco/surveys/economic-survey-poland.htm 

Additionally, the OECD Working Group on Bribery has provided recommendations on the implementation of the OECD Anti-Bribery Convention in Poland:  http://www.oecd.org/daf/anti-bribery/poland-oecdanti-briberyconvention.htm 

In March 2018, the OECD published a Rural Policy Review on Poland.  According to this review, Poland has seen impressive growth in recent years, and yet regional disparities in economic and social outcomes remain large by OECD standards.  The review is available at: http://www.oecd.org/poland/oecd-rural-policy-reviews-poland-2018-9789264289925-en.htm 

Business Facilitation

The Polish government has continued to implement reforms aimed at improving the investment climate with a special focus on the SME sector and innovations.  Poland reformed its R&D tax incentives with new regulations and changes encouraging wider use of the R&D tax breaks.  As of January 1, 2019, a new mechanism reducing the tax rate on income derived from intellectual property rights (IP Box) was introduced.  Please see Section 5 of this report for more information.

A package of five laws referred to as the “Business Constitution”—intended to facilitate the operation of small domestic enterprises—was gradually introduced in 2018.  The main principle of the Business Constitution is the presumption of innocence of business owners in dealings with the government.

Poland made enforcing contracts easier by introducing an automated system to assign cases to judges randomly.  Despite these reforms and others, some investors have expressed serious concerns regarding over-regulation, over-burdened courts and prosecutors, and overly burdensome bureaucratic processes.  The way tax audits are performed has changed considerably.  For instance, in many cases the appeal against the findings of an audit now must be lodged with the authority that issued the initial finding rather than a higher authority or third party.  Poland also enabled businesses to get electricity service faster by implementing a new customer service platform that allows the utility to better track applications for new commercial connections.

In Poland, business activity may be conducted in the 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 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.  Local corporate lawyers report that starting a business remains costly in terms of time and money, though KRS 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 2020 Doing Business Report.  A 2018 law introduced a new type of company—PSA (Prosta Spółka Akcyjna – Simple Joint Stock Company).  PSAs are meant to facilitate start-ups with simpler and cheaper registration procedures.  The minimum initial capitalization is 1 PLN (approx. USD 0.26) while other types of registration require 5,000 PLN (approx. USD 1,315) or 50,000 PLN (approx. USD 13,158).  A PSA has a board of directors, which merges the responsibilities of a management board and a supervisory board.  The provision for PSAs will enter into force in March 2021.

New provisions of the Public Procurement Law (“PPL”) transposing provisions of EU directives coordinating the rules of public procurement came into force on October 18, 2018.  These regulations apply to proceedings concerning contracts with a value equal to or exceeding the EU thresholds.

Polish lawmakers are gradually digitalizing the services of the KRS.   The first change, which entered into force on March 15, 2018, was the obligation to file financial statements with the Repository of Financial Documents via the Ministry of Finance website.  There is also a new requirement for representatives and shareholders of companies to submit statements on their addresses.  A requirement to file financial statements exclusively in electronic form entered into force on October 1, 2018, and, beginning in March 2021, all applications will have to be filed with the commercial register electronically.  A certified e-signature may be obtained from one of the commercial e-signature providers listed on the following website: https://www.nccert.pl/ 

• General information, National Court Register (KRS): https://ms.gov.pl/en/national-registers/national-court-register/general-information-on-the-national-court-register/ 
• Forms in English, National Court Register (KRS):https://ms.gov.pl/en/national-registers/national-court-register/application-forms-used-in-krs/ ;
• Electronic KRS access: https://ms.gov.pl/en/national-registers/national-court-register/electronic-access-to-the-national-court-register/ 

Agencies with which a business will need to file in order to register in the KRS: Central Statistical Office to obtain a business identification number (REGON) for civil-law partnership http://bip.stat.gov.pl/en/regon/subjects-and-data-included-in-the-register/ 

ZUS – Social Insurance Agency http://www.zus.pl/pl/pue/rejestracja 

Ministry of Finance http://www.mf.gov.pl/web/bip/wyniki-wyszukiwania/?q=business percent20registration 

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:  https://www.biznes.gov.pl/en/ 

and an online guide to choose a type of business registration is: https://www.biznes.gov.pl/poradnik/-/scenariusz/REJESTRACJA_DZIALALNOSCI_GOSPODARCZEJ 

