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    Joint Letter on Digital Services Act

    Posted on by Weronika Marzec

    We are writing to you on behalf of some of the most innovative tech startups and scaleups who are leading the charge to make Europe one of the leading digital economies in the world.

    We have been following the negotiations on the Digital Services Act (DSA) closely and are pleased to see the progress that has been made so far on legislation that will define Europe’s digital economy for decades to come. However, we remain concerned that some of the proposals under discussion may run counter to the ambitious and innovative digital goals Europe has, and we urge them to consider the following:

    • Enable businesses to continue to use targeted advertising as a means to connect with customers across the single market. Targeted advertising is a crucial tool for businesses looking to grow, innovate and sustain themselves and moves to heavily restrict it will harm their competitiveness.

    • Ensure that online marketplaces are not weighed down by disproportionate obligations. Online marketplaces are critical for ensuring a vibrant and innovative digital European economy. Requiring online marketplaces to undertake random checks of traders’ goods while carving out identification rules for SME traders may incentivise marketplaces to remove some of them off the platform due to the riskiness of hosting some traders. This will hinder further innovation and growth.

    • Ensure user redress systems are not overburdened. The high level of obligations required by the DSA will mean that intermediary service redress mechanisms will be overwhelmed. If a user is to receive a notification every time there is an action taken that impacts on visibility, ranking or demotion, there will be an unmanageable and overwhelming level of notifications for users to receive and intermediary services to manage. The most effective user redress mechanisms are those that are quick, user friendly and efficient. Additionally, policymakers should refrain from expanding redress for users flagging content under a platform’s Terms and Conditions. Platforms receive an enormous number of unfounded and erroneous user flags every day. To allow expansive redress for these flags is more than disproportionate; it could impair user safety by requiring online platforms to divert resources to dealing with groundless appeals.

    The DSA is a significant change in Europe’s digital rules and will reverberate for many years to come. As we enter the final stretch of the negotiations, we are confident that policymakers will find the right balance to achieve an ambitious and innovative digital future for all.

    Signatories:
    – Digital Future for Europe
    – Developers Alliance
    – ZPP Poland
    – Confederation of Industry of the Czech Republic
    – Finnish Federation for Communications and Teleinformatics
    – Digital Poland

    www.digitalfutureforeurope.com

     

    See more: Joint Letter on Digital Services Act

    CDA joint letter on EDPB guidance legal consistency with DSA

    Posted on by Weronika Marzec

    Brussels, 28 April 2022

     

    European Data Protection Board

    As a Coalition of Digital Ads (CDA) of SMEs we appreciate the European Data Protection Board’s efforts to bring greater clarity and awareness of how social media platform interfaces are designed. We believe that manipulative practices which do not respect GDPR and which hinder the ability of users to effectively protect personal data and make conscious choices should be minimised. All of those goals should be achieved while avoiding legal uncertainty and mixed signals.

    What is paramount is that SMEs get clarity on how practices are associated with targeted advertising and “dark patterns”. While the guidance provided by EDPB provides a helpful guide on identifying and avoiding dark patterns in social media platform interfaces, it still does not provide a precise definition nor an exhaustive list.

    While the EDPB’s guidelines are intended for GDPR compliances, the Digital Services Act (DSA) also addresses dark patterns. Any additional guidelines or regulations will have to be aligned with the DSA wording for clarity. Similarly, the Unfair Commercial Practices Directive (UCPD) must be considered which regulates dark patterns for consumer protection. It will therefore be important to ensure the text is precise in its description of dark patterns. Ideally this should specify that the term refers to manipulative design choices that materially distort the behaviour of an average user. However this should not lead to an outright ban on ads practices, which may be justified in some
    circumstances.

    The EDPB guidance similarly needs to ensure consistency with the DSA text and the relationship between the two should be clearly outlined. With proposed guidelines there is a risk of creating even more incompatibility between the various European regulations on dark patterns and further complications regarding compliance and execution. The DSA’s definition of “compliance by design” for online marketplaces might also interfere with the outcomes of the proposed guidelines.

    Almost all small businesses in Europe depend on digital channels to find new audiences, market to them and convert them to customers. European economic integration is dependent on the ability of SMEs to expand, grow and ultimately reach consumers throughout Europe. However, unlike large corporations, SMEs do not have the resources for large-scale marketing campaigns reliant on organic tools. What SMEs need is legal coherence, clarity and certainty to know what practices they must avoid and what they may utilise. Guidance must be clear on the outlined issues as legal expertise is a costly expense for SMEs if they are to navigate the wealth of different regulations
    addressing dark patterns.

    We hope that the voice of SMEs will be reflected in any upcoming digital communications regulations and guidelines. We remain open for further engagement in the process.

     

    Co-signatories

     

    The Coalition for Digital Ads (CDA) of SMEs supports thousands of SMEs that power Europe’s economy. Established by members of SME Connect in November 2021, CDA gives a voice to concerns over the EU draft proposals to initiate restrictions on personalised digital advertising across the EU and the impact a ban could have on SMEs, thus providing a necessary balance in an important debate. More about CDA: https://www.smeconnect.eu/cda/

    ZPP survey: 95% of “platform workers” are satisfied with the cooperation with the platforms. Most of them are against compulsory employment contracts.

    Posted on by Weronika Marzec

    Warsaw, 5 May 2022

     

    ZPP survey: 95% of “platform workers” are satisfied with the cooperation with the platforms. Most of them are against compulsory employment contracts.

     

    The survey was conducted in early 2022. The quantitative part was carried out using the CATI method, while the qualitative part in turn was developed on the basis of individual in-depth interviews. The survey included “platform workers” representing the following sectors:

    – food delivery,

    – passenger transport,

    – repairs and small services,

    – childcare,

    – parcel delivery,

    – IT services

    ADVANTAGES OF PLATFORM WORK ACCORDING TO EMPLOYEES

    According to the survey, one of the main factors encouraging people to work with platforms is the possibility of easier and faster access to customers or a low entry threshold, i.e. the ability to start work easily.

    A high level of flexibility is also important for “platform workers”. The fact that these expectations are realized in cooperation with platforms is evidenced by the fact that the same factors were indicated by the interviewees as key advantages of cooperation with platforms. As a result, 95% of respondents say they are satisfied with working with the platform.

    Respondents assess the terms of cooperation with platforms as understandable (98%) and fair (96%). The level of satisfaction with the cooperation, as well as a positive assessment of its conditions, also translates into an assessment of their own financial situation. 93% of “platform workers” assess their financial situation well, and almost every third respondent earns an income of more than 5 thousand PLN net from orders received through the platform.

    The high level of satisfaction with the cooperation with the platforms and the conditions they offer is reflected in the professional plans of the respondents. More than 80% of them plan to work in this type of job for longer, either as the only (42%) or additional (41%) source of income. For only 17% of respondents, “platform work” is temporary and temporary in nature.

    Significantly, but also very consistent with the responses to the question about the greatest advantages of “platform work,” the majority (61%) of platform collaborators surveyed would not want to see a law enacted that would make it necessary for the platform to hire them on a full-time basis, with 24% strongly opposing such an idea. At the same time, more than 40% would be willing to give up some of the pay or flexibility of the collaboration to gain the rights granted by the labor law.

    Thus, it should be considered that “platform workers” are in favor of freedom in shaping the relationship between themselves and the platforms. The vast majority of platform workers are self-employed, but 14% work under an employment contract. This suggests that there are different models of cooperation between platform workers and platforms.

