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Czech Republic

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Czech government actively seeks to attract foreign investment via policies that make the country a competitive destination for companies to locate, operate, and expand.  The Czech investment incentives legislation (amended Act No. 72/2000 Coll., effective as of September 6, 2019) creates incentive payments for high value-added investments that focus on R&D and create jobs for university graduates.  The law eliminates incentives for investments targeting low-skilled labor and establishes more favorable rules for technological investments in sectors such as aerospace, information and communication technology, life sciences, nanotechnology, and advanced segments of the automotive industry.  In addition, due to COVID-19, the government approved November 30, 2020 an amendment to this statute, which enables producers of personal protective equipment, medical devices, and pharmaceuticals to more easily obtain investment incentives.

CzechInvest, the government investment promotion agency that operates under the Ministry of Industry and Trade (MOIT), negotiates on behalf of the Czech government with foreign investors.  In addition, CzechInvest provides assistance during implementation of investment projects, consulting services for foreign investors entering the Czech market, support for suppliers, and assistance for the development of innovative start-up firms.  There are no laws or practices that discriminate against foreign investors.

The Czech Republic is a recipient of substantial FDI.  Total foreign investment in the Czech Republic (equity capital + reinvested earnings + other capital) equaled USD171.3 billion at the end of 2019, compared to USD164 billion in 2018.

As a medium-sized, open, export-driven economy, the Czech market is strongly dependent on foreign demand, especially from EU partners.  In 2020, 83.5 percent of Czech exports went to fellow EU member states, with 32.6 percent to the Czech Republic’s largest trading partner, Germany, according to the Czech Statistical Office.  Since emerging from recession in 2013, the economy had enjoyed some of the highest GDP growth rates of the European Union until the COVID-19 outbreak. While GDP growth reached 2.4 percent in 2019, there was a 5.6 percent GDP decline in 2020.  The Ministry of Finance is forecasting 3.1 percent growth for 2021.

The Czech Republic has no plans to adopt the euro as it believes having its own currency and independent monetary policy is helpful to manage an economic crisis like the current one caused by the COVID-19 pandemic.

The slow pace of legislative and judicial reforms has posed obstacles to investment, competitiveness, and company restructuring.  The Czech government has harmonized its laws with EU legislation and the acquis communautaire.  This effort involved positive reforms of the judicial system, civil administration, financial markets regulation, protection and enforcement of intellectual property rights, and in many other areas important to investors.

While there have been many success stories involving American and other foreign investors, a handful have experienced problems, for example in the media industry.   Both foreign and domestic businesses voice concerns about corruption.

Long-term economic challenges include dealing with an aging population and diversifying the economy away from  manufacturing toward a more high-tech, services-based, knowledge economy.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign individuals or entities can operate a business under the same conditions as Czechs.  Foreign entities need to register their permanent branches with the Czech Commercial Register.  Some professionals, such as architects, physicians, lawyers, auditors, and tax advisors, must register for membership in the appropriate professional chamber.  In general, licensing and membership requirements apply equally to foreign and domestic professionals.

In response to the European Commission’s September 2017 investment screening directive, the Czech government drafted foreign investment screening legislation.  The law will come into effect on May 1, 2021 and gives the government the ability to review greenfield investments and acquisitions by non-EU foreign investors.  The law allows MOIT to screen FDI in virtually any sector of the Czech economy but specifies four high-risk sectors for which investment screening is mandatory: critical infrastructure, ICT systems used for critical infrastructure, military equipment, and sensitive dual use items.  Outside these critical sectors, non-EU investors are under no obligation to report acquisitions or greenfield investments, but MOIT can retroactively review investments at any point within five years according to security concerns that may arise.  Screening of acquisitions is triggered when a non-EU buyer attempts to make a purchase that would give it at least 10% of the voting rights of a Czech company.  However, screening is possible at an even lower threshold in cases where the foreign investor has additional means of exerting potentially malign control over a Czech company, such as through appointment of staff to key positions.  Furthermore, the law gives regulators considerable leeway to designate an investor as “non-EU” if the investor is “indirectly controlled” by non-EU business or individuals.