Outward Investment

The Polish Agency for Investment and Trade (PAIH), under the umbrella of the Polish Development Fund (PFR), plays a key role in promoting Polish investment abroad.  More information on PFR can be found in Section 7 and at its website: https://pfr.pl/ 

The Minister of Foreign Affairs and the Minister of Development (formerly called the Minister of Entrepreneurship and Technology) have significantly reformed Poland’s economic diplomacy.  The Polish Information and Foreign Investment Agency (PAIiIZ) was reformed in February 2017 to become the Polish Agency for Investment and Trade (PAIH).  Trade and Investment Promotion Sections in embassies and consulates around the world have been replaced by PAIH offices.  These 70 offices worldwide constitute a global network and include six in the United States.

PAIH assists entrepreneurs with administrative and legal procedures related to specific projects as well as helps develop legal solutions and find suitable locations, and reliable partners and suppliers.

The Agency implements pro-export projects such as “the Polish Tech Bridges” dedicated to expansion of innovative Polish SMEs.

Poland is a founding member of the Asian Infrastructure Investment Bank (AIIB).  Poland co-founded and actively supports the Three Seas Initiative, which seeks to improve north-south connections in road, energy, and telecom infrastructure in 12 countries on NATO’s and the EU’s eastern flank.

Under the Government Financial Support for Exports Program, the national development bank BGK (Bank Gospodarstwa Krajowego) grants foreign buyers financing for the purchase of Polish goods and services.  The program provides the following financing instruments:  credit for buyers granted through the buyers’ bank; credit for buyers granted directly from BGK; the purchase of receivables on credit from the supplier under an export contract; documentary letters of credit post-financing; the discounting of receivables from documentary letters of credit; confirmation of documentary letters of credit; and export pre-financing.  In May 2019, BGK and the Romanian development bank EximBank founded the Three Seas Fund, a commercial initiative to support the development of transport, energy and digital infrastructure in Central and Eastern Europe.  In July 2019, BGK, the European Investment Bank, and four other development banks (French Deposits and Consignments Fund, Italian Deposits and Loans Fund, the Spanish Official Credit Institute and German Credit Institute for Reconstruction), began the implementation of the “Joint Initiative on Circular Economy” (JICE), the goal of which is to eliminate waste, prevent its generation and increase the efficiency of resource management.  BGK also opened two international offices in 2019:  London and Frankfurt.

PFR TFI S.A, an entity under the umbrella of the state-owned financial group PFR, supports Polish investors planning to or already operating abroad. PFR TFI also manages the Foreign Expansion Fund (FEZ), which provides loans, on market terms, to foreign entities owned by Polish entrepreneurs.  https://www.pfrtfi.pl/  and https://pfr.pl/en/offer/foreign-expansion-fund.html 

Poland has concluded bilateral investment agreements with the following countries: Albania (1993); Argentina (1992); Australia (1992); Azerbaijan (1999); Bangladesh (1999); Belarus (1993); Canada (1990); Chile (2000); China (1989); Egypt (1998); India (1997 – terminated in March 2017;   a 15 year sunset clause applies); Indonesia (1993); Iran (2001; although Poland supports international sanctions regimes); Israel (1992); Jordan; Kazakhstan (1995); Kuwait (1993); Macedonia (1997); Malaysia (1994); Moldova (1995); Mongolia (1996); Morocco (1995); Norway (1990); Serbia and Montenegro (1997); Singapore (1993); Slovakia (1996 termination under consultations); South Korea (1990); Switzerland (1990); Thailand (1993); Tunisia (1993); Turkey (1994); Ukraine (1993); United Arab Emirates (1994); the United States (1994); Uruguay (1994); Uzbekistan (1995); Vietnam (1994).

In May 2020, all EU-member states, except Sweden and Finland, signed an agreement of termination of intra-BITs concluded by the member states. This will terminate Poland’s final BIT, which is with Slovakia.  Sweden and Finland will sign bilateral agreements with Poland terminating the “sunset clauses.” in their existing BITs.  During the notice period, as stipulated in most of the intra-EU BITs, all the obligations assumed by Poland remain in force.  Moreover, most of the intra-EU BITs contain sunset clauses that prolong the treaty protections.

