Policies Towards Foreign Direct Investment

France welcomes foreign investment. In the current economic climate, the French government sees foreign investment as a means to create additional jobs and stimulate growth. Investment regulations are simple, and a range of financial incentives are available to foreign investors, who report they find France’s skilled and productive labor force, good infrastructure, technology, and central location in Europe attractive. France’s membership in the European Union (EU) and the Eurozone facilitates the efficient movement of people, services, capital, and goods. However, notwithstanding French efforts at economic and tax reform, market liberalization, and attracting foreign investment, perceived disincentives to investing in France include the relatively high tax environment. Labor market fluidity is improving due to labor market reforms but is still rigid compared to some OECD economies.

Limits on Foreign Control and Right to Private Ownership and Establishment

France is among the least restrictive countries for foreign investment. With a few exceptions in certain specified sectors, there are no statutory limits on foreign ownership of companies. Foreign entities have the right to establish and own business enterprises and engage in all forms of remunerative activity.

France maintains a national security review mechanism to screen high-risk investments. French law stipulates that control by acquisition of a domiciled company or subsidiary operating in certain sectors deemed crucial to France’s national interests relating to public order, public security and national defense are subject to prior notification, review, and approval by the Economy and Finance Minister. Other sectors requiring approval include energy infrastructure; transportation networks; public water supplies; electronic communication networks; public health protection; and installations vital to national security. In 2018, four additional categories – semiconductors, data storage, artificial intelligence and robotics – were added to the list requiring a national security review. For all listed sectors, France can block foreign takeovers of French companies according to the provisions of the Montebourg Decree.

On December 31, 2019 the government issued a decree that lowered the threshold for State vetting of foreign investment from outside Europe from 33 to 25 percent and enhanced government-imposed conditions and penalties in cases of non-compliance. The decree further introduced a mechanism to coordinate the national security review of foreign direct investments with the European Union (EU Regulation 2019/452). The new rules entered into force on April 1, 2020. The list of strategic sectors was also expanded to include the following activities listed in the EU Regulation 2019/452: agricultural products, when such products contribute to national food supply security; the editing, printing, or distribution of press publications related to politics or general matters; and R&D activities relating to quantum technologies and energy storage technologies.

Procedurally, the Minister of Economy and Finance has 30 business days following the receipt of a request for authorization to either: 1) declare that the investor is not required to obtain such authorization; 2) grant its authorization without conditions; or 3) declare that an additional review is required to determine whether a conditional authorization is sufficient to protect national interests. If an additional review is required, the Minister has an additional 45 business days to either clear the transaction (possibly subject to conditions) or prohibit it. The Minister is further allowed to deny clearance based on the investor’s ties with a foreign government or public authority. The absence of a decision within the applicable timeframe is a de facto rejection of the authorization.

The government has also expanded the breadth of information required in the approval request. For example, a foreign investor must now disclose any financial relationship with or significant financial support from a State or public entity; a list of French and foreign competitors of the investor and of the target; or a signed statement that the investor has not, over the past five years, been subject to any sanctions for non-compliance with French FDI regulations.

Economy and Finance Minister Bruno Le Maire announced on April 29, 2020 that France would further reinforce its control over foreign investments by including biotechnologies in the strategic sectors subject to FDI screening, effective on May 1, 2020 and through the end of the year. This includes lowering from 25 to 10 percent the threshold for government approval of non-European investment in French companies, which was implemented in response to the COVID-19 crisis to limit predatory acquisitions of distressed assets and is valid at least until the end of 2020.

Other Investment Policy Reviews

France has not recently been the subject of international organizations’ investment policy reviews. The OECD Economic Survey for France (April 2019) can be found here: http://www.oecd.org/economy/france-economic-forecast-summary.htm .

Business Facilitation

Business France is a government agency established with the purpose of promoting new foreign investment, expansion, technology partnerships, and financial investment. Business France provides services to help investors understand regulatory, tax, and employment policies as well as state and local investment incentives and government support programs. Business France also helps companies find project financing and equity capital. Business France recently unveiled a website in English to help prospective businesses that are considering investments in the French market (https://www.businessfrance.fr/en/invest-in-France ).

In addition, France’s public investment bank, Bpifrance, assists foreign businesses to find local investors when setting up a subsidiary in France. It also supports foreign startups in France through the government’s French Tech Ticket program, which provides them with funding, a resident’s permit, and incubation facilities. Both business facilitation mechanisms provide for equitable treatment of women and minorities.

President Macron has made innovation one of his priorities with a €10 billion ($11 billion) fund that is being financed through privatizations of State-owned enterprises. France’s priority sectors for investment include:  aeronautics, agro-foods, digital, nuclear, rail, auto, chemicals and materials, forestry, eco-industries, shipbuilding, health, luxury, and extractive industries. In the near-term, the French government intends to focus on driverless vehicles, batteries, the high-speed train of the future, nano-electronics, renewable energy, and health industries.

Business France and Bpifrance are particularly interested in attracting foreign investment in the tech sector. The French government has developed the “French Tech” initiative to promote France as a location for start-ups and high-growth digital companies. In addition to 17 French cities, French Tech offices have been established in 100 cities around the world, including New York, San Francisco, Los Angeles, Shanghai, Hong Kong, Vietnam, Moscow, and Berlin. French Tech has special programs to provide support to startups at various stages of their development. The latest effort has been the creation of the French Tech 120 Program, which provides financial and administrative support to some 123 most promising tech companies. In 2019, €5 billion ($5.5 billion) in venture funding was raised by French startups, an increase of nearly threefold since 2015. In September 2019, President Emmanuel Macron convinced major asset managers such as AXA and Natixis to invest €5 billion ($5.5 billion) into French tech companies over the next three years. He also announced the creation of a listing of France’s top 40 startups “Next 40” with the highest potential to grow into unicorns.

The website Guichet Enterprises (https://www.guichet-entreprises.fr/fr/ ) is designed to be a one-stop website for registering a business. The site is available in both French and English although some fact sheets on regulated industries are only available in French on the website.

Outward Investment

French firms invest more in the United States than in any other country and support approximately 728,500 American jobs. Total French investment in the United States reached $326.4 billion in 2018. France was our ninth largest trading partner with approximately $136 billion in bilateral trade in 2019. The business promotion agency Business France also assists French firms with outward investment, which it does not restrict.

Investment Incentives

France offers financial incentives, generally equally available to both French and foreign investors.  The government provides incentives for capital investment in small companies. For instance, a French company or a subsidiary of a foreign firm that would invest in a minority shareholding (less than 20 percent) of a small, innovative SME would benefit from a five-year, linear amortization of their investment.  To qualify, SMEs must allocate at least 15 percent of their spending on research.

Incentivizing research and development (R&D) and innovation is a high priority for the French government.  Business France, the country’s export and investment promotion agency, reported that R&D operations accounted for 10 percent of foreign investment projects in 2018 and created or maintained 2,793 jobs, up 23 percent from the prior year.  The United States is the leading foreign investor in R&D in France, accounting for 26 percent of 2018 investment decisions. International companies may join France’s 71 innovation clusters, increasing access to both production inputs and technical benefits of geographical proximity. Other components of this policy include: the Innovative New Company (Jeune Enterprise Innovante) and the French Young Entrepreneurs Initiative.

In response to the COVID-19 crisis, the government implemented an emergency fiscal package on March 24, 2020 totaling €410 billion ($447 billion), comprised of: 1) Loan guarantees: €300 billion ($330 billion); 2) Deferral of corporate tax and social security payments: €50 billion ($55 billion); 3) Partial unemployment scheme to avoid layoffs: €24 billion ($26 billion); 4) Recapitalizations, bailouts, or nationalizations if needed: €20 billion ($22 billion); 5) Solidarity Fund for very small companies, the self-employed and micro-entrepreneurs: €7 billion ($7.6 billion); 6) system of repayable advances of €500 million ($546 million) for SMEs to purchase inputs; 7) Late penalties cancelled for all State and local government procurement contracts.  The purpose of the emergency package is to fiscally absorb the economic impact of COVID-19.

Foreign Trade Zones/Free Ports/Trade Facilitation

France is subject to all EU free trade zone regulations.  These allow member countries to designate portions of their customs’ territory as duty-free, where value-added activity is limited.  France has several duty-free zones, which benefit from exemptions on customs for storage of goods coming from outside of the European Union.  The French Customs Service administers them and provides details on its website (http://www.douane.gouv.fr ).  French legal texts are published online at http://legifrance.gouv.fr .

In September 2018, President Macron announced the extension of 44 Urban Free Zones (ZFU) in low-income neighborhoods and municipalities with at least 10,000 residents.  The program provides incentives for employers, who have created 600 new jobs since 2016.  Incentives include exemption from payment of payroll taxes and certain social contributions for five years, financed by €15 million  ($16.5 million) a year in State funds.

Performance and Data Localization Requirements

While there are no mandatory performance requirements established by law, the French government will generally require commitments regarding employment or R&D from both foreign and domestic investors seeking government financial incentives.  Incentives like PAT regional planning grants (Prime d’Amenagement du Territoire pour l’Industrie et les Services) and related R&D subsidies are based on the number of jobs created, and authorities have occasionally sought commitments as part of the approval process for acquisitions by foreign investors.

The French government imposes the same conditions on domestic and foreign investors in cultural industries:  all purveyors of movies and television programs (i.e., television broadcasters, telecoms operators, internet service providers and video services) must contribute a percentage of their revenues toward French film and television productions.  They must also abide by broadcasting cultural content quotas (minimum 40 percent French, 20 percent EU).

In line with President Macron’s campaign promise to clean up French politics, the French parliament adopted in September 2017 the law on “Restoring Confidence in Public Life.” The new law bans elected officials from employing family members, or working as a lobbyist or consultant while in office. It also bans lobbyists from paying parliamentary, ministerial, or presidential staff and requires parliamentarians to submit receipts for expenses.

France’s “Transparency, Anti-corruption, and Economic Modernization Law,” also known as the “Loi Sapin II,” came into effect on June 1, 2017.  It brought France’s legislation in line with European and international standards.  Key aspects of the law include: creating a new anti-corruption agency; establishing “deferred prosecution” for defendants in corruption cases and prosecuting companies (French or foreign) suspected of bribing foreign public officials abroad; requiring lobbyists to register with national institutions; and expanding legal protections for whistleblowers.  The Sapin II law also established a High Authority for Transparency in Public Life (HATVP).  The HATVP promotes transparency in public life by publishing the declarations of assets and interests it is legally authorized to share publicly.  After review, declarations of assets and statements of interests of members of the government are published on the High Authority’s website under open license.  The declarations of interests of members of Parliament and mayors of big cities and towns, but also of regions are also available on the website.  In addition, the declarations of assets of parliamentarians can be accessed in certain governmental buildings, though not published on the internet.

France is a signatory to the OECD Anti-Bribery Convention.  The U.S. embassy in Paris has received no specific complaints from U.S. firms of unfair competition in France in recent years. France ranked 23^rd of 180 on Transparency International’s (TI) 2019 corruption perceptions index. See https://www.transparency.org/country/FRA .

Resources to Report Corruption

The Central Office for the Prevention of Corruption (Service Central de Prevention de la Corruption or SCPC) was replaced in 2017 by the new national anti-corruption agency – the Agence Francaise Anticorruption (AFA).  The AFA is charged with preventing corruption by establishing anti-corruption programs, making recommendations, and centralizing and disseminating information to prevent and detect corrupt officials and company executives.  The AFA will also administrative authority to review the anticorruption compliance mechanisms in the private sector, in local authorities and in other government agencies.

