The Constitution for Business soon in force
Three repealed acts, 189 amended acts, and five new acts, one containing recitals, form the Constitution for Business—the comprehensive legislative package regulating business activity in Poland.
On 30 April 2018 five acts on business activity forming the Constitution for Business will enter into effect:
- Business Act of 6 March 2018
- Act on the Central Registration and Information on Business and Information Desk for Businesses of 6 March 2018
- Act on the Small and Medium-sized Enterprises Ombudsman of 6 March 2018
- Act on the Rules for Participation by Foreign Businesses and Other Foreign Persons in Trade in the Republic of Poland of 6 March 2018
- Act of 6 March 2018 Implementing the Business Act and Other Acts Regulating Business Activity.
As of that day the following are repealed:
- Business Freedom Act of 2 July 2004
- Act on Provision of Services in the Republic of Poland of 4 March 2010
- Act on the Rules for Small-Scale Production Business Activity in the Polish People’s Republic by Foreign Legal and Natural Persons of 6 July 1982.
From 30 April 2018 the main legislative act for businesses will be the Business Act, laying down the rules for starting, conducting, and ending business activity in Poland, the rights and obligations of businesses, and the duties of public authorities. The act is intended not only to organise properly the legal environment with respect to business, but also to create certain new legal institutions enabling growth of business activity. Some selected issues which will be changed or introduced are described below.
Unregistered business activity and the allowance for starting a business
The Constitution for Business introduces “non-registered” activity in Art. 5 of the Business Act. This states that a natural person does not conduct business activity if the revenue generated does not exceed 50% of the minimum wage in any given month, which in 2018 is PLN 1,500 gross. Only natural persons who have not conducted business over the preceding 60 months can conduct unregistered business activity. Also, unregistered business activity cannot be conducted in the form of a civil partnership.
A person conducting unregistered activity does not have to register with the Central Registration and Information on Business (CEIDG) and does not have to pay social security contributions. A business that is starting up is also not required to pay social security contributions, as an allowance for starting up a business, for six months from the start of business. In principle this is an optional allowance available to natural persons starting a business for the first time or launching a business again after an interval of no less than 60 months from the date when business activity was suspended or came to an end. This cannot be activity performed for a former employer.
CEIDG commercial proxy
A major change is the option afforded businesses which are natural persons of appointing a commercial proxy and placing information about the commercial proxy in the CEIDG computer system. This issue has been discussed for many years in the legal literature, and now the new law states explicitly that businesses can appoint commercial proxies registered in the CEIDG (more information about commercial proxies can be found here).
Forms of regulation of business activity
The Constitution for Business organises and makes changes to forms of business activity regulation, leaving in place concessions (koncesje), permits (zezwolenia), and entries in regulated business activity registers, but abolishing permission (zgoda) and licences (licencje). The Business Act only addresses the main business regulation issues. Detailed aspects of concessions, permits, and entries in regulated business activity registers are dealt with in separate acts.
With respect to the abolished forms of business regulation (permission and licences), interim provisions play a major part. Permission granted in the past for business activity will become permits. Licences will also be treated as permits, but under both the Road Transport Act and the Railway Transport Act the term licencja (licence) is still used. Concessions, commitments to issue concessions or amendments to concessions, permits and licences granted before the Constitution for Business come into effect will continue to be valid (more information about regulated activity can be found here).
Changes for foreign businesses and other foreign persons
Business activity commenced and conducted in Poland by foreign persons and cross-border services, as well as opening of branches and representative offices by foreign undertakings, are regulated in a new act, the Act on the Rules for Participation of Foreign Undertakings and other Foreign Persons in Trade in the Republic of Poland. Some changes concern for instance operations via a representative office, i.e. activity which is only promotion and advertising of a foreign undertaking.
Firstly, representative offices will be registered for a period of two years. Registration can be extended for subsequent two-year periods at the request of the foreign undertaking (before 30 April 2018 registration is unlimited in time). Secondly, a document confirming the authority of the person named in the application to represent the foreign undertaking, and confirmation of acceptance of that authority by that person, have to be submitted with the application for entry in the representative office register. A certified copy of the document entitling a foreign undertaking to use real estate as its headquarters for the representative office does not have to be submitted with the registration application. Even so, a foreign undertaking is still required to hold legal title to the real estate (more information about changes for foreign businesses can be found here).