The United States and Poland signed a Treaty Concerning Business and Economic Relations in 1990 that was amended and re-ratified in October 2004 due to Poland’s entrance into the EU.  A current list of all Poland’s BITs, including the documents themselves, can be found at: http://investmentpolicyhub.unctad.org/IIA/CountryBits/168#iiaInnerMenu 

Poland has signed double taxation treaties with over 80 countries.  The United States shares a double taxation treaty with Poland; an updated bilateral tax treaty was signed in February 2013 and is awaiting U.S. ratification.  The “Agreement between the United States of America and the Republic of Poland on Social Security” prevents double taxation, enables resumption of payments to suspended beneficiaries, and allows transfer of benefit eligibility.

The Polish tax system underwent significant changes in 2018, many of which became effective in 2019 or will become effective in 2020.

In 2019, the most important changes involved:

• An obligatory split payment mechanism;

• A “White List” of VAT taxpayers (along with their VAT numbers and bank account details) and tax-deductible costs;

• Relief from income taxes for bad debts;

• Major changes to the processes for “withholding tax” (postponed until 1 July 2020);

• A new matrix of VAT rates;

• The replacement of VAT returns with a new Uniform Control File (JPK) structure;

• An agreement on cooperation in tax matters;

• Incentives for registering intellectual property, a.k.a. “IP Box” (See Section 5 for more details); and

• New rules for accounting for tax loss.

More information can be found at http://taxsummaries.pwc.com/ID/Poland-Overview 

Some U.S. investors have expressed concern that Poland’s tax authorities do not always consistently uphold presumably binding tax decisions and sometimes seek retroactive payments after a reversal.  In 2019, tax offices carried out nearly one-fifth fewer audits than in 2018. Irregularities were found more often, but the amount recovered to the budget was lower.  This trend has been observed for a few years and shows that the tax system is being effectively sealed and taxpayers are more accurately selected for audits. The double taxation treaty does not cover stock options as part of remuneration packages, according to some investors.

Poland’s Plan for Responsible Development identifies eight industries for development and incentives: aviation, defense, automotive parts manufacturing, ship building, information technology, chemicals, furniture manufacturing and food processing.  More information about the plan can be found at  this link: https://www.gov.pl/web/fundusze-regiony/plan-na-rzecz-odpowiedzialnego-rozwoju .  Poland encourages energy sector development through its energy policy, outlined in the November 2018 published draft report “Polish Energy Policy to 2040” and updated and expanded in 2019.  While this strategy has not yet been finalized, the government has generally followed the directions of development in the policy.  The updated draft policy can be found at:  https://www.gov.pl/web/aktywa-panstwowe/zaktualizowany-projekt-polityki-energetycznej-polski-do-2040-r .  The draft policy foresees a primary role for fossil fuels until 2040 as well as strong growth in electricity production.  The government will continue to pursue developing nuclear energy and offshore wind power generation, as well as distributed generation, but may revise the time frame for reaching landmarks in these areas.  The draft policy remains skeptical of onshore wind.  Poland’s National Energy and Climate Plan for years 2021-2030 (NECP PL) has been developed in line with the EU Regulation on the Governance of the Energy and Climate Action and was submitted to the European Commission https://ec.europa.eu/energy/topics/energy-strategy/national-energy-climate-plans_en#the-process .

A government strategy aims for a commercial 5G network to be operational in all cities by 2025.

Investment Incentives

A company investing in Poland, either foreign or domestic, may receive assistance from the Polish government.  Foreign investors have the potential to access certain incentives such as:  income tax and real estate tax exemptions; investment grants of up to 50 percent of investment costs (70 percent for small and medium-sized enterprises); grants for research and development; grants for other activities such as environmental protection, training, logistics, or use of renewable energy sources.