Contact information for Agence Française Anti-corruption (AFA):

Director: Charles Duchaine
23 avenue d’Italie
75013 Paris
Tel : (+33) 1 44 87 21 14
Email: charles.duchaine@afa.gouv.fr

Contact information for Transparency International’s French affiliate:

Transparency International France
14, passage Dubail
75010 Paris
Tel: (+33) 1 84 16 95 65;
Email: contact@transparency-france.org

France is a politically stable country.  Occasionally, large demonstrations and protests occur (sometimes organized to occur simultaneously in multiple French cities); these normally do not result in violence.  When faced with imminent business closures, on rare occasions French trade unions have resorted to confrontational techniques such as setting plants on fire, planting bombs, or kidnapping executives or managers.

From mid-November 2018 through 2019, Paris and other cities in France faced regular protests and disruptions, including “Gilets Jaunes” (Yellow Vest) demonstrations, initiated by discontent over high cost of living, taxes, and social exclusion.  In the second half of 2019, most demonstrations were in response to President Macron’s proposed unemployment and pension reform.  Authorities permitted peaceful protests.  During some demonstrations, damage to property, including looting and arson, in popular tourist areas occurred with reckless disregard for public safety.  Police response included water cannons, rubber bullets and tear gas.

On February 7, 2020, a survey produced by the American Chamber of Commerce in France and the consulting firm Bain & Company cited a renewed confidence of American companies regarding France’s attractiveness despite an outpouring of social unrest during the first half of 2019 and often violent protests throughout the whole year:  41 percent of the investors positive over the next two to three years (+ 11 points compared with 2018), and 51 percent expected to increase the number of their employees in France.  Furthermore, over 85 percent considered the impact of France’s reforms to be positive for investors.  France’s Yellow Vest movement rekindled class warfare in France and exemplified the existence of two Frances, putting on hold on-going economic and labor reforms such as cuts to unemployment benefits and pensions .

In recent years, more than 230 people have been killed in terrorist attacks in France, including the January 2015 assault on the satirical magazine Charlie Hebdo, the November 2015 Bataclan concert hall and national stadium attacks, and the 2016 Bastille Day truck attack in Nice.  While terrorists continue to target French interests, since July 2016 attacks have been smaller in scale and most often perpetrated by lone actors inspired by, but with little direct connection to, ISIS or other international terrorist organizations.  French security agencies continue to disrupt plots and cells, and their efforts have been aided by recent legislation and executive measures which strengthen search and detention authorities.  Despite the spate of recent small-scale attacks, France remains a strong, stable, democratic country with a vibrant economy and culture.  Americans and investors from all over the world continue to invest heavily in France.

France’s private sector labor force is a major asset in attracting foreign investment.  With a return to growth (1.7 percent in 2018 and 1.2 percent in 2019) and a drop in unemployment to 8.1 percent in 2019 from 8.8 percent in 2018, President Macron launched a labor market reform to reduce regulations and spur new hiring.  Five ordinances (executive orders), which came into effect on January 1, 2018, introduced measures easing companies’ ability to fire workers including by capping potential damage claims in cases of wrongful dismissal, and a one-year time limit for making claims, which business organizations have requested for several decades.  In order to make these proposals acceptable to labor unions, Labor Minister Penicaud increased regular required severance pay by 25 percent.  For example, an employee paid a monthly €2,000 ($2,160) and fired after 10 years will be entitled to a severance pay of €5,000 ($5,400), instead of the previous €4,000 ($4,320).

Mandatory company employee councils for consultations on economic, social and public safety issues have been reduced from three to one participant. Companies of all sizes are now able to initiate wide-scale voluntary layoffs with severance provisions for employees for any reason without fear of lawsuit, but with the agreement of labor unions representing a majority of employees.  Finally, foreign-owned companies no longer have to justify job cuts in France on the basis of their global turnover, but can base them on poor performance in the French market alone.  These measures have been welcomed by the business community.

France’s has one of the lowest unionized work forces in the developed world (between 8-11 percent of the total work force).  However, unions have strong statutory protections under French law that give them the power to engage in sector- and industry-wide negotiations on behalf of all workers.  As a result, an estimated 98 percent of French workers are covered by union-negotiated collective bargaining agreements.  Any organizational change in the workplace must usually be presented to the unions for a formal consultation as part of the collective bargaining process.

The number of apprenticeships in France has increased by 16 percent in 2019 and now totals 491,000 in both the public and private sectors, according to Labor Ministry figures.  Apprenticeships, like vocational training, have been placed under the direct management of the government via a newly created agency called France Compétences.  Growth of apprenticeship and reform of vocational training help to explain the recent drop in the unemployment rate.

The unemployment rate fell to 8.1 percent in the fourth quarter of 2019 from 8.8 percent in the previous quarter.  This was France’s lowest unemployment rate since the 2008 financial crisis.  However, youth unemployment remained high at 20 percent, from 20.8 percent in 2018 and 22.3 percent in 2017.  France’s partial unemployment scheme, which allows firms to retain their employees while the government continues to pay a portion of their wages, has expanded dramatically in scope and size during the Coronavirus epidemic.  Over half of France’s entire workforce was enrolled in the scheme at the end of April 2020.  The number of job seekers is likely to increase sharply if the government follows through with its plan to gradually taper off the scheme beginning in June 2020.

The COVID-19 crisis may cause the Macron Administration to delay or abandon two planned labor reforms on unemployment benefits and pensions.  Labor unions have asked the government to repeal its July 26, 2019 decrees gradually introducing tighter rules for unemployment benefit claims designed to encourage people to go back to work and save €3.4 billion ($3.75 billion) over three years.  The new rules reduce benefits for all unemployed people, especially the highest earners (above €4,500 / $4,950 a month).  Pension reform, approved by the government on January 24, 2020,  and opposed by all labor unions in its current form, is also unlikely to resurface in parliament as the government focuses on economic recovery.

Policies Towards Foreign Direct Investment

The German government and industry actively encourage foreign investment. U.S. investment continues to account for a significant share of Germany’s FDI. The 1956 U.S.-Federal Republic of Germany Treaty of Friendship, Commerce and Navigation affords U.S. investors national treatment and provides for the free movement of capital between the United States and Germany. As an OECD member, Germany adheres to the OECD National Treatment Instrument and the OECD Codes of Liberalization of Capital Movements and of Invisible Operations.  The Foreign Trade and Payments Act and the Foreign Trade and Payments Ordinance provide the legal basis for the Federal Ministry for Economic Affairs and Energy to review acquisitions of domestic companies by foreign buyers, to assess whether these transactions pose a risk to the public order or national security (for example, when the investment pertains to critical infrastructure).  For many decades, Germany has experienced significant inbound investment, which is widely recognized as a considerable contributor to Germany’s growth and prosperity.  The investment-related challenges facing foreign companies are broadly the same as face domestic firms, e.g high tax rates and labor laws that complicate hiring and dismissals. Germany Trade and Invest (GTAI), the country’s economic development agency, provides extensive information for investors:  https://www.gtai.de/gtai-en/invest

Limits on Foreign Control and Right to Private Ownership and Establishment

Under German law, a foreign-owned company registered in the Federal Republic of Germany as a GmbH (limited liability company) or an AG (joint stock company) is treated the same as a German-owned company.  There are no special nationality requirements for directors or shareholders.

The provision of employee placement services, such as providing temporary office support, domestic help, or executive search services, requires registration of a business in Germany.

Germany maintains an elaborate mechanism to screen foreign investments based on national security grounds.  The legislative basis for the mechanism (the Foreign Trade and Payments Act and Foreign Trade and Payments Ordinance) has been amended several times in recent years in an effort to tighten parameters of the screening as technological threats evolve, particularly to address growing  investment interest by malevolent actors in both Mittelstand (mid-sized) and blue chip German companies.  Amendments to implement the 2019 EU Screening Regulation are in draft or have been announced as of May 2020.  In addition, authorities will make “prospective impairment” of public order and security the new trigger for an investment review, in place of the current standard (which requires a de facto threat).

Other Investment Policy Reviews

The World Bank Group’s “Doing Business 2020” and Economist Intelligence Unit both provide additional information on Germany’s investment climate.  The American Chamber of Commerce in Germany also publishes results of an annual survey of U.S. investors in Germany (“AmCham Germany Transatlantic Business Barometer”, https://www.amcham.de/publications).

Business Facilitation

Before engaging in commercial activities, companies and business operators must register in public directories, the two most significant of which are the commercial register (Handelsregister) and the trade office register (Gewerberegister).

Applications for registration at the commercial register, which is  available under www.handelsregister.de , are electronically filed in publicly certified form through a notary.  The commercial register provides information about all relevant relationships between merchants and commercial companies, including names of partners and managing directors, capital stock, liability limitations, and insolvency proceedings.  Registration costs vary depending on the size of the company.

Germany Trade and Invest (GTAI), the country’s economic development agency, can assist in the registration processes  (https://www.gtai.de/gtai-en/invest/investment-guide/establishing-a-company/business-registration-65532 ) and advises investors, including micro-, small-, and medium-sized enterprises (MSMEs), on how to obtain incentives.

In the EU, MSMEs are defined as follows:

• Micro-enterprises:  less than 10 employees and less than €2 million annual turnover or less than €2 million in balance sheet total.
• Small-enterprises:  less than 50 employees and less than €10 million annual turnover or less than €10 million in balance sheet total.
• Medium-sized enterprises:  less than 250 employees and less than €50 million annual turnover or less than €43 million in balance sheet total.

Outward Investment

Germany’s federal government provides guarantees for investments by Germany-based companies in developing and emerging economies and countries in transition in order to insure them against political risks.  In order to receive guarantees, the investment must have adequate legal protection in the host country. The Federal Government does not insure against commercial risks.

Investment Incentives

Federal and state investment incentives – including investment grants, labor-related and R&D incentives, public loans, and public guarantees – are available to domestic and foreign investors alike.  Different incentives can be combined. In general, foreign and German investors must meet the same criteria for eligibility.

Germany Trade & Invest, Germany’s federal economic development agency, provides comprehensive information on incentives in English at:  https://www.gtai.de/gtai-en/invest/investment-guide/incentive-programs .

Foreign Trade Zones/Free Ports/Trade Facilitation

There are currently two free ports in Germany operating under EU law:  Bremerhaven and Cuxhaven. The duty-free zones within the ports also permit value-added processing and manufacturing for EU-external markets, albeit with certain requirements.  All are open to both domestic and foreign entities. In recent years, falling tariffs and the progressive enlargement of the EU have eroded much of the utility and attractiveness of duty-free zones.

Performance and Data Localization Requirements

In general, there are no requirements for local sourcing, export percentage, or local or national ownership.  In some cases, however, there may be performance requirements tied to an incentive, such as creation of jobs or maintaining a certain level of employment for a prescribed length of time.

U.S. companies can generally obtain the visas and work permits required to do business in Germany.  U.S. citizens may apply for work and residential permits from within Germany. Germany Trade & Invest offers detailed information online at https://www.gtai.de/gtai-en/invest/investment-guide/coming-to-germany.

There are no localization requirements for data storage in Germany.  However, in recent years German and European cloud providers have sought to market the domestic location of their servers as a competitive advantage.

Among industrialized countries, Germany ranks 9th out of 180, according to Transparency International’s 2019 Corruption Perceptions Index.  Some sectors including the automotive industry, construction sector, and public contracting, exhibit political influence and party finance remains only partially transparent.  Nevertheless, U.S. firms have not identified corruption as an impediment to investment in Germany. Germany is a signatory of the OECD Anti-Bribery Convention and a participating member of the OECD Working Group on Bribery.

