New commercial activity law in force

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In August 2004, most provisions of a long-awaited Act on independent commercial activity came into force in Poland. The new legislation, which has been dubbed 'the constitution for entrepreneurs', differs considerably from the previous rules. Employers' organisations have made varying assessments of the new Act, and pointed out some perceived inconsistencies in its regulations.

Poland's first legislation governing commercial activity that took into account the reality of nascent free enterprise was drafted in 1988, in the twilight days of the People’s Republic of Poland, by the cabinet of Prime Minister Mieczysław Rakowski. Responsibility for the statute, which eventually came into force in 1989, is generally accorded to Mieczysław Wilczek, then Minister of Industry. Even though this law was passed before the political change of 1989, Poland’s business community still regards it positively. The statute was a legal framework with 54 articles, making general provisions for business activity and not applying many limitations. In the subsequent years, especially in the mid-1990s, Polish laws governing commercial activity have undergone many changes - changes for the worse, in the view of many businesspeople. Successive cabinets argued that, while the Wilczek legislation may have been satisfactory enough at a time when free enterprise in Poland was taking its first unsteady steps, its provisions were ill-suited to what is now an active market economy.

Recent efforts at the ministerial level to liberalise the business activity laws were undertaken in consultation with the social partners by Jerzy Hausner, the minister charged with economic and labour matters. The goal, as Mr Hausner put it to parliament in February 2004, is to prevent the emergence of a 'bureaucratic hydra'. A new Act regarding independent commercial activity - dubbed 'the constitution for entrepreneurs'- was eventually adopted, and most of its provisions came into force on 21 August 2004. It replaces commercial activity legislation enacted in November 1999

Main provisions of new Act

The Act regarding independent commercial activity lays down a uniform definition of a business enterprise, extending this status to all commercial entities irrespective of their organisational or legal form (Article 4). Chapter 7 of the new Act, meanwhile, defines the concept of 'small and medium-sized enterprises': a small enterprise is one that employs fewer than 50 workers (over a two-year period) and has an annual turnover, in net terms, of up to EUR 10 million; and a medium-sized enterprise is one with fewer than 250 employees and an annual turnover below EUR 50 million. The new Act also introduces the concept of the 'micro enterprise', until now unknown in Polish law: this is an entity that has employed fewer than 10 workers in the space of the past two years and has a turnover not exceeding EUR 2 million. The categories of micro, small and medium-sized enterprise do not include entities in which the State Treasury or local government bodies hold stakes of 25% or more by way of in-kind contributions, shares, or votes in the entity’s governing bodies (PL0409107F).

An important provision is embodied in Article 13 of the Act, which states that enterprises based in all countries party to the European Economic Area (EEA) agreement may pursue commercial activity in Poland subject to the same terms and conditions as indigenous enterprises. European Union requirements concerning money laundering are addressed in Article 22 of the Act, which sets a maximum value of EUR 15,000 for one-off cash transactions - any remittances in excess of this limit must pass through the banking system.

An important novelty in Polish law is contained in Article 10 of the Act, which deals with the binding interpretation of laws. On the basis of this Article, an enterprise may apply to the appropriate administrative body for the issue of a written interpretation of the scope and application of laws whereunder that enterprise is required to pay taxes or provide other 'public benefits'. Having secured such an interpretation, the enterprise may not be held liable for any taxes or penalties insofar as it has abided by the interpretation. Practical issues relating to the issuing of such interpretations are regulated by the amended Article 14 of the Tax Ordinance. As of 1 January 2005 (the day on which Article 10 comes into force), the tax office will be bound by a three-month deadline for the issue of its interpretation in such cases; where the tax office does not meet this deadline, the enterprise applying for an interpretation will be free to proceed as suggested in its application without fear of subsequent penalties. Business enterprises applying for interpretations will also be entitled to appeal pertinent decisions before the appropriate state revenue chamber, and then before the administrative courts. It is hoped that these new laws will obviate the current problems whereby enterprises that had proceeded in accordance with a position taken by their local tax office have eventually been prosecuted and found guilty by a higher body.

Chapter 4 of the Act regarding independent commercial activity deals with licences and with regulated activity. Its provisions limit the application of licensing duties to areas of material importance to the national interest, including: extraction of minerals; production and dealing in explosives, weapons, and ammunition; fuels and energy; security services; dissemination of radio and television programmes; and aviation. Some types of activities that previously required permits from the state authorities (including organisation of sports and tourist events, detective/surveillance services and dealing in pesticides) have been reclassified as regulated activities, which simply require filing in the appropriate register.

