In the thirty years since Poland discarded communism and the fifteen years since it joined the European Union (EU), Poland’s investment climate has continued to grow in attractiveness to foreign investors, including U.S. investors. Poland’s economy has experienced a long period of uninterrupted economic expansion since 1992. In 2018, Poland’s economy again gained momentum with approximately 5 percent growth as consumption continued to increase and spending of EU funds accelerated public investment. Most economists, however, predict a slowdown in 2019 to around 4 percent gross domestic product (GDP) growth. Poland moved from middle to high-income status according to the FTSE Russell’s annual classification report. However, some proposed economic legislation continued to dampen optimism in some sectors (e.g. retail, media, energy, digital services), and investors have pointed to lower predictability and the outsized role of state-owned and state-controlled companies in the Polish economy as an impediment to long-term balanced growth.
Prospects for future growth, driven by domestic demand and inflows of EU funds from the 2014-2020 financial framework, will continue to attract investors seeking access to Poland’s dynamic market of over 38 million people, and to the broader EU market of over 500 million. Poland’s well-diversified economy reduces its vulnerability to external shocks, although it depends heavily on the EU as an export market. Foreign investors also cite Poland’s well-educated work force as a major reason to invest, as well as its proximity to major markets such as Germany. U.S. firms represent one of the largest groups of foreign investors in Poland. The volume of U.S. investment in Poland is estimated at around USD 6 billion by the national bank of Poland in 2017, although including indirect investment flows through subsidiaries may place it as high as USD 43 billion, according to the American Chamber of Commerce in Poland. Historically foreign direct investment (FDI) was largest in the automotive and food processing industries, followed by machinery and other metal products and petrochemicals. “Shared office” services such as accounting, legal, and information technology services, including research and development (R&D), are Poland’s fastest-growing sectors for foreign investment. The government seeks to promote domestic production and technology transfer opportunities in awarding military tenders. There are also some investment and export opportunities in the energy sector—both immediate (natural gas), and longer term (nuclear, energy grid upgrades, and offshore wind)—as Poland seeks to diversify its energy mix and reduce air pollution.
Defense is another promising sector for U.S. exports. The Polish government is actively modernizing its military inventory, presenting good opportunities for U.S. defense industry. In 2018, it signed its largest-ever defense contract when committing to purchase the PATRIOT missile defense system, and in 2019 it signed a contract to buy the High Mobility Artillery Rocket System (HIMARS). In February 2019, the Defense Ministry announced its updated technical modernization plan listing its top programmatic priorities, with defense modernization budgets forecasted to increase from approximately USD 3.3 billion in 2019 to approximately USD 7.75 billion in 2025. Information technology and cybersecurity along with infrastructure also show promise, as Poland’s municipalities focus on smart city networks. A USD 10 billion central airport project may present opportunities for U.S. companies in project management, consulting, communications, and construction. The government seeks to expand the economy by supporting high-tech investments, increasing productivity and foreign trade, and supporting entrepreneurship, scientific research, and innovation through the use of domestic and EU funding.
In 2018, Poland saw significant increases in wholesale electricity prices due largely to an increase in the price of coal and EU emissions permits. The government has proposed a new law to protect household consumers from rising electricity prices, but the bill was at odds with the European Commission (EC) for the lack of notification of what amounted to state aid measures.
Some organizations, notably private business associations and labor unions, have raised concerns that policy changes have been introduced quickly and without broad consultation, increasing uncertainty about the stability and predictability of Poland’s business environment. Some examples include a one-time bank holiday (to celebrate 100 years of Poland regaining independence) with less than a month warning, and a major tax overhaul passed after firms had already prepared budgets for the coming year. Previous proposals to introduce legislation on media de-concentration raised concern among foreign investors in the sector; however, these proposals seem to be stalled for the time being.
The Polish tax system underwent many changes over the last three years with the aim of increasing budget revenues, including more effective tax auditing and collection. The November 2018 tax bill included a number of changes important for foreign investors, such as penalties for aggressive tax planning, changes to the withholding tax, incentives for R&D, and an exit tax on corporations and individuals.
As the largest recipient of EU funds (which contribute an estimated 1 percentage point to Poland’s GDP growth per year), any significant decrease in EU cohesion spending would have a large negative impact on Poland’s economy. Draft EU budgets foresee a 24 percent decrease in Poland’s Cohesion funds in the next cycle. Also, observers are closely watching the European Commission’s proceedings under Article 7 of the Lisbon Treaty, initiated in December 2017, regarding rule of law and judicial reforms. These include the introduction of an extraordinary appeal mechanism in the enacted Supreme Court Law, which could potentially affect economic interests, in that final judgments issued since 1997 can now be challenged and overturned in whole or in part, including some long-standing judgments on which economic actors have relied.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||60/100
36 of 180
|World Bank’s Doing Business Report||2019||33 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2018||41.70||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, stock positions)||2017||USD 12,604||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2017||USD 12,730||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
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 2017, according to IMF and National Bank of Poland data, Poland attracted around USD 239 billion (cumulative) in foreign direct investment (FDI), principally from Western Europe and the United States. In 2017, reinvested profits 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 may operate an average of one Sunday a month, and in 2020 a total ban will be in effect (with the exception of seven Sundays). Polish authorities have publicly favored introducing a digital services tax. Since no draft has been released, the details of such a tax are unknown, but it would affect mainly foreign digital companies.
There is a variety of Polish agencies involved in investment promotion:
- The Ministry of Entrepreneurship and Technology 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 Polish Chamber of Commerce in the United States (POLCHAM USA), located in Washington, D.C., promotes the strengthening of economic and trade relationships between the United States and Poland. It is an independent, non-profit organization. https://polchamusa.org/
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 January 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.
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 Entrepreneurship and Technology 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 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 that can be amended at any time, but is updated at least once a year, usually in January. 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 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 25,575,542) 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 Polish government has drafted an amendment to extend the list of state companies with restrictions on selling shares and to increase the powers of the Prime Minister in the area of state property management. The companies slated for additional restrictions are pipeline operator PERN, postal service Poczta Polska, aviation group PGL, railway system PKP and the Special Purpose Vehicle in charge of building Poland’s planned central airport. The amendment also sanctions possible mergers of such entities.