Over the last two decades, Germany has increased penalties for the bribery of German officials, corrupt practices between companies, and price-fixing by companies competing for public contracts.  It has also strengthened anti-corruption provisions on financial support extended by the official export credit agency and has tightened the rules for public tenders. Government officials are forbidden from accepting gifts linked to their jobs.  Most state governments and local authorities have contact points for whistle-blowing and provisions for rotating personnel in areas prone to corruption. There are serious penalties for bribing officials and price fixing by companies competing for public contracts.

According to the Federal Criminal Office, in 2018, 73 percent of all corruption cases were directed towards the public administration (up from 63 percent in 2017), 18 percent towards the business sector (down from 22 percent in 2017), 7 percent towards law enforcement and judicial authorities (down from 12 percent in 2017), and 2 percent to political officials (down from 3 percent in 2017).

Parliamentarians are subject to financial disclosure laws that require them to publish earnings from outside employment.  Disclosures are available to the public via the Bundestag website (next to the parliamentarians’ biographies) and in the Official Handbook of the Bundestag. Penalties for noncompliance can range from an administrative fine to as much as half of a parliamentarian’s annual salary.

Donations by private persons or entities to political parties are legally permitted.  However, if they exceed €50,000, they must be reported to the President of the Bundestag, who is required to immediately publish the name of the party, the amount of the donation, the name of the donor, the date of the donation, and the date the recipient reported the donation.  Donations of €10,000 or more must be included in the party’s annual accountability report to the President of the Bundestag.

State prosecutors are generally responsible for investigating corruption cases, but not all state governments have prosecutors specializing in corruption.  Germany has successfully prosecuted hundreds of domestic corruption cases over the years, including large scale cases against major companies.

Media reports in recent years about bribery investigations against Siemens, Daimler, Deutsche Telekom, Deutsche Bank, and Ferrostaal have increased awareness of the problem of corruption.  As a result, listed companies and multinationals have expanded compliance departments, tightened internal codes of conduct, and offered more training to employees.

The Federation of Germany Industries (BDI), the Association of German Chamber of Commerce and Industry (DIHK) and the International Chamber of Commerce (ICC) provide guidelines in paper and electronic format on how to prevent corruption in an effort to convince all including small- and medium- sized companies to catch up.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Germany was a signatory to the UN Anti-Corruption Convention in 2003.  The Bundestag ratified the Convention in November 2014.

Germany adheres to and actively enforces the OECD Anti-Bribery Convention which criminalizes bribery of foreign public officials by German citizens and firms.  The necessary tax reform legislation ending the tax write-off for bribes in Germany and abroad became law in 1999.

Germany participates in the relevant EU anti-corruption measures and signed two EU conventions against corruption.  However, while Germany ratified the Council of Europe Criminal Law Convention on Corruption in 2017, it has not yet ratified the Civil Law Convention on Corruption.

Resources to Report Corruption

There is no central government anti-corruption agency in Germany.

Contact at “watchdog” organization:

Hartmut Bäumer, Chair
Transparency International Germany
Alte Schönhauser Str. 44, 10119 Berlin
+49 30 549 898 0
office@transparency.de

The Federal Criminal Office publishes an annual report: “Bundeslagebild Korruption” – the latest one covers 2018.

https://www.bka.de/SharedDocs/Downloads/DE/Publikationen/JahresberichteUndLagebilder/Korruption/korruptionBundeslagebild2018.html?nn=28078 

Political acts of violence against either foreign or domestic business enterprises are extremely rare.  Isolated cases of violence directed at certain minorities and asylum seekers have not targeted U.S. investments or investors.

The German labor force is generally highly skilled, well-educated, and productive.  Before the economic downturn caused by COVID-19, employment in Germany had risen for the thirteenth consecutive year and reached an all-time high of 45.3 million in 2019, an increase of 402,000 (or 0.9 percent) from 2018—the highest level since German reunification in 1990.

Simultaneously, unemployment had fallen by more than half since 2005, and reached in 2019 the lowest average annual value since German reunification.  In 2019, around 2.34 million people were registered as unemployed, corresponding to an unemployment rate of 5.2 percent, according to the Germany Federal Employment Agency.  Using internationally comparable data from the European Union’s statistical office Eurostat, Germany had an average annual unemployment rate of 3.2 percent in 2019, the second lowest rate in the European Union.  All employees are by law covered by the federal unemployment insurance that compensates for the lack of income for up to 24 months.  Long-term effects on the labor market, and the economy as a whole, due to COVID-19 are not yet fully conceivable.  However, as of April 2020, the number of unemployed had increased to 2.64 million (a 5.8% unemployment rate). A government-funded temporary furlough program allows companies to decrease its workforce and labor costs with layoffs and has helped mitigate a negative labor market impact in the short term.

Germany’s national youth unemployment rate was 5.8 percent in 2019, the lowest in the EU.  The German vocational training system has gained international interest as a key contributor to Germany’s highly skilled workforce and its sustainably low youth unemployment rate. Germany’s so-called “dual vocational training,” a combination of theoretical courses taught at schools and practical application in the workplace, teaches and develops many of the skills employers need.  Each year, there are more than 500,000 apprenticeship positions available in more than 340 recognized training professions, in all sectors of the economy and public administration. Approximately 50 percent of students choose to start an apprenticeship. The government is promoting apprenticeship opportunities, in partnership with industry, through the “National Pact to Promote Training and Young Skilled Workers.”

An element of growing concern for German business is the aging and shrinking of the population, which (absent large-scale immigration) will likely result in labor shortages.  Official forecasts at the behest of the Federal Ministry of Labor and Social Affairs predict that the current working age population will shrink by almost 3 million between 2010 and 2030, resulting in an overall shortage of workforce and skilled labor.  Labor bottlenecks already constrain activity in many industries, occupations, and regions. According to the Federal Employment Agency, doctors; medical and geriatric nurses; mechanical, automotive, and electrical engineers; and IT professionals are in particular short supply.  The government has begun to enhance its efforts to ensure an adequate labor supply by improving programs to integrate women, elderly, young people, and foreign nationals into the labor market. The government has also facilitated the immigration of qualified workers.

Labor Relations

Germans consider the cooperation between labor unions and employer associations to be a fundamental principle of their social market economy and believe this has contributed to the country’s resilience during the economic and financial crisis.  Insofar as job security for members is a core objective for German labor unions, unions often show restraint in collective bargaining in weak economic times and often can negotiate higher wages in strong economic conditions. According to the Institute of Economic and Social Research (WSI), the number of workdays lost to labor actions increased significantly to 1 million in 2018, compared to 238,000 in 2017.  WSI assesses this unusual increase was mostly due to the labor conflict in the machinery sector, which resulted in a large number of warning strikes at various companies and plants. However, in an international comparison, Germany is in the lower midrange with regards to strike numbers and intensity. All workers have the right to strike, except for civil servants (including teachers and police) and staff in sensitive or essential positions, such as members of the armed forces.

Germany’s constitution, federal legislation, and government regulations contain provisions designed to protect the right of employees to form and join independent unions of their choice. The overwhelming majority of unionized workers are members of one of the eight largest unions — largely grouped by industry or service sector — which are affiliates of the German Trade Union Confederation (Deutscher Gewerkschaftsbund, DGB).  Several smaller unions exist outside the DGB. Overall trade union membership has, however, been in decline over the last several years. In 2016, about 18.5 percent of the workforce belonged to unions. Since peaking at around 12 million members shortly after German reunification, total DGB union membership has dropped to about 6 million, IG Metall being the largest German labor union with 2.27 million members, followed by the influential service sector union Ver.di (1.97 million members).

The constitution and enabling legislation protect the right to collective bargaining, and agreements are legally binding to the parties.  In 2018, over three quarters (78 percent) of non-self-employed workers were directly or indirectly covered by a collective wage agreement, 59 percent of the labor force in the western part of the country and approximately 47 percent in the East.  On average, collective bargaining agreements in Germany were valid for 25 months in 2017.

By law, workers can elect a works council in any private company employing at least five people.  The rights of the works council include the right to be informed, to be consulted, and to participate in company decisions.  Works councils often help labor and management to settle problems before they become disputes and disrupt work. In addition, “co-determination” laws give the workforce in medium-sized or large companies (corporations, limited liability companies, partnerships limited by shares, co-operatives, and mutual insurance companies) significant voting representation on the firms’ supervisory boards.  This co-determination in the supervisory board extends to all company activities.

From 2010 to 2019, real wages grew by 1.2 percent on average.  Generous collective bargaining wage increases in 2019 (+3.2 percent) and the increase of the federal Germany-wide statutory minimum wage to €9.35 (USD 10.15) on January 1, 2020, led to 2.6 percent nominal wage increase. Real wages grew by 1.2 percent in 2019.

Labor costs increased by 2.3 percent in 2018.  With an average labor cost of €35 (USD 43) per hour, Germany ranked sixth among the 28 EU-members states (EU average: €26.80/USD 33.20) in 2018.

Policies Towards Foreign Direct Investment

The Netherlands is the seventeenth-largest economy in the world and the fifth largest in the European Union, with a gross domestic product (GDP) of over $910 billion (€812 billion).  According to the International Monetary Fund (IMF), the Netherlands is consistently among the three largest source and recipient economies for foreign direct investment (FDI) in the world, although the Netherlands is not the ultimate destination for the majority of this investment.  The government of the Netherlands maintains liberal policies toward FDI, has established itself as a platform for third-country investment with some 145 investment agreements in force, and adheres to the Organization for Economic Cooperation and Development (OECD) Codes of Liberalization and Declaration on International Investment, including a National Treatment commitment and adherence to relevant guidelines.

The Netherlands is the recipient of eight percent of all FDI inflow into the EU.  Of all EU member states, it is the top recipient of U.S. FDI, at over 16 percent of all U.S. FDI abroad as of 2017.  The Netherlands has become a key export platform and pan-regional distribution hub for U.S. firms.  Roughly 60 percent of total U.S. foreign-affiliate sales in the Netherlands are exports, with the bulk of them going to other EU members.

In 2014, foreign-owned companies made inward direct investment worth $15.8 billion (14.2 billion euros) – just over 30 percent of total corporate investment in durable goods in the Netherlands.  Foreign investors provide 19 percent of Dutch employment in the private sector (860,200 jobs).  U.S. firms contribute the most among foreign firms to employment, responsible for 214,000 jobs.  In its 2017 investment report, the UN Conference on Trade and Development (UNCTAD) identified the Netherlands as the world’s fifth largest destination of global FDI inflows and the third largest source of FDI outflows.

Although policy makers fear that Brexit will be detrimental for the Dutch economy, so far the Netherlands is benefitting from companies exiting the United Kingdom (UK).  According to the Netherlands Foreign Investment Agency (NFIA), 140 companies have made the move from the UK to the Netherlands since the Brexit referendum and another 420 internationally operating firms that have their European base in the UK are discussing possible plans to move to the Netherlands.  The companies are coming mainly from the health, creative industry, financial services, and logistics sectors.  The 2019 move of the European Medicines Agency (EMA) from London to Amsterdam is proving to be a major attraction for health and life sciences, as nineteen pharmaceutical-related companies have since followed the EMA to the Netherlands.  The Dutch Authority for the Financial Markets (AFM) has predicted Amsterdam will emerge as a main post-Brexit financial trading center in Europe for automated trading platforms and other ‘fintech’ firms, allowing these companies to keep their European trading within the confines of the EU after Brexit.

Dutch tax authorities provide a high degree of customer service to foreign investors, seeking to provide transparent, precise tax guidance that makes long-term tax obligations more predictable.  Advance Tax Rulings (ATR) and Advance Pricing Agreements (APA) are guarantees given by local tax inspectors regarding long-term tax commitments for a particular acquisition or Greenfield investment.  Dutch tax policy continues to evolve as the EU seeks to harmonize tax measures across members states.  A more detailed description of Dutch tax policy for foreign investors can be found at http://investinholland.com/incentives-and-taxes/  and http://investinholland.com/incentives-and-taxes/fiscal-climate/ .

