Poland’s Central Register of Beneficial Owners – help in the maze for foreign-owned businesses


For all businesses and also some non-business organisations in Poland now, there is a new obligation, namely to identify the real ultimate beneficial owners (“UBO”s) onto a central public register. In Polish this is called Centralny Rejestr Beneficjentów Rzeczywistych which is easy for them to say, but not so easy for us, so the form CRBR is an acceptable abbreviation. Literally this means “Central Register of Real Beneficiaries” but we would normally say “Beneficial Owners” or “Ultimate Beneficial Owners” or just UBOs which is like a UFO, but more “boring” than “flying”, unless of course you own something quite valuable, in which case it is not boring at all.

This was all enacted last year with an initial deadline of 13th May 2020 which has now, because of the pandemic, been set back to 13th July 2020, and may well need to be set back further, however at the time of writing the deadline is STILL 13th July 2020, which is a Monday.

The initiative became law by way of enacting an EU Directive on combatting money laundering which goes right back to 2015. This however is a text-book example if you need one, for how the international standard or law in organisations like the EU (not only the EU, but here it has tended to show up the most) is set and then member states have a degree of leeway in how they then put this into local law. There is usually a minimalist approach, but Poland somehow usually manages to show that it is well ahead of the curve by enacting something which is at the top end of how rigorous and bureaucratic it can be, with major penalties, with no real guidance as to how those penalties would be scaled and assessed, without making even logical exceptions (for instance, if the details already published in the KRS – Polish Companies House equivalent – are already public, up-to-date and accurate as a reflection of UBO the you’re exempt, but no, they didn’t do that. And they didn’t exempt even quoted companies which even Russia did when they enacted a version of UBO law which was seen as pretty strict back in 2015).

Part of the interface with the Government portal, which is only available in Polish even though there is no exemption for foreign businesses, moreover it is mainly intended for them. Thankfully, help is at hand…

So this is a great example of how the Polish authorities ride roughshod over business people in order to flex the muscles of the public sector and the state over the private sector muggins who pay for them to do it. They know full well that the business world, which remains in fear and thrall as in the days of yore, will do as they are told, and so they don’t worry too much. There is a computer interface, you have to use that, and you must use your company representative who is entitled to represent you as per the KRS (at which point you say, well if you do look in the KRS then you know that the UBOs are there already, but the answer is “we know what is on the KRS but we don’t know if these are not just nominees, and anyway it was the EU who told us to do this so just do it”).

The matter will be a minor chore for the majority of Polish businesses, but not even all of them. The problem they may have is the interface and the fact that when it comes to signing you need and electronic signature in the form of an ePUAP or a qualified signature, and even though official representatives of Companies are supposed to have these already, in fact they have not all done so, and those who have done so are still not very fluent in their use as they need to use them maybe once or twice a year, so this becomes a bit like expecting someone who goes to Church at Passover and Yom Kippur for weddings and funerals only, say the Nicene Creed and the First Surah from memory and in the original languages when very few people even speak Nicene these days.

Then you get people like us auditors who are using these things most weeks now, but we cannot just go in and do it for you, because it’s: a) not allowed and b) rendered impossible anyway by the very nature of electronic signing. Now imagine how more complex this is going to be for a foreign business especially if the Board are all non-Polish speakers and there is no Polish-speaking general proxy on the KRS or nobody on the KRS who can represent the company has an official electronic signature. Moreover the file has to be in a specific XML format, you cannot just hand in paper or even a pdf. The rules about what constitutes beneficial interest and how you measure it for various business cases are in a series of FAQs which are untranslated or badly translated.

And oh, I forgot to mention, the penalty for failure to do this by the deadline is, at least theoretically, PLN 1 million.

So, this means in practice, even though I know that a lot of UK-owned and other foreign-owned companies in Poland will be fretting about this, neither I no any other advisor, can come to you and say “hey that’s fine just hand it all over and we’ll do that for you and here’s my bill which is all you need to handle”. What can be done then, meaningfully?