As of early 2012, U.S. and other non-EU nationals could purchase real estate, including agricultural land, in the Czech Republic without restrictions.  However, following the implementation of the investment screening law as of May 1, 2021, land purchases by non-EU investors may be screened if located near critical infrastructure, such as military installations.  Enterprises are permitted to engage in any legal activity with the previously noted limitations in sensitive sectors.  The right of foreign and domestic private entities to establish and own business enterprises is guaranteed by law.  Laws on auditing, accounting, and bankruptcy are in force, including the use of international accounting standards (IAS).

Other Investment Policy Reviews

The OECD last conducted an economic survey of the government in 2020.

Business Facilitation

Individuals must complete a number of bureaucratic requirements to set up a business or operate as a freelancer or contractor.  MOIT provides an electronic guide on obtaining a business license, presenting step-by-step assistance, including links to related legislation and statistical data, and specifying authorities with whom to work (such as business registration, tax administration, social security, and municipal authorities), available at: https://www.mpo.cz/en/business/licensed-trades/guide-to-licensed-trades/.  MOIT also has established regional information points to provide consulting services related to doing business in the Czech Republic and EU.  A list of contact points is available at:  https://www.businessinfo.cz/en/starting-a-business/starting-up-points-of-single-contact-psc/addresses-points-of-single-contact-psc/.

The average time required to start a business is 25 days according to the World Bank’s ‘Doing Business’ Index.  The Czech Republic’s Business Register is publicly accessible and provides details on business entities including legal addresses and major executives.  An application for an entry into the Business Register can be submitted in a hard copy, via a direct entry by a public notary, or electronically, subject to meeting online registration criteria requirements.  The Business Register is publicly available at:  https://or.justice.cz/ias/ui/rejstrik.  The Czech Republic’s Trade Register is an online information system that collects and provides information on entities facilitating small trade and craft-oriented business activities, as specifically determined by related legislation.  It is available online at:  http://www.rzp.cz/eng/index.html.

Outward Investment

The Czech government does not incentivize outward investment.  The volume of outward investment is lower than incoming FDI.  According to the latest data from the Czech National Bank, Czech outward investments amounted to USD 45.1 billion in 2019, compared to inward investments of USD 171.3 billion.  However, according to the Export Guarantee and Insurance Corporation (EGAP), Czech companies increasingly invest abroad to get closer to their customers, save on transport costs, and shorten delivery times. As part of EU sanctions, there is a total ban on EU investment in North Korea as of 2017.

Hungary

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Hungary maintains an open economy and its high-quality infrastructure and central location in Europe attract foreign investment. The GOH actively promotes Hungary to attract FDI, in manufacturing and export-oriented sectors. According to some reports, however, government policies have resulted in some foreign investors selling their stakes to the government or state-owned enterprises in other sectors, including banking and energy.  In 2019, net annual FDI amounted to $5.2 billion, and total gross FDI totaled $97.8 billion.

As a bloc, the EU accounts for approximately 89 percent of all FDI in Hungary in terms of direct investors, and 62 percent in terms of ultimate controlling parent investor.  In terms of ultimate investor – i.e., country of origin – the United States was the second largest investor after Germany in 2019. In terms of direct investor location, Germany was the largest investor, followed by the Netherlands, Austria, Luxembourg, and then the United States. The majority of U.S. investment falls within the automotive, software development, and life sciences sectors.  Approximately 450 U.S. companies maintain a presence in Hungary. According to Hungarian Investment Promotion Agency (HIPA) data, U.S. foreign direct investment produced more jobs in Hungary in 2020 than investment from any other country.