Dutch corporations and branches of foreign corporations are currently subject to a corporate tax rate of 25 percent on taxable profits, which puts the Netherlands in the middle third among EU countries’ corporate tax rates and below the tax rates of its larger neighbors.  Profits up to $240,000 (200,000 euros) are taxed at a rate of 19 percent.  In October 2018, the Dutch government announced it would lower its corporate tax rate to 20.5 percent in 2021, with profits up to $240,000 taxed at a 15 percent rate from 2021 onwards.

Dutch corporate taxation generally allows for exemption of dividends and capital gains derived from a foreign subsidiary.  Surveys of the corporate tax structure of EU member states note that both the corporate tax rate and the effective corporate tax rate in the Netherlands are around the EU average.  Nevertheless, the Dutch corporate tax structure ranks among the most competitive in Europe considering other beneficial measures such as ATAs and/or APAs.  The Netherlands also has no branch profit tax and does not levy a withholding tax on interest and royalties.

Maintaining an investment-friendly reputation is a high priority for the Dutch government, which provides public information and institutional assistance to prospective investors through the Netherlands Foreign Investment Agency (NFIA) (https://investinholland.com/ ).  Historically, over a third of all Greenfield FDI projects that NFI attracts to the Netherlands originate from U.S. companies.  Additionally, the Netherlands business gateway at https://business.gov.nl/  – maintained by the Dutch government – provides information on regulations, taxes, and investment incentives that apply to foreign investors in the Netherlands and clear guidance on establishing a business in the Netherlands.

The NFIA maintains six regional offices in the United States (Washington, DC; Atlanta; Boston; Chicago; New York City; and San Francisco).  The American Chamber of Commerce in the Netherlands (https://www.amcham.nl/ ) also promotes U.S. and Dutch business interests in the Netherlands.

Limits on Foreign Control and Right to Private Ownership and Establishment

With few exceptions, the Netherlands does not discriminate between national and foreign individuals in the establishment and operation of private companies.  The government has divested its complete ownership of many public utilities, but in a number of strategic sectors, private investment – including foreign investment – may be subject to limitations or conditions.  These include transportation, energy, defense and security, finance, postal services, public broadcasting, and the media.

Air transport is governed by EU regulation and subject to the U.S.-EU Air Transport Agreement.  U.S. nationals can invest in Dutch/European carriers as long as the airline remains majority-owned by EU governments or nationals from EU member states.  Additionally, the EU and its member states reserve the right to limit U.S. investment in the voting equity of an EU airline on a reciprocal basis that the United States allows for foreign nationals in U.S. carriers.

In concert with the European Union, the Dutch government is considering how to best protect its economic security but also continue as one of the world’s most open economies.  The government’s interagency Economic Security Task Force is heading up an effort to establish a domestic investment review system that will consist of existing investment review regulations that are part of sectoral legislation and a new, broad investment review mechanism for investments that are not already covered in sector-specific legislation.  The government is in the process of finalizing legislation that will establish investment screening mechanisms in the first of its critical sectors: telecommunications.  The Netherlands has certain limitations on foreign ownership in sectors that are deemed of critical national interest (transportation, energy, defense and security, finance, postal services, public broadcasting, and the media).  There is no requirement for Dutch nationals to have an equity stake in a Dutch registered company.

Other Investment Policy Reviews

The Netherlands has not recently undergone an investment policy review by the OECD, World Trade Organization (WTO), or UNCTAD.

Business Facilitation

All companies must register with the Chamber of Commerce and apply for a fiscal number with the tax administration, which allows expedited registration for small- and medium-sized enterprises (SMEs) with fewer than 50 employees:  https://www.kvk.nl/english/ordering-products-from-the-commercial-register/ .

The World Bank’s 2020 Ease of Doing Business Index ranks the Netherlands as number 24 in starting a business.  The reports ranks the Netherlands first in terms of trading across borders, with zero costs and a small number of hours associated with border and documentary compliance, respectively.   The report ranks the Netherlands better than the OECD average on registration time, the number of procedures, and required minimum capital.

The Netherlands business gateway at https://business.gov.nl/  – maintained by the Dutch government – provides a general checklist for starting a business in the Netherlands:  https://business.gov.nl/starting-your-business/checklists-for-starting-a-business/general-checklist-for-starting-a-business-in-the-netherlands/ .  The Dutch American Friendship Treaty (DAFT) from 1956 gives U.S. citizens preferential treatment to operate a business in the Netherlands, providing ease of establishment that most other non-EU nationals do not enjoy.  U.S. entrepreneurs applying under the DAFT do not need to satisfy a strict, points-based test and do not have to meet pre-conditions related to providing an innovative product.  U.S. entrepreneurs setting up a sole proprietorship only have to register with the Chamber of Commerce and demonstrate a minimum investment of 4,500 euros.  DAFT entrepreneurs receive a two-year residence permit, with the possibility of renewal for five subsequent years.

Investment Incentives

General requirements to qualify for investment subsidy schemes apply equally to domestic and foreign investors.  Industry-specific, targeted investment incentives have long been a tool of Dutch economic policy to facilitate economic restructuring and to promote economic priorities.  Such subsidies and incentives are spelled out in detailed regulations.  Subsidies are in the form of tax credits disbursed through corporate tax rebates or direct cash payments if there is no tax liability.  For an overview of government subsidies and investment programs, see:  http://english.rvo.nl/subsidies-programmes .

FDI tends to be concentrated in growth sectors including information and communications technology (ICT), biotechnology, medical technology, electronic components, and machinery and equipment.  Investment projects are predominantly in value-added logistics, machinery and equipment, and food.

Since 2010, the government has shifted from traditional industrial support policies to a comprehensive approach to public/private financing agreements in areas where investment is deemed of strategic value.  Government, academia, and industry work together to determine recipient sectors for co-financed (public and private) R&D.  The government’s industrial policy focuses on nine “Top Sectors”:  creative industries, logistics, horticulture, agriculture and food, life sciences, energy, water, chemical industry, and high tech.  (For more information, see https://www.government.nl/topics/enterprise-and-innovation/contents/encouraging-innovation .)

Foreign Trade Zones/Free Ports/Trade Facilitation

The Netherlands has no free trade zones (FTZs) or free ports where commodities can be processed or reprocessed tax-free.  However, FTZs exist for bonded storage, cargo consolidation, and reconfiguration of non-EU goods.  This reflects the key role that transport, transit, logistics, and distribution play in the Dutch economy.  Dutch Customs oversee a large number of customs warehouses, free warehouses, and free zones along many of the Netherlands trade routes and entry points.

Schiphol Airport handles nearly 1.75 million tons of goods per year for distribution, making it the third largest cargo airport in Europe.  Specific parts of Schiphol are designated customs-free zones.  The Port of Rotterdam is Europe’s largest seaport by volume, handling over 37 percent of all cargo shipping on Europe’s Le Havre-Hamburg coastline and processing nearly 470 million tons of goods in 2018.  Many agents operate customs warehouses under varying customs regimes on the premises of the Port of Rotterdam.

Performance and Data Localization Requirements

There are no trade-related investment performance requirements in the Netherlands and no requirements for employment of local capital or managerial personnel.

The Dutch government does not follow a “forced localization” policy and does not require foreign information technology (IT) providers to turn over source code or provide access to surveillance.  The Dutch Data Protection Authority (DPA) monitors and enforces Dutch legislation on the protection of personal data (https://autoriteitpersoonsgegevens.nl/en ).  The Dutch DPA is active in the EU’s Article 29 Working Party, the collective of EU national DPAs.  The primary law on protection of personal data in the Netherlands is the Dutch law implementing EU directive 95/46/EC.  The new European General Data Protection Regulation (GDPR), which is directly applicable in member states, entered into force May 25, 2018, as part of the EU’s comprehensive reform on data protection.

The Dutch DPA recognized U.S. firms that registered and self-certified with the U.S.-EU Safe Harbor program that began in 2000 and focused on safe transfer of personal data between the European Union and the United States.  On July 12, 2016, the European Commission issued an adequacy decision on the EU-U.S. Privacy Shield framework (https://www.privacyshield.gov/welcome ), which replaced the Safe Harbor program, providing a legal mechanism for companies to transfer personal data from the EU to the United States.  In an October 2019 report, the European Commission confirmed that the EU-US Privacy Shield framework continues to ensure an adequate level of protection for personal data transferred from the EU to companies participating in the Privacy Shield program in the United States.  The Dutch government strongly supports Privacy Shield.

The Netherlands fully complies with international standards on combating corruption.  Transparency International ranked the Netherlands eighth in its 2019 Corruption Perception Index.

Anti-bribery legislation to implement the 1997 OECD Anti-Bribery Convention (ABC) entered into effect in 2001.  The anti-bribery law reconciles the language of the ABC with the EU Fraud Directive and the Council of Europe Convention on Fraud.  Under the law, it is a criminal offense if one obtains foreign contracts through corruption.

At the national level, the Ministry of the Interior and Kingdom Relations and Ministry of Justice and Security have both taken steps to enhance regulations to combat bribery in the processes of public procurement and issuance of permits and subsidies.  Most companies have internal controls and/or codes of conduct that prohibit bribery.

Several agencies combat corruption.  The Dutch Whistleblowers Authority serves as a knowledge center, develops new instruments for tracking problems, and identifies trends on matters of integrity.  The Independent Commission for Integrity in Government is an appeals board for whistleblowers in government and law enforcement agencies.

The Netherlands signed and ratified the UN Anticorruption Convention and is party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

The Government agency that aids and protects whistleblowers is the Dutch Whistleblowers Authority or “Huis for Klokkenluiders.”  The Whistleblowers Authority Act, which came into force in the Netherlands on July 1, 2016, underlies the establishment of the Whistleblowers Authority.  An English version of the Act can be found at https://www.huisvoorklokkenluiders.nl/Publicaties/publicaties/2016/07/01/dutch-whistleblowers-act.

Huis for Klokkenluiders
Maliebaan 72
3581 CV Utrecht
The Netherlands
Website: https://www.huisvoorklokkenluiders.nl/english 
Telephone:  +31 (0)88 – 133 1000
E-mail info@huisvoorklokkenluiders.nl

The Dutch office of Transparency International is located in Amsterdam:

Transparency International Nederland
Offices at KIT:  Royal Tropical Institute, room d-3
Mauritskade 64
1092 AD Amsterdam
The Netherlands
Website: https://www.transparency.nl/ 
Telephone: +31 (0)6 81 08 36 27
E-mail:  communicatie@transparency.nl

Although political violence rarely occurs in the highly stable and consensus-oriented Dutch society, public debate on issues such as immigration and integration policy has been contentious.  While rare, there have been some politically and religiously inspired acts of violence.

The Dutch economy derives much of its strength from a stable business climate that fosters partnerships among unions, business organizations, and the government.  Strikes are rarely used as a way to resolve labor disputes.  With ten workdays per 1000 employees lost to industrial action, the Netherlands ranks tenth on the list of OECD countries with the lowest incidence of strikes, behind other major developed economies like the United States (four days) and Germany (three days).

The Netherlands has a strongly regulated labor market (over 75 percent of labor contracts fall under some form of collective labor agreement) that comprises a well-educated and multilingual workforce.  Labor/management relations in both the public and private sectors are generally good in a system that emphasizes the concept of social partnership between industry and labor.  Although wage bargaining in the Netherlands is increasingly decentralized, there still exists a central bargaining apparatus where labor contract guidelines are established.