    It seems important that almost ¾ of the respondents (and most of the respondents have more than two years of experience working with platforms) have never encountered inconveniences when working with platforms. One in five respondents stated that they occasionally noted such inconveniences, generally in the nature of technical problems or application crashes. In the qualitative interviews, “platform workers” highlighted their perceived weaknesses in working with platforms. As a rule, they were related to specific rules resulting from the regulations of the platform, e.g. relating to commissions charged or settlement rules.  

    ZPP’s contribution to the Commission’s consultation on the VAT in a digital age

    Posted on by Weronika Marzec

    Warsaw, 9 May 2022

     

    ZPP’s contribution to the Commission’s consultation on the VAT in a digital age

     

    The Union of Entrepreneurs and Employers (ZPP) is pleased to participate in the public consultation on the “VAT in the Digital Age” proposal announced by the European Commission. Beyond responses provided in the survey, we would like to comment particularly on Single EU VAT Registration and Import One Stop Shop (IOSS) development workstreams. Additionally, we would like to draw attention to the current functioning of the Union One Stop Shop (UOSS) & IOSS. We will focus on how these mechanisms can be modified to serve their purpose better. IOSS & UOSS have experienced changes in their functioning following the e-commerce VAT package. The introduction of both processes has undoubtedly simplified VAT registration and accounting. Nevertheless, together with our members, we have identified certain issues that do not provide legal certainty for enterprises and can lead to loopholes in law application.

    Firstly, we find the functioning of the multiple OSS registrations redundant. Non-EU entities might, under currently functioning VAT rules following the go-live of the e-commerce VAT package, establish three different registrations for fulfilling EU VAT obligations; these are Non-Union OSS, UOSS and IOSS. In our view, this creates unnecessary complexity for companies. For this reason, we state that it would be beneficial to integrate these different schemes so that all types of supplies can be declared through One Stop Shop, including imported goods, services and domestic sales.

    Secondly, entrepreneurs find it troublesome to report credit notes and adjustments on product returns, invoicing errors and post-invoicing discounts. Current regulations require adjustment to be divided by country and period. This causes avoidable burdens for companies to fulfil their tax duties. In practice, this results in burdensome reporting obligations of the credit notes, which might take longer to process than to put together the return reporting tax due. We recommend easing the responsibility to split credit by period, thus making the One Stop Shop return efficient.

    Import One Stop Shop (IOSS)

    We welcome improvements brought with the implementation of the IOSS, such as the introduction of VAT calculation and remittance upon sale. Nevertheless, we would like to address issues that remain obstacles for companies under the current legal order.

    First of all, we would like to draw attention to the double taxation issue. IT taxation systems in some of the EU Member States are not yet ready to implement the functioning of the IOSS. As a result, H1 customs declarations of the IOSS-eligible shipments do not recognise IOSS identification codes and might lead to the double taxation of the companies.

    EU has done much to implement the mechanism to support double tax refunds. Nonetheless, this should only come as a temporary solution and shall be replaced with a widely functioning IOSS system across the EU. This is because double taxation causes administrative burdens for entities obliged to declare tax. Moreover, taxpayers might pose sanctions resulting from the lack of complementarity in functioning H1 customs declarations at the EU level. Therefore, IOSS numbers should become recognised by IT systems across all EU Member States to harmonise the execution of the regulations and ultimately simplify the functioning of the cross-border enterprises.

    Another factor causing inconveniences for the operation of European entrepreneurs is the potential misuse of IOSS numbers. Under currently biding regulations, it might occur that the IOSS number will be intentionally used inappropriately as well as misused by mistake—currently, IOSS is an optional feature. Additionally, numbers are not kept confidential, and there is no transparency among IOSS holders. That is why customs authorities can’t verify the actual holder of the number or payment of the VAT consignment but only whether the number is valid. The above factors contribute to the increased possibility of IOSS numbers misuse to avoid paying VAT at the customs border. For that reason, IOSS accounting is more frequently controlled, which might cause additional burdens for companies. IOSS registrant will have to explain reconciling differences between EU customs data and IOSS returns. This involves proving why they are not responsible for the IOSS misuse.

    Finally, in the EU, there are existing disparities between customs legislation and EU VAT. It is evident in the example of non-IOSS eligible shipments under EUR 150, such as B2B and excisable products, requiring direct clearance in the final delivery country under the scope of VAT and the new customs competent office rule emphasised in Article 212(4) of the UCC/IA.

    In our opinion, the functioning of IOSS and UOSS should be strengthened in order to make taxpayers’ obligations harmonised across the EU and thus ease the fulfilment of their obligations and remove the existing barriers to doing business.

    Proposals to improve the functioning of UOSS and IOSS

    The Union One Stop Shop has been enforced with the beginning of July 2021. It brought the simplification to the VAT settlement process for entrepreneurs. IOSS also forms a base for EU single VAT registration. Based on our expertise and experience shared by our members, we recommend UOSS extension to include usage in cases that were included in the e-commerce VAT package reform from July 1, 2021. We suggest covering with its scope reporting intra-EU transfers of own inventory as well as reporting and payment of VAT due on any onward B2C sale from the place of storage to the local customer. With this, we aim to remove local registration responsibilities for entities without a local establishment to conduct these transactions. We state that the UOSS serving domestic sales by non-established entities will have a positive impact unless a harmonised EU-wide domestic reverse charge mechanism is introduced whereby the customer self-accounts for the VAT due on its purchase. In our opinion, it would be beneficial to prevent registration obligations in the same way both B2B sales and B2C supplies. Often, enterprises will trade with their contractors, not knowing their actual business status at the time of the sale. For this reason, a reform introducing changes to B2C supplies would eradicate many additional VAT registration burdens for the EU industry and empower cross-border trade.

    Harmonising VAT registration through its standardising would enable the lifting of administrative requirements. It would fully enrich European entrepreneurs’ potential and minimise avoidable barriers for tax authorities, governments, and customs services. Hence, it will benefit both the administration and the private sector, which should be a primary aim of the regulation. For national governments, this means creating a more competitive EU market, which would lead to the intensification of trade, thus increasing tax revenues. At the same time, tax authorities will benefit from simplified and compliant reporting procedures and easier facilitation of cross-border goods movements. As a result, there will increase in the on-shore of goods and services on the internal market.

    On the other hand, the influx of individual packet shipments from non-EU countries will be reduced due to onward incentive distribution within the block. This will reduce the workload of customs services as they will receive more bulk shipments than individual ones. It means better access to the internal market and increased trade for the private sector. SMEs will benefit from lesser tax obligations; thus, they will be more competitive. Last but not least, customers will have a wider choice of products at more competitive prices, which will be delivered faster.

    Extention of the UOSS to all B2B and B2C sales is beneficial and relatively easy to carry out in our stance. Alternatively, we envisage the possibility of implementing a domestic reverse charge for B2B supplies to locally VAT registered companies across the EU. Equally important is to reinforce the mechanism over the transfer of goods. We note that the efficient system for cross-border transfer of goods would benefit the lessors of consignment stock sellers, e-mobility providers, agricultural producers, touring events companies, moveable property, customers of toll manufacturers, retailers & wholesalers using remote fulfilment, as well as companies involved in sale-or-return contracts.

    Current regulations make the VAT recoverable by entities through their local VAT registration in the country of arrival. This results from the fact that the cross-border transfer triggers a VAT charge but no cash flow or associated cost. On the other hand, the cash flow to the input side of transfers of own goods in UOSS might not be easy as is the case for the output side. Currently, there is no possibility of recovering VAT in the UOSS for the VAT due to cross-border transfers of own goods by which the output VAT due on cross-border transfers could be reclaimed. We acknowledge that the proposal of a full extension of UOSS on a VAT recovery feature would not gain the full support of Member States. However, we have formulated two possible policies that would be optimal to tackle the above concern.