Other Investment Policy Reviews
The 2018 OECD Economic Survey of Poland can be found here:
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
The Polish government has continued to implement reforms aimed at improving the investment climate with a special focus on the SME sector and innovations. In 2016-18, 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.
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 Entrepreneurship and Technology:
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 2019 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 PSA will enter into force in March 2020.
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 2020, 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 that a business will need to file with 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
- Ministry of Finance
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
The Polish Agency for Investment and Trade (PAIH) under the umbrella of the Polish Development Fund, 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 Entrepreneurship and Technology have significantly reformed Poland’s economic diplomacy. The Polish Information and Foreign Investment Agency (PAIiIZ) was reformed in February 2017 to be 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 offices offer a range of services to include: finding potential partners for Polish manufacturers/exporters; providing information on business opportunities; assisting in the organization of business trips and study tours; and assisting in initiating first contacts between interested local importers, distributors or wholesalers and Polish manufacturers or service providers. The Agency implements pro-export projects such as the Polish Tech Bridges dedicated to expansion of innovative Polish SMEs. PAIH has a number of investment/export-oriented government programs specially developed to promote Polish companies abroad such as Go China, Go India, Go Africa, Go ASEAN and Go Arctic. Vietnam and Iran are also priority investment and export destinations for Poland, though trade with Iran has dropped off since the re-imposition of U.S. sanctions. 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. . PAIH is responsible for the promotion of Poland at the EXPO Dubai 2020.
The national development bank BGK (Bank Gospodarstwa Krajowego) offers support for goods with a Polish component and depending on the credit can be a minimum of 30-40 percent of net contract revenue. BGK offers a number of short-term credit instruments like documentary letters of credit for post-financing. BGK offers direct credit for importers to purchase investment goods and services. The Export Credit Insurance Corporation KUKE insures the BGK-issued credit, including for companies from countries with higher trade risk.
2. Bilateral Investment Agreements and Taxation Treaties
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).
As of March 2019, Poland has terminated or is in the process of termination of all bilateral BITs with EU member states except with Slovakia (consultations on the termination process are in progress).
The United States and Poland signed a Treaty Concerning Business and Economic Relations in 1990 that was amended and 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 Tax 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 (“Totalization Treaty”) prevents double taxation, enables resumption of payments to suspended beneficiaries, and allows transfer of benefit eligibility.
In 2018, the Polish tax system again underwent significant changes. The most important changes involved:
- rules for mandatory disclosure;
- major changes to processes for “withholding tax”;
- introduction of a nine percent CIT for some companies;
- incentives for registering intellectual property, a.k.a. “IP Box” (See Section 5 for more details);
- new rules for accounting for tax loss;
- additional cost on accounting of hypothetical interest;
- an exit tax on both corporations and individuals; and
- additional liabilities for tax evasion.
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. Investors have reported an increase of inspections and more aggressive tax auditing, including on transfer pricing. The double taxation treaty does not cover stock options as part of remuneration packages, according to some investors.
4. Industrial Policies
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 full text of the plan can be found at this link: https://www.miir.gov.pl/strony/strategia-na-rzecz-odpowiedzialnego-rozwoju/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.” While the strategy has not yet been finalized, the government has generally followed the directions of development in the policy. The draft policy can be found at: http://www.me.gov.pl/Energetyka/Polityka+energetyczna . The draft policy foresees a primary role for fossil fuels until 2040 as well as strong growth in electricity production. The construction of the first nuclear plant is planned by 2033, until then coal is to remain the main fuel for electricity generation. The draft policy foresees a large potential for the development of offshore wind power generation, but the policy remains skeptical of onshore wind. . Poland plans to adopt a National Energy and Climate Plan by the end of 2019, in line with the EU Regulation on the Governance of the Energy and Climate Action.
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 2011-2020” 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: https://www.miir.gov.pl/strony/zadania/wsparcie-przedsiebiorczosci/program-wspierania-inwestycji-o-istotnym-znaczeniu-dla-gospodarki-polskiej-na-lata-2011-2023/
The Polish Investment Zone (PSI), the new system of tax incentives for investors replacing the previous system of special economic zones (SEZ), was launched September 5, 2018. Under the new law on the “Polish Investment Zone,” 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 the public aid amount 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. 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 (previously 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:
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 research and development (R&D) to increase to 1.7 percent of GDP by 2020. During 2014 – 20 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.
- Ministry of Investment and Economic Development:
- Ministry of Entrepreneurship and Technology:
- Ministry of Science and Higher Education:
The Second Law on Innovation (commonly referred to as the “Big Law on Innovation”) entered into force on January 1, 2018. Some of its provisions include:
- Tax credits for R&D raising the level of tax benefits up to 100 percent for both personal costs and for SMEs and large companies (raised from 50 percent in 2017),
- The extension of the catalog of eligible costs of non-durable materials,
- Clarification of labor costs and expert opinions as well as consulting services,
- Extension of the partial exemption from double taxation of limited partnerships and joint-stock limited companies (for the period of 2016-2023) This is an important incentive for potential investors because it gives startups better access to financing from venture capital funds,
- Enabling the use of concessions by companies also benefiting from incentives in Special Economic Zones,
- A tax credit of 150 percent for enterprises with Research and Development Center (RDC) status. The enterprises with this status can also benefit from additional eligible deductions (depreciation of buildings, places and expert reports made by entities other than research units – up to 10 percent of revenues).