The terms of collective labor agreements apply to all employees in a sector, not only union members.  To avoid surprises, potential investors are advised to consult with local trade unions prior to making an investment decision to determine which, if any, labor contracts apply to workers in their business sector.  Collective bargaining agreements negotiated in recent years have, by and large, been accepted without protest.

Every company in the Netherlands with at least 50 workers is required by law to institute a Works Council (“Ondernemingsraad”), through which management must consult on a range of issues, including investment decisions, pension packages, and wage structures.  The Social Economic Council has helpful programs on establishing employee participation that allow firms to comply with the law on Works Councils.  See https://www.ser.nl/en/SER/About-the-SER/What-does-the-SER-do .

Prior to the Covid-19 outbreak, the annual unemployment rate was forecast to be 3.2 percent in 2020, well below the EU average of 6.5 percent and less than half of Eurozone unemployment.  In March 2020, the Dutch government established various economic relief measures designed to preserve employment by providing Dutch corporations that suffer coronavirus-related problems with wage subsidies up to 90 percent.

The working population consists of 8.9 million persons.  Workers are sought through government-operated labor exchanges, private employment firms, or direct hiring.  At 47 percent, the Netherlands has the highest share of part-time workers in its workforce of all EU member states (in 2017, the EU average of part-time workers was 19 percent).  A rise in female participation in the workforce led to a 37 percent increase in the share of part-time workers in the total working population.  Three-quarters of women and one quarter of men work less than a 36-hour week.  Labor market participation, especially by older workers, is growing, and the number of independent contractors is rapidly increasing.

To ensure continued economic growth and address the impact of an aging population, increased labor market participation is critical.  The age to qualify for a state pension (AOW) will increase from age 65 to 67 by 2023.  Governmental labor market policies are targeted at increasing productivity of the labor force, including the expansion of working hours.  For example, access to daycare is improving in order to raise the average number of hours per week worked by women, which is 10 hours below the average of hours worked by men.

Effective July 1, 2020, the minimum wage for employees older than 20 years is €1,680 ($1,820) per month.

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’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 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.

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 2019, according to the Polish Central Statistical Office (GUS), the average gross wage in Poland was PLN 5,198 (approx. USD 1,293 per month) compared to 4,864 (approx. USD 1,200) in the last quarter of 2018.  Poland’s economy employed roughly 16.619 million people in the third quarter of 2019.  Eurostat measured total Polish unemployment at 2.9 percent, with youth unemployment at 7.9 percent in December 2019.  GUS reports unemployment rates differently and tends to be higher than Eurostat figures.  Unemployment varied substantially among regions: the highest rate was 8.6 percent (according to GUS ) in the north-eastern part of Poland (Warmia and Mazury), and the lowest was 2.8 percent (GUS) in the western province of Wielkopolska, at the end of the third quarter of 2019.  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 2019, of which almost 1.5 million were for Ukrainian workers (approximately the same number as a year earlier).  Under the revised procedure, local authorities may verify if potential employers have actual job positions for potential foreign 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 also introduced 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, tourism and similar industries.  Ministry of Family, Labor and Social Policy statistics show that during 2019, 183,941 seasonal work permits of this type were issued, of which 179,466 went to Ukrainians.  Ministry of Family, Labor and Social Policy statistics also show that in 2019, 330,495 thousand Ukrainians received work permits, compared with 238,334 in 2017.

Polish companies suffer from a shortage of qualified workers.  According to a 2020 report by the Ministry of Family, Labor and Social Policy, several industries suffer shortages, including the construction, manufacturing, and transportation industries.  The most sought-after workers in the construction industry include concrete workers, steel fixers, carpenters, and bricklayers.  Manufacturing companies seek welders, woodworkers, machinery operators, locksmiths, electricians, and electromechanical engineers.  Employment has expanded in service industries such as information technology, manufacturing, and 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.

Since 2017, the minimum retirement age for men has been 65, and 60 for women.  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.  In January 2020, the revised law on trade unions entered into force, which expanded 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.   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 the 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.

Policies Towards Foreign Direct Investment

Foreign direct investment (FDI) has played a significant role in modernizing the Spanish economy during the past 40 years. Attracted by Spain’s large domestic market, export possibilities, and growth potential, foreign companies set up operations in large numbers. Spain’s automotive industry is mostly foreign-owned. Multinationals control half of the food production companies, one-third of chemical firms, and two-thirds of the cement sector. Several foreign investment funds acquired networks from Spanish banks, and foreign firms control about one-third of the insurance market.

The Government of Spain recognizes the value of foreign investment. Spain offers investment opportunities in sectors and activities with significant added value. Spanish law permits 100 percent foreign ownership in investments (limits apply regarding audio-visual broadcast licenses and strategic sectors of the economy; see next section), and capital movements are completely liberalized. Due to its degree of openness and the favorable legal framework for foreign investment, Spain has received significant foreign investments in knowledge-intensive activities

New FDI into Spain declined by 54.8 percent in 2019 from its peak in 2018, according to Spain’s Industry, Trade, and Tourism Ministry data. Compared with the average between 2015 and 2017, 2019 was only slightly lower. In 2019, 30.1 percent of total gross investments were investments in new facilities or the expansion of productive capacity, while 34.0 percent of gross investments were in acquisitions of existing companies. In 2019 the United States had a gross direct investment in Spain of EUR 609 million, accounting for 2.7 percent of total investment and representing a decrease of 38.1 percent compared to 2018. U.S. FDI stock in Spain stayed relatively steady between 2013 (USD 33.9 billion) to 2017 (USD 33.1 billion).

Limits on Foreign Control and Right to Private Ownership and Establishment

Spain has a favorable legal framework for foreign investors. Spain has adapted its foreign investment rules to a system of general liberalization, without distinguishing between EU residents and non-EU residents. Law 18/1992, which established rules on foreign investments in Spain, provides a specific regime for non-EU persons investing in certain sectors: national defense-related activities, gambling, television, radio, and air transportation. For EU residents, the only sectors with a specific regime are the manufacture and trade of weapons or national defense-related activities. For non-EU companies, the Spanish government restricts individual ownership of audio-visual broadcasting licenses to 25 percent. Specifically, Spanish law permits non-EU companies to own a maximum of 25 percent of a company holding a digital terrestrial television broadcasting license; and for two or more non-EU companies to own a maximum of 50 percent in aggregate. In addition, under Spanish law a reciprocity principle applies (art. 25.4 General Audiovisual Law). The home country of the (non-EU) foreign company must have foreign ownership laws that permit a Spanish company to make the same transaction.

The Spanish government issued new regulations on foreign investment in March 2020. In Royal Decree-Law 8/2020, subsequently modified by Royal Decree 11/2020, the government prohibited the acquisition by foreign investors of 10 percent or more of companies active in sectors listed below. Purchases of less than 10 percent are also subject to authorization if they result in participation in the control/management of the company.

The sectors covered are:

• critical infrastructures, both physical and virtual (energy, transport, water, healthcare, communications, media, data storage and processing, aerospace, defense, finance, and sensitive installations)
• critical technology and dual-use products;
• essential supplies (energy, hydrocarbons, electricity, raw materials and food);
• sectors with sensitive information such as personal data or with capacity to control such information and;
• the media.

Under these 2020 Royal Decrees, foreign investment in any industry is also required to receive approval beforehand if the foreign investor is controlled directly or indirectly by the government of another country, if the investor has invested or participated in sectors affecting the security, public order, or public health in another EU Member State, or if administrative or judicial proceedings have been initiated against the investor for exercising illegal or criminal activities. Investments under EUR 1 million are exempted, investments between EUR 1 and 5 million follow a simplified procedure.

The Spanish Constitution and Spanish law establish clear rights to private ownership, and foreign firms receive the same legal treatment as Spanish companies. There is no discrimination against public or private firms with respect to local access to markets, credit, licenses, and supplies.

Other Investment Policy Reviews

Spain is a signatory to the convention on the Organization for Economic Co-operation and Development (OECD). Spain is also a member of the World Trade Organization (WTO) and the United Nations Conference on Trade and Development (UNCTAD). Spain has not conducted Investment Policy Reviews with these three organizations within the past three years.

Business Facilitation

To set up a company in Spain, the two basic requirements include incorporation before a Public Notary and filing with the Mercantile Register (Registro Mercantil). The public deed of incorporation of the company must be submitted. It can be submitted electronically by the Public Notary. The Central Mercantile Register is an official institution that provides access to companies’ information supplied by the Regional Mercantile Registers after January 1, 1990. Any national or foreign company can use it but must also be registered and pay taxes and fees. According to the World Bank’s Doing Business report, the process to start a business in Spain should take about two weeks.

“Invest in Spain” is the Spanish investment promotion agency to facilitate foreign investment. Services are available to all investors.

Useful web sites:

• Companies register: http://www.rmc.es/Home.aspx 
• Companies register for the Madrid region: https://www.rmercantilmadrid.com/RMM/Home/Index.aspx 
• More information on the Mercantile Registry: http://www.rmc.es/ 
• Investment promotion agency: http://www.investinspain.org/invest/es/cabecera/faq-s/establecimiento-de-una-empresa/index.html 

Outward Investment

Among the financial instruments approved by the Spanish Government to provide official support for the internationalization of Spanish enterprise are the Foreign Investment Fund (FIEX), the Fund for Foreign Investment by Small and Medium-sized Enterprises (FONPYME), the Enterprise Internationalization Fund (FIEM), and the Fund for Investment in the tourism sector (FINTUR). The Spanish Government also offers financing lines for investment in the electronics, information technology and communications, energy (renewables), and infrastructure concessions sectors.

Investment Incentives

A range of investment incentives exist in Spain, and they vary according to the authorities granting incentives and the type and purpose of the incentives. The national government provides financial aid and tax benefits for activities pursued in certain industries that are considered priority industries (e.g., mining, technological development, research and development, etc.), given these industries’ potential effect on the nation’s overall economy. Regional governments also provide similar incentives for most of these industries. Financial aid includes both nonrefundable subsidies and interest relief on loans obtained by beneficiaries—or combinations of the two.

Since Spain is a European Union (EU) Member State, potential investors are able to access European aid programs, which provide further incentives for investing in Spain. Spain’s central government provides numerous financial incentives for foreign investment, which are designed to complement European Union financing. The Ministry of Economy and Digital Advancement assists businesses seeking investment opportunities through the Directorate General for International Trade and Investments and the Directorate General for Innovation and Competitiveness. These directorates provide support to foreign investors in both the pre- and post-investment phases. Most grants seek to promote the development of select economic sectors; however, while these sectoral subsidies are often preferential, they are not exclusive.

A comprehensive list of incentive programs is available at the website:

www.investinspain.org 

In 2013, Spain passed the “Law of Entrepreneurs,” which established an entrepreneur visa for investors and entrepreneurs. Entrepreneurs may apply for the visa with a business plan that has been approved by the Spanish Commercial Office. Entrepreneurs must also demonstrate the intent to develop the project in Spain for at least one year. Investors who purchase at least EUR 2 million in Spanish bonds or acquire at least EUR 1 million in shares of Spanish companies or Spanish banks deposits may also apply. Foreigners who acquire real estate with an investment value of at least EUR 500,000 are also eligible.

Spain’s 17 regional governments, known as autonomous communities, provide additional incentives for investments in their region. Many are similar to the incentives offered by the central government and the EU, but they are not all compatible. Additionally, some autonomous community governments grant investment incentives in areas not covered by state legislation but which are included in EU regional financial aid maps. Royal Decree 899/2007, of July 6, 2007, sets out the different types of areas that are entitled to receive aid, along with their ceilings. Each area’s specific aspects and requirements (economic sectors, investments which can be subsidized, and conditions) are set out in the Royal Decrees determining the different areas. Most are granted on an annual basis.

