Contributed By Dubiński Jeleński Masiarz and Partners sp.k.
The capital market in Poland is still developing, with space for growth in the alternative investment funds (AIFs) area. Although the last few years have been associated with increased supervisory actions undertaken by the Polish Financial Supervisory Authority (PFSA), such as strict enforcement of administrative sanctions (even resulting in withdrawals of authorisations for the pursuit of operations), the investment funds market in Poland was also positively affected by pension reform increasing the participation of investment funds in the pension system through employee capital plans, which are organised mostly by special types of AIFs.
In the Polish legal regime, an AIF may operate in the form of: a specialised open-ended investment fund (SFIO) and a closed-ended investment fund (FIZ) or in the form of an alternative investment company (ASI). The PFSA is the supervisory body in regard to AIFs.
Various types of AIFs differ primarily in their regulatory regime, their principles of investment policy, the type of managing entity or the possibility to be admitted for public offering.
An SFIO may apply the investment principles and restrictions specified for open-ended investment funds or a FIZ. However, the formula complying with the investment policy of a FIZ is admissible only for (i) funds whose participants are legal persons and unincorporated organisational units, and (ii) natural persons only if their single payment to the fund amounts to no less than the Polish złoty (PLN) equivalent of EUR40,000. An SFIO sells participation units and redeems such units at the request of a fund participant. The units have the status of financial instruments.
A FIZ issues investment certificates having the status of securities. The certificates may be admitted to trading on a regulated market or introduced to an alternative trading system only if the foregoing is provided for in the fund’s articles of association and if the fund has been set up as a public FIZ pursuant to an authorisation of the PFSA or has been made public with a relevant authorisation of the PFSA by way of amendment of the articles of association. For public offering of a FIZ, a prospectus must be prepared and approved by the PFSA. Investment certificates of a public FIZ may be offered to individual investors without restrictions in accordance with relevant provisions of the Polish law governing the public trading in financial instruments.
In the case of a non-public FIZ, natural persons may be fund participants only if the value of the fund's first issue investment certificate is not less than the PLN equivalent of EUR40,000. The above restriction is not applicable to legal persons and unincorporated organisational units.
An ASI may operate in the form of a capital company (in Poland it is a limited liability company or a joint-stock company), including a European company, a limited partnership or a limited joint-stock partnership, in which the only general partner is a capital company, including a European company. Participation titles in an ASI depend on a legal form of setting up the company.
In addition, Polish legal regulations distinguish certain special structures of investment funds. Investment funds may be created with various categories of participation units or as umbrella funds or master and feeder funds.
Within statutory limits, an investment fund may develop an investment policy and an investment strategy corresponding to nearly all types of investment policies – including private equity, hedge, and fund of funds. In the case of an ASI, the law does not clarify investment limits or diversification rules. The investment policy and strategy of an ASI is determined by its constitutional documents.
As of September 2020, there were 65 investment fund management companies operating in the territory of Poland, 180 ASI managers (ZASIs) entered into the register carried by the PFSA (118 external and 62 internal ZASI), managing in total 246 ASIs and one licensed ZASI.
According to the data of Statistics Poland, at the end of 2019, in total 666 investment funds were operating on the Polish capital market, 620 of which were alternative investment funds, including:
Reliable and full statistics on the total assets value managed by ASIs are not publicly available.
In the Polish legal regime, the fundamental instrument of law governing the principles of operation of AIFs is the Act on Investment Funds and the Management of Alternative Investment Funds of 27 May 2004 (“Act”) and executive regulations issued pursuant thereto. Moreover, AIFs are directly subject to the applicable provisions of the EU law including the Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 and Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision.
An important issue regulated by the provisions of law are investment restrictions for an AIF. For each type of AIF, detailed investment limits are specified in the law and may be subject to additional restrictions provided for in the articles of association. The provisions of law specify in detail the catalogue of admissible asset classes that may be purchased by an SFIO and a FIZ, as well as their maximum level of engagement in a given type of asset. In the case of an ASI, the law does not regulate any investment limits or diversification rules. The investment policy and strategy of an ASI are set forth in its constitutional documents.
Both an SFIO and a FIZ must observe the investment limits set forth by legal regulations. An SFIO applying the investment principles and limits set forth for a FIZ are obligated to invest their assets and to observe the limits in the same way as a FIZ. Those funds are hence entitled to invest their assets in transferrable securities, receivables, shares in limited liability companies (including companies established abroad), currencies, derivatives (including non-standardised derivatives), specific property rights and money market instruments. The basic investment limit is an engagement limit of no more than 20% of assets in securities or money market instruments issued by one entity, and claims against and shares in that entity.
