In light of the surging popularity of digital currencies, Poland has positioned itself as a jurisdiction where cryptocurrency enterprises – encompassing mining, sales, and the acquisition of crypto assets – are subject to regulation and oversight by national authorities.
The oversight of the Polish financial market primarily falls under the purview of the Polish Financial Supervision Authority, tasked with ensuring the efficient operation and growth of the market. This regulatory body actively engages in formulating draft legal acts dedicated to the supervision of the financial market. The landscape of cryptocurrency businesses has recently become a regulated sector, primarily overseen by the Tax Administration Chamber. While there is currently no dedicated general licensing regime for Virtual Asset Service Providers (VASPs) or Cryptocurrency Asset Service Providers (CASPs), they are subject to general tax regulations.
These businesses are also required, to some extent, to comply with Anti-Money Laundering (AML) requirements. The regulatory framework is centered around the meticulous maintenance of a comprehensive record of crypto-related activities, facilitated through the establishment of the Register of Virtual Currencies. This ensures that businesses operating in the cryptocurrency space remain in compliance with applicable tax obligations and contribute to efforts addressing potential AML concerns.
Anti-Money Laundering and Counter-Terrorist Financing Law
The regulatory landscape governing Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) in Poland is robustly structured under the Act of March 1, 2018, on Counteracting Money Laundering and Financing of Terrorism, commonly referred to as the Polish AML Act. This pivotal legislation not only addresses traditional financial markets but also lays a solid foundation for combating illicit financial activities within the realm of cryptocurrencies.
Defining Virtual Currencies and AML Principles:
A milestone in Polish legislation, the AML Act of 2018 provides one of the earliest and most comprehensive definitions of the AML-specific term "virtual currencies". This legislation sets out fundamental AML principles that virtual currency institutions must adhere to, shaping the regulatory landscape for cryptocurrency-related activities in the country.
The scope of activities covered by the AML Act includes:
- Virtual currencies exchange
- Exchange of virtual currencies for fiat money
- Cryptocurrency brokerage
- Account provision and maintenance services for virtual currencies (crypto wallets)
Role of the General Inspector of Financial Information:
At the forefront of Poland's anti-money laundering and counter-terrorist financing system is the General Inspector of Financial Information. This institution plays a multifaceted role in ensuring the integrity and security of the financial system. The tasks of the General Inspectorate encompass:
- Enforcing compliance with the Polish AML Act
- Requesting transaction information from financial institutions
- Analyzing data on financial market actors linked to money laundering or terrorist financing
- Suspending transactions and blocking accounts when suspicious activities are detected
- Collaborating with national and foreign authorities, authorized to share information
- Assessing and reporting on national risks related to money laundering and terrorist financing
- Crafting strategies to combat money laundering and terrorist financing
- Imposing administrative penalties to enforce regulatory compliance
- Disseminating information about their work through public channels
Obligations Imposed on Virtual Currency Companies:
Virtual currency companies operating in Poland are subject to stringent obligations outlined by the AML Act. These obligations encompass a series of procedural requirements aimed at enhancing transparency, efficiency, and compliance within the virtual currency sector. These procedures include:
- Transparent Designation: Clearly designating the company's management responsible for executing duties outlined in the Polish AML Act.
- Internal AML Processes: Implementation of robust internal AML processes specifically designed to combat money laundering and terrorist financing.
- KYC Integration: Integration of Know Your Customer (KYC) processes for customer identification and verification, along with assessing potential client-related risks.
- Reporting: Regularly reporting to the General Inspector of Financial Information to ensure ongoing compliance.
- Training Programs: Designing and executing training programs for the company's staff responsible for implementing AML procedures.