Incentives from national, regional or municipal governments and the European Union are granted to Spanish and foreign companies alike without discrimination. The most notable incentives include those aimed at fostering innovation, technological improvement, and research and development projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

Both the mainland and islands (and most Spanish airports and seaports) have numerous free trade zones where manufacturing, processing, sorting, packaging, exhibiting, sampling, and other commercial operations may be undertaken free of any Spanish duties or taxes. Spain’s seven free zone ports are located in Vigo, Cadiz, Barcelona, Santander, Seville, Tenerife, and the Canary Islands—all of which fall under the EU Customs Union, permitting the free circulation of goods within the EU. The entire province of the Canary Islands is a Special Economic Zone (SEZ), offering fiscal benefits that include a reduced corporate tax rate, a reduced Value-Added Tax (VAT) rate, and exemptions for transfer taxes and stamp duties. The Spanish territories of Ceuta and Melilla also offer unique tax incentives; they do not impose a VAT but instead tax imports, production, and services at a reduced rate. Spanish customs legislation also allows companies to have their own free trade areas. Duties and taxes are payable only on those items imported for use in Spain. These companies must abide by Spanish labor laws.

Performance and Data Localization Requirements

Spain does not have performance and localization requirements for investors.

The Spanish Data Protection Agency and the Spanish Police request data from companies, although the companies may refuse unless required by court order.

Spain has a wide variety of laws, regulations, and penalties to address corruption. The legal regime has both civil and criminal sanctions for corruption, bribery, financial malfeasance, etc. Giving or accepting a bribe is a criminal act. Under Section 1255 of the Spanish civil code, corporations and individuals are prohibited from deducting bribes from domestic tax computations. There are laws against tax evasion and regulations for banks and financial institutions to fight money laundering terrorist financing. In addition, the Spanish Criminal Code provides for jail sentences and hefty fines for corporations’ (legal persons) administrators who receive illegal financing.

The Spanish government continues to build on its already strong measures to combat money laundering. After the European Commission threatened to sanction Spain for failing to bring its anti-money laundering regulations in full accordance with the EU’s Fourth Anti-Money Laundering Directive, in 2018, Spain approved measures to modify its money laundering legislation to comply with the EU Directive. These measures establish new obligations for companies to license or register service providers, including identifying ultimate beneficial owners; institute harsher penalties for money laundering offenses; and create public and private whistleblower channels for alleged offenses.

The General State Prosecutor is authorized to investigate and prosecute corruption cases involving funds in excess of roughly USD 500,000. The Office of the Anti-Corruption Prosecutor, a subordinate unit of the General State Prosecutor, investigates and prosecutes domestic and international bribery allegations. The Audiencia Nacional, a corps of magistrates has broad discretion to investigate and prosecute alleged instances of Spanish businesspeople bribing foreign officials.

Spain enforces anti-corruption laws on a generally uniform basis. Public officials are subjected to more scrutiny than private individuals, but several wealthy and well-connected business executives have been successfully prosecuted for corruption. In 2019, Spanish courts conducted 42 corruption cases involving 170 defendants. The courts issued 102 sentences, with 39 including a full or partial guilty verdict.

There is no obvious bias for or against foreign investors. U.S. firms have rarely identified corruption as an obstacle to investment in Spain, although entrenched incumbents have frequently attempted and at times succeeded in blocking the growth of U.S. franchises and technology platforms in both Madrid and Barcelona. As a result, Spain is among the least welcoming countries in Europe for some of the U.S.’s leading technology companies. Although no formal corruption complaints have been lodged, U.S. companies have indicated that they have been disqualified at times from public tenders based on reasons that these companies’ legal counsels did not consider justifiable.

Spain’s rank in Transparency International’s annual Corruption Perceptions Index improved slightly in 2019, with the country climbing to position 30 (from 41 in 2018); however, its overall score (62) is one of the lowest among Western European countries.

Spain is a signatory of the Organization for Economic Co-operation and Development (OECD) Convention on Combating Bribery and the UN Convention Against Corruption. It has also been a member of the Group of States Against Corruption (GRECO) since 1999. The OECD has noted concerns about the low level of foreign bribery enforcement in Spain and the lack of implementation of the enforcement-related recommendations. In a 2019 report, GRECO highlighted that of the group’s 11 recommendations to combat corruption from 2013, only two had been fully implemented, eight had been partly implemented, and one had not been implemented.

Resources to Report Corruption

Ministry of Finance
Alcala, 9
28071 Madrid, Spain
Telephone: +34 91 595 8000
Email: informacion.administrativa@minhap.es
Website: https://ssweb.seap.minhap.es/ayuda/consulta/PTransparencia 

Transparency International
National Chapter – Spain
Fundacion Jose Ortega y Gasset
Calle Fortuny, 53
28010 Madrid, Spain
Telephone: +34 91 700 4105
Email: transparency.spain@transparencia.org.es
Website: http://www.transparencia.org.es/ 

There have been periodic peaceful demonstrations calling for pension increases and other social or economic reforms. Public sector employees and union members have organized frequent small demonstrations in response to service cuts, privatization, and other government measures.

Spain’s unemployment rate fell to 13.8 percent at the end of 2019, down from 14.7 percent at the beginning of the year, and continued its downward trend from a peak of 26.9 percent in 2013. The youth unemployment rate fell to 30.5 percent at the end of 2019, an improvement of almost three percentage points from 2018, but still representing 454,400 unemployed people under the age of 25. Spain’s economically active population totaled 23.1 million people, of whom 19.9 million were employed and 3.2 million unemployed. Foreign nationals represented 12.4 percent of Spain’s workforce in 2019. In 2020, employment numbers worsened significantly due to the global pandemic.

The labor market is mainly divided into permanent workers with full benefits and temporary workers with many fewer benefits. In the event of dismissal for an objective reason (e.g. economic reasons), severance pay is made available to the worker and amounts to 20 days’ wages per year of service with a maximum of 12 months’ wages. A worker dismissed for disciplinary reasons is not entitled to severance pay. For termination of a fixed term contract (either its term expiration or completion of the work), the worker is entitled to a severance payment of 12 days per year of service. Under Spanish Labor law, an employee may bring a claim against the employer for unfair dismissal within 20 days of receiving a termination letter.

Mechanisms for the prevention and resolution of individual labor disputes in Spain are developed by labor laws and alternative dispute resolution (ADR) systems through collective bargaining agreements. Each of Spain’s 17 autonomous communities has a different ADR system at different levels generally dealing with collective disputes. Spanish law stipulates that, before taking individual labor disputes to court in search of a solution, parties must first attempt to reach agreement through conciliation or mediation.

The Spanish Public Employment Service (SEPE) under the Ministry of Employment, and Social Economy administers unemployment benefits called the Contributory Unemployment Protection. This benefit protects those who can and wish to work but become unemployed temporarily or permanently, or those whose normal working day is reduced by a minimum of 10 percent and a maximum of 70 percent.

Collective bargaining is widespread in both the private and public sectors. A high percentage of the working population is covered by collective bargaining agreements, although only a minority (generally estimated to be about 10 percent) of those covered are actually union members. Large employers generally have individual collective agreements, while smaller companies use industry-wide or regional agreements. Business-level agreements currently hold primacy over sectoral and regional agreements. Collective labor agreements must be renegotiated within one year of expiration.

The Constitution guarantees the right to strike, and this right has been interpreted to include the right to call general strikes to protest government policy.

Policies Towards Foreign Direct Investment

The UK encourages foreign direct investment.  With a few exceptions, the government does not discriminate between nationals and foreign individuals in the formation and operation of private companies.  The Department for International Trade actively promotes direct foreign investment, and prepares market information for a variety of industries.  U.S. companies establishing British subsidiaries generally encounter no special nationality requirements on directors or shareholders. Once established in the UK, foreign-owned companies are treated no differently from UK firms.  The British Government is a strong defender of the rights of any British-registered company, irrespective of its nationality of ownership, reflected in the fact that the UK has never had to defend an investment dispute at the level of international arbitration.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign ownership is limited in only a few strategic private sector companies, such as Rolls Royce (aerospace) and BAE Systems (aircraft and defense).  No individual foreign shareholder may own more than 15 percent of these companies.  Theoretically, the government can block the acquisition of manufacturing assets from abroad by invoking the Industry Act of 1975, but it has never done so.  Investments in energy and power generation require environmental approvals. Certain service activities (like radio and land-based television broadcasting) are subject to licensing.  The Enterprise Act of 2002 extends powers to the UK government to intervene in mergers which might give rise to national security implications and into which they would not otherwise be able to intervene.

The UK requires that at least one director of any company registered in the UK be ordinarily resident in the UK.  The UK, as a member of the Organization for Economic Cooperation and Development (OECD), subscribes to the OECD Codes of Liberalization and is committed to minimizing limits on foreign investment.

While the UK does not have a formalized investment review body to assess the suitability of foreign investments in national security sensitive areas, an ad hoc investment review process does exist and is led by the relevant government ministry with regulatory responsibility for the sector in question (e.g., the Department for Business, Energy, and Industrial Strategy would have responsibility for review of investments in the energy sector).  U.S. companies have not been the target of these ad hoc reviews.  The UK is currently considering ways to revise its rules related to foreign direct investment that may implicate UK national security interests. (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/690623/Government_Response_final.pdf ).  The Government has proposed to amend the turnover threshold and share-of-supply tests within the Enterprise Act 2002, in orderto give the Government more leeway to examine and potentially intervene in high-risk mergers that currently fall outside the thresholds in two areas: (i) the dual use and military use sector and, (ii) parts of the advanced technology sector.  For these areas only, the Government proposes to lower the turnover threshold from £70 million ($92 million) to £1 million ($1.3 million) and remove the current requirement for the merger to increase the share of supply to or over 25 percent.

Other Investment Policy Reviews

The Economist’s “Intelligence Unit”, World Bank Group’s “Doing Business 2018”, and the OECD’s “Economic Forecast Summary (May 2019) have current investment policy reports for the United Kingdom:

http://country.eiu.com/united-kingdom 
http://www.doingbusiness.org/data/exploreeconomies/united-kingdom/ 
http://www.oecd.org/economy/united-kingdom-economic-forecast-summary.htm 

Business Facilitation

The UK government has promoted administrative efficiency  to facilitate business creation and operation.  The online business registration process is clearly defined, though some types of company cannot register as an overseas firm in the UK, including partnerships and unincorporated bodies.  Registration as an overseas company is only required when the company has some degree of physical presence in the UK.  After registering their business with the UK governmental body Companies House, overseas firms must separately register to pay corporation tax within three months.  On average, the process of setting up a business in the UK requires thirteen days, compared to the European average of 32 days, putting the UK in first place in Europe and sixth in the world.  As of April 2016, companies have to declare all “persons of significant control.”  This policy recognizes that individuals other than named directors can have significant influence on a company’s activity and that this information should be transparent.  More information is available at this link: https://www.gov.uk/government/publications/guidance-to-the-people-with-significant-control-requirements-for-companies-and-limited-liability-partnerships .  Companies House maintains a free, publicly searchable directory, available at this link: https://www.gov.uk/get-information-about-a-company .  