    Firstly, we believe that there should be applicable VAT exemption with credit to the transfer of own goods in the country of arrival, thus forming an equivalent VAT cash-flow position today. This solution has multiple benefits. Since no VAT reporting requirement and refund are required from the EU Member State of arrival, companies transferring of own goods would not face the cash-flow cost. Given that there is no net VAT revenue associated with movements of own goods in almost all cases, there is an evident similarity with the state of play as it is today. This applies to the outputs and inputs netting off in the same VAT return. On a technical note, it is worth mentioning that extending UOSS functionality would require a simple adaptation of the system. It could be implemented into the broader DRR initiative. Hence, we perceive this solution as the easiest to implement for both taxpayers and national tax authorities level.

    Alternatively, we opt for limiting the VAT cash-flow disadvantage by strengthening the VAT recovery mechanisms for non-established entities. In our view, creating more straightforward claim procedures under the Council Directive 2008/9/EC (know as ‘8th Directive’) for taxable persons registered in the UOSS – both EU and non-EU established. On a practical note, this would enable cash-flow cost without separate VAT registration for EU companies and entail output VAT reporting requirement, which would remain on the transfer of own goods. VAT refund requests would have to submit from the EU Member State of arrival due to the lack of VAT recovery feature built into the UOSS. This would require implementing specific changes to cross-border refund schemes currently in operation. The first change would need to extend the cross-border refund eligibility to VAT incurred on intra-EU transfer of own goods which VAT has been paid through the UOSS. It would apply to both EU and non-EU enterprises.

    Additionally, a period specified in the 8th Directive for processing reclaims would need to be significantly reduced. It would mainly relate to VAT self-accounted on cross-border transfer of own goods. We suggest linking the UOSS with data in the 8th Directive claim system. Validation of VAT claimed on cross-border transfers on own goods shall be processed promptly matching claim and payment done through the UOSS. This will enable relevant Member States to refund the VAT immediately.

    To sum up, ZPP recommends a single EU VAT registration model that includes B2C and B2B supplies and the transfer of own goods. Both options will reduce cash drag and total VAT cost on transfers of own goods. The ultimate goal of the legislator shall be to increase VAT compliance across the block while levering incentives for the companies by improving investments put into developing UOSS for both governments and taxpayers.

    Proposals to improve the functioning of IOSS

    We believe it should be of the legislator’s highest concern to improve the security of the IOSS system. That is why we identified in our expertise specific proposals to make the IOSS more fraud-proof and improve its performance.

    Firstly, we suggest making the IOSS obligatory for all business entities, which would be a complementary solution. In any proposal, we find covering all deemed suppliers, such as marketplaces, essential in the short term. The reason is to ensure a level playing field by countering unfair market practices (i.e. undervaluing goods or migration to the marketplace, which have not opted into IOSS, thus misuse of system’s numbers.

    Secondly, we state that the European Commission shall monitor the system in order to protect it from the misuse of IOSS numbers. This can be done by comparing deviances reported by the Member States on the number of parcels declared through customs under the corresponding IOSS number and on IOSS returns. This would apply to numbers whose deviances cannot be explained by other factors than misuse, ex. accounting error.

    Thirdly, currently biding regulations create many possibilities for its legal interpretation and, consequently, strive the complexity for the customs clearance at the border. This might lead to certain inconsistencies, beginning with the supplier opting out to use the IOSS or parcels, including items excising duty regulations. Moreover, when the parcel is sold to a business or private customer. Avoidance of these frictions shall lead to higher satisfaction for customers and suppliers and reduce the workload for customs authorities, whose capacity shall be focused more on countering fraud.

    We notice that high-value shipments (over 150 EUR) are subject to customs duties. Thus there are to be included in the taxable base for VAT purposes. That is why we suggest prioritising expanding the IOSS to higher value shipments. Companies might not necessarily know the customs duty due on products at the point of sale. For this reason, we recommend adjusting legal requirements over interaction with customs duties carefully.

    On the other hand, there is common dependence on increasing the EU customs duty alongside increasing the IOSS threshold. For that reason, we believe it should be considered to raise the customs duty threshold. The European internal market has a lower threshold than other major markets globally. Less costly VAT collection would compensate higher trade-off; hence increased IOSS threshold would balance the lost duty. Duty rates in the EU are relatively low compared to VAT rates, so based on our expertise, we believe that the increased duty exemption would be overall beneficial to the system’s functioning.

     

    See more: 09.05.2022 ZPP’s contribution to the Commission’s consultation on the VAT in a digital age

    Position of the Union of Entrepreneurs and Employers on the Consumer Credit Directive review

    Posted on by Weronika Marzec

    Warsaw, 26 April 2022 

     

    Position of the Union of Entrepreneurs and Employers on the Consumer Credit Directive review

     

    The European Commission has proposed a new Directive regulating consumer credit in June 2021.[1] The proposal is intended to replace the existing Consumer Credit Directive of 2008.[2] The draft rationale states that the current legal Act has not fully met its objectives, and therefore a revision is necessary. The aim is to introduce provisions that provide a clear legal framework for the financial industry’s economic activities and adapt regulations fit for the digital transformation. The rapidly expanding possibilities of electronic payments and socio-economic trends following it are causing consumers to change their habits in favour of the use of tools that have not yet been legally regulated.

    The change in consumers’ behaviour necessitates an appropriate technological adaptation of financial products. This is due to the progressive digitalisation of commerce, payment methods and financial services. As a result, creditworthiness assessment mechanisms are often based on automated decision-making systems and products information is commonly provided in electronic form. The legislation aims to harmonise laws at the European level and strengthen consumer protection.

    The Union of Entrepreneurs and Employers (ZPP) recognises the need to revise the provisions of the Consumer Credit Directive. We believe that it should create a legal framework that stimulates the development of the financial technology sector, which is undergoing significant changes and not make excessive barriers to the development and innovation of European businesses. Regulation should seek to strengthen consumer protection and increase consumer welfare in the digital environment through access to modern and secure digital tools. In our analysis of the proposal’s text, we identified several solutions in the draft that may be detrimental to the development of FinTechs in Europe and negatively affect the quality of available digital tools and consumer satisfaction with their use. In the following position paper, we set out our concerns regarding the revision proposal.

    Buy-Now-Pay-Later

    The development of FinTechs in Europe is very dynamic. There are already over 300 such companies in Poland, and the vast majority of them are young enterprises not older than 4 – 5 years.[3] The lack of regulations excessively limiting the use of modern digital tools is of great importance for the development of financial technology companies. Currently, the fastest-growing functionality in e-commerce is the ‘buy-now-pay-later. This enables the consumer to purchase online and pay later with no fee (or a very low fee). This instrument kicked off in Sweden and has become popular in Scandinavian countries. It is now rapidly gaining popularity in Europe as the e-commerce sector develops. The data presented shows BNPL’s share of the total e-commerce payment industry at 7.4 per cent of the European market, over 20 per cent share in the Swedish market and only four per cent lower share in the German market. This positions BNPL as an ordinary payment instrument for European consumers.

    Access to secure financial services is beneficial to consumers and allows them to fulfil their daily needs. Low-interest (or interest-free) online loans are, as a rule, low-rate financial instruments. Therefore, they are not equivalent to high-value bank loans to purchase a house or a car. BNPL has a low risk of increasing consumer insolvency. BNPL operators offer many solutions to fit the product to the customer’s needs. However, the ability to create tailored offerings for customers may be limited due to disproportionate regulatory burdens on operators, which may lead to the creation of instruments that are unintuitive and incomprehensible to consumers.

