In just a matter of months, some jurisdictions in which all virtual asset service providers registered their companies yesterday began to apply such strict regulation that it becomes impossible or at least extremely difficult to do business there.
Updates on regulation of cryptoactives in Poland
Cryptocurrency transactions in Poland have been de facto legal in the country until November 2021, since there were no rules prohibiting the exchange and trade of cryptocurrencies. In accordance with the new amendments to the Act on combating money laundering and the financing of terrorismon combating money laundering (hereinafter referred to as the “AML/CFT Act”), which entered into force as of November 2021. In accordance with new amendments, the scope of responsibility of organizations involved in cryptocurrency trading has expanded, the fundamental change of which is the registration of transactions with cryptocurrency for the purpose of countering the legalization (laundering) of income, established limits for the amount for cryptocurrency activities.
Regulatory measures
Special legislation regarding the regulation of cryptocurrencies and related activities in Poland is at an early stage. The main law governing the circulation of cryptocurrencies today is the AML/CFT act. According to this law, virtual currency is defined as a digital expression of values that are not legal tender issued by the National Bank of Poland or other countries, electronic money, bills of exchange or checks.
Registration and authorisation procedure
From November 2021, the conduct of activities in the field of virtual assets turnover becomes a regulated business in Poland. Businesses engaged in such activities will be required to obtain permission to record their activities in the register of cryptocurrency businesses in Poland. Entry of entrepreneurs in the register of virtual currency will have to meet certain formal requirements and will be recognized in Poland as a kind of license for activities related to cryptocurrencies. According to the AML/CFT Act, the following types of services providers in the field of virtual currencies are subject to comply with the obligations set out in the act:
- exchange services between virtual currencies and FIATs (bureaux de change, exchanges);
- exchange services between virtual currencies (bureaux de change, exchanges);
- brokering services between virtual currencies and FIATs or between virtual currencies (as above);
- maintenance of accounts in electronic form (account maintenance services for virtual currencies (i.e. wallets)), identifying data that allows authorized persons to use virtual currency units, including the conduct of transactions for their exchange.
Registry of crypto asset service providers
To be listed in the register and obtain a so-called license (or authorization), entities must meet several conditions:
- absence of criminal record: – Companies should provide a document confirming that all directors, shareholders, beneficial owners have no criminal record. And the readiness for checks from the regulatory body for the presence or absence of a criminal record of the persons mentioned above;
- expertise working with digital assets: – Companies should be able to prove the experience of the company’s representatives in the provision of services in the field of cryptocurrencies. According to the AML/CFT act, this condition can be met by passing a training or course covering legal and practical issues related to activities with virtual currencies by representatives of a legal entity or by providing relevant documents to confirm the experience in the field of virtual currencies for at least one year.
The company that meets all the established requirements shall be included in the register within 14 days from the date of application. Companies that already carry out activities related to virtual assets will be given another 6 months to comply with newly established requirements (i.e. until May 1, 2022). Failure to comply with the requirements might result in fines up to PLN 100,000 (EUR 21,269).
Limits on amounts for operations with cryptocurrency
In addition to the above-mentioned business registration obligations or experience requirements, a new provision was also introduced regarding the limits on the amount of virtual currencies. For ease of reference – before the latest changes, the limit was 15,000 euros. Organizations that engage in cryptocurrency activities will have to apply financial security measures in accordance with occasional transactions equal to or exceeding € EUR 1,000. Put differently, it is impossible to buy / sell cryptocurrency without presenting an identity document if the value of the transaction equals to EUR 1000 or more.
Company registration
Registering a company in Poland is quite straightforward and not as complicated as in other European countries, provided that the established rules are followed. The entire incorporation procedure can take from two weeks to a month, depending on the chosen organizational and legal form of the company. There are two ways to register a company In Poland: either online or physically at a notary office.
Taxation of transactions with virtual currencies
Since January 2019, virtual currencies are taxed in Poland as capital gains and are subject to corporate tax of 19%, although taxation at a preferential rate of 15% is possible. Income tax on the exchange of virtual currencies for virtual or fiat currencies ranges from 17% to 32% in accordance with the progressive scale of taxation. Trade and exchange of cryptocurrency in Poland is currently not currently subject to#nbsp; payment of value added tax.
Concluding remarks
All things considered, by introducing changes to existing AML act, the government aims to prevent the application of cryptocurrencies for criminal activities and to increase scope of investor protection. Poland is quite an attractive jurisdiction for starting a business in the field of virtual currencies. The ease of compliance with the requirements for obtaining a license by experienced businessmen in this field and a low tax rate are drawing more and more attention from foreigners to set up businesses in Poland. Signed bilateral agreements on the avoidance of double taxation between Poland and more than 84 countries of the world make it possible to classify the jurisdiction as one of the most favorable destinations from taxation perspective.
Our team of professionals constantly observe the pulse of regulative measures and regularly explore new jurisdictions in order to be able to offer its customers working solutions starting from company registration, the taxation of transactions with virtual assets and business in general.
The content of this article is intended to provide a general guide to the subject matter, not be considered as a legal consultation.