Total, cumulative FDI from Asian sources has approximately doubled since 2010, accounting for over five percent of total FDI stock in 2019. South Korea made several major new investments in the manufacturing sector in 2019. According to HIPA, South Korea, Japan, China, India, and other Asian countries accounted for about 40 percent of the value of new foreign investment projects in Hungary in 2020.

The GOH has implemented a number of tax changes to increase Hungary’s regional competitiveness and attract investment, including a reduction of the personal income tax rate to 15 percent in 2016, the corporate income tax rate to 9 percent in 2017, and the gradual reduction of the employer-paid welfare contribution from 27 percent in 2016 to 15.5 percent in 2020.  As of 2016, the GOH streamlined the National Tax and Customs authority (NAV) procedure to offer fast-track VAT refunds to customers categorized as “low-risk.”

Many foreign companies have expressed displeasure with the unpredictability of Hungary’s tax regime, its retroactive nature, slow response times, and the volume of legal and tax changes.  According to the European Commission (EC), a series of progressively-tiered taxes implemented in 2014 disproportionately penalized foreign businesses in the telecommunications, tobacco, retail, media, and advertisement industries, while simultaneously favoring Hungarian companies.  Following EC infringement procedures, the GOH phased out most discriminatory tax rates by 2015 and replaced them with flat taxes. Another 2014 law required retail companies with over $53 million in annual sales to close if they report two consecutive years of losses.  Retail businesses claimed the GOH specifically set the threshold to target large foreign retail chains.  The EC likewise determined that the law was discriminatory and launched an infringement procedure in 2016, leading the GOH to repeal the law in November 2018.

In 2017, the GOH passed a regulation that gives the government preemptive rights to purchase real estate in World Heritage areas.  The rule has been used to block the purchase of real estate by foreign investors in the most desirable areas of Budapest. In April 2020, during the COVID-19 pandemic, the GOH issued a decree that levied sector-specific taxes on the banking and retail sectors to fund crisis economic support. This progressive tax on retail grocery outlets is structured such that it applies mainly to large foreign retail firms.

In April 2020, during the COVID-19 pandemic, the GOH issued a decree that levied sector-specific taxes on the banking and retail sectors to fund crisis economic support. This progressive tax on retail grocery outlets is structured such that it applies mainly to large foreign retail firms.

The GOH publicly declared its intention to reduce foreign ownership in the banking sector in 2012. Accordingly, various GOH initiatives have reduced foreign ownership from about 70 percent in 2008 to 40.5 percent by the end of 2020. These initiatives included a 2010 bank tax; a 2012 financial transaction tax levied on all cash withdrawals; and regulations enacted between 2012-2015 that obligated banks to retroactively compensate borrowers for interest rate increases on foreign currency-denominated mortgage loans, even though these increases were spelled out in the original contracts with customers and had been permitted by Hungarian law.

While the pharmaceutical industry is competitive and profitable in Hungary, multinational enterprises complain of numerous financial and procedural obstacles, including high taxes on pharmaceutical products and operations, prescription directives that limit a doctor’s choice of drugs, and obscure tender procedures that negatively affect the competitiveness of certain drugs.  Pharmaceutical firms have also taken issue with GOH policies to weigh the cost of pharmaceutical procurement as heavily as efficacy when issuing tenders for public procurement.

The Hungarian Investment Promotion Agency (HIPA), under the authority of the Ministry of Foreign Affairs and Trade, encourages and supports inbound FDI.  HIPA offers company and sector-specific consultancy, recommends locations for investment, acts as a mediator between large international companies and Hungarian firms to facilitate supplier relationships, organizes supplier training, and maintains active contact with trade associations.  Its services are available to all investors. For more information, see:  https://hipa.hu/main .