Well, folk like me, UK Chartered Accountants in Poland should be able to (and I definitely am able to) provide a CRBR Walk-Through Service with the following elements:

 

  1. Feasibility check
    Talk to you beforehand to find out in your own language (I’m happy to do this in English, German, Russian, Polish and French) what your situation is regarding the representation, if the people have their PESEL or not, the ePUAP or qualified signature and make sure you are going to be able to make deadline without additional legal actions such as changes to the KRS. These might take a month or more if needed as there are several steps, and may even involve travel in this tough time, so there is no time to waste for that procedure if it’s needed now. If we identify that that’s needed you can take it to your usual company lawyer or I’ll get my own team on it, your choice. This stage may involve checking that you have a valid sig and remember your password to it. In no case will I ask for or see this password.
  2. Information gathering
    Talk through the situation re what the Ultimate Beneficial Owner profile is in your Company and how to apply the rules, again in your language, from the list above. If it’s not a typical situation so that research is needed, again you wouldn’t want to leave that to the last minute. In most cases it isn’t, but if you have situations where there are complex groups and offshore structures it can be difficult. (By the way, don’t trouble me if your purpose is to actually do money laundering and get around the law and keep people secret. I have no interest on helping anyone who does this and will not do so, as stated elsewhere on this site. I don’t like reporting people as I do not like to think of myself as an arm of the state, but please do not even put me into that dilemma, just go and find someone desperate enough to assist you.   However,  as long as you do want to obey the spirit of this law and play fair, and are simply interested in knowing how to do so in a complex situation, then I am happy to involve myself).
  3. Prep the XML, then enter it with you talking through the process
    Based on the info in 1 and 2, I can go in and prepare the XML file and send it to you, then we talk again and with share screen I show you how to add the XML file, and then go through the signature process if you have doubts about it. Then I explain about taking and keeping the file which proves you have done this and also check that the register now shows what we think it should given the information gathering in part 2.
  4. Concurrent health-check in KRS
    While we are about it we can check that the filings in the KRS look in order and up-to-date and if not what needs to be done.

 

Depending on complexity, I would expect to be able to help you with that walk-through approach as per the above steps for between £200 and £500, depending on complexity, paid half in advance, half on completion. As I mentioned, you don’t have to be a UK or Irish or other Anglosphere business, but if you need the service and speak English, French, German, or Russian, then I can help make sure this is done and keep you safe from the rather draconian fine they are waving in the faces of decent business people.If you are interested in this walk-through service and would like to know more, please fill in the below form and submit it.

 

Monopoly the way we know it is not much of a game…


A German Monopoly board in the middle of a gam...
Monopoly - the only game in town

In Monopoly, whichever player is banker is supposed to keep the bank money separate to the money he’s also doing business with in the market. He’s also supposed to run the bank according to certain rules and if he was cheating it’d be game over. They should bring out a new version of Monopoly in which the Banker is allowed to cheat all he likes and always automatically wins, and another player is called The Government and that player chooses from the Chance and Community Chest cards for the other players instead of just getting them to take the next one in a shuffled pack. The Government cannot only do it to the banker – they automatically give the Banker the best card. Banker and Government get to throw three dice instead of two, and they are also allowed to compulsorily purchase other player’s properties, and also send them to Jail for two turns if they complain about the unfairness of the rules.

That modern update to the famous board game would be most enlightening. Nobody would play it given the choice, but in reality of course we don’t really have a choice. After all, there’s a monopoly of government in any country and there’s an oligopoly of banks.

Liability of Polish company Management Board members – TGC Legal Alert


Warsaw skyline from Pole Mokotowskie
Warsaw Skyline - TGC's new office is near the left side.
 
 TGC corporate lawyers have sent in the following reminder of legal responsibilities of directors in Poland that are often overlooked. Please take a moment to ensure you know the following if it impacts on you.
Dear Quoracy.com subscribers,We would like to draw your attention to the liability of members of the management board in Polish companies, as regulated by a number of legal acts. Management board members bear civil liability, criminal liability, liability for tax obligations, liability to the Social Insurance Office and liability resulting from specific provisions (e.g. resulting from the Accounting Act – Journal of Laws of 2009, no. 152, position 1223).According to the provisions of the Commercial Companies Code (Journal of Laws of 2000, no. 94, position 1037) members of the management board bear civil liability for actions taken on behalf of the company already at the stage of establishment of the company, i.e. from the date of signing of articles of incorporationof the company. This applies even before registration of the company with the State Court Register.It should be noted that members of the management board bear civil liability towards the company, among other things, for any damages inflicted upon the company in result of the management board members’ activities or omissions contrary to the articles of incorporation. Furthermore, they are jointly and severally liable for the company’s liabilities when enforcement proceedings against the company have proven ineffective.