A FIZ and an SFIO (applying the investment principles and limits specified for a FIZ) may also invest their assets in deposits in domestic banks, foreign banks or credit institutions, provided that deposits in one domestic bank, foreign bank or credit institution may not account for more than 20% of the fund’s assets, excluding deposits kept by the depositary. In certain circumstances, those funds may also invest up to 100% of their assets in participation units or investment certificates of one investment fund or in participation titles issued by one undertaking for collective investments established abroad. The fund may be involved in short selling.
The above regulations do not apply to ASI, as this entity may freely shape its investment policy.
SFIOs, FIZs and ASIs (established with an authorisation) are also obligated to have a depositary, who performs this function pursuant to an agreement. Its responsibilities include keeping the assets, keeping the register of assets, and assuring that the value of AIF assets is determined in accordance with the law and the articles of association of a given fund.
An AFI’s ability to originate loans is determined by the specific type of AFI and its investment policy. In principle, AFIs operating in the form on an investment fund are allowed to originate loans within the limitations provided for by the Act.
A FIZ and an SFIO applying the investment principles and restrictions specified for a FIZ may originate securities loans and, taking into account the fund's investment objective, also money loans. In the case of securities loans, the total value of loaned securities and securities issued by a single entity in the fund's investment portfolio cannot exceed 20% (or 25% in the case of a mortgage bank) of the fund's assets. Total value of money loans originated by such fund cannot exceed 50% of the fund's assets, while the amount of money loans granted to a single entity cannot exceed 20% of the fund's assets. If the fund's articles of association provide for originating loans, it should specify the criteria to be met by the borrower, rules of loan repayment and types and minimum amount of collateral that the fund will require to establish.
An SFIO applying the specified investment principles and restrictions may originate exclusively dematerialised securities loans for a period no longer than 12 months, which total amount cannot exceed 30% of the net asset value of the fund. Such loan may only be originated on the condition of providing an appropriate collateral in cash, securities or property rights in which the fund may invest in accordance with the investment policy set out in its articles of association. The value of the collateral must be determined according to the method adopted for the valuation of the fund's assets and must be at least equal to the value of the loaned securities on each day of the valuation until the date of return of loaned securities. In addition, any collateral that may be recorded in the fund’s accounts must be recorded therein and any collateral that cannot be recorded in the fund’s accounts must be evidenced by the deposit of appropriate documents with the depositary maintaining the register of the fund's assets.
The total value of loaned securities and securities issued by a single entity in the fund's investment portfolio shall not exceed the statutory investment limitations applicable to the SFIO.
There are no restrictions as to the ASI's investment policy, which means that restrictions on loan origination are determined by its constitutional documents.
Currently, Polish law does not provide detailed regulation regarding cryptocurrencies, nor regarding similar alternative assets. A general definition of cryptocurrencies is provided in the Polish AML Act of 2018 and means a digital representation of value exchangeable for the other legal means of payment that is not issued by the central bank nor any public administration authority and does not qualify as electronic money, a financial instrument, bill of exchange or cheque.
Nevertheless, it should be noted that, in case of SFIOs and FIZs, cryptocurrencies and non-traditional assets are prohibited as an investment.
In case of an ASI, Polish law does not provide restrictions with respect to investments in alternative assets. However, the PFSA has recently challenged the eligibility of investment in cryptocurrencies.
In the licensing procedure for a TFI and a ZASI, the PFSA examines in particular: the qualifications and good reputation of individuals having an impact on the operation of such entities; the entity’s ownership structure and the credibility and financial standing of its shareholders; the compliance of its organisational structure (especially as regard to the management of the AIF’s portfolios, risk management, and management of conflicts of interest) with the national regulatory requirements; and a detailed business plan describing the first year of the entity’s operations. The provisions of Polish law do not specify any binding time limit for the PFSA in which the licensing procedure must be finished. Depending on how complicated the licensing structure is, the procedure can take between six and 12 months.
With respect to AIFs established with an authorisation, the PFSA examines in particular the investment policy, risk profile and general characteristics of operations.