Foreign investors generally report a productive dialogue with the government, both individually and through business organizations.  The American Chamber of Commerce (AmCham) enjoys an ongoing high-level dialogue with the GOH and the government has adopted many AmCham policy recommendations in recent years.  In 2017, the government established a Competitiveness Council, now chaired by the Minister of Finance, which includes representatives from multinationals, chambers of commerce, and other stakeholders, to increase Hungary’s competitiveness.  Many U.S. and foreign investors have signed MOUs with the GOH to facilitate one-on-one discussions and resolutions to any pending issues. The GOH has regularly consulted foreign businesses and business associations as it has developed economic support measures during the pandemic. For more information, see:  https://kormany.hu/kulgazdasagi-es-kulugyminiszterium/strategiai-partnersegi-megallapodasok  and  https://www.amcham.hu/ .

The U.S.-Hungary Business Council (USHBC) – a private, non-profit organization established in 2016 – aims to facilitate and maintain dialogue between American corporate executives and top government leaders on the U.S.-Hungary commercial relationship.  The majority of significant U.S. investors in Hungary have joined USHBC, which hosts roundtables, policy conferences, briefings, and other major events featuring senior U.S. and Hungarian officials, academics, and business leaders. For more information, see:  https://www.us-hungarybusinesscouncil.com/ .

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign ownership is permitted with the exception of some “strategic” sectors including farmland and defense-related industries, which require special government permits.  As part of its economic measures during the COVID-19 pandemic, the GOH passed a decree which requires foreign investors to seek approval for foreign investments in Hungary.

Foreign law firms and auditing companies must sign a cooperation agreement with a Hungarian company to provide services on Hungarian legal or auditing issues. According to the Land Law, only private Hungarian citizens or EU citizens resident in Hungary with a minimum of three years of experience working in agriculture or holding a degree in an agricultural discipline can purchase farmland.  Eligible individuals are limited to purchasing 300 hectares (741 acres). All others may only lease farmland. Non-EU citizens and legal entities are not allowed to purchase agricultural land. All farmland purchases must be approved by a local land committee and Hungarian authorities, and local farmers and young farmers must be offered a right of first refusal before a new non-local farmer is allowed to purchase the land.  For legal entities and those who do not fulfill the above requirements , the law allows the lease of farmland up to 1200 hectares for a maximum of 20 years. The GOH has invalidated any pre-existing leasing contract provisions that guaranteed the lessee the first option to purchase, provoking criticism from Austrian farmers. Austria has reported the change to the European Commission, which initiated an infringement procedure against Hungary in 2014.  In March 2018, the European Court of Justice ruled that the termination of land use contracts violated EU rules, opening the way for EU citizens who lost their land use rights to sue the GOH for damages. In 2015, the EC launched another – still ongoing – infringement procedure against Hungary concerning its restrictions on acquisitions of farmland.

The GOH passed a national security law on investment screening in 2018 that requires foreign investors seeking to acquire more than a 25-percent stake in a Hungarian company in certain sensitive sectors (defense, intelligence services, certain financial services, electric energy, gas, water utility, and electronic information systems for governments) to seek approval from the Interior Ministry.  The Ministry has up to 60 days to issue an opinion and can only deny the investment if it determines that the investment is designed to conceal an activity other than normal economic activity. In 2020, as part of the measures to mitigate the economic effects of the COVID-19 pandemic, the GOH passed an additional regulation requiring foreign investors to seek approval from the Ministry of Innovation and Technology (MIT) for greenfield or expansion of existing investments.

On April 6, Hungary’s Ministry of Interior (MOI) blocked an Austria’s Vienna Insurance Group from buying Dutch insurer Aegon’s Hungarian subsidiary, scuttling a four-country acquisition. The GOH granted the specific power to block this type of sale to the MOI in November 2020 under emergency COVID-related legislation, just one day before the parties agreed to the sale, after months of open negotiations.

Other Investment Policy Reviews

Hungary has not had any third-party investment policy reviews in the last three years.