As of January 1, 2019, the Innovation Box or IP Box reduces the tax rate applicable to an income derived from IP 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 IP 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 possible nuclear project. For example, the state-owned Polish Development Fund (along with Singaporean and Australian partners) plans to purchase 30 percent of the soon-to-be-expanded 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. The 2004 Customs Law regulates operation of FTZs in Poland. The Minister of Finance and the Minister of Investment and Development establish 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 March 2018, 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 fourteen bonded warehouses: Bydgoszcz-Biale Blota; Krakow-Balice; Wroclaw-Strachowice; Katowice-Pyrzowice; Gdansk-Trojmiasto; Lodz; Braniewo; Poznan-Lawica; Rzeszow-Jasionka, Warszawa-Modlin, Lublin, Szczecin-Goleniow; Radom, 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, 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 regulation.
Post is not aware of excessively onerous visa, residence, work 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. 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.
5. Protection of Property Rights
Poland recognizes and enforces secured interests in property, movable and real. The concept of a mortgage exists in Poland, and there is a recognized system of recording such secured interests. There are two types of publicly available land registers in Poland: the land and mortgage register (ksiegi wieczyste), the purpose of which is to register titles to land and encumbrances thereon, and the land and buildings register (ewidencja gruntow i budynkow), whose function is more technical as it contains information concerning physical features of the land, class of land and its use. Generally, real estate in Poland is registered and legal title can be identified on the basis of entries in the land and mortgage registers which are maintained by relevant district courts. Each register is accessible to the public and excerpts are available on application, subject to a nominal fee. The registers are available online.
Poland has a non-discriminatory legal system accessible to foreign investors that protects and facilitates acquisition and disposition of all property rights, including land, buildings, and mortgages. However, foreigners (both individuals and entities) must obtain a permit to acquire property (See Section 1 Limits on Foreign Control and Right to Private Ownership and Establishment). Many investors, foreign and domestic, complain the judicial system is slow in adjudicating property rights cases. Under the Polish Civil Code, a contract to buy real property must be made in the form of a notary deed. Foreign companies and individuals may lease real property in Poland without having to obtain a permit.
Widespread nationalization of property during and after World War II has complicated the ability to establish clear title to land in Poland, especially in major municipalities. While the Polish government has an administrative system for reviewing claims for the restitution of communal property, former individual property owners must file and pursue claims in the Polish court system in order to receive restitution. There is no general statute of limitations regarding the filing or litigation of private property restitution claims, but there are exceptions for specific cases. For example, in cases involving the communist-era nationalization of Warsaw under the Bierut Decree, there were claims deadlines that have now passed, and under current law, those who did not meet the deadlines would no longer be able to make a claim for either restitution or compensation. During 2017, Warsaw city authorities began implementing a 2015 law that critics stated might extinguish potential claims by private individuals of public properties seized during the Second World War or the communist era if no one comes forward to pursue a restitution claim within six months after publication of the affected property. Any potential claimants who come forward will have an additional three months to establish their claim after the initial six-month period. The city began publishing lists in February 2017, and is expected to continue to publish similar property cases going forward. The city’s website contains further information on these cases and the process to pursue a claim: http://bip.warszawa.pl/Menu_podmiotowe/biura_urzedu/SD/ogloszenia/default.htm?page=1 .
It is sometimes difficult to establish clear title to properties. There are no comprehensive estimates of land without clear title in Poland.
On October 11, 2017, the Ministry of Justice announced comprehensive private property restitution draft legislation that would block any physical return of former properties, provide compensation of 20-25 percent of the property’s value at the time of taking in cash or government bonds, and set a one-year claims filing period. The legislation drew intense media coverage and public scrutiny, and critics argued the legislation would exclude potential foreign claimants, many of whom are Holocaust survivors or their heirs. As of March 2019, the Justice Ministry had not submitted the draft legislation to the Council of Ministers (cabinet) for review and approval.
The agricultural land law bans sale of Agricultural Property Agency (APA) (state-owned) farmland for five years. The impact of the five-year ban is not significant, as at present more than 90 percent of all agricultural land is already privately owned. State-owned farm land will be available only under long-term lease for farmers who want to enlarge their farms, to a maximum of 300 hectares (new and old land combined size). Foreigners can (and do) lease agricultural land. The agricultural land law also imposed restrictions on the sale of privately owned farm land, and gives the APA preemptive right to purchase in case of land sales by a private owner. Official statistics on the impact of the new law on prices and turnover of land is not available. Recently, the government announced plans to loosen these regulations. The Law on Forest Land similarly prevents Polish and foreign investors from purchasing privately-held forests and gives state-owned forestry agency (Lasy Panstwowe) preemptive right to buy privately-held forests, though the government may be considering relaxing some restrictions.
Intellectual Property Rights
The Polish intellectual property rights (IPR) law is stricter than European Commission directives require. Enforcement is good and improving across all IP types. Physical piracy (e.g., optical discs) is not a problem in Poland. However, online piracy continues to be widespread, despite progress in enforcement, and a popular cyberlocker platform in Poland is listed on the 2018 Notorious Markets List. Poland does not appear in the USTR’s Special 301 Report.
Polish law requires a rights holder to start the prosecution process. In Poland, authors’ and creators’ organizations and associations track violations and present motions to prosecutors. Rights holders express concern that penalties for digital IPR infringement are not high enough to deter violators. In an effort to address these concerns, the Polish government established a national IPR strategy for 2015-17.
A new act passed on June 15, 2018, which implements EU Directive 2014/26/EU on the collective management of copyright and related rights and the granting of multi-territorial licenses regarding rights to music for online use on the internal market. The purpose of the bill is comprehensive regulation of the activities of collective management organizations in Poland. It will replace the existing provisions in this area, ex. chapters 12 and 12 (1) of the Copyright and Related Rights Act. Additional harmonization with existing regulations, such as the Act on the Protection of Databases and the Act on Copyright and Related Rights, is to be carried out in 2019. On March 11, 2019, the Polish President signed amendments to the Act on Industrial Property Law (“IPL”). Many adjustments resulted from the implementation of EU Trademark Directive 2015/2436. The amendments entered into force on March 12, 2019. IPL introduced, inter alia, the abandonment of the graphical representation requirement, introduction of a new mechanism for trademark protection renewals, extended licensee’s rights, as well as remedies against counterfeit goods in transit and against infringing preparatory acts. The changes provide new tools to fight against infringements of trademark protection rights.