    Creditworthiness assessment

    The creditworthiness requirements introduced by the proposed Directive should be customised to the type of financial commitment. The different lengths and costs of credit should determine the adequate assessment of credit risk in relation to the actual threat of insolvency. Socio-economic factors should influence the distinction between BNPL as a flexible payment option, loans with a high-interest rate or additional charges and products with a high commitment amount. Furthermore, e-commerce companies have their own reliable debt risk assessment systems based on online purchase history or credit fraud databases. This makes BNPL a low-risk service which should be reflected in the proposed Directive. In addition, it is a service characterised by immediate execution, so the traditional method of credit assessment based on manual verification of documents, such as income certificates, is inadequate for the needs of e-commerce and more costly than an assessment based on automated systems. Consumers may be reluctant to share their documents online, or it may prove too burdensome. As a result, this would be at the loss of FinTech companies and exclude some consumers from accessing credit tools.

    Low-value loans

    The current Act includes under the scope loans between €200 and €75,000. The proposed Directive extends its provisions to all loans with a value equal to or less than €100,000. This means that the Directive provisions will cover small purchases using BNPL.

    Many BNPL users do not perceive this financing method as a loan. This is due to the tool’s flexibility, which can be tailored to the needs of a specific offer. It can take the form of a delayed repayment for a set period (e.g. 30 or 60 days), or it can be spread in instalment. Another possibility is to buy ‘on trial’ without making an immediate payment. Free trial shopping is complementary to the online shops’ free returns policies. The above makes it difficult for the consumer to associate BNPL with classic consumer credit. It is also not entirely clear how the different types of BNPL should be classified. Depending on the service provided, it can take the form of various contact obligations known to law.

    Pre-contractual information obligations

    Another factor that may negatively affect the development of innovative financial products may be the excessive pre-contractual information obligation enshrined in the draft Directive. FinTech products are becoming increasingly popular thanks to simple and transparent rules. This is a major difference from traditional banking products, burdened with restrictive information obligations. Loan amounts in BNPL are low and short-term, so there is no need to provide detailed information on held commitments.

    Moreover, a large number of users purchase through mobile devices. Consequently, BNPL is also most commonly used for purchases via mobile phones or tablets. The introduction of a broad information obligation will result in the illegibility of the proposed offer. It may result in the unclarity of the service to the consumer’s detriment. In addition, it might lead consumers to give consent without knowing the actual terms of the agreement. This can lead to a dangerous situation called ‘consent-fatigue’. This is a phenomenon where the user is presented with a large amount of information to read and accept before using a product or service. A large amount of information shown causes a feeling of overwhelm on the consumer, who wants to use the tool as efficiently as possible without time-consuming familiarisation with voluminous information content. This psychological effect leads to a threat to the consumer’s attention who, accepting the rules without familiarisation, may fall prey to fraud and accept unfavourable conditions. This is a negative phenomenon resulting from a disproportionate information obligation on the operator. Considering the above, we believe that the increased information obligation will not benefit the consumers if an effective way of presenting and prioritising the information is not ensured.

    In conclusion, we recognise the need to review consumer credit legislation and adapt it to the new demands of digital transformation. However, we note that specific provisions of the new Directive may halt the dynamic development of FinTech companies in Europe and be detrimental to consumers. Given the importance of consumer protection in the line with the case-law of the Court of Justice of the EU and the legislative activity of the European Institutions, there is no doubt that the welfare of consumers is a value that should be paramount when creating a new law. For this reason, we urge European legislators to consider the comments made above in order to make the provisions of the Consumer Credit Directive the most beneficial to the European economy.

    ***

    [1] https://ec.europa.eu/info/sites/default/files/new_proposal_ccd_en_3.pdf

    [2] https://eur-lex.europa.eu/legal-content/PL/ALL/?uri=CELEX%3A32008L0048

    [3] https://www.ican.pl/b/jak-wyglada-polski-fintech-rzut-oka-na-branze/PMQpOzRdk

     

    See more: 26.04.2022 Position on the review of the Consumer Credit Directive

    The companies that decided to continue their operation in Russia have nothing to do with “the social responsibility of the business” And what does their fair CIT settlement in Poland look like?

    Posted on by Weronika Marzec

    Warsaw, 8 April 2020

     

    The companies that decided to continue their operation in Russia have nothing to do with “the social responsibility of the business” And what does their fair CIT settlement in Poland look like?

    REPORT OF THE UNION OF ENTREPRENEURS AND EMPLOYERS

     

    The disgusting and unjustified Russian invasion of Ukraine has led to widespread ostracism and consumer boycotts. The broad scope of the sanctions meant that some companies had limited choice as far staying in Russia goes. Companies in the banking, energy or high-tech sectors have had to submit to decisions ordering to halt the trade immediately. The only companies that had a say in all of this were the ones of the retail and manufacturing sectors. Most of them have made this decision on their own – and in the eyes of the ZPP the only right decision there is – to leave this country. But not all of them.

    ZPP has made a decision to look into the companies that have chosen to stay in Russia. Continuing our series of publications on how some multinational corporations go about their tax settlement, we have turned our attention to entities that have decided to continue doing business in the Russian Federation. In the course of the analysis it turned out that a significant number of these entities pay marginal income tax in Poland – in many cases, in relation to their revenues and the scale of their activity, multiple times lower than in Russia.

    – Companies like to boast about their social responsibility, but the real value of these declarations is verified in moments of trial, when basic decency has to be demonstrated – says Jakub Bińkowski, member of the board and director of the Law and Legislation Department at ZPP.

    – Maintaining the decision to continue operating in Russia feeds the aggressor’s budget and generates funds for the war-related activities. This is difficult to understand, all the more so since doing business in the country now involves gigantic risks and the purchasing power of Russian consumers is consistently decreasing. We are not particularly surprised that those who have decided to continue operating in this country, despite everything that’s happening, pay almost symbolic CIT in Poland. However, this is an additional reason why urgent reform of the tax system is necessary. Especially since the same entities pay much higher sums to the Russian budget – adds Jakub Bińkowski.

    However, the information presented in the report is also a reminder of the extent to which companies remaining on the Russian market contribute to the country’s budget, also by paying corporate income tax. They are thus becoming sponsors of Vladimir Putin’s regime and, indirectly, of the ongoing war-related activities.

    Leaving aside the current context, this phenomenon once again shows how inefficient the Polish tax system is, particularly in the area of tax paid by capital companies. We have repeatedly argued that CIT is de facto voluntary, as it is paid only by those entities that do not engage in tax optimisation.

    Companies cited in the report include Makro Cash&Carry, Auchan, Astrazeneca Pharma, Decathlon, Leroy Merlin, but also Rockwool, Bonduelle, Total Polska (Totalenergies Group), Glaxosmithkline Pharmaceuticals and Schneider Electric. It turns out that these companies have not only decided to stay in Russia, but also systematically pay CIT at a fraction of a percent of revenue.

    – We went a step further in our analysis and checked what the tax practice of the same companies looks like on the territory of the Russian Federation – says Kamila Sotomska, deputy director of the Law and Legislation Department of the ZPP.

    – Logically, the same entities that do not pay CIT in Poland would not pay it in Russia in order to maximise global profit. Well, apparently not. Let’s take Leroy Merlin – in 2020 alone it paid almost three times as much tax in Russia as it did for nine years in Poland. Auchan paid five times more to the Russian budget in 2020 than to the Polish tax in 2012-2021 – she stresses.

    More details in our report: How much CIT do companies that stayed in Russia pay in Poland?