The proceedings for obtaining an authorisation of the PFSA to set up an investment fund may take several months, usually in the region of six months. In each case the length of the proceedings before the PFSA depends to a large degree on their subject matter and may take from one month up to 12 months. In principle, administrative proceedings of the PFSA for issuing an authorisation to set up a fund or sub-fund takes several months, usually about six months.
Importantly, an authorisation of the PFSA is required in order to set up an SFIO and a FIZ, whose certificates will be admitted to trading on a regulated market. The PFSA’s authorisation will be also necessary for setting up a new sub-fund within the already existing umbrella fund. A fee for an authorisation issued by the PFSA to set up an investment fund amounts to EUR4,000; the costs connected with setting up an investment fund also include notarial fees and court costs.
No authorisation of the PFSA is necessary in order to set up a FIZ issuing only investment certificates in a way other than a public offering or by way of a public offering in which no issue prospectus has to be prepared and where such certificates will be neither admitted to trading on a regulated market nor introduced to an alternative trading system (“non-public FIZ”). In the case of a non-public FIZ, the total minimum amount of payments and the manner of collecting such payments is specified by the articles of association of the fund. The process of setting up a non-public FIZ should not, in principle, take longer than one month.
The process of setting up an ASI is slightly different, and may have a few variants depending on (i) whether the company will be established as a separate legal person managed by an external manager or as an internally managed ASI, and (ii) on the total value of assets managed by the manager of a given ASI. A basic rule for setting up an ASI is that it must have a manager (internal or external). In order to establish the manager, an authorisation of the PFSA is required, except when the total value of assets that are managed or are going to be managed by the manager does not exceed the equivalent of EUR100 million, and in the event that the manager manages only an ASI which does not apply financial leverage and in which the participation rights may be repurchased after at least five years from their purchase – the equivalent of EUR500 million. In such case, only an entry to the register of ZASIs kept by the PFSA is required. The process of obtaining an authorisation of the PFSA for the pursuit of operations by the ZASI takes no less than six months. In addition, in order to set up an ASI, activities analogous to those for setting up a FIZ and an SFIO must be taken.
TFIs and ZASIs must be commercial companies established in the territory of the Republic of Poland. Members of governing bodies of management companies do not have to be Polish residents; however, in accordance with the Principles of Corporate Governance for Supervised Institutions developed by the PFSA, appropriate participation of members who have a good command of Polish, as well as knowledge and experience about the functioning of the Polish capital market, should be assured in the governing bodies of management companies.
AIFs may be managed by EU managers licensed in another other member state in accordance with the single passport regime.
In addition, it should be noted that AIFs portfolio management may be delegated to another entity (including foreign entities) provided that additional conditions are met (see 3.6 Outsourcing of Investment Functions/Business Operations).
Polish law requires that Polish AIFs should operate in one of the legal forms allowed by the Act (see 2.1 Types of Alternative Funds). Furthermore, the registered office of an SFIO and a FIZ is the registered office of a TFI.
It is a statutory requirement for each SFIO, FIZ and ASI (only with respect to ASIs established with an authorisation of the PFSA) to have a depositary.
The Act sets forth certain organisational requirements with respect to employees of TFIs and ZASIs (SFIOs and FIZs are not allowed to hire employees). Both TFI and ZASI should fulfil the following requirements, among others:
Moreover TFIs and ZASIs are obliged to establish their operations in a manner ensuring proper fulfilment of statutory duties – for example, employing a proper number of employees (adequate to the scale of operations) and ensuring that such persons possess proper knowledge and skill.
The management board of a TFI and the manager of an ASI must be composed of at least two members. The management board of a TFI must have separated functions regarding risk management and investment decisions.
All management board members must have full capacity to perform acts in law, no criminal record and enjoy a good reputation connected with the functions held. At the same time, at least two management board members must have a degree-level education, or the licence to practice as an investment adviser and work for at least three years on an executive or independent position in financial market institutions, or hold functions in governing bodies of such institutions over the same period.
The initial capital of a TFI and the external manager of an ASI amounts to EUR125,000; in the case of the internal manager of an ASI, such capital amounts to EUR300,000. In the event that the total value of portfolios managed by an ASI has exceeded EUR250 million, the manager’s initial capital must be increased by 0.02% of such excess. After the manager’s initial capital has reached EUR10 million, no further increases are necessary.
Legal regulations impose on investment fund management companies' obligations to have in place and apply internal procedures with respect to the prevention of conflicts of interest, including the prevention of using confidential information. AIF are also obligated to apply the provisions on the prevention of money laundering and terrorist financing.
