Dear Sirs,


We would like to share the September issue of the newsletter by Weremczuk Bobeł & Partners' law firm.
First, we recommend the article on the law which is to enter into force on 1st December 2014 and simplify the procedure of registering entities in the National Court Register within the system of so-called “one-stop shops.”
Furthermore, we analyze the amended antimonopoly law on the control of concentrations and anti-monopoly practices. In another text, we discuss amendments to the Personal Income Tax Act concerning the manner of taxing income which is allocated to the supplementary capital or the reserve capital when a company is converted to a partnership.
Last but not least, we present the resolution in which the Supreme Court clarified the status of a person who is authorized in the branch office to represent the foreign entrepreneur and who is referred to in Article 87 of the Freedom of Business Activity Act.
We hope you enjoy reading our newsletter.


The Team

How profit allocated to the supplementary capital or the reserve capital is taxed when a company is converted to a partnership?

Income (revenue) from participation in profits of legal persons means income (revenue) which has been actually obtained from such participation, including the value of undistributed profits in the company and the value of the profit which has been allocated to other capitals than the share capital of the company which undergoes conversion (if the company is converted into a partnership which is not a legal person); the revenue is calculated on the day when the company is converted, - such is the new wording of Article 24.5.8 of the Personal Income Tax Act, which has been introduced by the amending act of 26th June 2014, which enters into force on 1st January 2015. This is already the third attempt to levy a tax on the profit which has been allocated to the supplementary capital or the reserve capital before the company is converted into a partnership. Previous changes to the relevant law took place in 2009 and early 2014; however, neither of them helped to dispel doubts related mainly to the meaning of “undistributed income,” which does not have its legal definition in the Polish Code of Commercial Partnerships and Companies or in the Act in question. According to the interpretation given by tax authorities, e.g. in the individual tax ruling of 5th November 2012 issued by the Head of the Tax Chamber in Warszawa (IPPB2/415-772/12-3/MG) and the ruling of 4th February 2014 issued by the Head of the Tax Chamber in Łódź (IPTPB3/423-455/13-2/GG), the undistributed profit is a profit which has not been paid to shareholders in the form of a dividend but has been allocated to the capitals enumerated above. On the other hand, entrepreneurs argued that the undistributed profit means a profit in relation to which shareholders passed no resolution which would include a decision permitted by the Polish Code of Commercial Partnerships and Companies, i.e. a decision to distribute such a profit among shareholders, cover the losses from previous years or allocate such a profit to the supplementary capital or the reserve capital. Once the provision quoted above was amended by adding the words “and the value of the profit which has been allocated to other capitals than the share capital of the company which undergoes conversion,” the doubts concerning the meaning of “undistributed income” were dispelled and now it is clear that income tax has to be paid in the situation in question.

Kamil Kłopocki, lawyer


Power of attorney to represent a foreign entreprenuer in court proceedings.

The status and limits of the authority vested in the authorized representative of a foreign entrepreneur has been a contentious matter for a long time. In the judicature and doctrine to date, it was explicitly stated that the foreign entrepreneur's branch office does not have a legal personality or a legal capacity and, therefore, does not have a capacity to be a party in court proceedings. However, a considerable practical controversy arose over the question of whether or not it is possible for people operating in branch offices to grant powers of attorney to represent in court proceedings.
This question was settled by the Supreme Court.
On 26th February 2014, the Supreme Court passed a resolution pursuant to which a person who is authorized to represent the foreign entrepreneur in the branch office (as their data has been recorded in the National Court Register entry of the relevant branch office) can grant a power of attorney to represent the foreign entrepreneur in court proceedings in relation to claims arising from the activity of the branch office.
In its resolution, the Supreme Court stated that the person referred to in Article 87 of the Freedom of Business Activity Act (i.e. the person who is authorized to represent the foreign entrepreneur in the branch office) does not have the status of that entrepreneur's body, statutory representative, holder of a commercial power of attorney or attorney and does not act solely as a liquidator of the branch office. According to the Supreme Court, the Freedom of Business Activity Act is an autonomous regulation in this regard, which cannot be equated to any of classical structures of civil law and, in particular, cannot be equated to a power of attorney. For those reasons, the Supreme Court decided that, because the term “represent” used in Article 87 of the Freedom of Business Activity Act was not limited in any way by the legislator and because in other provisions related to legal persons' bodies this term means the authority to perform acts related both to substantive law and to court proceedings, analogous principles shall apply to the foreign entity's representative who operates within the Polish branch office of that entity.
The Supreme Court noted that, if the scope of the authorized person's authority was limited by excluding the right to participate in court proceedings, the rule laid down in Article 87 of the Freedom of Business Activity Act would be defective in the context of the aims of that Act, from the point of view of not only the foreign entrepreneur but also third parties having legal relations with that entrepreneur.

Katarzyna Brzoziewska, attorney trainee

 

Simplified registration procedure under the amended National Court Register Act.