    Opinion of the Chief Energy Technology Specialist at The ZPP: achieving energy autonomy requires additional legislative action

    Posted on by Weronika Marzec

    Warsaw, 6 April 2022

     

    Opinion of the Chief Energy Technology Specialist at The ZPP: achieving energy autonomy requires additional legislative action

     

    On Thursday, 31 March, a signing ceremony took place for an appeal to unlock investment opportunities in onshore wind energy. Known as ’10H law’, it can be considered a key piece of legislation for the Polish energy sector in the context of the country’s current geopolitical situation. As a result of the war in Ukraine, energy independence is becoming a priority both politically and economically. This is an aspect that requires us to act in an extremely quick and focused manner.

    The only sources that can rapidly replenish our energy balance in the near future – significantly increasing the supply of energy – are onshore wind farms and large-scale solar sources. ZPP has been calling for a special legislative priority to streamline these investments for a long time, presenting the benefits for the entire Polish economy of such projects.

    In the face of a rapidly increasing green energy deficit, both of these sources are crucial, especially for companies exporting to European markets. Investments in the developing distributed energy also have an impact on the security level in the country. The war in Ukraine has shown how easy it is to take over large power stations and the consequences this can have on a security level in the country. In contrast, it is more difficult to disrupt a million of small, distributed solar and wind installations.

    We believe that every action towards increasing security and achieving energy independence in Poland should be strongly supported, hence our decision to join the appeal for a quick unblocking of investment in onshore wind energy. This is particularly important if we want to save a certain proportion of our coal-fired power generation from political death, and thus obtain the Union’s approval to extend the process of moving away from coal. Only consistent action in this area can ensure our energy autonomy.

    The development of distributed energy will be important for the entire Polish economy, provided that it is an integral part of the whole programme of energy transformation in the country. The recently presented assumptions for the revision of the Energy Policy of Poland assume dynamic development of this form of energy, so we hope that the rapid restoration of investment opportunities for onshore wind energy will be one of the most important objectives of the Polish government.

    We would like to once again draw attention to the enormous potential offered by the development of large-scale solar sources on post-industrial areas. A large part of these places is in the hands of state-owned companies with investment and connection capacities. The only problem in this case is the exceedingly long time it takes to obtain building permit.

    Legislative shortening of the deadlines for issuing these permits on post-industrial and post-mining sites would give us an additional 4 to 5 GW of green power in just 3 to 4 years. Amending the Wind Power Investment Act that would liberalise the 10H rule provide another 5 – 7 GW of capacity, thus making the achievement of 20 – 25 GW of installed green powers in 2027 fully feasible. This, in turn, translates into 40 to 45 terawatt hours of energy per year, which would come from distributed onshore installations.

    Based on the above calculations, it can be assumed that in 2027 we would be able to produce 25-30% of our energy solely from land-based, distributed and renewable sources, and this would already constitute a clear step towards Poland’s energy sovereignty. We turn to the decision-makers and urge them to act quickly in proceeding and passing the necessary legislation that will enable us to achieve autonomy in the area of energy supply.

     

    Włodzimierz Ehrenhalt
    Chief Energy Technology Specialist at the ZPP

     

    See: 06.04.2022 Opinion of the Chief Energy Technology Specialist at The ZPP: achieving energy autonomy requires additional legislative action

    The stance of the ZPP on the Act of 7 April 2022, on special arrangements to prevent the promotion of aggression against Ukraine and to protect national security

    Posted on by Weronika Marzec

    Warsaw 12 April 2022 

     

    The stance of the ZPP on the Act of 7 April 2022, on special arrangements to prevent the promotion of aggression against Ukraine and to protect national security

     

    On 30 March 2022, the draft law on special arrangements to prevent the promotion of aggression against Ukraine and to protect national security was submitted to the Polish Sejm. The law aims to restrict the activities of persons and entities linked to Russia, which on 24 February 2022 attacked Ukraine, as well as Belarus, which supports the Russian Federation in these actions. The bill was very quickly adopted by the Sejm by a large majority – 445 in favour, 0 against and 11 abstentions. The bill has been forwarded to the Senate and will most likely be passed and signed by the President in the coming days.

    This project focuses on the possibility of ‘freezing’ the assets of individuals and entities linked to Russia and Belarus that support aggression against Ukraine. Entities from these countries will also not be able to participate in tenders organised under the public procurement procedure. In addition, individual persons may be included in the list of foreigners whose residence in the territory of the Republic of Poland is undesirable. These are, therefore, relatively comprehensive measures to eliminate both the physical and economic presence and capital of specific companies and individuals.

    The aforementioned sanctions may be imposed on entities and persons who will be included in the list maintained by the appropriate Minister in charge of internal affairs, responsible for making administrative decisions in this regard, based largely on the provisions of the Code of Administrative Proceedings. The proceedings in the matter of an entry may be undertaken by the Minister ex officio or at the request of one of the entities enumerated in the Act (e.g. the heads of the Central Anticorruption Bureau, the Internal Security Agency, the Foreign Intelligence Agency, the Military Intelligence Service, the Military Counterintelligence Service and the National Public Prosecutor). The list will be published in the Bulletin of Public Information on the Ministry’s website. It is therefore important that businesses keep their contractors, both current and future, under review for potential sanctions stipulated in the provisions of the Act.

    Pursuant to the Art. 3 sec. 2 persons and entities who directly or indirectly support the Russian aggression against Ukraine or severely violate human rights, repress civil society and democratic opposition, or whose activities pose another serious threat to democracy or the rule of law in the Russian Federation and Belarus may be included in the list. Entities may also be included on the list if they are directly related to previously listed entities, in particular through personal, organisational, economic or financial links.

    It is also worth noting that the Minister in charge of internal affairs will be able to limit the scope of justification of the decision on entry and removal from the list for reasons of state security or public order in accordance with Art. 3 sec. 9 of the Act.  This provision is meant to ensure state security, e.g. in the dissemination of classified information.

    Another important step provided for in the Act is to prohibit the import and transit of coal from Russia and Belarus through the territory of Poland. The entities trading in coal will have to document its origin and keep the relevant documents for 5 years.

    The Act will also prohibit the use, application or promotion of symbols or names supporting the aggression of the Russian Federation against Ukraine (Art. 16 of the Act). The ban will apply, for example, to the ‘Z’ symbol used to mark the military vehicles of the aggressor’s army and, in recent weeks, also used by supporters of the policies of Russian President – Vladimir Putin. Violation of the ban is punishable by imprisonment of up to 2 years.

    It is important to note that entities that fail to comply with their obligations under the Act with respect to, for example, freezing funds, funds or resources of persons identified on a list maintained by the Minister, violate the prohibition on the import and transit of coal, take action to circumvent the prohibitions or otherwise violate the prohibitions set out in the Act may be subject to financial liability. The fine for individual violations can be up to PLN 20 million.

    In view of the current geopolitical situation, the introduction of the Act on special measures to prevent support for aggression against Ukraine and to protect national security is undoubtedly justified. Russia is not a reliable economic partner for Poland, and the measures provided for in the Act may restrict funding for arming activities of a state which does not respect the sovereignty of its neighbours and which, in the future, could potentially deploy its troops even against our country. It is worth noting that the value of Polish exports to Russia is around 36.6 billion PLN, while the value of imported goods is 77.8 billion PLN. This means that Russia is not, on an economy-wide basis, a key trading partner, although certainly in many industries the proposed measures could be very noticeable. It is therefore crucial to urgently secure other channels of trade. In view of the above arguments, it must be assumed that it is certainly more important to guarantee the security of the state and to cut off trade with Russia than to go through some temporary trade problems.

    It should be pointed out, however, that the Act does not provide details on how traders should fulfil their obligations under the agreement in question, how they should behave towards listed entities under ongoing contracts. It is important for Polish companies to have information on the procedure for freezing funds, securing assets and potential liability for loss of value, damage or destruction.  Guidance in this regard seems necessary to avoid the potential risks involved in even unintentional breaches of the Act.