Criminal liability of members of the management board arises as a result of a property damage caused to the company.

Apart from civil and criminal liability, members of the management board are jointly and severally liable for tax arrears, as well as for lack of (timely) payment of contributions to social insurance. It has to be noted that this type of liability lasts even after deletion of the company from the State Court Register.

In most cases members of the management board may protect themselves against responsibility for the company’s liabilities on condition that they undertake appropriate preventive activities in due time.

We will be happy to give you any detailed information with regard to the liability of the management board members, as well as circumstances of release of the liability.

For further information please contact our expert:

Agata Pastuchow-Brzezińska
Director of Corporate Department
T: +48 22 653 3649
E: apastuchow

TGC Corporate Lawyers
ul. Królewska 27
00-060 Warsaw, Poland
T: +48 22 653 3644
F: +48 22 827 6915
E: tgc
W: http://www.tgc.eu

We are moving!From 1st May 2011our new Warsaw office address and phone numbers will be:Crown Tower
ul. Hrubieszowska 2, 01-209 WarsawTelephone: +48 22 295 3300
Fax: +48 22 295 3301

It pays to avoid the BBBs (Bargain Basement Bookkeepers)


Violent Storm Strikes Western Europe
Is a storm brewing over your books and records?

I am writing to relate a story based on true events which came to light last week when one gentleman came into one of our offices and spoke to me. To keep matters confidential, I won’t say the country – the same can happen in any country – or identify anything about this company the gentleman had – even the sector. It can happen to many sectors.

This gentleman had given his company bookkeeping and tax affairs to an outsourced book-keeper for his business in that particular country. He used outsourcing back home in his own country (I’m not saying where that is either) and he appreciated the benefit of being able to have his bookkeeping professionally handled by experts without needing to employ anyone, worry about holiday cover, etc etc.

Some time ago this gentleman had included our firm in his search, and we gave him a price entirely fair for a company with our niche in the market, that is, internationally trained people, with English, with proper quality assurance, supervision and back-up.  In other words,  a peer-reviewed, branded service tailored absolutely to the needs of West European businesses in the middle tier coming to start up in East Europe, and also very good for businesses not exactly in the middle tier and from places outside West Europe.

That means that the fee offered was not nearly as high as a Big Four service would cost, but certainly higher than a purely local service.

Now I’m not knocking the purely local services – many of them are very good, but for purely local clients as they don’t tend to be claiming proficiency in foreign languages or have the ability to engage cross-culturally with the client (a source of just as many miscommunications as the language barrier on its own). They are not a great fit with the international client, and often their cheaper price becomes a false economy as frustrations rise on both sides of the desk.

The problem in this case wasn’t lack of English – this gentleman’s chosen bookkeeper spoke English, apparently.

But she was in business just on her own. With no back-up employees, probably very little insurance, probably very few resources to turn to, and very few overheads hence enabling a price no quality firm could ever compete with. That was the price that tempted this gentleman to take her bid over mine.

But since then, it became apparent that this bookkeeper was not entirely what she seemed to be.

Neither this gentleman nor myself are qualified psychiatrists, and we could only speculate on what might have gone wrong, or been wrong all along with this person. The fact is, though, that mental illness happens in the human population. We’ve probably all had employees or acquaintances who have had a mental illness, and in a larger company they quickly get noticed by colleagues, and steps taken to look after them and safeguard the clients’ affairs. When they are on their own, no such controls exist.

Suffice it to say this lady no longer was answering emails or picking up the telephone when he was calling, and when he rang from another number she didn’t know, she put the phone down when she heard his voice – the person entrusted with his company’s books and records and processing a VAT reclaim for more money than she would normally earn in many years. As you can see, the situation is now much harder – and therefore more costly – for us to repair than if he had simply given us the work in the first place.