The depositary of an SFIO, FIZ and ASI (if required) needs to meet certain statutory criteria. As a general rule, depositaries are prohibited from providing other services to TFIs and AIFs if such services could lead to a conflict of interests between the depositary, AIF, TFI and/or investors.
A depositary of an SFIO and a FIZ may be one of the following:
A FIZ is also able to choose as a depositary an investment firm entitled to perform specific activities and with initial capital of no less than EUR730,000.
A depositary of an ASI may be one of the following:
Since 2019, a non-public FIZ is obliged to register issued investment certificates in a securities deposit (dematerialisation). To fulfil the said requirement, a non-public FIZ – prior to the conclusion of an agreement to register investment certificates with a securities deposit – shall conclude an agreement with an investment firm authorised to maintain securities accounts or with a custodian bank, to act as an agent for the issue of investment certificates. In Poland, a securities deposit is operated by the National Securities Depository (Krajowy Depozyt Papierów Wartościowych S.A.).
AIF, TFI and ASI managers are obliged to perform duties resulting from anti-money laundering regulations and are obliged to apply know-your-customer (KYC) procedures to its clients and designate senior management responsible for carrying out AML duties. In the case of TFIs and ZASIs, senior management responsible for such obligations needs to be members of a management body of those entities.
With respect to asset valuation of AFIs, certain limitations are imposed by the virtue of law. Asset valuation of assets in general may be conducted by a TFI or ZASI (under certain conditions). Moreover, asset valuation may be conducted by an audit firm, an entity entitled to render book-keeping services, an entity entitled to be the depositary (except for the prime broker acting as the ASI counterparty), or any other entity specialised in the valuation of assets.
In principle, foreign entities may provide services to AIFs and then are obligated to observe the Polish law provisions. In some cases it will be connected with a necessity to notify the PFSA. Such cases include outsourcing of the performance of activities connected with the operations pursued by TFI to a foreign entrepreneur, outsourcing by a ZASI to a foreign entrepreneur of the performance of activities connected with the operations pursued by such ZASI.
According to Polish tax regulations, an AIF (an SFIO applying the investment principles and restrictions specified for a FIZ) may enjoy exemption from corporate income tax on a subject matter basis. This exemption covers the income (revenue) of a FIZ and an SFIO applying the investment principles and restrictions specified for a FIZ with the exception of the following:
Also free of income tax is income (revenue) of an ASI derived from transfer of shares, provided that, if transferring an ASI held before the date of transfer, no less than 10% of shares in the capital of a company for a period of two consecutive years.
In the case of an ASI, the principles of levying (personal or corporate) income tax on profits distributed to investors depend not only on the type of investor and legal form of an ASI operation, but also on the investment policy followed and the form of earning and distribution of income. (A detailed discussion of this topic is outside the scope of the current article. Consultation with a tax adviser is necessary on a case-by-case basis.)
Generally Polish AIFs qualify for benefits under double-tax treaties. Details regarding applicability depends on the tax status of a given AIF.
(A detailed discussion of this topic is outside the scope of the current article. Consultation with a tax adviser is necessary on a case-by-case basis.)
SPVs are often used for investment purposes by AIFs. Use of SPVs results, among others, from investment restrictions applicable to AIFs (eg, restriction on eligible assets). On the other hand, SPVs are a way to diversify investment risk.
With regard to Polish investment funds, there are no particular preferences in investment promoters/sponsors from any jurisdiction.
Polish investment funds are, in principle, targeted to a local group of investors. Regardless of their type, such funds may take advantage of the freedom to provide services within the EU territory. In order to commence the offering of Polish investment funds in other EU member states, a prior notification in a host member state is required, but this procedure is not commonly used in Poland.
Notwithstanding the foregoing, it must be noted that foreign investors often choose Polish closed-ended investment funds to carry out their investment in Poland. In these cases, investment certificates of a closed-ended investment fund are purchased in Poland, while funds themselves are set up only for a specific investor or group of investors whose intention is to have an investment vehicle enabling efficient investment in the territory, on the basis of knowledge and experience of Polish managers familiar with specific features of the local market.
With regard to Polish investment funds, no particular preferences in the accumulation of fund investments in a particular region or jurisdiction is observed.
In light of previous years, it is observed that AIFs continue to be used as investment vehicles – however, the number of AIFs established depends on the type of AIF. A significant increase in the number of ASIs is observed. In the case of SFIOs, however, their increase is connected with the implementation of employee capital plans, created mostly in this legal form. In the case of FIZs, a clear decrease in the total number of such entities may be seen. It should be assumed that these trends will continue in the nearest future.