New tax incentives for intellectual property known collectively as “IP Box” or “Innovation Box” were included in the November 2018 tax amendment. See Section 4 Investment Incentives.
Polish customs tracks seizures of counterfeit goods but failed to provide this information for the reporting period.
General information on copyright in Poland: http://www.copyright.gov.pl/pages/main-page/copyright-in-poland/general-information.php
Polish Patent Office: http://www.uprp.pl/o-urzedzie/Lead03,14,56,1,index,pl,text/
Ministry of Digitalization: https://www.gov.pl/cyfryzacja/co-robimy
For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/details.jsp?country_code=PL
6. Financial Sector
Capital Markets and Portfolio Investment
The Polish regulatory system is effective in encouraging and facilitating portfolio investment. Both foreign and domestic investors may place funds in demand and time deposits, stocks, bonds, futures, and derivatives. Poland’s equity markets facilitate the free flow of financial resources. Poland’s stock market is the largest and most developed in Central Europe. In September 2018, it was reclassified as developed market status by FTSE Russell’s country classification report. The stock market’s capitalization amounts to around 35 percent of GDP, but management want to increase it increase it to 50 percent in 2023. Although the Warsaw Stock Exchange (WSE) is itself a publicly traded company with shares listed on its own exchange after its partial privatization in 2010, the state retains a significant percentage of shares which allows it to control the company. WSE has become a hub for foreign institutional investors targeting equity investments in the region. In addition to the equity market, Poland has a wholesale market dedicated to the trading of treasury bills and bonds (Treasury BondSpot Poland). This treasury market is an integral part of the Primary Dealers System organized by the Finance Ministry and part of the pan-European bond platform. Wholesale treasury bonds and bills denominated in PLN and some securities denominated in Euros are traded on the Treasury BondSpot market. Non-government bonds are traded on Catalyst, a WSE managed platform. The capital market is a source of funding for Polish companies. While securities markets continue to play a subordinate role to banks in the provision of finance, the need for medium-term financial support for the modernization of the electricity and gas sectors is likely to lead to an increase in the importance of the corporate bond market. The Polish government acknowledges the capital market’s role in the economy in its development plan. Foreigners may invest in listed Polish shares, but they are subject to some restrictions in buying large packages of shares. Liquidity remains tight on the exchange.
The Capital Markets Development published in 2018 identifies 20 key barriers and offers 60 solutions. Some key challenges include low levels of savings and investment, insufficient efficiency, transparency and liquidity of many market segments, and lack of taxation incentives for issuers and investors. The primary aim of the strategy is to improve access of Polish enterprises to financing. The strategy focuses on strengthening trust in the market, improving the protection of individual investors, the stabilization of the regulatory and supervisory environment and the use of competitive new technologies. The strategy will not become a law, however, it will set the direction for further regulatory proposals. Poland is one of the most rigorously supervised capital markets in Europe according to the European Commission.
The Employee Capital Plans program (PPK)—which is designed to increase household saving to augment individual incomes in retirement—could provide a boost to Poland’s capital markets and reduce dependence on foreign saving as a source for investment financing.
High-risk venture capital funds are becoming an increasingly important segment of the capital market. According to Bain and Company/CEE, PE/VC investments in Poland in 2018 dropped to EUR 2.0 billion from EUR 2.2 billion in 2017. The market is still shallow and one major transaction may affect the value of the market in a given year. The funds remain active and Poland is a leader in this respect in Central and Eastern Europe.
Poland provides full IMF Article VIII convertibility for current transactions. Banks can and do lend to foreign and domestic companies. Companies can and do borrow abroad and issue commercial paper, but the market is less robust than in Western European countries or the United States. The Act on Investment Funds allows for open-end, closed-end, and mixed investment funds, and the development of securitization instruments in Poland. In general, no special restrictions apply to foreign investors purchasing Polish securities.
Credit allocation is on market terms. The government maintains some programs offering below-market rate loans to certain domestic groups, such as farmers and homeowners. Foreign investors and domestic investors have equal access to Polish financial markets. Private Polish investment is usually financed from retained earnings and credits, while foreign investors utilize funds obtained outside of Poland as well as retained earnings. Polish firms raise capital in Poland and abroad. Inflation remained below the National Bank of Poland’s medium-term target rate of 2.5 percent in 2018. The Monetary Policy Council maintains a dovish tone, saying they expect to raise raises in late 2020 at the earliest.
Confidence in the banking regulator was shaken in 2018 by allegations of corruption that led to the resignation of the head of the Polish Financial Supervisory Authority (KNF). Recent changes in the governance structure of the KNF are aimed at increasing cross governmental coordination and a better-targeted response in case of financial shocks, while achieving greater institutional effectiveness through enhanced resource allocation. A legislative amendment improved funding of the KNF by granting greater budgetary independence. It also enlarged the composition of the Authority, increasing the number of government representatives, but only four out of nine voting members are designated by the government. Additionally, KNF’s supplementary powers increased, allowing it to authorize the swift acquisition of a failing or likely to fail lender by a stronger financial institution.
Money and Banking System
The banking sector plays a dominant role in the financial system, accounting for about 70 percent of financial sector assets. The sector is predominantly privately owned, with the state controlling about one third of the banking sector and the biggest insurance company. Poland had 34 locally incorporated commercial banks at the end of August 2018, according to the KNF. The number of locally-incorporated banks has been declining over the last five years. Poland’s 550 cooperative banks play a secondary role in the financial system, but are widespread. The state owns eight banks (up from five in February 2016). Over the last few years, growing capital requirements, lower prospects for profit generation and uncertainty about legislation addressing foreign currency mortgages has pushed banks towards mergers and acquisitions. The KNF welcomes this consolidation process, seeing is as “natural” way to create an efficient banking sector.