Business Facilitation

In 2006, Hungary joined the EU initiative to create a European network of “point of single contact” through which existing businesses and potential investors can access all information on the business and legal environment, as well as connect to Hungary’s investment promotion agency.  In recent years, the government has strengthened investor relations, signed strategic agreements with key investors, and established a National Competitiveness Council to formulate measures to increase Hungary’s economic competitiveness.

The registration of business enterprises is compulsory in Hungary.  Firms must contract an attorney and register online with the Court of Registration.  Registry courts must process applications to register limited liability and joint-enterprise companies within 15 workdays, but the process usually does not take more than three workdays.  If the Court fails to act within the given timeframe, the new company is automatically registered. If the company chooses to use a template corporate charter, registration can be completed in a one-day fast track procedure.  Registry courts provide company information to the Tax Authority (NAV), eliminating the need for separate registration. The Court maintains a computerized registry and electronic filing system and provides public access to company information.  The minimum capital requirement for a limited-liability company is HUF 3,000,000 ($10,800); for private limited companies HUF 5,000,000 ($17,900), and for public limited companies HUF 20,000,000 ($71,400). Foreign individuals or companies can establish businesses in Hungary without restrictions.

Further information on business registration and the business registry can be obtained at the GOH’s information website for businesses:  http://eugo.gov.hu/starting-business-hungary  or at the Ministry of Justice’s Company Information Service:  https://ceginformaciosszolgalat.kormany.hu/elektronikus-cegeljaras , and the Tax Authority https://en.nav.gov.hu/taxation/registration/specific_rules.html .

Hungarian business facilitation mechanisms provide equitable treatment for women. They offer no special preference or assistance for them in establishing a company.

Outward Investment

The stock of total Hungarian investment abroad amounted to $36.8 billion in 2019.  Outward investment is mainly in manufacturing, pharmaceuticals, services, finance and insurance, and science and technology.  There is no restriction in place for domestic investors to invest abroad. The GOH announced in early 2019 that it would like to increase Hungarian investment abroad and it is considering incentives to promote such investment.

Poland

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward 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 identified 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 2019, according to IMF and National Bank of Poland data, Poland attracted around $234.9 billion (cumulative) in foreign direct investment (FDI), principally from Western Europe and the United States. In 2019, 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 media, 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 has gradually phased out Sunday retail commerce in Poland, especially for large retailers. From 2020, the trade ban applies to all but seven Sundays a year. In 2020, a law was adopted requiring producers and importers of sugary and sweetened beverages to pay a fee. The government is planning to introduce (in mid-2021) an advertising tax – hailed as a “solidarity fee”- covering a wide array of entities including publishers, tech companies and cinemas. Only small media businesses would be exempt from the new levy. The revenue would support the National Health Fund, the National Fund for the Protection of National Monuments, and establish a new fund, the Media Support Fund for Culture and National Heritage, to support Polish culture and creators struggling due to the pandemic. Polish authorities have also publicly favored introducing a comprehensive digital services tax. The details of such a tax are unknown because no draft has been publicly released, but it would presumably affect mainly large foreign digital companies.

There are 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 is also the 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 the media sector as suggested by governing party politicians.

Over the past five years, Poland’s ranking on Reporters without Borders’ Press Freedom Index has dropped from 18th to 62nd. The governing Law and Justice (PiS) party aims to decrease foreign ownership of media, particularly outlets critical of their governing coalition. Approaches have included proposals to set caps on foreign ownership, the use of a state-controlled companies to purchase media, and the application of economic tools (taxes, fines, advertising revenue) to pressure foreign and independent media. 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 5, Protection of Property Rights.

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; 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 ($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.