Large priority-sector investments may qualify for the “Program for Supporting Investment of Considerable Importance for the Polish Economy for 2011-2030.”  The program, amended in October 2019, is one of the instruments enabling support for new investment projects, particularly relevant for the Polish economy.  Its main goal is to increase innovation and the competitiveness of the Polish economy.  Under the amended program, it is possible to co-finance large strategic investments as well as medium-sized innovative projects.  Projects that adapt modern technologies and provide for research and development activities are awarded.  The program is also conducive to establishing cooperation between the economic sector and academic centers.  The support is granted in the form of a subsidy, based on an agreement concluded between the Minister of Development and the investor.  The agreement regulates the conditions for the payment of subsidies and the investment implementation schedule.  Under the program, investment support may be granted in two categories: eligible costs for creating new jobs and investment costs in tangible and intangible assets.  Companies can learn more at: https://www.paih.gov.pl/why_poland/investment_incentives/programme_for_supporting_investments_of_major_importance_to_the_polish_economy_for_2011_-_2030 

https://www.gov.pl/web/rozwoj/program-wspierania-inwestycji-o-istotnym-znaczeniu-dla-gospodarki-polskiej-na-lata-2011-2030 

The Polish Investment Zone (PSI), the new system of tax incentives for investors which replaced the previous system of special economic zones (SEZ), was launched September 5, 2018.  Under the new law on the PSI, companies can apply for a corporate income tax (CIT) exemption for a new investment to be placed anywhere in Poland.  The CIT exemption is calculated based on the value of the investment multiplied by the percentage of public aid allocated for a given region based on its level of development (set percentage).  The CIT exemption is for 10-15 years, depending on the location of the investment.  Special treatment is available for investment in new business services and research and development (R&D).  A point system determines eligibility for the incentives.

The deadline for utilizing available tax credits from the previous SEZ system is the end of 2026 (extended from 2020).  The new regulations also contain important changes for entities already operating in SEZs, even if they do not plan new investment projects.  This includes the possibility of losing the right to tax incentives in the event of fraud or tax evasion.  Investors should consider carefully the potential benefits of the CIT exemption in assessing new investments or expansion of existing investments in Poland.

More information on government financial support:

https://www.paih.gov.pl/why_poland/investment_incentives 

The Polish government is seeking to increase Poland’s economic competitiveness by shifting toward a knowledge-based economy.  The government has targeted public and private sector investment in R&D to increase to 1.7 percent of GDP by 2020.  During the seven year period of 2014 to 2020, Poland will receive approximately USD 88.85 billion in EU Structural and Cohesion funds dedicated to R&D.  Businesses may also take advantage of the EU primary research funding program, Horizon 2020.

More information:

Ministry of Funds and Regional Development:

https://www.gov.pl/web/fundusze-regiony/otwarte-konkursy-nabory-dotacje-i-dofinansowania 

Ministry of Economic Development:

https://www.gov.pl/web/rozwoj/programy-i-projekty 

Ministry of Science and Higher Education:

http://www.nauka.gov.pl/horyzont-2020/ 

As of January 1, 2019, the Innovation Box, or IP Box, reduces the tax rate applicable to income derived from intellectual property rights to 5 percent.  Taxpayers applying the IP Box shall be entitled to benefit from the tax preference until a given right expires (in case of a patented invention – 20 years).  In order to benefit from the program, taxpayers will be obliged to separately account for the relevant income.  Foreign investors may take advantage of this benefit as long as the relevant  is registered in Poland.

The Polish government does not issue sovereign guarantees for FDI projects.  Co-financing may be possible for partnering on large FDI projects, such as the planned central airport project or a nuclear project.  For example, the state-owned Polish Development Fund (along with Singaporean and Australian partners) purchased 30 percent of the Gdansk Deepwater Container Terminal.

Foreign Trade Zones/Free Ports/Trade Facilitation

Foreign-owned firms have the same opportunities as Polish firms to benefit from foreign trade zones (FTZs), free ports, and special economic zones (since January 2019, they make up the Polish Investment Zone).  The 2004 Customs Law (with later amendments) regulates operation of FTZs in Poland.  The Minister of Finance establishes duty-free zones.  The Ministers designate the zone’s managing authorities, usually provincial governors, who issue operating permits to interested companies for a given zone.

Most activity in FTZs involves storage, packaging, and repackaging.  As of April 2019, there were seven FTZs: Gliwice, near Poland’s southern border; Terespol, near Poland’s border with Belarus; Mszczonow, near Warsaw; Warsaw’s Frederic Chopin International Airport; Szczecin; Swinoujscie; and Gdansk.  Duty-free shops are available only for travelers to non-EU countries.

