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Newsletter No. 04/2019

29.04.2019

1. First penalty for failure to comply with the GDPR

At the end of March, the Office for Personal Data Protection (UODO) announced the first financial penalty for incorrect processing of personal data. The decision involved a Warsaw company which collected data publicly available on the internet from the Central Register and Information on Business, the National Court Register, the Central Statistical Office, the Central Register of Vehicles and Drivers, and the Court and Economic Monitor.

After collecting the data, the company sent emails to all business owners whose email addresses had been disclosed, informing them about the processing of their data. Other people whose email addresses had not been disclosed were not informed of this by the company. The company cited a provision of the General Data Protection Regulation which allows this obligation to be omitted if it requires a disproportionately large effort.

The UODO fined the company PLN 1 million and ordered letters to be sent by post to business owners who had not been informed about the processing of their personal data.

2. Documents will play a major role in disputes between businesses

The Sejm is working on a change in civil procedure that will speed up court proceedings, especially those related to business.

An important source of delay in hearing business cases is the lack of proper documentation of facts from which the parties derive their claims and allegations. It is then necessary to use the testimony of witnesses or parties, which leads to longer proceedings.

After this change to the civil procedure, evidence from witness testimonies can only be admitted after other evidence has been exhausted or if there are no unexplained facts relevant to the resolution of the case. However, some of the activities of the parties will need to be proved only by documents. Therefore, we recommend that our business clients exercise diligence in preparing documents and show greater care in this regard.

3. No income tax advance on payments for acting as a proxy

Many companies appoint proxies, who may be foreigners. There are occasions when such persons receive payment based on a resolution of the company’s management board.

The National Tax Information Office received a query regarding how to classify the source of income of these payments. The applicant had doubts regarding the method of monthly settlement of payment received for acting as a proxy and the need to pay monthly advance payments for personal income tax.

The National Tax Information Office replied that payment for acting as a proxy is classified as income from other sources. A person who receives such a payment will pay the tax based on their annual settlement without the need to pay monthly amounts to the tax office.

4. Supreme Court ruling regarding the amount of compensation due to an employee for unlawful termination of an employment contract on two occasions

An employee had his employment contract terminated, and during the notice period, the employer terminated the employment contract without notice due to the fault of the employee. Therefore, the employee applied to the court for compensation for unlawful termination of the employment contract.

The District Court considered whether the applicant should be compensated for incorrect termination of the employment contract, compensation for terminating the employment contract during the notice period, or whether he should receive two payments of damages jointly. The first instance court decided that the applicant should be compensated for incorrect termination of his employment contract.

The applicant appealed this decision. The second instance court had doubts in this regard. In the end it decided that although the applicant was entitled to claim one compensation, he should also receive compensation for termination of his employment contract during the notice period for the period up to the end of the notice period.

The Supreme Court stated that an employee whose contract of employment has been terminated with notice and during the notice period the contract is terminated without notice due to the fault of the employee is entitled to two compensation payments. Therefore, it is important that the employer analyses the best options before terminating an employment contract.

5. Supreme Court ruling: not being entered in the National Court Register does not absolve the president of a company from liability

A limited partnership sued two management board members of a limited liability company due to unpaid invoices for the delivery of construction equipment. The company based its claim on a provision in the Code of Commercial Companies according to which if enforcement against a company is ineffective, the board members are jointly and severally liable for the liabilities of that company.

The District Court determined that on the date on which the debt arose one of the defendants was the president and the other a member of the management board. The court upheld the claim and issued a payment order. The defendants did not raise any objections.

The case went to the Regional Court, which dismissed the claim against the CEO due to the fact that on the date of which the debt arose he was not the president of the management board because a few months earlier he had been dismissed from that position. The other defendant was at that time a member of the management board and was appointed as the president of the management board; however, that change had not been reported to the National Court Register (KRS). The District Court ruled that entry in the register does not determine the liability of a member of the management board. A management board resolution in this matter is more important.

The plaintiff appealed the decision. The Supreme Court ruled that an entry in the National Court Register does not forejudge who is responsible for the liabilities of a company. What is more important is who was the president of that company at a given time. In the opinion of the Supreme Court the provision of the Code of Commercial Companies cited by the plaintiff means that liability rests with the actual members of the management board regardless of entry in the register.

6. CJEU ruling on the immediate payment of exit tax

The Court of Justice of the European Union (CJEU) has issued a ruling concerning a German citizen who moved to Switzerland. The CJEU stated that a tax office cannot demand the immediate payment of tax on unrealised profits (exit tax), because that violates EU regulations, including the free movement of capital. It also pointed out that the demand for immediate payment of this tax may disrupt the financial liquidity of business owners, and thus may discourage them from disposing of their assets.

This ruling may also have a significant impact on people doing business in Poland. Exit tax rules were introduced into the Tax Ordinance and came into force on 1 January 2019. They apply to both natural and legal persons who have settled taxes for at least five years in Poland and who change their residence or transfer assets worth more than PLN 4 million to another country. The rules state that tax should be paid seven days after the change of residence or transfer of assets.

Currently the Ministry of Finance is analysing the effects of the CJEU ruling.

7. President of Poland signs a law implementing the GDPR

The European regulation on the protection of individuals with regard to the processing of personal data and on the free movement of such data has been in force since 25 May 2018. The President of Poland signed the act amending the package of laws to ensure the application of the GDPR on 3 April 2019. The new act will change about 168 other acts and will affect areas including labour, administrative, banking, insurance, telecommunications and education law. The act has 176 articles and will enter into force 14 days from the date on which it is formally published.

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