Polish Law

POLISH LAW

Poland is a rapidly developing new member of the European Union and a major recipient of foreign direct investment in Central and Eastern Europe. Poland's entry into the EU was followed by instant economic growth that has slowed down substantially recently due to external factors, including the current economic crisis. However, due to its economic policy and through measures taken to encourage the inflow of foreign investment, Poland has benefited from large-scale investment from Western Europe, the United States, a number of Asian countries and elsewhere.
In a 2006 report published in the Financial Times Poland ranked 5th among top investment destinations worldwide. Its central geographical location, large territory and population of nearly 40 million are attracting a growing number of foreign investors. Thanks to dynamic political and economic changes in recent years Poland has taken a major leap forward in virtually every sphere of life – including the media. Poland has become a popular destination for foreign documentary film crews and feature film producers.

Business Law
Obligations of Entrepreneurs
Film production

Autonomous production
Cooperation with a Polish partner
Additional financing of the film production 
Who can apply?
The amounts
Fees and Taxes
Work Permits
Filming Permits
Health Insurance
Film Production Insurance
State Aid

Business Law

The process of rapprochement between Poland and Western Europe gained impetus in time with Poland’s political and economic transformation, culminating in EU accession in 2004. Thanks to modern regulations, European standards and guaranteed equal rights for foreign businesses, non-Polish film-makers do not require any special permits.
Foreign entrepreneurs, regardless of their country of origin, can operate freely in the film industry in Poland without any additional formalities resulting from their origin.
The basic legal framework is provided by the Act on Freedom of Economic Activity of 2 July 2004 ¹. Pursuant to this Act, an ‘entrepreneur’ is any person, organization or non-corporate organizational unit with legal capacity conducting economic activity on its own, while ‘economic activity’ is defined as professional (permanent and professional activity, as opposed to occasional and amateur), subordinated to the rules of profitability and profit, repeatable and resulting in economic turnover.
Entrepreneurs from Member States of the EU and EFTA may engage in economic activity on the same terms and conditions as Polish entrepreneurs. Entrepreneurs from elsewhere are restricted to the following legal forms: joint-stock company, limited liability company, limited partnership or limited joint-stock partnership; they can also take over or acquire shares in these listed forms of entities.

Obligations of Entrepreneurs
Carrying on economic activity requires prior registration in the Register of Entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) or in the Economic Activity Registry (Ewidencja Działalności Gospodaczej)
In order to perform economic activity in Poland, an entrepreneur is obliged to:

• obtain a tax identification number (NIP) at the appropriate tax office and for use in official business (official correspondence, company seals etc.),
• obtain an identity number based on the type of activity (REGON) at the Statistical Office,
• register the business with and pay contributions to the Social Security Office (ZUS) when employing staff,
• open a bank account and use it for all business related transactions,
• file monthly returns and pay taxes (i.e. VAT, income tax, advances on payroll tax etc.) to the local tax office,
• file financial statements and statistical reports as required by appropriate regulations.

The entrepreneur must observe rules of fair competition (as set by EU regulations, which prohibit monopolistic practices, concentrated (cartel) practices, dumping pricing policies, illegal concentration etc.), follow regulations determining the terms and conditions of economic activity (in particular, health and safety, public ethics and environmental protection) and, where required by law, employ only properly trained and skilled professionals.

Film production
The basic legislation for film production is the Cinematography Act of June 30, 2005 (Polish Official Journal 2005 No 132 item 1111). Poland is also a signatory of the European Convention on Cinematographic Co-production of October 2, 1992.
The State supports the film industry in Poland. There are public grants given for film production, selected festivals and events, developing archives, education and professional training, as well as for promotion of the Polish film industry abroad.
The key organization in the film industry is the Polish Film Institute, set up under the Cinematography Act.
The Cinematography Act regulates issues related to the financing of film production (feature, documentary and animation) and project development. It sketches out the basic legal framework for the functioning of the film market and provides clear legal definitions of selected industry terms – e.g. producer, co-producer, film production and film services.
Other important Polish film production regulations are e.g.: Regulation of the Minister of Culture dated 27 October 2005 on the co-financing of cinematography undertakings by the Polish Film Institute²  and the Regulation of the Minister of Culture dated 24 November 2005 on the means of audit of entities with reference to the use of additional project funding³. Also applicable will be general rules of Polish civil law and copyright law e.g. when formulating and signing option agreements, or obtaining intellectual property rights to music and songs used in films.
There are no legal impediments for foreign entrepreneurs in terms of autonomous economic activity in Poland, including the field of film production, even for a single project. A producer from an EU Member State will, however, naturally come across a number of formalities to fulfil. Patience and forward-planning become key factors when planning to establish some sort of cooperation with a Polish co-producer, contributing financially or bringing the promising option of acquiring non-returnable public funds, because (as elsewhere) public institutions require some time to assess additional project funding applications, in terms of both content (script value assessment) and finances.

Autonomous production

When undertaking autonomous production (i.e. without a Polish counterpart) a foreign producer must first register its economic activity based on the same regulations that apply to Polish businesses. Tax is a separate issue. Foreign entrepreneurs must set up a Polish office; hire qualified legal representatives and an accounting service provider. This does not imply release of the foreign entrepreneur from liability for legal and financial decisions. Under Polish fiscal regulations (the Tax Ordinance Act and income tax laws), as a business entity the foreign entrepreneur is responsible for any transgressions.