The Polish National Bank (NBP) is Poland’s central bank. At the end of 2018, the banking sector was overall well capitalized and solid. Poland’s banking sector meets European Banking Authority regulatory requirements. The share of non-performing loans is close to the EU average and recently has been falling. Between January-June 2018 non-performing loans were seven percent of portfolios. According to S&P Rating Agency, Poland’s central bank is willing and able to provide liquidity support to the banking sector, in local and foreign currencies, if needed.
The banking sector is liquid, profitable and major banks are well capitalized. This was confirmed by a stress test undertaken by the European Banking Authority in November 2018. Two Polish banks were among the most stress-resistant of all 50 banks participating in the test. Profitability increased slightly in 2018 as a result of rapid GDP growth, a pickup in investments and low provisioning costs, and remained at a reasonable level (ROE at 7.5 percent after nine months of 2018). Nevertheless, profits remain under pressure due to low interest rates, the unsolved issue of conversion of Swiss Francs mortgage portfolios into PLN, and a special levy on financial institutions (0.44 percent of the value of assets excluding equity and Polish sovereign bonds).
In general, supervision and risk management contained excessive risk-taking. Since 2015, the Polish government established an active campaign aiming to increase the market share of national financial institutions. In 2017, for the first time Polish investors’ share in the banking sector has reached over 50 percent of the sector’s total assets, and exceeded the foreign share in the sector. The State controls about 40 percent of total assets, including the two largest banks in Poland. These two lenders control about one third of the market. Rating agencies warn that an increasing state share in the banking sector might impact competitiveness and profits in the whole financial sector. There is concern that lending decisions at state-owned banks could come under political pressure, especially after allegations of questionable loans being issued by a newly state-owned bank in 2018. Nevertheless, Poland’s strong fundamentals and the size of its internal market mean that many foreign banks will want to retain their positions.
The financial regulator has restricted the availability of loans in Euros or Swiss Francs in order to minimize the banking system’s exposure to exchange risk resulting from fluctuations. Only individuals who earn salaries denominated in these currencies continue to enjoy easy access to loans in foreign currencies
The national bank (NBP) did not provide information on correspondent banking relationships in 2018. In 2017, NBP had relationships with 25 banks commercial and central banks, and was not concerned about losing any of them.
Foreign Exchange and Remittances
Poland is not a member of the Eurozone; its currency is the Polish Zloty. The current government has shown little desire to adopt the euro (EUR). The Polish Zloty (PLN) is a floating currency; it has largely tracked the EUR at approximately PLN 4.2-4.3 to EUR 1 in recent years and PLN 3.77 to UDS 1. Foreign exchange is available through commercial banks and exchange offices. Payments and remittances in convertible currency may be made and received through a bank authorized to engage in foreign exchange transactions, and most banks have authorization. Foreign investors have not complained of significant difficulties or delays in remitting investment returns such as dividends, return of capital, interest and principal on private foreign debt, lease payments, royalties, or management fees. Foreign currencies can freely be used for settling accounts.
Poland provides full IMF Article VIII convertibility for current transactions. Polish Foreign Exchange Law, as amended, fully conforms to OECD Codes of Liberalization of Capital Movements and Current Invisible Operations. In general, foreign exchange transactions with the EU, OECD, and European Economic Area (EEA) are accorded equal treatment and are not restricted.
Except in limited cases which require a permit, foreigners may convert or transfer currency to make payments abroad for goods or services and may transfer abroad their shares of after-tax profit from operations in Poland. In general, foreign investors may freely withdraw their capital from Poland, however, the November 2018 tax bill included an exit tax (see Section 2). Full repatriation of profits and dividend payments is allowed without obtaining a permit. However, a Polish company (including a Polish subsidiary of a foreign company) must pay withholding taxes to Polish tax authorities on distributable dividends unless a double taxation treaty is in effect, which is the case for the United States. Changes to the withholding tax in the 2018 tax bill increased the bureaucratic burden for some foreign investors (see Section 2). The United States and Poland signed an updated bilateral tax treaty in February 2013 that the United States has not yet ratified. As a rule, a company headquartered outside of Poland is subject to corporate income tax on income earned in Poland, under the same rules as Polish companies.
Foreign exchange (FX) regulations require non-bank entities dealing in foreign exchange or acting as a currency exchange bureau to submit reports electronically to the National Bank of Poland (NBP) at http://sprawozdawczosc.nbp.pl . An exporter may open foreign exchange accounts in the currency the exporter chooses.
Poland does not prohibit remittance through legal parallel markets utilizing convertible negotiable instruments (such as dollar-denominated Polish bonds in lieu of immediate payment in dollars). As a practical matter, such payment methods are rarely, if ever, used.
Sovereign Wealth Funds
The Polish government does not maintain a Sovereign Wealth Fund. However, the government established the Polish Development Fund (PFR), an umbrella organization pooling resources of several governmental agencies and departments, including EU funds. A strategy for the Fund was adopted in September 2016, and it was registered in February 2017 at which point the Ministry of Economic Development took supervision over the Fund (this ministry was re-named the Investment and Development Ministry in 2018). PFR supports the implementation of the Responsible Development Strategy.
The PFR operates as a group of state-owned banks and insurers, investment bodies, and promotion agencies. The budget of PFR group initially reached PLN 14 billion, which managers estimate is sufficient to raise capital worth PLN 90-100 billion. Various actors within the organization can invest through acquisition of shares, through direct financing, seed funding, and co-financing venture capital. Depending on the instruments, PFR expects different rates of return. PFR intends to launch a new fund of funds in 2018 with the aim of financing capital investments valued at PLN 50-100 million (USD 14.7 – 29.4 million). In March 2019, the Entrepreneurship Ministry presented a draft law, which aimed at formalizing and improving the cooperation of institutions that make up the PFR Group, strengthen the position of the Fund’s president and secure additional funding from the Finance Ministry. The group will have one common strategy. An almost four-fold increase in the share capital will enable PFR to significantly increase the scale of investment in innovation, infrastructure and help Polish companies expand into foreign markets. While supporting overseas expansion of Polish companies, the fund’s mission is domestic. Until now, the group’s operations had been based on the strategy of responsible development, not legal regulations.
