Crypto license in Poland

The legality of cryptocurrency business in Poland

Until November 2021, any cryptocurrency activity was legal in Poland, as there were no direct laws that prohibited the trading and exchange of crypto assets. However, after signing the amendments to the AML Law, the government expanded the scope of responsibility of cryptocurrency companies.To combat the legalization and laundering of profits, as well as the establishment of a limit on financial transactions - any crypto-activity must be registered. Regulations on cryptocurrencies are in the initial stages of development, and virtual currency has the definition of a digital expression of value, which does not apply to legal tender.

Under Polish law, almost any activity that is not directly prohibited by law is allowed. Because there is no specific provision that prohibits activities that are related to cryptocurrency - such business is allowed by law under certain conditions. Cryptocurrency companies are supervised by regulatory authorities, which means that all entrepreneurs are required to register with the cryptocurrency registry, similar to obtaining a crypto license in other jurisdictions.

In addition, cryptocurrency activities are not prohibited by the European Union, as confirmed by the EU Court of Justice in its decision (C-264/14) of 22.10.2015. It establishes that virtual currency can perform the function of means of payment, and any transactions with it are presented as the provision of paid services, which in most cases are exempt from VAT tax.

Cryptocurrency regulation in Poland

The Polish financial market is supervised by the Polish Financial Supervision Authority, which is responsible for the efficient development of the market and its functioning, moreover, it participates in the organization of legal agreements created to supervise the financial markets.

Cryptocurrency activity is a separate regulated area, which is supervised by the Polish Chamber of Fiscal Administration, which controls the "Register of Virtual Currencies".

Poland's cryptocurrency regulation is also controlled by the Ministry of Finance. Any actions with cryptocurrency (exchange transactions, storage of crypto assets) fall under the regulation of the Polish national authorities.

As noted earlier, to provide services related to cryptocurrencies, it is necessary to register a company with the Virtual Currency Registry of Poland, which is equivalent to obtaining a crypto license.Such companies fall under the Polish AML law, which was adopted on 01.03.2018 and is the main legal act against money laundering and terrorist financing.It is drafted by the 4th EU Directive, which provides a mechanism for checking suspicious transactions involving virtual currencies. It is also one of the first pieces of legislation in Poland that defines the term "virtual currency" to counter money laundering and regulate it in the country. The law establishes the basic AML principles for institutions providing services in the cryptocurrency sector.

To understand the peculiarities of cryptocurrency regulation in Poland we need to pay attention to the new KYC threshold, which was set for transactions according to the new legislation. Previously the level was set at 15.000 EUR, but starting from 31.10.2021, companies are obliged to identify all customers who carry out a transaction amounting to 1000 EUR or more. Organizations whose main business is the exchange or purchase of cryptocurrencies will have to identify every single transaction over EUR 1,000. This means that it is not possible to buy or sell cryptocurrencies without verification, provided that the transaction volume exceeds this threshold.

Polish Virtual Cryptocurrency Registry

For the legal operation of cryptocurrency companies in Poland, there is no need to separately obtain a crypto license. According to the current legislation, it is necessary to obtain registration in the state registry, which is under the control of the Chamber of Tax Administration - the Virtual Currencies Registry.

Compulsory registration in the Cryptocurrency Registry applies to the following types of services:

• The exchange between cryptocurrencies to fiat money (exchanges, exchangers) - allows the firm to exchange digital currency for FIAT or vice versa for a fee.
• The exchange between virtual currencies - is required when exchanging cryptocurrency for a fee.
• Intermediation when exchanging cryptocurrency into fiat money and one cryptocurrency into another - when providing point 1 and 2 exchange services.
• Maintenance and storage of cryptocurrency wallets - for companies providing wallets for storing cryptocurrency, creating encrypted customer keys, as well as storing them.

The registry is overseen by the Polish Ministry of Finance and is part of the updated KYC procedures. There is a fine of PLN 100,000 for running a cryptocurrency business without going through the registration procedure.

Crypto-authorization process for registration in the Polish Virtual Currency Registry

To get into the legal field of cryptocurrency regulation in Poland and work legally in the cryptocurrency sector, you need to go through the Virtual Currency Registry authorization process.

The first steps to register with the Polish Cryptolic License Registry should be to prepare and submit documentation for company authorization, obtain a PESEL (Polish Tax Number) and make payment of state fees.

Application procedure:

• submission of the application;
• acceptance of the application at the Registry;
• verification of documents and application;
• registration of the company in the Registry or refusal.

Necessary actions for the owner of a cryptocurrency company before applying:

• Prepare a declaration that will confirm the crypto company's compliance with the conditions imposed by Polish law;
• Prepare certificates of no criminal or criminal record;
• Fill out the ePUAP application form;
• Pay the state fee of PLN 616 (prepare a bank statement of payment).

Please note: the application can only be submitted electronically through ePUAP (Electronic Public Services Platform). Subject to the availability of the necessary documentation and compliance with the requirements, the deadline for registration in the Registry is 2 weeks from the date of submission. If the registrar has additional questions or needs to clarify data, the deadline can be extended for an additional 14 days.