As part of the COVID-19 Anti-Crisis Shield, on June 24, 2020, new legislation entered into force extending significantly the FDI screening mechanism in Poland for 24 months. An acquisition from a country that is not a member of the EU, the EEA, or the OECD requires prior clearance from the President of the Polish Competition Authority if it targets a company generating turnover exceeding EUR 10 million (almost $12 million) that either: 1) is a publicly-listed company, 2) controls assets classified as critical infrastructure, 3) develops or maintains software crucial for vital processes (e.g., utilities systems, financial transactions, food distribution, transport and logistics, health care systems); 4) conducts business in one of 21 specific industries, including energy, gas and oil production, storage, distribution and transportation; manufacture of chemicals, pharmaceuticals and medical instruments; telecommunications; and food processing. The State Assets Ministry is preparing similar and more permanent measures.

In November 2019, the governing Law and Justice party reestablished a treasury ministry, known as the State Assets 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 State Assets Ministry. The Deputy Prime Minister and Minister of State Assets announced he would seek to consolidate state-owned companies with similar profiles, including merging Poland’s largest state-owned oil and gas firm PKN Orlen with state-owned Lotos Group. 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. In September 2020, a new government plenipotentiary for the transformation of energy companies and coal mining was appointed.

Other Investment Policy Reviews

The government has not undergone any third-party investment policy review through a multilateral organization,

The OECD published its 2020 survey of Poland. It can be found here: https://www.oecd.org/economy/poland-economic-snapshot/ 

Additionally, the OECD Working Group on Bribery has provided recommendations on the implementation of the OECD Anti-Bribery Convention in Poland here:  https://www.oecd.org/poland/poland-should-urgently-implement-reforms-to-boost-fight-against-foreign-bribery-and-preserve-independence-of-prosecutors-and-judges.htm 

Business Facilitation

In 2020, government activities and regulations focused primarily on addressing challenges related to the outbreak of the pandemic.

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, Protection of Property Rights 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. Tax audit methods have changed considerably. For instance, in many cases an appeal against the findings of an audit must now 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.

The Ministry of Finance and the National Tax Administration have launched an e-Tax Office, available online at https://www.podatki.gov.pl/ . The website, which will be constructed in stages through September 2022, will make it possible to settle all tax matters in a single user-friendly digital location. digital location.

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 with the Ministry of Development here:  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 maintained 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 ($0.25) while other types of registration require 5,000 PLN ($1,274) or 50,000 PLN ($12,737). 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 July 2021.

On August 5, 2020, the Government Legislation Center published the detailed assumptions of a draft amendment to the Commercial Companies Code developed by the Commission for Owner Oversight Reform with the Ministry of State Assets. The draft amendment’s primary assumption is to enact a so-called “holding law,” laying down the principles of how a parent company may instruct its subsidiaries, as well as stipulating the parent company’s liability and the principles of creditor, officer, and minority shareholder protections. Apart from introducing the holding law, the draft provides for several additional regulations, including those enhancing the supervisory board’s position, both within the holding law framework and for companies not comprising any group. The amendment is projected to come into force sometime in 2021.

On January 1, 2021, a new law on public procurement entered into force. This law was adopted by the Polish Parliament on September 11, 2019. The new law aims to reorganize the public procurement system and further harmonize it with EU law. The new public procurement law is also more transparent than the previous act.

Beginning in July 2021, an electronic system must be used for all applications submitted in registration proceedings by commercial companies disclosed in the National Court Register, i.e., both applications for registration, deletion, and any changes in the register.

A certified e-signature may be obtained from one of the commercial e-signature providers listed on the following website:  https://www.nccert.pl/ 

National Court Register (KRS): https://www.gov.pl/web/gov/uslugi-dla-przedsiebiorcy 

Agencies with which a business will need to file in order to register in the KRS include:

Central Statistical Office to register for 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 (KRS and REGON) 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/ 

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, State-Owned Enterprises and at its website: https://pfr.pl/ 

PAIH has 70 offices worldwide, including six in the United States.

PAIH assists entrepreneurs with administrative and legal procedures related to specific projects as well as with the development of legal solutions and with finding suitable locations, and reliable partners and suppliers.

The Agency implements pro-export projects such as “Polish Tech Bridges” dedicated to the outward 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. BGK has international offices in London and Frankfurt.