There are bonded warehouses in:  Bydgoszcz-Szwederowo; Krakow-Balice; Wroclaw-Strachowice; Katowice-Pyrzowice; Gdansk-Trojmiasto; Lodz -Lublinek; Poznan-Lawica; Rzeszow-Jasionka, Warszawa-Modlin, Lublin, Szczecin-Goleniow; Radom-Sadkow, Olsztyn-Mazury.  Commercial companies can operate bonded warehouses.  Customs and storage facilities must operate pursuant to custom authorities’ permission.  Only legal persons established in the EU can receive authorization to operate a customs warehouse.

Performance and Data Localization Requirements

Poland has no policy of “forced localization” designed to force foreign investors to use domestic content in goods or technology.  Investment incentives apply equally to foreign and domestic firms.  Over 40 percent of firms in Special Economic Zones are Polish.  There is little data on localization requirements in Poland and there are no requirements for foreign information technology (IT) providers to turn over source code and/or provide access to surveillance (backdoors into hardware and software or turn over keys for encryption).  Exceptions exist in sectors where data are important for national security such as critical telecommunications infrastructure and in gambling.  The cross-border transfer rules in Poland are reasonable and follow international best practices, although some companies have criticized registration requirements as cumbersome.  In Poland, the Telecommunications Law (Act of 16 July 2004 – unified text, Journal of Laws 2018, item 1954) includes data retention provisions.  The data retention period is 12 months.

In the telecommunication sector, the Office of Electronic Communication (UKE) ensures telecommunication operators fulfill their obligations.  In radio and television, the National Broadcasting Council (KRRiT) acts as the regulator.  Polish regulations protect an individual’s personal data that are collected in Poland regardless of where the data are physically stored.  The Personal Data Protection Office (UODO) enforces personal data regulations.

Post is not aware of excessively onerous visa, residence permit or similar requirements inhibiting mobility of foreign investors and their employees, though investors regularly note long processing times due to understaffing at regional employment offices.  U.S. companies have reported difficulties obtaining work permits for their non-EU citizen employees.  Both regulatory challenges and administrative delays result in permit processing times of 3 to 12 months.  This affects the hiring of new employees as well as the transfer of existing employees from outside Poland.  U.S. companies have complained they are losing highly-qualified employees to other destinations, such as Germany, where labor markets are more accessible.  The problem is especially acute in southern Poland.

Generally, Poland does not mandate local employment, but there are a few regulations that place de facto restrictions e.g., a certain number of board members of insurance companies must speak Polish.

Polish law limits non-EU citizens to 49 percent ownership of a company’s capital shares in the air transport, radio and television broadcasting sectors as well as airport and seaport operations.  There are also legal limits on foreign ownership of farm and forest lands as outlined in Section 2 of this report under Limits on Foreign Control and Right to Private Ownership and Establishment.  Pursuant to the Broadcasting Law, a TV broadcasting company may only receive a license if the voting share of its foreign owners does not exceed 49 percent and if they hold permanent residence in Poland.  In the insurance sector, at least two members of management boards, including the chair, must speak Polish.

Poland’s Ministry of Funds and Regional Development supports implementation of responsible business conduct (RBC) and corporate social responsibility (CSR) programs.  The Ordinance of the Minister of Investment and Development of May 10, 2018, established working groups responsible for sustainable development and corporate social responsibility.  The chief function of the working groups is to create space for dialogue and exchange of experiences between the public administration, social partners, NGOs, and the academic environment in CSR/RBC.  Experts cooperate within 5 working groups: 1) Innovation for CSR and sustainable development; 2) Business and human rights; 3) Sustainable production and consumption; 4) Socially responsible administration, and 5) Socially responsible universities.  The greater team issues recommendations concerning implementation of the CSR/RBC policy, in particular the objectives of the Strategy for Responsible Development – a strategic national policy document.

In 2017, on the initiative of the then existent Ministry of Economic Development, a partnership was established for the translation into Polish of the Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector.  The parties involved included representatives of the business sector, industry organizations and NGOs.  The Polish version of the Guidelines was announced on June 29, 2018.  The document, available on the OECD NCP website , is a practical tool explaining how to implement the principles of due diligence, taking into account risks related to child labor, forced labor, water use, hazardous waste, etc.