It simply doesn’t pay to use these Bargain Basement Bookkeepers. You know what you get if you pay peanuts, and if a price looks too good to be true, it probably is.

Domain names scam – what to do if affected


World Map Politic 2005 with ccTLDs - LQ version
CCTLD map from Wikipedia

You may have received e-mail (especially from Chinese and Hong Kong companies relating to .cn domains bearing your name if you didn’t register in China, but now more commonly in East Europe also) which says that if you use these people’s services they can prevent your name’s domain in that country from getting blocked.

Now this email gets sent out all over the world to addresses harvested from the internet page and chats and from usenet fora by robots, and of course the people behind the email cannot really afford to block every single domain that they are fishing for.  The one sure fire way of making sure that they do block your domain is if you respond to them, whether with threats or with asking for the help, even in terms of “what it would cost”. I suggest you only do this if you don’t want the domain really and have no intention of buying it, as if you are lucky it will lead the scammers into real cash outlay which they’ll never see any return on. I highly encourage that! Maybe some of these pests will stop it if they see that enough internet users are wise to them and don’t mind leading them up a garden path…

You can always search here on EuroDNS (in the interests of transparency that affiliate link earns 10% of anything you buy after you go there, but it shouldn’t cost you more and it’s the service I use myself) and see what the status is of all of your possible combinations of your name and the country endings or generic endings, as well as check the Whois status of all these countries, both Europe and Asia, all in one place. You will probably find that nobody has blocked your domain at all, and if you are interested in owning the domain you can block it there and then. They are ethical and I never had a problem with them that the owner didn’t solve within a week. If they are not contactable one day you can usually get them the next day. Continue reading “Domain names scam – what to do if affected”

So you want to start a business in the Czech Republic? What do you set up, a Company or a Branch?


The main considerations are grouped under headings

LEGAL

• The scope of business of the branch may not be broader than the scope of business of the foreign entity.

• The branch must publish the financial statements of the foreign company in the registry of documents kept by the Commercial Register, which effectively means getting the whole report of the company the branch is part of and translating it into Czech, and publicising it even if the accounts were not liable to be made public in the jurisdiction of the Company.

ACCOUNTING

• In general the same statutory obligations apply for both branch and legal entity from accounting and financial reporting point of view, i.e. every corporate entity doing business in Czech Republic must keep the books in Czech language and must file the financial statements to the Commercial Register.

• The only difference we can see is that the statutory financial statements of branch are to be incorporated into the statutory accounts of the founder whereas in case of legal entity financial statements stands alone and the financial asset (i.e. investment in the subsidiary) is to be shown in the accounts of the parent company.  Branches do not really have separate equity, as they are not legal persons, but in order for the balance sheet to balance the capital employed needs to be shown as if they were, on a pro-forma basis. Likewise purchases of goods by the branch from the company it is part of is legal nonsense, as there is no tranfer of ownership to a branch, but still in order to give a picture of the performance of the branch as well as to be above board with regard to international transfer pricing, again branch accounts should be done with these intra-company “sales” and “purchases” included as pro forma. Remember that the branch has its own tax life in the country where it is.

AUDIT

• The same statutory obligations apply for both branch and legal entity to have its accounts audited.

• The general rules are as follows:

1) joint stock companies One of the following criterions is met for two consecutive accounting periods: a) gross assets of 40.000K CZK b) revenues of 80.000K CZK c) average number of employees over 50.

2) other legal entities (limited liability companies, branches, etc.) Two of three above criterions are met for two consecutive accounting periods.

 TAX

• From the Czech corporate taxation point of view the branch must register for corporate income tax only if having taxable income in the Czech Republic through a permanent establishment, the legal entity must register in any case.

• In case of the branch the income and costs need to be allocated to branch activities, however keeping in mind transfer pricing and substance-over-form principle that are applicable under both structures, i.e. under both branch and legal entity constructs.

• Profits/losses will be included in profits of the founder of the branch taking into consideration double taxation reliefs.

• From the VAT perspective in case of the branch the VAT payer is actually the headquarter that has Czech VAT registration while in case of the legal entity it is actually the entity itself being Czech VAT payer.

• Profit repatriation in the case of the legal entity must be taken into account, however, if the parent company being an EU entity with more than 10% shareholding for more than 12 months dividend payments are tax exempt.