Competition and Consumer Protection
In the landscape of cryptocurrency regulation in Poland, specific provisions dedicated to consumer protection in the crypto sphere are yet to be defined. However, existing legal frameworks, such as the Consumer Rights Act of 30 May 2014, play a pivotal role in governing economic transactions involving businesses and consumers. Irrespective of the transactional medium, this act applies to virtual currency dealings. Cryptocurrency-using businesses, like all participants in the market, are obligated to adhere to the Consumer Rights Act when entering contracts with consumers. This includes recognizing the consumer's right to withdraw from a contract under the conditions stipulated in the Consumer Rights Act.
It's crucial to note that, in the absence of virtual currencies qualifying as e-money, and thus not falling under the category of payment services, they are exempt from the provisions of the Payment Services Act.
While Poland currently lacks specific competition regulations tailored for cryptocurrencies, the Act on the Protection of Competition and Consumers of 16 February 2007 serves as the guiding legislation. This comprehensive act addresses various facets of competition and consumer protection, including:
- Regulation to promote and safeguard competition.
- Protection of the interests of entrepreneurs and consumers in the public interest.
- Prevention of anticompetitive practices within the market.
- Mitigation of practices that infringe upon collective consumer interests.
- Prevention of the application of wrongful provisions in model forms of contracts.
- Safeguarding against anticompetitive concentrations and the combination of entrepreneurs.
In essence, while specific regulations for cryptocurrencies are yet to be outlined, Poland's existing legal frameworks ensure that consumer rights are protected and competition within the market remains fair and just. The holistic approach of the Act on the Protection of Competition and Consumers serves as a robust foundation for governing these aspects in the rapidly evolving landscape of cryptocurrency transactions.
The Registry of Virtual Currencies
For any company intending to delve into cryptocurrency-related economic activities in Poland, a legal imperative stands tall – registration with the Register of Virtual Currencies. This regulatory measure is diligently overseen by the already mentioned Tax Administration Chamber, ensuring compliance with the landscape of cryptocurrency transactions.
Engaging in specific activities necessitates inclusion in the Register, including:
- Exchange of virtual currencies for fiat money.
- Exchange of virtual currencies among themselves.
- Provision and maintenance of accounts for virtual currencies (wallets).
- Intermediation for the exchange of virtual currencies (brokerage).
The nature of these activities further dictates the type of license that a virtual currencies company should pursue, offering flexibility for businesses to obtain one or multiple applicable licenses as deemed necessary.
This Register is an integral component of the amended Know Your Customer (KYC) procedures, adding an extra layer of scrutiny to ensure the transparency and legitimacy of cryptocurrency-related activities. Failure to register before initiating crypto operations can result in significant penalties, with fines reaching up to 100,000 PLN (approximately 22,000 EUR). It is very important for crypto businesses to thoroughly align with specific legal requirements before embarking on the mandatory crypto-authorization procedure.
For those seeking a more detailed exploration of the license and registration process in Poland, we have already crafted a comprehensive article.
Reporting Obligations
Every category of companies operating within the borders of Poland is bound by the mandate to adhere to the annual reporting and auditing requirements. It is imperative for companies to furnish the e-Tax Office with their annual financial statements and annual income tax declarations. In addition, cryptocurrency enterprises shoulder the responsibility of submitting Anti-Money Laundering (AML) reports to the General Inspector of Financial Information. The frequency of Value Added Tax (VAT) reporting varies, with submissions occurring either on a monthly or quarterly basis.
Conversely, the necessity for a certified audit is contingent upon a Limited Liability Company satisfying a minimum of two of the ensuing conditions:
- Annual net revenue surpasses 5 million EUR.
- Annual turnover exceeds 2.5 million EUR.
- Annual employment encompasses 50 or more full-time employees.
This underscores the significance of companies, including cryptocurrency entities, to meticulously fulfill their reporting obligations, ensuring compliance with regulatory frameworks and financial transparency.
Taxation
While there is no cryptocurrency-specific tax in Poland, companies operating in the cryptocurrency space are subject to various existing taxes, depending on their legal structure. Certain exceptions may apply, given Poland's agreements on the avoidance of double taxation with more than 80 countries.