Catalogue of rules for businesses and authorities
Chapter 1 of the Business Act contains a catalogue of the main principles applicable to businesses and public authorities. The rules laid down have been in effect for a long time, following directly or indirectly from the Polish Constitution. Nevertheless, legislators mention in the statement of reasons that the principles are listed in a single place for informational and organisational purposes, and for the purpose of greater legal awareness. The catalogue of business activity principles should also provide guidelines for interpretation of provisions for authorities enforcing the law.
The principles for businesses and public authorities include the principle of freedom of commercial activity, the principle that anything is legal if not prohibited, the principle of presumption of honesty of a business, the principle of finding in businesses’ favour in cases of doubt, the principle of strengthening businesses’ trust in public authorities, the proportionality principle, and the principle of disclosing information.
Established interpretational practice and legal explanatory notes
A new institution in the Business Act is established interpretational practice. The act defines this as “clarification of the scope and manner of application of legal provisions which require businesses to pay a public levy or social security or health insurance contributions, which dominate in individual rulings issued in the same circumstances and same legal conditions within a particular settlement reference period and during the 12 months before the settlement reference period starts” (Art. 35(4) of the Business Act).
In areas where a business complies with established interpretational practice, it cannot be given fines, administrative penalties, or penalties or levies exceeding values adopted in the established interpretational practice. This principle also applies to compliance with individual rulings or legal explanatory notes. The latter is another new development in the Business Act. Legal explanatory notes clarify business activity regulations relating to application in practical terms. Explanatory notes are to be issued automatically by law or by the competent ministers and certain authorities for the issues for which they are competent at the request of the SME Ombudsman.
Small and Medium-sized Enterprise (SME) Ombudsman
Another new institution is the SME Ombudsman, who above all is charged with defending the rights of micro, small, and medium-sized enterprises. The duties of the SME Ombudsman also include issuing opinions on legislative proposals, assisting in organising mediation between businesses and public authorities, and working for example with NGOs or associations. The SME Ombudsman can also submit a special complaint to the Supreme Court, request instigation of administrative proceedings, file appeals and cassation appeals with administrative courts, and participate in proceedings in courts of that kind. The SME Ombudsman can only take these initiatives where they help to defend businesses’ rights.
The examples given above are not all of the changes introduced in the legislative package making up the Constitution for Business. The new regulations also apply to issues such as suspension of business activity, the business registration number (REGON), the opening of a Business Information Desk, and many others. Also, some changes provided for in the Constitution for Business affect everybody, and not only businesses. The act implementing the Business Act, to give an example, amends a provision in the Administrative Procedure Code to make administrative proceedings more efficient. From 30 April 2018, administrative matters can be dealt with verbally or by telephone, electronic communication, or other means of communication when it is in a party’s interest and not prevented by any law. In such a case, before 30 April 2018, the only alternative to the main forms of handling a case (in writing or an electronic document) is verbal handling of a case.
The Business Act and other acts in the Constitution for Business introduce a range of new institutions and make numerous modifications to the existing legal solutions concerning conducting business in Poland. It will not be possible to evaluate their impact on the business environment in full until the new legislation has been in place for some time, especially as some changes still await implementation. For example, the SME Ombudsman has to be appointed for the first term within six months after the Constitution for Business takes effect. This means that the extent to which the SME Ombudsman exercises powers may not be known anytime soon.
Not all of the solutions in the Constitution for Business are revolutionary. Some are merely intended to improve organisation of current laws. Certain initiatives are positive moves, such as the option of businesses registered in the CEIDG appointing commercial proxies. Another good idea is eliminating certain purely technical provisions from the main act on business (as of 30 April 2018 the Business Act, currently in the Business Freedom Act), and moving them to other acts.
Julia Dolna, M&A and Corporate Practice, Wardyński & Partners