It is not possible to appeal against the refusal to receive the registration. However, there is an opportunity to submit a new application for additional review by the Director of the Chamber of Tax Administration of Katowice. This can be done using the ePUAP platform or by sending a letter to 40-282 Paderewski Street 32b, Katowice

Requirements for companies engaged in crypto activities in Poland

In Poland, not only government regulations but also EU directives on AML/CTF compliance are in effect. Cryptocurrency companies need to comply with generally accepted European regulatory standards, namely:

• Develop a business plan that includes documentation of software and all necessary hardware for cryptocurrency activities.
• Draw up AML/KYC policies, control, and risk monitoring rules.
• Hire an officer as required by the AML. The officer must not be a Polish resident and must have professional experience in the field.

Important: all documentation must be in Polish or submitted with a sworn translation.

If the owners of a cryptocurrency company are not Polish citizens, they can request a PESEL, which allows signing documents electronically. In this case, most of the requirements can be fulfilled online, as well as using the necessary Polish Internet services to conduct business.

Company owners and directors are required to:

Have an impeccable reputation, which means no convictions for violations of the law: against state authorities, justice, economic turnover, trading in securities and money; or intentional financial crimes. The regulator may request proof of compliance with this requirement. As proof, it is sufficient to provide a certificate of no criminal record, which has been issued by the Ministry of Justice of Poland.

Must have knowledge or experience relevant to the activities in this area. If requested by the regulatory authority, proof of this requirement must be provided.

According to the Polish AML/CFT Law, this condition is met after:

Completion of courses or training that cover legal and practical issues related to cryptocurrency activities.

Or

Submission of a supporting document that the company has experience (for at least one year) in the field of virtual currencies.

The process of setting up a company for a cryptocurrency business in Poland

If you follow all the established rules, the registration of a company in Poland will not take much time (2 to 4 weeks) and will not create any special difficulties for both residents and investors from other countries.

Registration can be done physically at a notary's office or online in the S24 system, thanks to which you can submit annual reports online and sign documents with an electronic signature.

Steps in setting up a company in Poland:

• Prepare a unique name for entry in the registry.
• Draw up a power of attorney (in case of remote application).
• Prepare and provide apostilled copies of documents of all owners, founders, and employees.
• Register a Polish company with a "physical" address. Provide office rental agreement in Poland.
• Open a corporate account with a Polish bank
• Pay in the authorized capital of 5000 zlotys (at the time of registration you need to pay 100% of the amount)
• Prepare and notarize the deed of incorporation.
• Obtain statistical numbers (REGON) and tax identification numbers (NIP)
• Apply for registration of the VAT number
• Demonstrate the development of AML/KYC policies for risk control and monitoring, as well as a transparent and reliable structure of the enterprise.
• Apply for company registration

Taxation for cryptocurrency companies in Poland

There is no separate taxation for cryptocurrency in Poland, but all companies that engage in cryptocurrency activities are obliged to pay existing taxes. However, there is good news: Poland has signed bilateral agreements with 84 global countries to avoid double taxation.

The most popular taxes for LLCs (limited liability companies) include VAT, corporate income taxes, as well as personal income taxes, excise tax, property tax, social contributions, and health insurance for employees.

Polish companies have to pay the following tax rates:

• Corporate Income Tax (CIT) - 9% if the annual turnover does not exceed 2.000.000 EUR, if the company exceeds this threshold - 19%
• Personal Income Tax (PIT) - from 17% to 32%, depending on the profit and the form of taxation
• Value Added Tax (VAT) - the basic rate of 23%
• Dividend TAX - 19% for residents of Poland. Foreigners need to further study the tax treaty between the countries
• Repatriation of income (Withholding Tax) - from 0% to 20%

In addition, if the company has officially employed employees, it is necessary to pay social insurance, and health insurance, and make contributions to the pension fund

Obligations for crypto companies in Poland

Every crypto company that provides commercial services and falls under the regulation of cryptocurrency in Poland is obliged to fulfill specific obligations established by the Polish government, namely:

• Develop procedures to identify and assess the risks of money laundering and sponsorship of terrorism that may be associated with cryptocurrency transactions.
• Follow all financial security measures: identify customers and verify their data.
• Monitor suspicious transactions and provide information to the Polish regulator
• Perform continuous monitoring of the working relationship with customers
• Cooperate with the Polish government and provide any information that may be related to financial crimes
• Combat sponsorship of terrorism and money laundering within the company
• Not to provide services to unidentified third parties

Sanctions for violating crypto-business obligations

In case of avoiding or ignoring state obligations for cryptocurrencies, the Polish government can impose several sanctions, namely:

• Publish information about illegal activities on the website of the Ministry of Finance's Office of Public Bulletin.
• Prohibit or partially restrict any activities of the company
• Exclude from the Virtual Currency Registry
• Prohibit the activities of the company's executive person
• To impose a fine equal to twice the amount of the profit or loss avoided by the violation of the law. If the amount is not specified, the fine can be up to EUR 1,000,000
• If the owner of the company or the person representing the name of the company fails to notify the government of suspected criminal activity, provides false information, or conceals the true identity of a potential criminal, the penalty is imprisonment for up to 5 years.