     

    See: 12.04.2022 The stance of the ZPP on the Act of 7 April 2022, on special arrangements to prevent the promotion of aggression against Ukraine and to protect national security

    Commentary of the Union of Entrepreneurs and Employers (ZPP) on the progress of work on the Digital Services Act

    Posted on by Weronika Marzec

    Warsaw, 15 April 2022

     

    Commentary of the Union of Entrepreneurs and Employers (ZPP) on the progress of work
    on the Digital Services Act

     

    Digital Services Act (DSA) will soon amend the E-Commerce Directive that has been in place for more than 20 years. Work on the new regulation has been ongoing continuously since late 2020. The trilogue – a trilateral negotiation between key EU institutions – is expected to conclude early this month. However, we are now seeing the emergence of numerous proposals that were not included in the negotiators’ original mandate.

    The disproportionality of the crisis response mechanism

    Among the most recent proposals is the Crisis Response Mechanism (CRM), which was created to enable institutions to counter Russian disinformation attacks efficiently. We welcome that the EU institutions take decisive steps to fight against Russian propaganda. Nevertheless, we have some doubts as to whether introducing the proposed provisions in DSA at this stage of the negotiations is the best way to tackle this problem.

    At the request of the French Presidency, the Commission has proposed introducing provisions that could force large technology companies to quickly adapt their platforms and increase the number of staff moderating content during major crises such as natural disasters, terrorist attacks or war. The new DSA Article 25(a) would empower the Commission to require specific actions only based on a recommendation from a Council of European National Regulators. Paris has suggested that a two-thirds majority of regulators would be needed. Technology companies’ efforts to tackle disinformation or problems related to a specific crisis would be legally limited to three months. At the same time, the Commission would have to keep its decisions transparent.

    This proposal has been protested against by 24 citizens’ organisations, who point out in their open letter that the European Commission should not be empowered to declare an EU-wide state of emergency unilaterally. Furthermore, these organisations note that the CRM is far from respecting international human rights standards of legality, legitimacy, necessity and proportionality, and they call for reformulation.

    Moreover, the new Article 25a of DSA is intended to empower national digital coordinators to require smaller platforms to comply with risk mitigation obligations that usually fall on very large platforms only. Such a provision appears to place a disproportionate burden on smaller platforms, whose ability to comply with the requirements mentioned above will be limited in practice, especially in the short term.

    Ultimately, attempts to combat Russian disinformation may be undermined by other provisions found in DSA. Article 15(2) requires platforms to provide information on the facts and circumstances as well as the means used whenever content-related activities are undertaken. This will provide disinformation actors with full knowledge of how platforms combat disinformation and reduce the visibility of harmful content. As a result, in an effort to increase transparency, DSA will make it easier for bad actors to fool security systems and, consequently, more complex to fight disinformation. In the current situation, the EU institutions should create instruments that allow platforms to fight against disinformation actions carried out by third countries on a massive scale, rather than introducing new solutions to a horizontal regulation such as DSA at such a late stage.

    Return of the ban on targeted advertising

    In a plenary vote in the European Parliament, MEPs rejected a complete ban on targeted advertising. As a result, they voted to restrict the targeting of minors and targeting using sensitive data. We welcomed the EP decision. We believe it strikes the right balance between user protection and business rights. A total ban would have hit SMEs, depriving them of a cost-efficient way to reach their customers and severely limiting their growth opportunities. Therefore, we watch with concern the amendments tabled by MEPs aimed at achieving a de facto ban on targeted advertising.

    Before discussing the EP’s latest proposals, it is first necessary to draw attention to the so-called ‘known minor problem’. Platforms would have to verify minors’ age to be able to restrict the use of targeted advertising. In the absence of general age verification on the Internet, platforms have to process user traffic data to determine age based on activity. Paradoxically, a ban on targeting could, in theory, lead to more tracking of children’s online activities.

    To address this issue, the EP proposed an amendment to Article 24(1)(b), which states that ‘compliance with the obligation set out in the first subparagraph shall not entail the processing by online platforms of additional personal data on minors in order to verify the age of the recipient of the service’. Whilst we recognise the need to promote child safety through data minimisation, we believe that a provision worded in this way will be difficult to implement in practice and will reduce targeted advertising across all age groups. We propose that the provision be amended to prohibit excessive, rather than an additional, collection of personal data for age verification purposes.

    Moreover, MEPs propose to extend the ban if the platform has doubts about whether the recipient is a minor (Article 24(1)(c)). This also means expanding the prohibition to the user when age verification is not possible. Given the current state of technology, such a provision could lead to a de facto ban on personalised advertising. This provision should be limited to cases where the platform has serious grounds, not just doubts, to believe that the recipient is a minor to avoid negotiators walking out their mandate. A provision worded in this way will simultaneously protect minors.

    Extension of know-your-business-customer

    As a final point, attention should be drawn to the proposal to extend the know-your-business-customer rule, which obliges Internet Service Providers (ISPs) to collect information that identifies business users in order to verify their identity. KYBC aims to improve online security by halting certain entities from using legitimate services to conduct illegal business anonymously. Assuming that the list of information required to be obtained from ISPs is proportionate and not an unreasonable administrative burden, the proposal should be viewed positively. However, during the January negotiation rounds, it was proposed to extend this principle to all types of ISPs, thus covering market places and social media, instant messaging, or streaming services.

    In order to understand the implications of the KYBC extension, it is important to remember that DSA, like the E-Commerce Directive, is based on a prohibition of general internet monitoring. Such an injunction has been rejected from both the E-Commerce Directive and DSA, as it undermines fundamental values such as freedom of expression and could lead to censorship (i.e. excessive blocking or removal) of lawful content. Extending the KYBC to all intermediate service providers means extending it to all content that appears on the Internet. Therefore, it is hard to imagine in practice how the application of such a rule would take place without general monitoring of the Internet while still meeting DSA’s stringent requirements for human factors provision.

    The Union of Entrepreneurs and Employers actively participated in the work on the Act and, from the very beginning, called for solutions that would not overburden digital businesses. At the end of DSA negotiations, we maintain this call and urge policymakers not to place impossible demands on digitally active companies.

     

    See more: 15.04.2022 Commentary of the Union of Entrepreneurs and Employers (ZPP) on the progress of work on the Digital Services Act

    Memorandum of the Union of Entrepreneurs and Employers (ZPP) on the economic situation in Ukraine and its consequences for Polish companies

    Posted on by Weronika Marzec

    Warsaw, 31 March 2022

    Memorandum of the Union of Entrepreneurs and Employers (ZPP) on the economic situation in Ukraine and its consequences for Polish companies

     

    On 24 February 2022, the Russian Federation invaded Ukraine. Hostilities spread over almost the entire territory of our eastern neighbour. The extent of the damage after nearly a month of attacks is counted in the tens of billions of dollars. Almost all critical infrastructure was either destroyed or severely damaged.

    The humanitarian disaster in Ukraine brings with it a migrant and economic crisis for the entire region, the economic impact of which will be felt around the world for years to come. Ukraine is one of the largest producers of cereals and vegetable oils. The production crisis will lead to a spike in prices for the food industry on world markets. This has a major impact on Poland’s economy due to the disruption of supply chains and the almost total lack of business opportunities in war zones. Hundreds of Polish companies in Ukraine have been forced to temporarily close or relocate their businesses and offices.

    At present, a comprehensive assessment of the foreseeable impact of the situation on Polish business is probably impossible. Polish investors are left to actively monitor changing regulations, assess the safety of conducting business activities and hope that the war ends as soon as possible. 