On 12th August 2014, the President of the Republic of Poland signed the Act of 26th June 2014 Amending the National Court Register Act and Amending Certain Other Acts. The new law is to enter into force on 1st December 2014. The amendment is supposed, among others, to simplify the registration procedure for entities which are subject to entry in the National Court Register.
Simplification of the registration procedure is to take place within the system of so-called “one-stop shops,” which have been already introduced but still leave a lot to be desired. At the moment, documents which have to be submitted to the registry court in order to register an entity in the National Court Register [Krajowy Rejestr Sądowy] include not only the application for entry in the National Court Register but also extra forms (for the tax office [urząd skarbowy], the Central Statistical Office [Główny Urzad Statystyczny] and the Social Insurance Institution [Zakład Ubezpieczeń Społecznych]). Having registered the entity in the National Court Register, the registry court sends those extra forms via mail to the said offices. If any missing information has to be supplied, the offices call the applicant to provide such missing information. As a result of this procedure, the applicant has to wait longer for the assignment of NIP [Tax ID No.] and REGON [Statistical ID No.], which are necessary for the actual commencement of business activity.
Pursuant to the amended National Court Register Act, the entrepreneur who wishes to register an entity in the National Court Register shall be no longer required to attach extra forms to the application for entry in the National Court Register Act. All the data which is required to assign NIP and REGON numbers to a new entity will be submitted through the modified application form for entry in the National Court Register. After the entity has been registered in the National Court Register, the registry court will send the information about registration via the IT system to the Central Statistical Office, the Central Register of Entities – National Register of Taxpayers [Centralny Rejestr Podmiotów – Krajowa Ewidencja Podatników] and the Social Insurance Institution. NIP and REGON numbers will be assigned automatically once those offices receive the information that the entity has been registered in the National Court Register. Those identification numbers will be then transferred from the offices to the registry court via the IT system and will be immediately disclosed in the National Court Register. Disclosure of the NIP number in the National Court Register will confirm that the number has been assigned to the entity registered in the National Court Register. This new procedure will not require the entrepreneur's participation.
Once the entrepreneur commences business activity, they will be required, within 21 days of entry in the National Court Register, to submit so-called supplementary data, which they usually do not have at the time of entry in the National Court Register and which includes: bank account number, address of the place where accounting documentation is stored, contact information, estimated number of employees. The supplementary data is to be submitted to the tax office, the Central Statistical Office and the Social Insurance Institution.
Another important change involves limitation of the requirement that the application for entry in the National Court Register include no more than ten types of activities from the Polish Classification of Activities [Polska Klasyfikacja Działalności] and indicate one main activity on the subclass level.
The amended law entrusts the head of the tax office with the power to conduct the so-called a posteriori inspection, i.e. to verify if the taxpayer uses false or fictitious addresses of their registered office or place of business. Having conducted such an inspection, the head of the tax office will have the power to revoke the assigned NIP number ex officio, by means of decision. Once the reasons for revoking the NIP number cease to exist (as the address is changed in a relevant register), the NIP number will be restored in the Central Register of Entities – National Register of Taxpayers. It is possible that the new powers of the head of the tax office will cause problems to entrepreneurs with virtual offices if such offices are deemed to be fictitious places of business.

Martyna Nawrocka, legal trainee

 

Amended antimonopoly law to enter into force on 18th January 2015.

The main aims of the amendment to the Protection of Consumers and Competition Act include: streamlining proceedings on concentration as well as increasing the rates of detection and removal of anti-competitive practices.
What are the means by which the legislator is planning to achieve those aims?
The rapidity of proceedings on concentration is to be improved by introducing one-stage and two-stage procedures for examining entrepreneurs' applications related to mergers and acquisitions. In uncomplicated cases, the procedure will consist of one stage and will be completed within one month. According to the Office for the Protection of Consumers and Competition, about 80% of all proceedings on concentration will involve the one-stage procedure. In more complex cases, the first stage of examination will be followed by the second stage which will take up to 4 months. This means that the maximum total time of proceedings on concentration will be as much as 5 months.
What deserves praise is the reform which will make it possible for the entrepreneur to learn the expected nature of the decision during the course of proceedings. As a result, the entrepreneur will be able to modify their application and activity in such a way so that they can avoid receiving an unfavorable decision.
Fight against anti-competitive practices is to become more effective thanks to the expansion of the program of penalty reductions, so-called leniency. The program will become more flexible, e.g. by introducing a requirement that the entrepreneur withdraw from an unlawful agreement “without delay” after they submit the application, no later than on the day when the President of the Office for the Protection of Consumers and Competition is informed about the presence of such an agreement. At the moment, entrepreneurs are obliged to withdraw from the agreement “forthwith,” which often makes it impossible for them to take advantage of the leniency program. In addition to that, the amendment will create additional opportunities to have a penalty reduced through so-called leniency plus. Thanks to this new policy, the entrepreneur who submits an application with information about an anti-competitive agreement but is not the first to inform about this particular agreement will have their penalty reduced by 30% if, at the same time, they inform the authorities about another anti-competitive agreement in which they have participated.
From the point of view of consumers, the reform which is especially worth noting is the one which will entrust the President of the Office for the Protection of Consumers and Competition with the right to issue public warnings against practices which infringe upon collective interests of consumers and may expose consumers to substantial financial losses.
Amendments to the Protection of Consumers and Competition Act are to enter into force on 18th January 2015.


Paulina Szymańska, lawyer


This Newsletter is for general informational purposes only. It is not intended and shall not be treated as professional advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.
   

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