These trends are influenced by, among others, recent actions of the regulator (increased supervisory activity and significantly higher administrative sanctions), as well as uncertainty as to the applicable law – in particular, instability in tax regulations.
According to Polish legal regulations, all types of AIFs – and so SFIOs, FIZs and ASIs – are obligated to make available to investors on a regular basis the valuation of their assets and their financial statements (annual and semi-annual). The requirements for the minimum frequency of asset valuation are as follows: (i) on each day of sale and redemption of participation units for an SFIO; (ii) once every quarter for a FIZ; and (iii) once a year for an ASI.
Another information obligation imposed on an AIF is the provision of information documents to investors. The form and content of such documents depend on the type of fund. In the case of an SFIO, it is an information prospectus, key investor information and information for an AIF client prepared in accordance with Polish legal regulations. For a FIZ, such documents will be: the terms of issue of investment certificates (for a FIZ issuing investment certificates in a way other than a public offering or by way of a public offering in which no issue prospectus has to be prepared, and where such certificates will be neither admitted to trading on a regulated market nor introduced to an alternative trading system) or an issue prospectus approved by the PFSA (for a FIZ issuing investment certificates which will be admitted to trading on a regulated market or introduced to an alternative trading system) and information for an AIF client. In the case of an ASI, information for an AIF client and issue prospectus (for an ASI admitted to trading).
AIFs are also obligated to make available their constitutional documents (the articles of association) and key information documents (KIID).
In addition, when participation units of SFIOs, investment certificates of FIZs and ASIs are, respectively, sold, issued or introduced to trading in Poland, they are obligated to make available to, respectively, fund participants and ASI investors on a periodic and regular basis.
The COVID-19 pandemic put on hold the planned-for 2020 transformation of pension fund management companies, established at the end of the 1990s into TFIs. The reform of the pension system was postponed to 2021 and entails the transformation of pension funds that have been operating on the Polish market for over 20 years into SFIOs.
As a result of this transformation, the number of participants in SFIOs will increase and the investment funds market will see the entry of entities that have been focused to date only on pensions plans. In connection with a new legal form, newly established TFIs will be fully authorised to set up strictly investment funds.
We may thus expect an increased competition on the investment funds market. It is then possible that space will appear for carrying out concentration processes, both within capital groups – in which case, two TFI entities will emerge following transformation – and that acquisitions may appear in connection with the increased competition.
An AIF operating in the form of an investment fund, namely an SFIO and a FIZ, may be established and managed exclusively by a TFI. This TFI – the fund manager of the SFIO and FIZ – must be set up in the form of a joint-stock company with its registered office in the territory of Poland and obtain authorisation from the PFSA.
A ZASI – the manager of the ASI – may operate only in the form of a commercial company, namely a joint-stock company, a limited liability company or a European company. Establishment and management of a licensed ZASI is subject to a licensing procedure before the PFSA. A registered ASI may be established and managed by an entity registered by the PFSA without the need to obtain its authorisation.
As a rule, due to the low value of the assets under management (below EUR100 million), ZASIs on the Polish market manage only registered ASIs and benefit from a statutory exemption to operate under a simplified supervisory regime – without the need to obtain an authorisation from the PFSA, but on the basis of an entry in the register. In July 2020, this law firm was responsible for carrying out the first proceedings before the PFSA in Poland for issuing a licence to perform the activity of the licensed ZASI.
As of September 2020, this is the one entity on the Polish market that has been authorised by the PFSA to operate as a licensed ZASI.
In the Polish legal regime, the fundamental instrument of law governing the principles of operation of AIFs is the Act and executive regulations issued pursuant thereto. Moreover, AIFs are directly subject to the applicable provisions of the EU law including the Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 and Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision.
For the description of local regulatory requirements concerning AIF managers, see 2.8 Other Local Requirements.
A TFI as a joint-stock company and a ZASI as a capital company (joint-stock company, limited liability company or a European company) are subject to corporate income tax – in principle, this amounts to 19% of the taxable base; for small taxpayers, a rate of 9% is applied.
No special rules are applicable with respect to permanent establishments of an AIF for taxation purposes.
Polish tax law does not provide for specific rules regarding carried interest– this is subject to taxation on a general basis.