7. State-Owned Enterprises
State owned enterprises (SOEs) exist mainly in the chemical, defense, energy, transport, and financial sectors. The government intends to keep majority share ownership and/or state-control of economically and strategically important firms, and is expanding the role of the state in the economy. Some U.S. investors have recently expressed concern that the government favors SOEs by offering loans from the national budget as a capital injection and unfairly favoring SOEs in investment disputes. Since Poland’s EU accession, government activity favoring state-owned firms has received careful scrutiny from Brussels. Since the Law and Justice government came to power in 2015, there has been a considerable increase in turnover in managerial positions of state-owned companies (although this has also occurred in previously changes of government, but to a lesser degree) and increased focus on building national champions in strategic industries to be able to compete internationally. SOEs are governed by a board of directors and most pay an annual dividend to the government, as well as prepare and disclose annual reports.
Companies classified as “important for the economy” are under the supervision of the Council of Ministers. The list of such companies is under this link: https://bip.kprm.gov.pl/kpr/bip-kancelarii-prezesa/podmioty-nadzorowane-pr/4884,lead.html
Among them are companies of “strategic importance” whose shares cannot be sold, including: Grupa Azoty SA, Grupa LOTOS SA, KGHM Polska Miedz SA, Energa SA.
The government sees SOEs as drivers and leaders of its innovation policy agenda; in the last few years state ownership in the banking and energy sectors was significantly increased. For example, several energy SOEs established a company to develop electro mobility. So far the SOEs’ performance remained overall strong and broadly similar to that of private companies. However, international evidence suggests that a dominant role of SOEs can pose fiscal, financial, and macro-stability risks.
As of March 2019, there were over 370 companies in partnership with state authorities. Among them there are companies under bankruptcy, in liquidation and companies where the State Treasury held residual shares. Here is a link to the list of companies, including information under the control of which ministry they fall: http://nadzor.kprm.gov.pl/spolki-z-udzialem-skarbu-panstwa
The value of stock owned by the state in publicly-held companies, many of which are the biggest companies in their sectors, was worth over USD 30 billion (PLN 113 billion) in 2017. The same standards are generally applied to private and public companies with respect to access to markets, credit, and other business operations such as licenses and supplies. Government officials occasionally exercise discretionary authority to assist SOEs. In general, SOEs are expected to pay their own way, finance their operations, and fund further expansion through profits generated from their own operations.
On November 27 2018, the Council of Ministers adopted a bill on the management of state-owned property. It introduced new procedures and modifies s some provisions related to the reform of state-owned property management system, which was introduced on January 1, 2017. The list of companies in which shares and rights from Treasury shares are not subject to sale will be expanded to include: PERN SA, Poczta Polska SA, Polska Grupa Lotnicza SA, and Polskie Koleje Panstwowe SA. In order to provide a source of financing for the tasks bestowed to the PM by the bill’s provisions, including the purchase and subscription of shares in companies, the draft provides for the creation of a new public special purpose fund – the Capital Investment Fund managed by the PM’s office and financed by dividends from state controlled companies.
OECD Guidelines on Corporate Governance of SOEs
In Poland, the same rules apply to SOEs and publicly listed companies unless statutes provide otherwise. The state exercises its influence through its rights as a shareholder in proportion to the number of voting shares it holds (or through shareholder proxies). In some cases, a SOE is afforded special rights as specified in the company’s articles, and in compliance with Polish and EU laws. In some non-strategic companies, the state exercises special rights as a result of its majority ownership but not as a result of any specific strategic interest. Despite some of these specific rights, the state’s aim is to create long-term value for shareholders of its listed companies by adhering to the OECD SOE Guidelines. State representatives who sit on supervisory boards must comply with the Commercial Companies Code and are expected to act in the best interests of the company and its shareholders. In 2018, the European Commission noted that “Polska Fundacja Narodowa” (an organization established to promote Polish culture worldwide and funded by Polish SOEs funded) was involved in the organization and financing of the campaign supporting the controversial judiciary changes by the government. The commission stated this was broadly against OECD recommendations on SOE involvement in financing political activities.
SOE employees can designate two fifths of the Supervisory Board’s members. In addition, according to Poland’s privatization law, in wholly state-owned enterprises with more than 500 employees, the employees are allowed to elect one member of the Management Board. SOEs are subject to a series of additional disclosure requirements above those set forth in the Company Law. The supervising ministry prepares specific guidelines on annual financial reporting to explain and clarify these requirements. SOEs must prepare detailed reports on management board activity, plus a report on previous financial year activity, and a report on the result of the examination of financial reports. In practice, detailed reporting data for non-listed SOEs is not easily accessible. State representatives to supervisory boards have to go through examinations to be able to apply for a board position. Many majorstate-controlled companies are listed on the Warsaw Stock Exchange and are subject to the “Code of Best Practice for WSE Listed Companies.”
On September 30, 2015, the Act on Control of Certain Investments entered into force. The law creates mechanisms to protect against hostile takeovers of companies operating in strategic sectors (gas, power generation, chemical, petrochemical and defense sectors) of the Polish economy (see Section 2 on Investment Screening), most of which are SOEs or state-controlled.
The SOE governance law of 2017 is being implemented gradually. The framework formally keeps the oversight of the SOE supervision centralized, while transferring the responsibilities from the Ministry of the Treasury to the Prime Minister’s Office (PMO). However, the supervision has been delegated to line ministries, some of which (e.g. the Ministry of Energy) set their own supervisory guidelines. In October 2017, the PMO issued supervisory guidelines as a reference framework for line ministries. In 2018, oversight of over 30 important SOEs was transferred to the Chancellery of the Prime Minister.
A possible merger of two major energy sector companies (PKN Orlen and Lotos) was announced in March 2018. The Polish government has completed the privatization of most of the SOEs it deems not to be of national strategic importance. With few exceptions, the Polish government has invited foreign investors to participate in major privatization projects. In general, privatization bidding criteria have been clear and the process transparent.