    1. General information about the Ukrainian economy (state before the Russian invasion). Expected reforms and changes to business regulations.

    In the first years after gaining independence in 1991, Ukraine was a heterogeneous country plagued by internal conflicts and corruption. The country’s economy regularly faced economic crises, internal power struggles which were not conducive to development and foreign investors’ confidence. It was not until 2014 that the country shifted and chose a Western course for further development which ended in partial Russian aggression. Recent years, however, have seen slow reforms of the judiciary system, a fight against corruption (increasingly successful and producing tangible results), opening more to Western investments and, finally, land reform. The country’s development decisively accelerated after 2018 and even the COVID-19 pandemic did not manage to diminish Ukraine’s very good prospects in the short and medium term. 


    *Data does not include GDP of occupied Donbass and Crimea, **Source UKRSTAT


    *Data does not include GDP of occupied Donbass and Crimea, **Source UKRSTAT

    Based on the above data, we can conclude that the Ukrainian economy has been growing slowly but steadily, despite the large expenditure on armaments since the beginning of the war with the Russian Federation in 2014. Another interesting issue is the level and origin of foreign direct investments over the last 10 years. Even before 2015, Russian capital from Cyprus, where it was mostly legalised, was at the top of the list of largest investors. Following the annexation of Crimea, the structure of foreign capital in Ukraine changed significantly. It should be mentioned that in recent years Poland has not only become one of Ukraine’s main economic partners, but the level of Polish investment in the country itself is one of the highest in history and it has been showing an upward trend. It should be noted, of course, that the rate of investment has slowed sharply in 2020 – 2021 due to the restrictions on economic activity caused by the coronavirus outbreak.


    *Source UKRSTAT


    *Source UKRSTAT

    An example of the changes is the “Dia City” bill, which introduced far-reaching changes and tax reliefs for almost the entire IT sector (the bill came into force on 1 January 2022). “Dia City” aimed to develop the entire IT sector, fight against the grey employment market and introduce low and transparent taxes for foreign investors as well as their employees. The main objectives of the bill are as follows:

    a) A company that has passed the verification may choose the method of corporate taxation: 9% of dividend tax, or 18% income tax under the general rules.

    b) When profits are distributed by a participant in the Dia City programme to a non-resident founder, the tax benefits provided for in international conventions for the elimination of double taxation shall apply regardless of the corporate tax payment system chosen.

    c) Preferential taxation of employees:

    based on an employment agreement, personal income tax (hereinafter referred to as “PIT”)
    – 5% single social security contribution,

    – 22% minimum wage for PIT,
    – 1.5% military tax,

    if an employee’s total remuneration is higher than EUR 240,000 per year, all income above this limit shall be subject to 18% personal income tax.

    d) Dividends paid by IT companies to their founders – natural persons (both residents of Ukraine and non-residents) shall be exempt from taxation in Ukraine provided that the dividends are paid no more often than once every 2 years.

    1. The banking system of Ukraine during the war

     The operation of the banking system and the foreign exchange market in Ukraine during wartime is regulated by a resolution of the National Bank of Ukraine of 24 February 2022:

    – all banks operating on the territory of Ukraine shall continue to provide their services and operate in their field branches as part of their business,

    – banks shall continue to provide both natural persons and companies with access to safe deposit boxes,

    – domestic transfers in Ukrainian currency shall be unlimited,

    – cash deliveries to ATMs shall takes place without restrictions,

    – The NBU shall refinance banks without restrictions to maintain liquidity for up to one year with the possibility of extension for another year.

    The relevant resolution also provides for the introduction of temporary restrictions from 24 February 2022, namely:

    – suspension of foreign exchange market operations as of 24 February 2022, with the exception of the sale of foreign currency to the bank’s customers,

    – UAH exchange rate freeze as of 24 February 2022,

    – Limiting cash withdrawals from a customer’s account to UAH 100,000 per day (except for salaries and social benefits), except for enterprises and institutions ensuring the implementation of mobilisation plans (tasks), the Government and individual authorisations of the National Bank of Ukraine,

    – prohibiting the transfer of funds from customer accounts in foreign currencies, except for enterprises and institutions ensuring the implementation of mobilisation plans (tasks), the Government and individual authorisations of the National Bank of Ukraine; on 4 March 2022, Resolution No.: N36 of the National Bank of Ukraine lifts the prohibition on the transfer of funds (except for Russian and Belarusian roubles) to residents’ accounts in banks for export transactions.

    – introducing a moratorium on cross-border payments in foreign currencies (with the exception of enterprises and institutions ensuring the implementation of mobilisation plans (tasks) and individual authorisations of the National Bank of Ukraine),

    – suspension of spending operations conducted through the banks’ operation on the accounts of residents of the country that invaded Ukraine.

    On 8 March, the NBU eased restrictions on the foreign exchange market by introducing Resolution no. 44 of the NBU Board of Directors of 8 March 2022. Martial law requires the NBU to gradually ease and clarify the list of restrictions on the foreign exchange market. For this purpose, from 8 March 2022, the National Bank of Ukraine:

    – provided banks with the possibility to open accounts for soldiers and to carry out their identification and verification on the basis of a call-up paper,

    – enabled customers in areas at risk of occupation by an aggressor state to withdraw cash
    in domestic and foreign currency without quantity restrictions, and to purchase cash in foreign currency and precious metals with physical delivery, subject to the availability of cash or precious metals at bank branches. The decision to carry out such an operation shall be made by the General Manager of the bank. The General Manager may also delegate this right to a Branch Manager of the bank,

    – established that the prohibition of transactions in Ukraine using the accounts of residents of Russia or Belarus and legal entities whose ultimate beneficial owners are residents of Russia or Belarus does not apply to social benefits, salaries, utilities, taxes, fees and other mandatory payments,

    – extended the possibility for residents and non-residents to make transfers to charitable foundation accounts not only in hryvnia but also in foreign currency. This applies to charitable foundations whose purpose and areas of charitable activity are the promotion of defence capabilities and state mobilisation readiness, support of the Armed Forces, territorial defence of Ukraine, social protection, health care and other pressing martial law issues,

    – clarified that settlements of documentary and standby letters of credit / guarantees / counter-guarantees granted (confirmed) from 24 February 2022 are prohibited. The NBU made an exception only for the cases of payments for critical imports, settlements with MFIs and other operations of bank customers, the list of which is set out in points 2-6, paragraph 14 of Resolution no. 18 of the NBU Board of Directors of 24 February 2022.

    The NBU also decided that the bank may exchange funds in Russian or Belarusian roubles coming from abroad for the purposes of export and import of goods into another currency on the international foreign exchange market and continue to book them on customers’ accounts.

    1. Settlements with the Ukrainian tax authorities during the war

    In Ukraine, a moratorium on penalties related to non-compliance with tax obligations has been introduced for both natural and legal persons, as confirmed by the authorities responsible for assessing emergency situations:

    “Ukrainian Chamber of Commerce and Industry confirms that the circumstances of martial law from 24 February 2022 until the official end of the war are extraordinary, unavoidable and objective circumstances for business entities and/or natural persons under an agreement, separate tax and/or other obligations, which were performed in accordance with the terms of the agreement, statutory or other regulations, the performance of which became impossible within the prescribed period due to the occurrence of such force majeure (force majeure).”  The occurrence of force majeure is confirmed by the Ukrainian Chamber of Commerce and Industry on the basis of Art. 14, 14-1 of the Law “On Ukrainian Chambers of Commerce and Industry” of 2 December 1997 № 671/97-VR, Statute of the Ukrainian Chamber of Commerce and Industry.