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. As of March 2021, there were nine core sponsors involved in the Fund.

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. PFR TFI S.A, an entity also under the umbrella of PFR, supports Polish investors planning to or already operating abroad. PFR TFI manages the Foreign Expansion Fund (FEZ), which provides loans, on market terms, to foreign entities owned by Polish entrepreneurs. See https://www.pfrtfi.pl/  and https://pfr.pl/en/offer/foreign-expansion-fund.html 

Slovakia

1. Openness To, and Restrictions Upon, Foreign Investment 

Policies Towards Foreign Direct Investment

Slovakia is one of the most open economies in the EU.  The government’s overall attitude toward foreign direct investment (FDI) is positive, and the government does not limit or discriminate against foreign investors.  FDI plays an important role in the country’s economy, with major foreign investments in manufacturing and industry, financial services, information and communication technologies (ICT), and Business Service Centers, where U.S. companies have a significant presence.

Slovakia’s assets, including skilled labor, EU and Eurozone membership, and a central location in Europe have attracted a significant U.S. commercial and industrial presence, with investments from Accenture, Adient, Amazon, Amphenol, AT&T, Cisco, Dell, Garrett, GlobalLogic, Hewlett-Packard, IBM, Lear, Oracle, U.S. Steel, Whirlpool, and others.

The Ministry of Economy coordinates efforts to improve the business environment, innovation, and support for less-developed regions.  Within the Ministry of Economy, the Slovak Investment and Trade Development Agency (SARIO) is responsible for identifying and    advising potential investors, providing in-depth information on the Slovak business environment, investment incentives, the process for setting up a business, as well as advising on suitable locations and real estate leasing. The government encourages investment through tax incentives and grants to support employment, regional development, and training.  Section Four of the Regional Investment Aid Act (57/2018) specifies the eligibility criteria for receiving assistance.

According to the National Bank of Slovakia’s preliminary data, in 2019, inward FDI flows to Slovakia reached 2.2 billion EUR, and inward FDI stock was 54 billion EUR.  EU Member States, including the Netherlands, Austria, the Czech Republic, Luxembourg, and Germany, are the largest foreign investors in Slovakia.  South Korea remains by far the largest investor among non-EU countries.

The Act on Special Levy on Regulated Sectors (235/2012 Coll., and later amendments) imposes a special tax on regulated industries, including the energy and network industries, insurance companies, electronic communications companies, healthcare, air transport, and others.  The levy applies to profits generated from regulated activities above 3 million EUR.

The Slovak government requires ride-sharing and app-based hospitality platforms that are active on the local market to register a permanent office in Slovakia for tax collection purposes.   Platforms that have not yet registered an office must pay either a 19 or 35 percent withholding tax on the fees it pays to a foreign entity, based on the residence of the recipient of such fee and whether bilateral taxation treaties exist.

The government actively works with investors to keep them operating in the country. In late 2020, Volkswagen, already one of the largest private employers in the country, credited a decision to expand its investment, in part, to the government’s assistance in negotiations with local partners.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity in Slovakia.  Businesses can contract directly with foreign entities.  Private enterprises are free to establish, acquire, and dispose of business interests, but must pay all Slovak obligations of liquidated companies before transferring any remaining funds out of Slovakia.  All new businesses registered from October 2020 onwards must provide the national registration numbers of their partners, authorized representatives, and members of the boards of directors and supervisory boards when registering the business. Foreigners must provide their passport or residence permit numbers when registering the business.

In February 2021, Slovak Parliament approved legislation, over the opposition of representatives of the business community, requiring government review of ownership transfers larger than 10 percent of companies considered “critical infrastructure” – which includes a number of companies with foreign ownership. The law was passed through a fast-track procedure in response to a reported demand from Russian Sberbank that Slovakia’s electricity generator Slovenske Elektrarne back its debt to the bank with equity. The Economy Ministry has said that it will release a more robust Investment Screening Mechanism in 2021, which will be based on the EU Investment Screening Regulation 2020/1298, and will replace the fast-tracked legislation.