The majority of the SOEs classified as “economically important” and “strategically important” is in the energy, mining, and financial sectors. The government intends to keep majority share ownership of these firms, or to sell tranches of shares in a manner that maintains state control. The government is currently focused on consolidating and improving the efficiency of the remaining SOEs.
8. Responsible Business Conduct
Starting in 2018, around 300 Polish companies were obligated to publish to a non-financial information statement alongside their business activity report – this was 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 following criteria: the average annual number of employed persons numbers over 500 individuals; the company’s balance sheet totals to over 85 million Polish zlotys (approx. USD 30 million), or the gross earnings from the sale of commodities and products for the fiscal year amount to 170 million zlotys (aaprox. USD 46 million). Despite this new requirement, companies often voluntarily compile CSR activity reports based on international reporting standards.
Poland’s Ministry of Investment and Development supports implementation of responsible business conduct (RBC) and corporate social responsibility (CSR) programs. A working group responsible for CSR issues has existed since 2015 to provide recommendations concerning the implementation directions of CSR standards with regards to the Strategy for Responsible Development. The group consists of representatives of federal and local governments, trade unions and employer organizations and representatives of social organizations and scientific institutions.
In May 2018, the Advisory Board for Sustainable Development and Corporate Social Responsibility, an auxiliary body of the Minister of Investment and Economic Development was created. The chief function of the Advisory Board is to create space for dialogue and exchange of experiences between the public administration, social partners, NGOs and the academic environment in the field of corporate social responsibility (CSR/RBC). Experts cooperate within 5 working group: 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 Advisory Board issues recommendations concerning implementation of the CSR/RBC policy, in particular taking into account 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 non-governmental organizations. The Polish version of the Guidelines was announced on the 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, among others, to child labor, forced labor, water use, hazardous waste, etc.
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 Ministries. Below is the link this document: https://www.gov.pl/documents/1149181/1150183/Raport_ percentC5 percent9Ar percentC3 percentB3dokresowy_z_realizacji_KPD.pdf/029a9586-2f1a-e655-4d18-00b6abe4a5a1
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).
Independent organizations including non-governmental organizations (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/
Poland maintains a National Contact Point (NCP) for OECD MNE Guidelines: https://www.miir.gov.pl/strony/zadania/wsparcie-przedsiebiorczosci/spoleczna-odpowiedzialnosc-przedsiebiorstw-csr/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.
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 revenues 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.
Resources to Report Corruption
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 2018, the Transparency International (TI) index of perceived public corruption ranked Poland as the 36th (the same as in 2017) 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)
Ujazdowskie 9, 00-583 Warszawa
+48 800 808 808
www.cba.gov.pl ; link: Zglos Korupcje (report corruption)
The Batory Foundation, Public Integrity Program serves as a non-governmental watchdog organization. The foundation can be reached by whistleblowers at +48 (22) 536 0257 or email@example.com.
10. Political and Security Environment
Poland is a politically stable country. Constitutional transfers of power are orderly. The last presidential elections took place in May 2015 and parliamentary elections took place in October 2015; observers considered both elections free and fair. The new government formed in November 2015. There was a change of the Prime Minister in December 2017 and a major government reshuffle in January 2018. Local elections took place in October 2018. Elections to the European Parliaments will take place in May 2019. The next parliamentary elections are scheduled for the fall of 2019. The next presidential election is scheduled for May 2020.
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.
11. Labor Policies and Practices
Poland has a well-educated, skilled labor force. Productivity, however, remains below OECD averages but is rising rapidly and unit costs are competitive. In the last quarter of 2018, according to the Polish Central Statistical Office (GUS) the average gross wage in Poland was PLN 4,864 (approx. USD 1,293 per month) compared to 4,517 (approx. USD 1,200) in the last quarter of 2017. Poland’s economy employed roughly 16.617 million people in the third quarter of 2018. Eurostat measured total Polish unemployment at 3.7 percent, with youth unemployment at 11.5 percent in December 2018. GUS reports unemployment rates differently and tends to be higher than Eurostat figures. Unemployment varied substantially between regions, the highest rate (9.9 percent according to GUS ) in the north-eastern part of Poland (Warmia and Mazury), and the lowest at 3.2 percent (GUS ) in the western province of Wielkopolska, in the third quarter of 2018. Unemployment was lowest in major urban areas. Polish workers are usually eager to work for foreign companies, in Poland and abroad. Since Poland joined the EU, up to two million Poles have sought work in other EU member states.
A January 2018 revision of the Law on Promoting Employment and Labor Market Institutions introduced greater regulatory control over the “simplified procedure” of hiring foreigners from six countries (Ukraine, Belarus, Georgia, Armenia, Moldova and Russia), which allows foreigners from these countries to work in Poland without a work permit for six months. According to the Ministry of Family, Labor and Social Policy, 1.6 million “simplified procedure” work declarations were registered in 2018, of which almost 1.5 million were for Ukrainian workers (compared to 1.7 million a year earlier). Under the revised procedure, local authorities may verify if potential employers have actual job positions for potential foreigner workers. The law also authorizes local authorities to refuse declarations from employers with a history of abuse, as well as to ban employers previously convicted of human trafficking from hiring foreign workers. The January 2018 revision of the law on promoting employment and labor market institutions introduced also a new type of work permit for foreign workers – the so-called seasonal work permit, which allow for legal work up to nine months in agriculture, horticulture and tourism and similar industries. The Ministry of Family, Labor and Social Policy statistics show that during 2018 121,436 seasonal work permits of this type were issued, of which 119,929 went to Ukrainians. Ministry of Family, Labor and Social Policy statistics also show that in 2018, 238,334 thousand Ukrainians received work permits, compared with 192, 547 in 2017.