    The law exempts taxpayers from financial liability for tax offences and violations of other regulations resulting from force majeure (paragraph 112.8.9 of the Tax Code of Ukraine; CC), provided that the Ukrainian Chamber of Commerce and Industry confirms the occurrence of force majeure. In the case of force majeure, the tax authorities shall not apply penalties if the taxpayer is not able to perform the following actions on time:

    1. pay taxes and charges,
    2. file tax returns,
    3. register tax invoices and calculations of adjustments made to them in the Unified Register of Tax Invoices,
    4. register excise invoices and calculations of adjustments made to them in the Unified Register of Excise Invoices,
    5. submit electronic documents containing data on actual fuel residues and volumes of fuel/ethanol traded, etc., but as soon as the state declares the force majeure to have ceased, the taxpayer must fulfil his/her tax obligations.

    At the same time, the Government of Ukraine issued an appeal to all companies operating on the territory of Ukraine to make every effort to conduct (as much as possible) normal operations
    in order to minimise losses to the Ukrainian economy and supply.

    In addition, the Verkhovna Rada of Ukraine passed a law on 17 March 2022 providing for a simplified taxation system for big business, abolishing excise duty on fuel and VAT, exempting private individuals from paying the single social security contribution and more. This was announced by Prime Minister Denys Shmyhal – Law No. 7137-d on the website of the Verkhovna Rada. The document provides for a large number of changes affecting various sectors, as well as small and medium-sized enterprises. This preferential tax regime shall last until the end of martial law.

    Fuel taxes: From now on, excise duties on petrol, heavy distillates and liquefied petroleum gas are EUR 0 per 1000 litres. The rate of value added tax on fuel imports has been reduced from 20% to 7%.

    Big business will be able to take advantage of the simplified tax system and pay one tax. The annual revenue limit was raised from UAH 10 million to UAH 10 billion and restrictions on the number of employees were lifted. The tax shall be 2% of turnover regardless of the type of business activity. The tax relief shall not apply to businesses involved in the sale of excise goods, the gambling industry and the extraction and sale of minerals.

    1. The flow of goods and services between Poland and Ukraine. 

    The Cabinet of Ministers of Ukraine adopted Resolution No. 234 of 9 March 2022 on uninterrupted supply of imported food and feed under martial law. According to the resolution:

     – entities operating in the food market who, as a result of military (combat) activities, are unable to comply with the requirements of Art. 10 of the Law of Ukraine “On the Provision of Food Information to Consumers”, may sell food in the customs territory of Ukraine that is labelled in a language other than Ukrainian. However, larger consignments must contain basic information
    on the origin and ingredients in Ukrainian;

    – foreign humanitarian aid entering the customs territory of Ukraine is completely exempt from the obligation to include a description of the goods in the Ukrainian language.

    Under martial law, the government established new rules for the export of a number of agricultural products.
    In particular, the resolution prohibits the export of:

    – oats,

    – millet,

    – buckwheat groats,

    – sugar,

    – salt,

    – wheat,

    – live cattle,

    – pork and beef meat products.

    In addition, the Cabinet of Ministers of Ukraine is banning fertiliser exports from Ukraine due to martial law in order to maintain balance in the domestic market of important mineral fertilisers. Thus, a zero quota is introduced for their export. This applies to nitrogen, phosphorus, potassium and compound fertilisers:

    – mineral or chemical fertilisers, nitrogen (UKT FEA code 3102),

    – mineral or chemical fertilisers, phosphorus (UKT FEA code 3103),

    – mineral or chemical fertilisers, potassium (UKT FEA code 3104),

    – mineral or chemical fertilisers containing two or three nutrients: nitrogen, phosphorus
    and potassium; other fertilisers; goods of this type in tablets, in packages of a gross weight not exceeding
    10 kg (UKT FEA code 3105).

    This entails a de facto total ban on all exports of the above-mentioned products.

    Exports of the following products were allowed under a specific declaratory licence:

    – wheat and a mixture of wheat and rye,

    – maize,

    – domestic chickens meat,

    – eggs of domestic hens,

    – sunflower oil,

    Obtaining a declaratory export licence means allowing the export of a particular good in a limited quantity. All other goods can be freely exported according to the standard procedure.

    From the point of view of Polish importers, the restrictions in force will not have a significant direct impact on fertiliser prices. However, it is important to remember that the sanctions imposed on Russia and Belarus will already have a significant impact.

    On the other hand, it is obvious that Polish exports to Ukraine are facing a slump; many companies importing Polish goods in eastern and southern Ukraine have been destroyed and some are operating to a limited extent. In the central and western regions of the country, most of the retail chains, distribution, logistics and production companies are operating normally. It should be noted that Poland was Ukraine’s third largest economic partner (after Germany and China).


    *Source UKRSTAT


    *Source UKRSTAT

    1. General situation of Polish business in Ukraine

    As of 1 January 2022, there were approximately 1,000 companies with Polish capital operating in Ukraine, and the scale of Polish investments in the Ukrainian economy was one of the highest compared to other countries. The largest Polish investments concern the following sectors:

    – insurance

    – banking

    – manufacturing

    – construction

    – IT

    – clothing

    – fuel

    – pharmaceuticals

    – furniture.

    For many Polish companies in Ukraine, current events may mean closing their factories, warehouses and offices. A few weeks ago, most foreign companies (not only Polish ones) decided to evacuate key personnel to Lviv in western Ukraine or their home countries. Some companies offered to relocate their employees and their families to other countries and, after martial law was declared, to relocate to areas of western Ukraine.

    Many Polish companies with branches in Ukraine also operate outside the country, which means that foreign projects (for men
    aged 18-60) are on hold. Only the men who meet the following criteria can leave the country:

    – have 3 children,

    – are unfit for military service,

    – are professional drivers with special authorisation to engage in road transport,

    – are the sole guardians of minors,

    Some employees also cannot fulfil their professional duties due to being called up for active military service. For IT companies responsible for key infrastructure, there is an option to withhold conscription for 6 months for key employees. However, they still cannot travel outside Ukraine, even temporarily.

    The Kyiv School of Economics hired Gradus Research to conduct a study, which found that because of the war, as many as 85% of companies in Ukraine work part-time or are closed, including:

    – 1% of companies have closed and have no plans to restart,
     – 35% of companies have suspended operations waiting for better times.


    *Source Gradus Reaserch

    Some Ukrainian companies have decided to change their business activity for the duration of the hostilities, e.g. leading confectionery manufacturer Roshen – humanitarian aid; Carlsberg Ukraine breweries – bottled mineral water.


    *Source Gradus Reaserch


    *Source Gradus Reaserch


    *Source Gradus Reaserch

    To sum up, the situation for Polish business in Ukraine is difficult and deteriorates with every day of hostilities by the Russian Federation. Even at this stage of the war, it will likely take years to rebuild the infrastructure and the economy. Even with substantial financial assistance from Western countries, a return to the past performance by Polish companies is impossible, at least in the short term.

    Ukraine is one of the ten most important foreign markets for Polish business; its proximity and untapped potential since the beginning of the 1990s still provide opportunities for development and stabilisation for many Polish companies. It can already be said that a large proportion of Polish foreign investment in Ukraine has been successful. The companies have strong standing, many customers, and in some cases become local market leaders, employing tens or even hundreds of employees. Unjustified aggression by the Russian Federation can destroy the capital built up over many years. With this in mind, we should consider supporting Polish companies that have built up a reputation for Poland as a reliable business partner over the years.


    See: 25.03.2022 Memorandum of the Union of Entrepreneurs and Employers (ZPP) on the economic situation in Ukraine and its consequences for Polish companies

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