(A detailed discussion of this topic is outside the scope of the current article. Consultation with a tax adviser is necessary on a case-by-case basis.)
A TFI may entrust the management of an SFIO or FIZ to a manager from the EU – ie, a legal person established in the territory of a member state which has obtained an authorisation of the competent authority in that member state to perform the activity involving the management of AIFs in accordance with the community law governing the operations of AIF managers. A manager from the EU may also take over the management of an externally managed ASI – such a manager may start carrying on activities in Poland after having effectively notified the supervision authority in its home state. In order to take over the management of an SFIO, FIZ or an externally managed ASI, it is necessary to obtain authorisation from the PFSA and consent of the AIF’s investors as well as to make respective amendments to the AIF’s constitution documents.
Notwithstanding the above, a TFI may also entrust to third parties the performance of other business operations. In such cases, certain statutory should be met (eg, written form of agreement, notification to the PFSA of intent to conclude agreement, financial standing of outsourcer) to ensure proper execution of the agreement.
See 3.2 Regulatory Regime.
Pursuant to Polish legal regulations, it is allowed both for EU managers and management companies to perform their operations on Polish territory. In the case of an EU manager, it is possible provided that such entity has been authorised by a competent supervision authority of the manager’s home state to perform the operations entailing the management of alternative investment funds. The operations may be performed in the form of a branch and after previously providing the PFSA with the information required by legal regulations.
To an EU manager operating on the Polish territory in the form of a branch or in the form other than a branch, the regulations of its home state are applicable, provided that a branch of the EU manager is obligated to observe the provisions of Polish law with respect to acting in the best interest of the SFIO or FIZ participants or ASI investors, acting in a reliable and professional manner, and managing conflicts of interest, and observing the provisions of Polish law relating to SFIOs or FIZs, and, in the case of management of an ASI, to observe the provisions of law relating to the operation of such firms. To that extent, an EU manager is subject to supervision by the PFSA.
It is not possible to distinguish any preferred type of investment funds from analysing the number of particular types of investment funds operating in Poland.
A clear preference is visible among institutional investors interested in benefits provided by securitisation who invest in special types of closed-ended funds – for example, as securitisation funds investing mainly in receivables portfolios.
Over recent years, the number of clients of investment funds in Poland has been constantly increasing, with the number of investment funds operating on the Polish market decreasing. Among participants of alternative investment funds, all types of investors may be discerned (eg, institutional investors, retail investors, high net worth individuals, etc).
Up to the end of 2016, investment funds of the FIZ variety were very popular among investors, especially individual investors. This popularity resulted mainly from tax privileges characteristic of this type of investment fund. The advantages of a FIZ also include a simplified registration procedure – in principle, no PFSA authorisation is required to set up such a fund, and there are preferential regulations on investment restrictions. Because of a change in tax regulations, a decreased interest of investors in this type of investment funds has been noted for several years – this is particularly evident in the last year, when the number of FIZs dropped from 780 to 557.
Currently, ASIs are the least numerous group, owing to the fact that an ASI is a new type of investment fund and the ASI market is still under development. On the other hand, ASIs are often used within the framework of business development and enterprise innovation support programmes carried out by Polish state institutions. In such case, an ASI is a tool used to finance projects with the support of public funds.
Participants of investment funds may be natural persons, legal persons and unincorporated organisational units. Apart from special cases, in Poland there are no restrictions for selling participation titles of retail investment funds that would cover specific groups of potential investors. However, marketing communication should take into account target groups for which a given investment product is appropriate.
Participation units of an SFIO may be sold with the intermediation of the investment fund management company (TFI) managing a given SFIO, an investment fund management company which is not a governing body of that fund, as well as an investment firm or a domestic bank, provided that an investment firm and a domestic bank are duly authorised to perform operations within the scope of the offering of financial instruments.
It is also possible to sell participation units of an SFIO with the intermediation of another entity than those mentioned above (a PFSA authorisation is required in such case). Those entities have an obligation to act in a reliable and professional manner, in accordance with the principles of fair trade, and with special regard to the interest of clients and participants of those funds.
In the case of a FIZ, investment certificates may be offered directly by the investment fund management company managing that FIZ or with the intermediation of an investment firm, or a domestic bank performing operations within the scope of the offering of financial instruments.
The manner of issue and sale of participation rights in an ASI depends on a legal form of the investment firm. The participation rights in an ASI are, respectively, a share in a limited liability company or a share of stock in a joint-stock company.