At the same time, the Ministry of Family, Labor and Social Policy statistics show a growing number of work permits issued to workers from South and East Asia. For example, the number of work permits for the Nepalese workers has grown from 7,000 in 2017 to 19,912 in 2018. While the the number of work permits for Bengali workers increased from 2,412 in 2017 to 8,341 in 2018.
Despite this influx of foreign workers, Polish companies suffer from a shortage of qualified workers. The most sought-after specialists are engineers, IT specialists, salespersons, project managers, and technical advisors. Manufacturing companies seek welders, bricklayers, and machinery operators. Employment has expanded in service industries such as information technology, manufacturing, administrative and support service activities. The business process outsourcing industry in Poland has experienced dynamic growth. The state-owned sector employs about a quarter of the work force, although employment in coal mining and steel are declining.
In 2017, a retirement law entered into force that lowered the minimum retirement age for men (from 67 to 65) and for women (from 67 to 60). The Parliament passed a bill on December 15, 2017, abolishing the limit beyond which Poles do not pay pension or disability contributions, a move which would have increased social insurance contributions by 5.4 billion PLN/year (USD 1.5 billion). The Constitutional Court ruled the law unconstitutional on November 14, 2018.
Labor laws differentiate between layoffs and dismissal for cause (firing). In the case of layoffs (when workers are dismissed for economic reasons in companies which employ more than 20 employees), employers are required to offer severance pay. In the case of dismissal for cause, the labor law does not require severance pay.
Most workers hired under labor contracts have the legal right to establish and join independent trade unions and to bargain collectively. On July 25, 2018, the president signed the revision of the law on trade unions to expand the right to form a union to persons who entered into an employment relationship based on a civil law contract and to persons who were self-employed. The law is the result of the 2015 the Constitutional Court ruling that found any limitation to the freedom of association violates the constitution, and required the government and parliament to amend the law on trade unions. Trade union influence is declining, though unions remain powerful among miners, shipyard workers, government employees, and teachers.
The Polish labor code outlines employee and employer rights in all sectors, both public and private, and has been gradually revised to adapt to EU standards. However, employers tend to use temporary and contract workers for jobs that are not temporary in nature. Employers have used short-term contracts because they allow firing with two weeks’ notice and without consulting trade unions. Employers also tend to use civil instead of labor contracts because of ease of hiring and firing, even in situations where work performed meets all requirements of a regular labor contract.
Polish law requires equal pay for equal work and equal treatment with respect to signing labor contracts, employment conditions, promotion, and access to training. The law defines equal treatment as nondiscrimination in any way, directly or indirectly on the grounds of gender, age, disability, race, religion, nationality, political opinion, ethnic origin, denomination, sexual orientation, whether or not the person is employed temporarily or permanently, full time or part time.
The 1991 Law on Conflict Resolution defines the mechanism for labor dispute resolution. It consists of four stages: first, the employer is obliged to conduct negotiations with employees; the second stage is a mediation process, including an independent mediator; if an agreement is not reached through mediation, the third stage is arbitration, which takes place at the regional court; the fourth stage of conflict resolution is a strike.
The Polish government adheres to the International Labor Organization’s (ILO) core conventions and generally complies with international labor standards. However, there are several gaps in enforcing these standards, including legal restrictions on the rights of workers to form and join independent unions. Cumbersome procedures make it difficult for workers to meet all of the technical requirements for a legal strike. The law prohibits collective bargaining for key civil servants, appointed or elected employees of state and municipal bodies, court judges, and prosecutors. There were some limitations with respect to identification of victims of forced labor. Despite prohibitions against discrimination with respect to employment or occupation, such discrimination occurs. Authorities do not consistently enforce minimum wage, hours of work, and occupational health and safety, either in the formal or informal sectors.
The National Labor Inspectorate (NLI) is responsible for identifying possible labor violations; it may issue fines and notify the prosecutor’s office in cases of severe violations. According to labor unions, however, the NLI does not have adequate tools to hold violators accountable and the small fines imposed as punishment are an ineffective deterrent to most employers.
The United States has no FTA or preference program (such as GSP) with Poland that includes labor standards.
12. OPIC and Other Investment Insurance Programs
The Overseas Private Investment Corporation (OPIC) provides political risk insurance for U.S. companies investing in Poland against political violence, expropriation, and inconvertibility of local currency. OPIC offers medium and long-term financing in Poland through its direct loan and guarantee programs. Direct loans are reserved for U.S. businesses or cooperatives. Loan guarantees are issued to U.S. lending institutions.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
|Host Country Statistical Source*||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|Host Country Gross Domestic Product (GDP) ($M USD)||2017||$518,587||2017||$526,466||http://www.worldbank.org/en/country|
|Foreign Direct Investment||Host Country Statistical Source*||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|U.S. FDI in partner country ($M USD, stock positions)||2017||$5,729||2017||$12,604||BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data|
|Host country’s FDI in the United States ($M USD, stock positions)||2017||$812.6||2017||**||BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data|
|Total inbound stock of FDI as % host GDP||2017||46.0||2017||48.5||UNCTAD data available at
* In Poland the National Bank of Poland (NBP) collects data on FDI. Annual FDI report/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.
**Data are suppressed to avoid disclosure of data of individual companies
Table 3: Sources and Destination of FDI (as of end of 2017)
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||239,624||100%||Total Outward||30,322||100%|
|“0” reflects amounts rounded to +/- USD 500,000.|
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.
Table 4: Sources of Portfolio Investment (as of June 2018)
|Portfolio Investment Assets|
|Top Five Partners (Millions, US Dollars)|
|Total||Equity Securities||Total Debt Securities|
|All Countries||37,685||100%||All Countries||24,017||100%||All Countries||13,669||100%|
|Intl Orgs||2,557||7%||Germany||1,017||3%||Intl Orgs||2,557||19%|
Note: NBP publishes only total amounts of portfolio investment assets.
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 or Cyprus hence results for these countries include investments from other countries/economies.
14. Contact for More Information
Trade and Investment Officer
Ul. Ujazdowskie 29/31, 00-540, Warsaw, Poland
+48 22 504 2000