In May 2017, the Council of Ministers adopted the National Action Plan (NAP) for the Implementation of the United Nations Guiding Principles on Business and Human Rights 2017-2020 (UNBHR-GPs).  In December 2018, the Midterm report from the implementation of National Action Plan for UN Business and Human Rights Guidelines was adopted by the Council of Ministers.  Here is the link to this document: https://www.gov.pl/documents/1149181/1150183/Raport_ percentC5 percent9Ar percentC3 percentB3dokresowy_z_realizacji_KPD.pdf/029a9586-2f1a-e655-4d18-00b6abe4a5a1 

An increasing number of Polish enterprises is implementing the principles of CSR/RBC in their activities.  One of these principles is to openly inform the public, employees, and local communities about the company’s activities by publishing non-financial reports.  Sharing experience in the field of integration of social and environmental factors in everyday business activities helps build credibility and transparency of the Polish market.

In Poland, provisions relating to responsible business conduct are contained within the Public Procurement law and are the result of transposition of very similar provisions contained in the EU directives.  For example, there is a provision for reserved contracts, where the contracting authority may limit competition for sheltered workshops and other economic operators whose activities include social and professional integration of people belonging to socially marginalized groups.

Independent organizations including NGOs, business and employee associations promote CSR in Poland.  The Responsible Business Forum (RBF), founded in 2000, is the oldest and largest NGO in Poland focusing on corporate social responsibility:  http://odpowiedzialnybiznes.pl/english/ .  CSR Watch Coalition Poland, part of the OECD Watch international network aims to advance respect for human rights in the context of business activity in Poland in line with the spirit of the UNBHR-GPs and the OECD Guidelines for Multinational Enterprises (MNEs): http://pihrb.org/koalicja/ 

Research shows that sustainability and CSR are increasingly translating into consumer choices in Poland.  According to SW Research for Stena Recycling, nearly 70 percent of Poles would like their favorite products to come from sustainable production and are willing to switch to more sustainably produced products.

Starting in 2018, approximately 300 Polish companies were required to publish a non-financial information statement alongside their business activity report.  This requirement is tied to the January 26, 2017, amendment of the Act on Accounting, which implements the directive 2014/95/UE into Polish law.  The rules of the act concern companies that fulfill two out of the three of the following criteria: the average annual number of employed persons numbers over 500; the company’s balance sheet totals over PLN 85 million (approx. USD 30 million), or gross earnings from the sale of commodities and products for the fiscal year amount to at least PLN 170 million (approx. USD 46 million).  Many companies voluntarily compile CSR activity reports based on international reporting standards.

In February 2020, the Responsible Business Forum presented its 2019 “Responsible Business in Poland. Good Practices” report, which is the most comprehensive CSR review in Poland, with a record number of responsible business activities featured.  In total, the 2019 report contains 1,696 practices reported by 214 companies.  Environmental practices are the most dynamically growing area – an increase of over 35% in relation to the previous report.  Examples of activities include activities related to reducing the consumption of plastic, a circular economy, conservation of biodiversity, environmental education, and counteracting the climate crisis.  Poland maintains a National Contact Point (NCP) for OECD Guidelines for Multinational Enterprises: https://www.gov.pl/web/fundusze-regiony/krajowy-punkt-kontaktowy-oecd 

The NCP promotes the OECD MNE Guidelines through seminars and workshops.  Investors can obtain information about the Guidelines and their implementation through Regional Investor Assistance Centers.

Information on the OECD NCP activities is under this link:

https://www.gov.pl/web/fundusze-regiony/oecd-ncp-activities 

Poland is not a member of the Extractive Industries Transparency Initiative (EITI) or the Voluntary Principles on Security and Human Rights.  The primary extractive industries in Poland are coal and copper mining.  Onshore, there is also hydrocarbon extraction, primarily conventional natural gas, with limited exploration for shale gas.  The Polish government exercises legal authority and receives revenues from the extraction of natural resources and from infrastructure related to extractive industries such as oil and gas pipelines through a concessions-granting system, and in most cases through shareholder rights in state-owned enterprises.  The Polish government has two revenue streams from natural resources: 1) from concession licenses; and 2) from corporate taxes on the concession holders.  License and tax requirements apply equally to both state-owned and private companies.  Natural resources are brought to market through market-based mechanisms by both state-owned enterprises and private companies.