Slovakia has no formal performance requirements for establishing, maintaining, or expanding foreign investments.  Large-scale privatizations are possible via direct sale or public auction.  There are no formal requirements to approve FDI, though the government ultimately approves investment incentives.  If investment incentives apply, the Economy Ministry manages the associated government approval process.  The Act on Regional Investment Aid (57/2018) specifies that only three categories of projects may be subsidized: industrial production, technology, or business services.  An amendment to the Act in force from January 2021 slightly relaxed the conditions for receiving investment aid, increasing the maximum time to finish work on the investment project from three to five years.

The Slovak government treats foreign entities established in Slovakia in the same manner as domestic entities, and foreign entities face no impediments to participating in R&D programs financed and/or subsidized by the Slovak government.  Since January 2020, up to 200 percent of R&D spending is tax deductible.

The Slovak government holds stakes in a number of energy companies.  It has historically been less open to private investment in energy assets that it considers to be in the national security interest.  There are no domestic ownership requirements for telecommunications and broadcast licenses.  The Act on Civil Air Transport (143/1998 Coll.) sets out rules for foreign operators seeking to operate in Slovakia.

Please consult the following websites for more information:

Other Investment Policy Reviews

In its Investment Policy Monitor, The United Nations Conference on Trade and Development (UNCTAD) highlights Slovakia’s 2018 adoption of the Act on Regional Investment Aid and notes that tourism was excluded. The report highlights that income tax exemptions are the primary form of state aid, but direct subsidies for land purchase are also available, and investors may apply for job creation contributions from the government or may be permitted to let or own property at lower than a market value.

Business Facilitation

According to the World Bank’s Doing Business 2020 report, Slovakia ranks 118 out of 190 countries surveyed on the ease of starting a business, up from 127 in 2019.  It takes, on average, 21.5 days to start a business versus 26.5 days in 2019, and involves seven procedures. There are business development companies that provide assistance with navigating the process of establishing a new business. The main agencies with which a company must register are the business registry, tax office, and social security agency.

In 2020, the Economy Ministry presented more than 500 measures that will decrease the administrative burden on businesses. More than 100 of these measures were approved by Parliament in July 2020. The Economy Ministry also announced plans for regular reviews of existing legislation to ensure it still serves its purpose, and stricter reviews during the transposition of EU legislation to ensure that the laws are not adding administrative burden beyond what is required.

The Central Government Portal “ slovensko.sk ” provides useful information on e-Government services for starting and running a business, citizenship, justice, registering vehicles, social security, etc.  Checklists of procedures necessary for registrations, applications for permits, etc., are currently available on the websites of the business registry, tax office and social security agency. The Economy Ministry is working on streamlining the information into one common platform.  The government has also announced plans for a major overhaul to the e-Government service portal to streamline access to public services.

Please consult the following websites for more information:

Outward Investment

Due to their limited size, Slovak companies have not made significant outward foreign direct investments.

Several state agencies share responsibility for facilitating outward investment and trade.  SARIO is officially responsible for export facilitation and attracting investment.  The Slovak Export-Import Bank (EXIM Bank) supports exports and outward investments with financial instruments to reduce risks related to insurance, credit, guarantee, and financial activities; it assists both large companies and small and medium sized enterprises (SMEs), and is the only institution in Slovakia authorized to provide export and outward investment-related government financial assistance.  The Ministry for Foreign and European Affairs runs a Business Center that provides services for exporters and helps identify investment opportunities.  Slovakia’s diplomatic missions, the Ministry of Finance’s Slovak Guarantee and Development Bank, and the Deputy Prime Minister’s Office for Investments and Regional Development also play a role in facilitating external economic relations. Slovakia does not restrict domestic investors from investing abroad.

Investment Climate Statements
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