  Subsidiary Branch
Tax registration obligatory Only if taxable income from sources in the Czech Republic
Tax at operational level 19% CIT 19% CIT
Tax at parent/headquarter level in respect of subsidiary’/branch’s profits Participation exemption or tax credit (in cases of dividend distribution) Tax rate of the headquarter (note: double taxation relief ® participation exemption or tax credit)
Withholding tax (dividend, interest, royalties) Often (note: EC Directives and tax treaties) Rarely
Loss settlement with foreign parent company/headquarter In principle no Yes (unless exempt under headquarters’ domestic tax law)
Liability debt (claims) at operational level Local operating company (=subsidiary) Headquarter

The above was based on the amiable co-operation of TGC Corporate Lawyers and Baker Tilly sro in Prague and Brno.

Poland – New Anti-Smoking Law At Long Last!


On 15 November 2010 an amendment to the Law on Health Protection against the Consequences of Tobacco Products comes into force. The amendment introduces a total ban on smoking, i.e. in hospitals and health clinics, schools and colleges, cultural and recreation sites, pubs and restaurants, sports facilities, public transport and workplaces. Owners or property managers (e.g. hotels, schools, workplaces) may designate smoking rooms on their territory, which means separate facilities that meet certain standards of construction and air ventilation.

Implications for employers

To date smoking in the workplace was also prohibited, but employers with at least 20 staff were obliged to establish a smoking room, regardless of the number of smoking employees. Specific standards in terms of space and ventilation of smoking rooms are governed by general health and safety (BHP) regulations.

After 15 November 2010 the decision on establishment of a smoking room will belong to the owner or administrator of the building. The existing smoking rooms may continue to operate if they meet the standards required by BHP regulations. In addition, the owner or property manager is obliged to put up in visible places clear information about the ban on smoking tobacco in the building. Employees smoking outside designated sites may be punished by a disciplinary penalty, and the employer may be given a mandate.

While considering the establishment of a smoking room in the office, the employer should take into account many aspects. Creation of a smoking room generates costs, but lacking a smoking room will not result in smokers resigning their habit or improving work efficiency. The need to go outside the office premises to smoke results in a loss of working time, and the sight of groups of smokers and cigarette-ends outside the office entrance does not improve company image. Certainly, more effective would be the prevention of psychosocial hazards and the promotion of healthy behaviour by the employer.

Traditional vs. electronic cigarette

For several years e-cigarettes have been available on the market, which are electronic devices that provide inhaled doses of nicotine. The electronic cigarette is a small device – resembling a traditional cigarette – which is electric or battery powered. The “smoke” from an e-cigarette is almost odourless and much less burdensome for non-smokers.

The e-cigarette is a new product and therefore its legal status is varied. In some countries its sale is forbidden, and in some completely legal or permitted under certain conditions. Poland has not yet developed any regulations on the sale and use of e-cigarettes. Recent legal changes have not covered this issue as well, although the Ministry of Health is considering a prohibition of the sale of e-cigarettes in the near future.

The National Labour Inspectorate (PIP) receives more and more inquiries from employers and employees regarding the terms of use of e-cigarettes in the workplace. In particular, non-smoking employees are worried whether smoking e-cigarettes in the office does not cause similar effects to passive smoking. Because there is no conclusive research yet on the effects of e-cigarettes for their users and the environment, it seems possible that within their obligation to ensure all employees safe and healthy working conditions the employers introduce a ban on smoking e-cigarettes in the workplace (similar to traditional tobacco products).

To find out more

If you need a detailed interpretation of the new regulations or consultation on creating healthy work environment, please contact the  experts at TGC who are briefing businesses and individuals on this area:

Agnieszka Janowska
Director of the Labour Law Department
Tel.: +48 22 653 3862
Email: ajanowska@tgc.eu

Dorota Strzelec
Consultant/ Occupational Psychologist
HR Management Department
T:  +48 22 653 3866
E: dstrzelec@tgc.eu

TGC Corporate Lawyers
ul. Królewska 27
00-060 Warsaw, Poland
T: +48 22 653 3644
F: +48 22 827 6915
E: tgc@tgc.eu
W: http://www.tgc.eu