The UK offers a welcoming environment to foreign investors, with foreign equity ownership restrictions in only a limited number of sectors covered by the World Bank’s Investing Across Sectors indicators.  As in all other EU member countries, foreign equity ownership in the air transportation sector is limited to 49 percent for investors from outside of the European Economic Area (EEA).  It remains to be determined how this will change after the UK leaves the transition period with the EU on December 31, 2020.  https://invest.great.gov.uk/int/ 

https://www.gov.uk/government/organisations/department-for-international-trade 
https://www.gov.uk/set-up-business 
https://www.gov.uk/topic/company-registration-filing/starting-company 
http://www.doingbusiness.org/data/exploreeconomies/united-kingdom/starting-a-business 

Special Section on the British Overseas Territories and Crown Dependencies

The British Overseas Territories (BOTs) comprise Anguilla, British Antarctic Territory, Bermuda, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Falkland Islands, Gibraltar, Montserrat, Pitcairn Islands, St. Helena, Ascension and Tristan da Cunha, Turks and Caicos Islands, South Georgia and South Sandwich Islands, and Sovereign Base Areas on Cyprus.  The BOTs retain a substantial measure of responsibility for their own affairs.  Local self-government is usually provided by an Executive Council and elected legislature.  Governors or Commissioners are appointed by the Crown on the advice of the British Foreign Secretary, and retain responsibility for external affairs, defense, and internal security.  However, the UK imposed direct rule on the Turks and Caicos Islands in August 2009 after an inquiry found evidence of corruption and incompetence.  Its Premier was removed and its constitution was suspended.  The UK restored Home Rule following elections in November 2012.

Many of the territories are now broadly self-sufficient.  However, the UK’s Department for International Development (DFID) maintains development assistance programs in St. Helena, Montserrat, and Pitcairn.  This includes budgetary aid to meet the islands’ essential needs and development assistance to help encourage economic growth and social development in order to promote economic self-sustainability.  In addition, all other BOTs receive small levels of assistance through “cross-territory” programs for issues such as environmental protection, disaster prevention, HIV/AIDS and child protection.

Seven of the BOTs have financial centers:  Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Montserrat, and the Turks and Caicos Islands.  These Territories have committed to the OECD’s Common Reporting Standard (CRS) for the automatic exchange of taxpayer financial account information.  They are already exchanging information with the UK, and began exchanging information with other jurisdictions under the CRS from September 2017.

The OECD Global Forum on Transparency and Exchange of Information for Tax Purposes has rated Anguilla as “partially compliant” with the internationally agreed tax standard.  Although Anguilla sought to upgrade its rating in 2017, it still remains at “partially compliant” as of May 2020.  The Global Forum has rated the other six territories as “largely compliant.”  Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar and the Turks and Caicos Islands have also committed in reciprocal bilateral arrangements with the UK to hold beneficial ownership information in central registers or similarly effective systems, and to provide UK law enforcement authorities with near real-time access to this information.  These arrangements came into effect in June 2017.

Anguilla:  Anguilla is a neutral tax jurisdiction.  There are no income, capital gains, estate, profit or other forms of direct taxation on either individuals or corporations, for residents or non-residents of the jurisdiction.  The territory has no exchange rate controls.  Non-Anguillan nationals may purchase property, but the transfer of land to an alien includes an additional 12.5 percent surcharge.

British Virgin Islands:  The government of the British Virgin Islands welcomes foreign direct investment and offers a series of incentive packages aimed at reducing the cost of doing business on the islands.  This includes relief from corporation tax payments over specific periods but companies must pay an initial registration fee and an annual license fee to the BVI Financial Services Commission.  Crown land grants are not available to non-British Virgin Islanders, but private land can be leased or purchased following the approval of an Alien Land Holding License.  Stamp duty is imposed on transfer of real estate and the transfer of shares in a BVI company owning real estate in the BVI at a rate of 4 percent for belongers (i.e., residents who have proven they meet a legal standard of close ties to the territory) and 12 percent for non-belongers.  There is no corporate income tax, capital gains tax, branch tax, or withholding tax for companies incorporated under the BVI Business Companies Act.  Payroll tax is imposed on every employer and self-employed person who conducts business in BVI.  The tax is paid at a graduated rate depending upon the size of the employer.  The current rates are 10 percent for small employers (those which have a payroll of less than $150,000, a turnover of less than $300,000 and fewer than 7 employees) and 14 percent for larger employers.  Eight percent of the total remuneration is deducted from the employee, the remainder of the liability is met by the employer.  The first $10,000 of remuneration is free from payroll tax.

Cayman Islands:  There are no direct taxes in the Cayman Islands.  In most districts, the government charges stamp duty of 7.5 percent on the value of real estate at sale; however, certain districts, including Seven Mile Beach, are subject to a rate of nine percent.  There is a one percent fee payable on mortgages of less than KYD 300,000, and one and a half percent on mortgages of KYD 300,000 or higher.  There are no controls on the foreign ownership of property and land.  Investors can receive import duty waivers on equipment, building materials, machinery, manufacturing materials, and other tools.

Falkland Islands:  Companies located in the Falkland Islands are charged corporation tax at 21 percent on the first GBP one million and 26 percent for all amounts in excess of GBP one million.  The individual income tax rate is 21 percent for earnings below $15,694 (GBP 12,000) and 26 percent above this level.

Gibraltar:  The government of Gibraltar encourages foreign investment.  Gibraltar has a stable currency and few restrictions on moving capital or repatriating dividends.  The corporate income tax rate is 20 percent for utility, energy, and fuel supply companies, and 10 percent for all other companies.  There are no capital or sales taxes.  Gibraltar is unique among British Overseas Territories in having been a part of the European Union’s single market,    Gibraltar left the EU with the rest of the UK and its final status is currently subject to negotiations between the UK and Spain.

Montserrat:  The government of Montserrat welcomes new private foreign investment.  Foreign investors are permitted to acquire real estate, subject to the acquisition of an Alien Land Holding license which carries a fee of five percent of the purchase price.  The government also imposes stamp and transfer fees of 2.6 percent of the property value on all real estate transactions.  Foreign investment in Montserrat is subject to the same taxation rules as local investment, and is eligible for tax holidays and other incentives.  Montserrat has preferential trade agreements with the United States, Canada, and Australia.  The government allows 100 percent foreign ownership of businesses but the administration of public utilities remains wholly in the public sector.

St. Helena:  The island of St. Helena is open to foreign investment and welcomes expressions of interest from companies wanting to invest.  Its government is able to offer tax based incentives which will be considered on the merits of each project – particularly tourism projects.  All applications are processed by Enterprise St. Helena, the business development agency.

Pitcairn Islands:  The Pitcairn Islands have approximately 50 residents, with a workforce of approximately 29 employed in 10 full-time equivalent roles.  The territory does not have an airstrip or safe harbor.  Residents exist on fishing, subsistence farming, and handcrafts.

The Turks and Caicos Islands:  The islands operate an “open arms” investment policy.  Through the policy, the government commits to a streamlined business licensing system, a responsive immigration policy to give investment security, access to government-owned land under long-term leases, and a variety of duty concessions to qualified investors.  The islands have a “no tax” status, but property purchasers must pay a stamp duty on purchases over $25,000.  Depending on the island, the stamp duty rate may be up to 6.5 percent for purchases up to $250,000, eight percent for purchases $250,001 to $500,000, and 10 percent for purchases over $500,000.

The Crown Dependencies:

The Crown Dependencies are the Bailiwick of Jersey, the Bailiwick of Guernsey and the Isle of Man.  The Crown Dependencies are not part of the UK but are self-governing dependencies of the Crown.  This means they have their own directly elected legislative assemblies, administrative, fiscal and legal systems and their own courts of law.  The Crown Dependencies are not represented in the UK Parliament.

Jersey has a  zero percent standard rate of corporate tax .  The exceptions to this standard rate are financial service companies, which are taxed at 10 percent, utility companies, which are taxed at 20 percent, and income specifically derived from Jersey property rentals or Jersey property development, taxed at 20 percent.  VAT is not applicable in Jersey as it is not part of the EU VAT tax area.

Guernsey has a zero percent rate of corporate tax.  Exceptions include some specific banking activities, taxed at 10 percent, utility companies, which are taxed at 20 percent, Guernsey residents’ assessable income is taxed at 20 percent, and income derived from land and buildings is taxed at 20 percent.

The Isle of Man’s corporate standard tax is zero percent.  The exceptions to this standard rate are income received from banking business, which is taxed at 10 percent and income received from land and property in the Isle of Man which is taxed at 20 percent.  In addition, a 10 percent tax rate also applies to companies who carry on a retail business in the Isle of Man and have taxable income in excess of £500,000 from that business.  VAT is applicable in the Isle of Man as it is part of the EU customs territory.

The tax data above are current as of April 2020.

Outward Investment

The UK remains one of the world’s largest foreign direct investors, currently ranked fourth.  The UK’s international investment position abroad (outward investment) increased from GBP 1,713.3 billion in 2018 to GBP 1,857.7 in 2019, dropping to .   GBP 1,805 billion by the end of 2019.  The main destination for UK outward FDI is the United States, which accounted for approximately 21 percent of UK outward FDI  at the end of 2018.  Other key destinations include the Netherlands, Luxembourg, France, and Spain which, together with the United States, account for a little under half of the UK’s outward FDI stock.

The UK’s international investment position within the Americas was GBP 419.7 billion in 2018.  This is the largest recorded value in the time series since 2009 for the Americas.

Investment Incentives

The UK offers a range of incentives for companies of any nationality locating in economically depressed regions of the country, as long as the investment generates employment.  DIT works with its partner organizations in the devolved administrations – Scottish Development International, the Welsh Government and Invest Northern Ireland – and with London and Partners and Local Enterprise Partnerships (LEPs) throughout England, to promote each region’s particular strengths and expertise to overseas investors.

Local authorities in England and Wales also have power under the Local Government and Housing Act of 1989 to promote the economic development of their areas through a variety of assistance schemes, including the provision of grants, loan capital, property, or other financial benefit.  Separate legislation, granting similar powers to local authorities, applies to Scotland and Northern Ireland.  Where available, both domestic and overseas investors may also be eligible for loans from the European Investment Bank.

Foreign Trade Zones/Free Ports/Trade Facilitation

The cargo ports and freight transportation ports at Liverpool, Prestwick, Sheerness, Southampton, and Tilbury used for cargo storage and consolidation are designated as Free Trade Zones.  No activities that add value to commodities are permitted within the Free Trade Zones, which are reserved for bonded storage, cargo consolidation, and reconfiguration of non-EU goods.  The Free Trade Zones offer little benefit to U.S. exporters or investors, or any other non-EU exporters or investors.  Questions remain as to whether the UK will continue to employ Free Trade Zones and Free Ports in a post-Brexit environment.

Performance and Data Localization Requirements

The UK does not mandate “forced localization” of data and does not require foreign IT firms to turn over source code.  The Investigatory Powers Act became law in November 2016 addressing encryption and government surveillance.  It permitted the broadening of capabilities for data retention and the investigatory powers of the state related to data.

As of May 2018, companies operating in the UK comply with the EU General Data Protection Regulation.  The UK presently intends to transpose the requirements of the GDPR into UK domestic law after the UK withdraws from the EU.  The impact of the UK leaving the EU on the free flow of data between the EU and the UK, and the UK and United States, is unknown at this time.  The UK Government does not mandate local employment, though at least one director of any company registered in the UK must be ordinarily resident in the UK.

Immigration rules (HC1888) that came into effect on April 6, 2012 have wide-ranging implications for foreign employees, primarily affecting businesses looking to sponsor migrants under Tier 2 as well as migrants looking to apply for settlement in the UK.  In particular, the UK Government has introduced a 12-month cooling off period for Tier 2 (General) applications similar to the one that is currently in place for Tier 2 (Intra-company transfer).  The effect of this is that, while those who enter the UK under Tier 2 (General) to work for one company will be able to apply in-country under Tier 2 (General) to work for another company, if they leave the UK, they will not be able to apply to re-enter the UK under a fresh Tier 2 (General) permission until twelve months after their previous Tier 2 (General) permission has expired.