The predominant taxes applicable to Limited Liability Companies (LLCs) in Poland encompass Corporate Income Tax, Personal Income Tax, Value Added Tax (VAT), Stamp Duty, Real Estate Tax, and Excise Duty. Additionally, virtual currency companies, like any other employer, must fulfill obligations related to Social Insurance and Health Insurance contributions to the Polish government if they employ individuals.
Standard tax rates in Poland include:
- Corporate Income Tax – 19%
- Personal Income Tax – Ranges from 17% to 32%
- VAT – Fixed at 23%.
- Dividends Withholding Tax – Stands at 19%.
Noteworthy aspects concerning Corporate Income Tax in Poland include:
- Revenues from the exchange of virtual currency for legal tender, goods, services, or property rights, other than the virtual currency, constitute capital gains.
- The value of virtual currency obtained in exchange for other virtual currency is not considered revenue.
- Expenses incurred in the exchange of virtual currency for another virtual currency are not considered revenue-earning costs.
- Income from the transfer of virtual currencies is determined by the difference between total revenues earned from the transfer against consideration and revenue-earning costs in a given tax year.
- To benefit from preferential tax rates or exemptions under relevant double tax agreements, the taxpayer's seat for tax purposes must be documented with a certificate of residence.
When registering as a VAT taxpayer, it's essential to note:
- According to EU law, services involving the exchange of cryptocurrencies into traditional currencies and vice versa are VAT exempt.
- Other products and services are subject to VAT.
Suspending VASPs Activities
In the event of suspending activities related to virtual currencies, a company can apply for removal from the Register of Virtual Currencies. This application is exempt from stamp duty, and information about the deletion becomes visible in the Register within 14 days from the decision's finalization.
Mandatory reporting on the suspension of virtual currency activities involves submitting an electronic form via ePuap within 14 days from the suspension date. Authorities can remove a company from the Register if it fails to meet legal conditions, becomes incompatible with the actual state of affairs, or if information about removal from the Central Register and Information on Economic Activity or National Court Register is obtained.
Next Steps
- Market in Crypto Assets Regulation (MiCAR)
Poland maintains a relatively relaxed stance for cryptocurrency businesses despite the growing popularity and associated regulatory challenges. Regulatory developments are slowly unfolding at the national level, aligning with the EU framework. New EU rules, exemplified by the Markets in Crypto-Assets (MiCA) regulation, are poised to impact Polish Crypto Asset Service Providers (CASPs) by addressing market abuse, market manipulation, and insider trading.
- Regulatory Sandbox and Support
In 2022, the EU finalized regulations for the pilot regime for Distributed Ledger Technology (DLT)-based market infrastructures, akin to a sandbox approach. The pilot, scheduled for a March 2023 launch, provides a legal framework for crypto asset trading and settlement. ESMA is actively consulting on guidelines to establish standard formats and templates for DLT applications, with ongoing Q&As to assist implementation.
This DLT pilot is just one of the examples of how EU initiatives can potentially influence and shape crypto regulations in Poland.
Poland, as an EU member, collaborates with EU authorities on financial and regulatory matters. The outcomes of the EU pilot may lead to increased collaboration between Polish and EU authorities in shaping effective and consistent regulations for the cryptocurrency industry.
Conclusion
As the crypto regulatory landscape undergoes constant transformation, businesses operating in Poland face the challenge of navigating this dynamic environment. Our highly experienced and trusted consultants stand ready to provide tailored support for registering with the Register of Virtual Currencies and obtaining a crypto license in Poland. We closely monitor local regulations and are well-prepared to guide our clients through every stage of the registration process efficiently.
Note: This text is the sole work of the author and does not bind BlockReg Advisors Ltd. nor does it constitute legal advice. All rights reserved.
If you would be interested in learning more about Poland, and how you can play a bigger role in defining the upcoming rules and regulations, please reach out to Malgorzata Owczarska, Senior Consultant at BlockReg Advisors [email protected] or send us message to [email protected].