Chapter 7 of the new Act introduces a long-awaited 'one-stop' rule that has been much sought by enterprises. The idea is that, under the new rules, a person wishing to commence business activity will be able to submit all the relevant applications, registration documents etc to a single administrative authority. Entities incorporated in accordance with the Commercial Companies and Partnerships Code (Krajowy Rejestr Sądowy, KRS) will be serviced by the National Court Register divisions of the courts, and private individuals pursuing business activity in their own name by the local community office. The remaining formalities will be attended to by the court or the office, which will submit the relevant data of the new business entity to the Social Insurance Institution (Zakład Ubezpieczeń Społecznych, ZUS) and to the REGON statistical system maintained by the Central Statistical Office (Główny Urząd Statystyczny, GUS). Previously, registration of a business company generally required personal visits to several different administrative entities. An on-line registration system through which applications would be validated on the basis of an electronic signature is also under preparation. These new solutions, however, will not come into force before 1 January 2007, by which time the Central Information System for Commercial Activity Registration should be up and running, enabling identification of a business entity in all official documents on the basis of the NIP taxpayer identification number.

Chapter 5 of the new Act introduces limits on inspection and supervision of business enterprises. Article 82 lays down a general rule whereby control authorities may not subject any entity to more than one inspection at once, with the exception of circumstances where:

• pertinent international treaties provide otherwise;

• the enterprise in question is the object of a criminal investigation;

• simultaneous control/inspection proceedings are authorised by other statutes;

• the inspection concerns legitimacy of VAT refunds claimed by the enterprise;

• the inspection is justified on grounds of safeguarding health and safety or protecting the environment; or

• the control/inspection proceedings are undertaken on the authority of EU competition law or concern safeguarding of EU financial interests.

Article 83 addresses the duration of control/inspection proceedings. In the space of one year, inspection may not last longer than four weeks in the case of small enterprises, and more than eight weeks for larger enterprises. The list of exceptions is very similar to that set out in Article 82, summarised above.

Business assessment

The main objective of the Act regarding independent commercial activity, when it was formulated in 2003, was to introduce a systemic change leading to reconstruction of the relationship between the public administration and business enterprises. As work on the new Act progressed with the involvement of the major business/employer organisations (PL0209104F), however, divergent appraisals arose of the direction in which the project was heading. These differences of opinion have persisted after promulgation of the Act.

The most favourable reviews to date have come from the Polish Confederation of Private Employers (Polska Konfederacja Pracodawców Prywatnych, PKPP). Its representatives have praised the new Act, describing it as 'revolutionary' and 'constitutional'. While the representatives of other business organisation acknowledge the importance of the Act’s provisions, they have been more restrained in their comments. According to Henryka Bochniarz, a prominent member of the business lobby, it takes more than administrative sanction to institute freedom and the title of the new Act should be viewed as symbolic more than anything else. She has also expressed the opinion that the preparation of the Act as well as its ultimate form 'constitute proof of the need consistently to fight for the rights of entrepreneurs', a group at risk from 'the lingering legacy of the previous system, in evidence in the regulations and in the frame of mind'. Significant doubts with respect to specific provisions of the law were voiced by representatives of the Union of Polish Crafts (Związek Rzemiosła Polskiego, ZRP), who maintain that the Act contains too many general clauses along the lines of 'the most expedient possible time frame for addressing the issue', which make it difficult to ascertain exactly what the legislature was trying to say.

Some members of the business community have questioned the capacity of local authorities to implement the 'one-stop' rule as of early 2007. There have also been comments to the effect that the Act may be read as expanding the list of occupations whose practice can be deemed to constitute commercial activity - this point refers to the legal professions and to certified auditors, among other groups. While the institution of statutory definitions for micro enterprises and for small and medium-sized enterprises - in line with EU regulations - has been welcomed, some critics wonder why these definitions will become binding only as of 2005; the import of this argument exceeds the purely linguistic if one considers that the national Integrated Operating Programme (Zintegrowany Program Operacyjny, ZPORR) for 2004-6 earmarks EUR 165 million for micro enterprises, a category which - as yet - does not formally exist.

Commentary

The 2004 Act regarding independent commercial activity is not as liberal as the Wilczek Act of 1989, and it does not eliminate all of the bureaucratic red tape. It does, however, do away with some of the administrative impediments in place since 1999, and it also introduces some new elements. For the time being, one can not be sure whether its implementation will lead to any significant scaling back of the bureaucracy that plagues Polish business. Much will depend on how the Act’s provisions are interpreted by administrative entities with decision-making powers, and also on the legal awareness of Polish entrepreneurs (most of whom fall squarely in the 'micro' category). That said, the legislative Act regarding independent commercial activity, if not revolutionary in character, certainly has considerable institutional potential which, if put to good use, can reduce the distinct streak of 'wantonness' which marks Polish administrative practice in the realm of business activity.

As a side-effect brought about by work on the Act, by all means a positive one, there arose in its course the Entrepreneurship Council (Rada Przedsiębiorczości, RP), an informal assembly of the largest business organisations in the country. This is the first body of its sort in the arena of Polish industrial relations. (Jacek Sroka, Institute of Public Affairs [Instytut Spraw Publicznych, ISP] and Wroclaw University [Uniwersytet Wrocławski])