In addition, those who enter the UK under Tier 2 (Intra-company transfer)  will not be able to change their status in-country to Tier 2 (General) under any circumstances.  If they leave the UK, they will also not be able to apply to enter the UK under Tier 2 (General) until 12 months after their previous Tier 2 (Intra-company transfer) permission has expired.

Where an individual is sent to the UK on assignment under Tier 2 (Intracompany transfer), and the sponsoring company subsequently wishes to hire them permanently in the UK, they will not be able to apply either to remain in the UK under Tier 2 (General) or leave the UK and submit a Tier 2 (General) application overseas.

This  means that employers must carefully consider the long-term plans for all assignees that they send to the UK and whether Tier 2 (Intracompany transfer) is the most appropriate category.  This is because, if the assignee is subsequently required in the UK on a long-term basis, it will not be possible for them to make a new application under Tier 2 (General) until at least twelve months after their Tier 2 (Intra-company transfer) permission has expired.

In 2016, the British government updated requirements for Tier 2 visas by increasing the Tier 2 minimum salary threshold to GBP 30,000 for experienced workers.  This change was phased in, with the minimum threshold increased to GBP 25,000 in fall 2016 and to GBP 30,000 in April 2017.  Employers will continue to be able to recruit non-EEA graduates of UK universities without first testing the resident labor market and without being subject to the annual limit on Tier 2 (General) places, which will remain at 20,700 places per year.  From April 2017, extra weighting was added within the Tier 2 (General) limit where the allocation of places is associated with the relocation of a high-value business to the UK or, potentially, supports an inward investment.  It also waived the resident labor market test for these applications.

Although isolated instances of bribery and corruption have occurred in the UK, U.S. investors have not identified corruption of public officials as a factor in doing business in the UK.

The Bribery Act 2010 came into force on July 1, 2011.  It amends and reforms the UK criminal law and provides a modern legal framework to combat bribery in the UK and internationally.  The scope of the law is extra-territorial.  Under the Bribery Act, a relevant person or company can be prosecuted for bribery if the crime is committed abroad.  The Act applies to UK citizens, residents and companies established under UK law.  In addition, non-UK companies can be held liable for a failure to prevent bribery if they do business in the UK.

Section 9 of the Act requires the UK Government to publish guidance on procedures that commercial organizations can put in place to prevent bribery on their behalf.  It creates the following offenses: active bribery, described as promising or giving a financial or other advantage, passive bribery, described as agreeing to receive or accepting a financial or other advantage; bribery of foreign public officials; and the failure of commercial organizations to prevent bribery by an associated person (corporate offense).  This corporate criminal offense places a burden of proof on companies to show they have adequate procedures  in place to prevent bribery (http://www.transparency.org.uk/our-work/business-integrity/bribery-act/adequate-procedures-guidance/ ).  To avoid corporate liability for bribery, companies must make sure that they have strong, up-to-date and effective anti-bribery policies and systems.  The Bribery Act creates a corporate criminal offense making illegal the failure to prevent bribery by an associated person.  The briber must be “associated” with the commercial organization, a term which will apply to, amongst others, the organization’s agents, employees, and subsidiaries.  A foreign corporation which “carries on a business, or part of a business” in the UK may therefore be guilty of the UK offense even if, for example, the relevant acts were performed by the corporation’s agent outside the UK.  The Act does not extend to political parties and it is unclear whether it extends to family members of public officials.

UN Anticorruption Convention, OECD Convention on Combatting Bribery 

The UK formally ratified the OECD Convention on Combating Bribery in December 1998.  The UK also signed the UN Convention Against Corruption in December 2003 and ratified it in 2006.  The UK has launched a number of initiatives to reduce corruption overseas.  The OECD Working Group on Bribery (WGB) criticized the UK’s implementation of the Anti-Bribery convention.  The OECD and other international organizations promoting global anti-corruption initiatives pressured the UK to update its anti-bribery legislation which was last amended in 1916.  In 2007, the UK Law Commission began a consultation process to draft a Bribery Bill that met OECD standards.  A report was published in October 2008 and consultations with experts from the OECD were held in early 2009.  The new Bill was published in draft in March 2009 and adopted by Parliament with cross-party support as the 2010 Bribery Act in April 2010.

Resources to Report Corruption 

UK law provides criminal penalties for corruption by officials, and the government routinely implements these laws effectively.  The Serious Fraud Office (SFO) is an independent government department, operating under the superintendence of the Attorney General with jurisdiction in England, Wales, and Northern Ireland.  It investigates and prosecutes those who commit serious or complex fraud, bribery, and corruption, and pursues them and others for the proceeds of their crime.

All allegations of bribery of foreign public officials by British nationals or companies incorporated in the United Kingdom—even in relation to conduct that occurred overseas—should be reported to the SFO for possible investigation.  When the SFO receives a report of possible corruption, its intelligence team makes an assessment and decides if the matter is best dealt with by the SFO itself or passed to a law enforcement partner organization, such as the Overseas Anti-Corruption Unit of the City of London Police (OACU) or the International Corruption Unit of the National Crime Agency.  Allegations can be reported in confidence using the SFO’s secure online reporting form: https://www.sfo.gov.uk/contact-us/reporting-serious-fraud-bribery-corruption/ . 

Details can also be sent to the SFO in writing:

SFO Confidential
Serious Fraud Office
2-4 Cockspur Street
London, SW1Y 5BS
United Kingdom

The UK is politically stable but continues to be a target for both domestic and global terrorist groups.  Terrorist incidents in the UK have significantly decreased in frequency and severity since 2017, which saw five terrorist attacks that caused 36 deaths.  In 2019, the UK suffered one terrorist attack resulting in three deaths (including the attacker), and another two attacks in early 2020 caused serious injuries and resulted in the death of one attacker.  In November 2019, the UK lowered the terrorism threat level to substantial, meaning the risk of an attack was reduced from “highly likely” to “likely.”  UK officials categorize Islamist terrorism as the greatest threat to national security, though officials identify a rising threat from racially or ethnically motivated extremists, which they refer to as “extreme right-wing” terrorism.  Since March 2017, police and security services have disrupted 15 Islamist and seven extreme right-wing plots.

Environmental advocacy groups in the UK have been involved with numerous protests against a variety of business activities, including: airport expansion, bypass roads, offshore structures, wind farms, civilian nuclear power plants, and petrochemical facilities.  These protests tend not to be violent but can be disruptive, with the aim of obtaining maximum media exposure.

Brexit has waned as a source of political instability.  Nonetheless, the June 2016 EU referendum campaign was characterized by significant polarization and widely varying perspectives across the country.  Differing views about what should be the terms of the future UK-EU relationship continue to polarize political opinion across the UK.  The people of Scotland voted to remain in the EU and Scottish political leaders have indicated that the UK leaving the EU may provide justification to pursue another Referendum on Scotland leaving the UK.  A failure to fully implement the Withdrawal Agreement could contribute to political and sectarian tensions in Northern Ireland.

The process of Brexit itself has been politically fraught.  The UK was originally due to leave the EU on March 29, 2019, but then-Prime Minister (PM) Theresa May and her successor Boris Johnson had to ask for four delays in total as they both were unable to bring together a majority in the House of Commons to ratify the Withdrawal Agreement setting out the terms of the UK’s departure from the bloc.  The prolonged political paralysis resulted in an early General Election on December 12, 2019, which gave PM Johnson a solid 80-seat majority in the House of Commons and a clear mandate to press ahead with the UK’s withdrawal from the EU.  The UK formally departed the bloc on January 31, 2020, following the ratification of the Withdrawal Agreement, and entered a transition period during which the country is effectively still a member of the EU without voting rights, while continuing talks on its long-term future economic and security arrangements with the bloc.  The transition is currently scheduled to end on December 31, 2020, and HMG has categorically ruled out any extension.  The challenging timeline for negotiating an agreement of such breadth and complexity makes the prospect of no deal at the end of the transition period a real possibility at the time of writing.

Both main political parties have recently tacked in a less business-friendly direction.  The Conservative Party, traditionally the UK’s pro-business party, was, until the COVID-19 pandemic, focused on implementing Brexit, a process many international businesses oppose because they expect it to make trade in goods, services, workers, and capital with the UK’s largest trading partners more problematic and costly, at least in the short term.  In addition, the Conservative Party has implemented a Digital Services Tax (DST), a 2% tax on the revenues of predominantly American search engines, social media services and online marketplaces which derive value from UK users.  The DST has delayed a reduction in the Corporation Tax rate from 19 percent to 17 percent.  The Conservative Party also intends to limit and reduce international immigration, an issue that was a main driver of the UK’s vote to leave the EU.  The opposition Labour Party, until a resounding electoral loss in December 2019, was led by Jeremy Corbyn MP and Chancellor John McDonnell MP, who promoted policies opposed by business groups including laws that would give employees and shareholders the right to a binding vote on executive remuneration, make trade union rights stronger and more expansive, increase corporation tax, and nationalize utility companies.  The Labour Party’s new leader, former Brexit Shadow Secretary, Sir Keir Starmer MP, although widely acknowledged to be more economically centrist, has proposed few policies as the UK’s political system contends with the COVID-19 crisis.

The UK’s labor force is just over 41 million people. For the period between December 2019 and February 2020, the employment rate was 76.6 percent, with 33 million workers employed – the highest employment rate since 1971. Unemployment also hit a 43-year low with 1.36 million unemployed workers, or just 4 percent (no change from a year earlier).

The most serious issue facing British employers is a skills gap derived from a high-skill, high-tech economy outpacing the educational system’s ability to deliver work-ready graduates.  The government has improved the British educational system in terms of greater emphasis on science, research and development, and entrepreneurial skills, but any positive reforms will necessarily deliver benefits with a lag.

As of 2018, approximately 23.5 percent of UK employees belonged to a union.  Public-sector workers have a much higher share of union members, at 52.5 percent, while the private sector is 13.2 percent.  Manufacturing, transport, and distribution trades are highly unionized. Unionization of the workforce in the UK is prohibited only in the armed forces, public-sector security services, and police forces.  Union membership has been relatively stable in the past few years, although the trend has been downward over the past decade.

Once-common militant unionism is less frequent, but occasional bouts of industrial action, or threatened industrial action, can still be expected.  Recent strike action was motivated in part by the Coalition Government’s deficit reduction program impacts on highly unionized sectors.  In the 2018, there were 273,000 working days lost from 81 official labor disputes.  The Trades Union Congress (TUC), the British nation-wide labor federation, encourages union-management cooperation as do most of the unions likely to be encountered by a U.S. investor.

On April 1, 2020, the UK raised the minimum wage to GBP 8.72 ($10.86) an hour for workers ages 25 and over.  The increased wage impacts about 2 million workers across Britain.

The UK decision to leave the EU has also introduced uncertainty into the labor market, with questions surrounding the rights of workers from other EU countries currently in the UK, the future rights of employers to hire workers from EU countries, and the extent to which the UK will maintain EU rules on workers’ rights.

The 2006 Employment Equality (Age) Regulations make it unlawful to discriminate against workers, employees, job seekers, and trainees because of age, whether young or old.  The regulations cover recruitment, terms and conditions, promotions, transfers, dismissals, and training.  They do not cover the provision of goods and services.  The regulations also removed the upper age limits on unfair dismissal and redundancy.  It sets a national default retirement age of 65, making compulsory retirement below that age unlawful unless objectively justified.  Employees have the right to request to work beyond retirement age and the employer has a duty to consider such requests.