Poland has laws, regulations, and penalties aimed at combating corruption of public officials and counteracting conflicts of interest.  Anti-corruption laws extend to family members of officials and to members of political parties who are members of parliament.  There are also anti-corruption laws regulating the finances of political parties.  According to a local NGO, an increasing number of companies are implementing voluntary internal codes of ethics.  In 2019, the Transparency International (TI) index of perceived public corruption ranked Poland as the 41^st (five places lower than in 2018 TI index) least corrupt among 180 countries/territories.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

The Polish Central Anti-Corruption Bureau (CBA) and national police investigate public corruption.  The Justice Ministry and the police are responsible for enforcing Poland’s anti-corruption criminal laws.  The Finance Ministry administers tax collection and is responsible for denying the tax deductibility of bribes.  Reports of alleged corruption most frequently appear in connection with government contracting and the issuance of a regulation or permit that benefits a particular company.  Allegations of corruption by customs and border guard officials, tax authorities, and local government officials show a decreasing trend.  If such corruption is proven, it is usually punished.

Overall, U.S. firms have found that maintaining policies of full compliance with the U.S. Foreign Corrupt Practices Act (FCPA) is effective in building a reputation for good corporate governance and that doing so is not an impediment to profitable operations in Poland.  Poland ratified the UN Anticorruption Convention in 2006 and the OECD Convention on Combating Bribery in 2000.  Polish law classifies the payment of a bribe to a foreign official as a criminal offense, the same as if it were a bribe to a Polish official.

At its March 2018 meeting, the OECD Working Group on Bribery urged Poland to make progress on carrying out key recommendations that remain unimplemented more than four years after its Phase 3 evaluation in June 2013.

For more information on the implementation of the OECD Anti-Bribery Convention in Poland, please visit:  http://www.oecd.org/daf/anti-bribery/poland-oecdanti-briberyconvention.htm 

Resources to Report Corruption

Centralne Biuro Antykorupcyjne (Central Anti-Corruption Bureau – CBA)
al. Ujazdowskie 9, 00-583 Warszawa
+48 800 808 808
kontakt@cba.gov.pl
www.cba.gov.pl ; link: Zglos Korupcje (report corruption)

The Public Integrity Program of the Batory Foundation, which served as a non-governmental watchdog organization, has been incorporated into a broader operational program (ForumIdei) run by the Foundation.  The Batory Foundation continues to monitor public corruption, carries out research into this area and publishes reports on various aspects of the government’s transparency.  Contact information for Batory Foundation is: batory@batory.org.pl; 22 536 02 20.

Poland is a politically stable country.  Constitutional transfers of power are orderly.  The last presidential elections took place in June 2020 and parliamentary elections took place in October 2019; observers considered both elections free and fair.  Prime Minister Morawiecki’s government was re-appointed in November 2019.  Local elections took place in October 2018.  Elections to the European Parliament took place in May 2019.  The next parliamentary elections are scheduled for the fall of 2023.  There have been no confirmed incidents of politically motivated violence toward foreign investment projects in recent years.  Poland has neither insurgent groups nor belligerent neighbors.  The Overseas Private Investment Corporation (OPIC) provides political risk insurance for Poland but it is not frequently used, as competitive private sector financing and insurance are readily available.

* In Poland, the National Bank of Poland (NBP) collects data on FDI.  An annual FDI report and data are published at the end of the following year.  GDP data are published by the Central Statistical Office.  Final annual data are available at the end of May of the following year.

Results of table are consistent with the data of the National Bank of Poland (NBP).  NBP publishes FDI data in October/November.
A number of foreign countries register businesses in the Netherlands, Luxemburg and Cyprus, hence results for these countries include investments from other countries/economies.

Note: NBP publishes only total amounts of portfolio investment assets.
Results of the table are consistent with data from the National Bank of Poland (NBP). NBP publishes FDI data in October/November.
A number of foreign countries register businesses in the Netherlands, Luxemburg and Cyprus hence results for these countries include investments from other countries/economies.