Cooperation with a Polish partner
Film production in Poland is much easier and more convenient when cooperating with a Polish business partner. Such cooperation can take two forms – either a service order or co-production, for applicable projects and on condition that the foreign producer does not lay claim to exclusive distribution rights. A Polish partner can be helpful in obtaining funding from various public and private sources. Aside from essential business confidence strengthened by a written contract and ease of communication, the Polish partner should be able to provide fast budgeting, prepare the shooting schedule and index of production resources, present organizational options for the pre-production, principal photography and post-production stages, and should also be familiar with the film service and technology market and respective financial alternatives (e.g. stock vs. magnetic film), not to mention a fully-functioning head office, qualified staff and the all-important personal contacts.
The most common form of operating in the film industry is a limited liability company (Polish abbreviation: sp. z o.o.). Every company must submit an annual balance sheet and make various other filings with the National Court Registry, e.g. regarding changes of address of the company, management board members, rules of representation etc. This data is publicly available and can be helpful in assessing a company’s credibility.
A well-constructed co-production agreement should regulate at least the following matters: the budget, financing of the production, management of the co-production, ownership rights (chain of title is an issue of crucial importance) and matters related with negatives, credits and so forth.
   
Additional financing of the film production  
Additional financing may be available, on application, from the Polish Film Institute or Eurimages Fund. In the Polish Film Institute, projects are judged by film experts on the following criteria: artistic, cognitive and ethical values, meaning for national culture, supporting Polish traditions and the Polish language, enriching cultural diversity in Europe, expected effects of the planned undertaking and, finally, the financial and economic terms of the project’s realization. For Eurimages, the criteria are slightly different. The following aspects of the projects are important: artistic merits, experience of the director, the producers, the artistic team (authors, scriptwriter, casting, etc.) and the crew members, circulation potential of the project, its commercial potential, artistic and/or technical co-operation between the co-producers, degree of confirmed financing and the European character of the project.
Additional project funding from the Polish Film Institute can be granted in the form of subsidies, loans or warranties, while financial support from Eurimages takes the form of a conditionally repayable interest-free loan.

Who can apply?
Important issues in applying for co-production finance are the number and origin of the co-producers, the character of contributions (purely financial or otherwise) and the share (in percentage terms) of individual contributions to the film budget.
Eurimages financing can be applied for by any natural or legal person governed by legislation of one of Eurimages Fund’s member states whose principal activity consists in producing cinematographic works. There must be at least 2 co-producers from two different member states of the Fund. Co-producers from countries outside of the Eurimages Fund are accepted too, but their combined percentage participation may not exceed 30% of the total co-production budget;
Financing from the Polish Film Institute is also available to non-Polish individuals or legal entities carrying on cinematographic activities, so long as they are from an EU or EFTA member state (excluding Switzerland).

The amounts
The maximum percentage of funding available in relation to the overall budget is as a general rule 50% of the total budget, when funding comes from the Polish Film Institute. It is a maximum 15% of the total production cost (no more than € 700 000) from Eurimages (for films with total production costs below € 1.5 million - financial support shall not exceed 20%).

The Polish Film Institute processes additional project funding applications within the framework of the relevant operational programme four times a year. On average, the assessment procedure lasts about three months; however, the entire period between application approval and signing of the contract may exceed six months. In relation to applications, foreign producers are required to appear at meetings in Poland.

Fees and Taxes
Certain fees are levied on foreign producers undertaking film production in Poland, regardless of the form of cooperation with Polish business partners. The most important of these are as follows:

• advance on personal  income tax (initial charges made upon payment of wages);
• VAT on invoices from goods and service providers;
• social security contributions on employment contracts and mandate contracts ;
• advance on corporate income tax (if any)

Other occasional fees and taxes include legal fees (e.g. when signing certain lease contracts; notary charges; court registry fees), bank fees (bank transfers, loan servicing etc.), real estate taxes (where applicable), local costs (e.g. permits for aerial photography or entry to national parks), and others.

Work Permits

No work permit is required from EU or EEA citizens. Unless otherwise stated in international agreements, production crew members from other countries must obtain a work permit from the regional ‘voivod’ (Polish: Wojewoda) authorities.
Certain professionals – including musicians and actors (up to 30 days) - are allowed to work in Poland without any additional permits.

Filming Permits
Generally, it is possible to film in any location.
The most common solution is to sign fixed term lease agreements with clearly stated conditions of use. Unless specified in a fixed tariff, rent is negotiable.
Permission often has to be obtained from property owners or local authorities before filming can commence (and they have the right to refuse). It is highly recommended to apply for any permits well in advance, as certain procedures need to be finalized 30 days prior to shooting.
Official procedures may be time-consuming, for instance for permission to film in the street. When applying, the producer must attach a plan for traffic reorganization and cordoning off of the area.
When planning to shoot in decrepit buildings or in ruins, a positive safety report must be commissioned for persons accessing the area in order to obtain a permit to film.

Health Insurance
All EU and EEA citizens are covered by public health insurance in Poland.

Film Production Insurance
Completion bonds are generally uncommon in Poland. During production, the film crew and equipment must be covered by third party and accident insurance, for which most insurance companies in Poland offer a wide range of services.

State Aid
The State can provide entrepreneurs with public aid only on terms and in forms clearly stated in separate provisions. Public aid must be granted in particular with respect to the rules of fair competition and equal rights.

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¹ see: Act of 2 July on Freedom of Economic Activity, Polish Official Journal (Dziennik Ustaw – Dz.U.) 2004, no. 173, item 1807.

² see: Regulation of the Minister of Culture dated 27 October 2005 on the co-financing of cinematography undertakings by the Polish Institute, Dz.U. 2005, no. 219, item 1870; with later amendments.

³ see: Regulation of the Minister of Culture dated 24 November 2005 on the mode and method of audit with reference to the use of additional project funding, Dz.U. 2005, no. 242, item 2044.