Detailed description of documents required to be provided to investors at the time of acquisition of participation units of an SFIO, and investment certificates of a FIZ or participation rights in an ASI are described in 2.18 Disclosure/Reporting Requirements.
Local investors are allowed to invest in AFIs established in Poland. Polish AFIs are, in principle, targeted to a local group of investors.
Depending on the AFI structure, certain filing duties may apply with respect to marketing of the AFI.
An SFIO is obliged to submit to the PFSA its information prospectus and KIID immediately after preparation.
A FIZ is obliged to submit to the PFSA terms of issue of investment certificates (for a FIZ issuing investment certificates in a way other than a public offering or by way of a public offering in which no issue prospectus has to be prepared, and where such certificates will be neither admitted to trading on a regulated market nor introduced to an alternative trading system) immediately after preparation or submitting the prospectus for the PFSA’s approval (for a FIZ issuing investment certificates which will be admitted to trading on a regulated market or introduced to an alternative trading system) prior to the offering.
An ASI is obliged to submit a prospectus to the PFSA for approval (for an ASI operating as a joint stock company which intends to sell its shares in public offer and/or which will be admitted to trading on a regulated market or introduced to an alternative trading system) prior the offering.
For disclosure requirements applicable with respect to investors, see 2.18 Disclosure/Reporting Requirements.
In the case of an SFIO and a FIZ, income tax is charged only upon the cancellation of participation units or investment certificates or the transfer of certificates to a third party. The framework of taxing income from participation in AIFs is uniform for SFIOs and FIZs, with the exception of an ASI.
In the case of natural persons, income from participation in investment funds is subject to income tax from participation in investment funds collected in a lump-sum form, amounting to 19% of derived income. In the case of investment funds, income tax is charged only upon redemption of participation units or investment certificates or disposal of certificates to a third party. Income from investment funds is not combined with other income, taxable in accordance with general principles, according to a tax scale.
Income derived from the disposal of investment certificates against payment is also not combined with income (revenue) taxable in accordance with general principles. However, a taxpayer has to disclose this income in a separate tax return, and calculate on their own and pay a due tax of 19%. Additionally, the transaction of disposal of investment certificates is subject to a tax on civil law transactions amounting to 1% of the market value of certificates disposed of, which is charged to a purchaser of investment certificates.
If fund participants are legal persons and unincorporated organisational units, except for unincorporated companies, income of these entities from participation in an investment fund is subject to a corporate income tax, which amounts to 19% of the taxable base; for small taxpayers a rate of 9% is applied.
The above taxation principles of fund participants are also applicable to the taxation of fund participants who are foreign investors, with a reservation that they may not apply if fund participants are persons affected by double tax treaties concluded by the Polish government.
In the case of an ASI, the principles of levying income tax (personal or corporate income tax, respectively) on profits distributed to investors depend not only on the type of investor and the legal form of the ASI, but also on the investment policy followed and the type of earning and distribution of income. (A detailed discussion of this topic is outside the scope of the current article. Consultation with a tax adviser is necessary on a case-by-case basis).
The above taxation principles of fund participants apply also to taxation of fund participants who are foreign investors, with a reservation that they may not be applicable if fund participants are individuals to whom agreements on the avoidance of double taxation concluded by the government of Poland apply.
Poland is a party to the Agreement with the Government of the United States of America to Improve International Tax Compliance and to Implement FATCA, and is included in the group of co-operating countries as Model 1 IGA. Regulations on the performance of this agreement were adopted on 9 October 2015. Polish investment funds are, in principle, reporting financial institutions within the meaning of FATCA, and therefore they must be registered with the Internal Revenue Service (IRS), have a GIIN number assigned by that institution and are obligated to identify and report American clients. Polish investment funds report to the IRS with the intermediation of competent tax authorities in Poland, based on Polish legal regulations implemented in order to perform the above Agreement on FATCA with the USA.
In order to implement the Council Directive 2014/107/EU of 9 December 2014 amending Directive 2011/16/EU as regard to mandatory automatic exchange of information in the field of taxation in Poland, the Act on exchange of tax information with other countries of 9 March 2017 was adopted. Thus, Polish investment funds are obligated (apart from special cases envisaged by legal regulations) to collect and report information about their clients within the scope required by the Common Reporting Standard (CRS). Domestic legislation enabling investment funds to comply with the requirements set forth by the CRS has been effective since the beginning of the second quarter of 2017.