Since the outbreak of the war in Ukraine in February 2022, cooperation with foreign companies has become even more dangerous than before. The European Union has imposed an embargo on the trade of certain goods and services, as well as a ban on economic contacts with entities from Belarus and Russia listed on the blacklist. Polish entrepreneurs face severe penalties for violating these bans, which can amount to millions of zlotys and even imprisonment. However, Belarusian and Russian entrepreneurs have learned to circumvent sanctions by operating through foreign entities. How to avoid the risk of sanctions and check a company from Belgium, which, in October 2023, declared further expansion of the embargo?
Exercising due diligence in verifying a contractor
In today’s world, it is very easy to establish a company. In many countries, this can be done without leaving your home, via the internet. Therefore, one can never be sure who is really behind the created name and entry in the registry until it is verified. Verification involves commonly used actions in business intelligence, primarily consisting of checking the authenticity and currency of the contractor’s documentation, KRS, NIP, REGON, as well as the permits and certificates necessary for carrying out a particular type of activity.
Verification can be done by obtaining information from relevant individuals and institutions such as registration courts, ZUS, tax offices, or national and international chambers of commerce. It is worth delving into the knowledge of the history of the business and its owners, including opinions about the company, also by searching the internet or asking other entrepreneurs, contractors of this entity, and directly the interested party. It should be remembered that failure to exercise due diligence in the selection of a contractor carries legal consequences, such as being accused of conscious involvement in irregularities, and the resulting tax and legal sanctions.
Economic cooperation with Belgium
As reported by the Polish Economy Forum (fpg24.pl), economic cooperation between Poland and Belgium is thriving. In 2021, trade turnover between both countries reached a record level of 14.1 billion euros, nearly 30% more than in the previous year. According to official government data, the Belgian economy is one of the most developed in the world. The share of services in the creation of the national income there is approximately 70%. The most important branches of the Belgian industry are chemistry, metallurgical industry, electro-machinery (including car production), as well as the food and textile industries. According to the Central Statistical Office (GUS) in 2019, Belgium was Poland’s 11th trading partner in terms of the value of commodity turnover, ranking 13th on the list of exporters and 10th on the list of importers. In 2019, Belgians mainly imported from Poland products of the electromechanical industry (over 43% of the total Polish exports to Belgium), chemical products (15.3%), and agricultural and food products (14%). In the opposite direction, exports included chemical products (42% of the total Polish imports from Belgium), products of the electromechanical industry (19.8%), and agricultural and food products (14.3%). The value of services provided by Polish companies to Belgium amounted to nearly 1.3 billion euros, while services acquired by Polish entrepreneurs from Belgian companies reached 907 million euros. With a cumulative investment value of 6.9 billion euros, Belgium was the ninth-largest foreign investor in Poland.
The legal framework for economic cooperation with Belgium is established by EU community regulations and international agreements signed by Poland with the Kingdom of Belgium or with its individual regions. This primarily concerns the convention on the avoidance of double taxation, the prevention of tax fraud, and tax evasion in the field of income and property taxes from August 20, 2001, as well as the agreement on cooperation with the Government of Flanders from June 6, 1994, and the agreement on cooperation with the Government of the French Community of Belgium and the Government of Wallonia.
National and EU Sanctions
In connection with the violation of Ukraine’s territorial integrity, the European Union imposed 11 packages of sanctions on Russia until June 23, 2023. Poland also imposes additional sanctions. These include key individuals in Russia and companies from both Russia and Belarus. The trade of goods and services with Russian and Belarusian companies is prohibited. Polish entrepreneurs face financial penalties of up to 20 million PLN and even up to 15 years of imprisonment for violating these sanctions. However, Russian and Belarusian entrepreneurs have learned to circumvent international bans, using complex holding structures created in other countries where it is difficult to detect the true ownership structure.
During a visit to Ukraine on October 11, 2023, Belgian Prime Minister Alexander De Croo announced the upcoming expansion of sanctions to Russian diamonds, which are a significant source of income for Russia. In 2021, a year before the invasion of Ukraine, Russia exported rough diamonds worth about 4 billion dollars, with Belgium being the primary destination due to its diamond trading hub in Antwerp.
Detailed information regarding the types of economic transactions prohibited by the EU with Belarus and Russia can be found on the European Council’s websites: https://www.consilium.europa.eu/. The list of individuals and entities subject to sanctions is available in the Official Journal of the European Union at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0269-20220721. The Polish Ministry of Internal Affairs and Administration also maintains a current registry of sanctioned entities, allowing you to check a contractor, their affiliations, reasons for inclusion in the registry, and the applied sanctions: https://www.gov.pl/web/mswia/lista-osob-i-podmiotow-objetych-sankcjami.
Therefore, the first step in verifying a Belgian company is to check whether it appears in any of the aforementioned registers. Useful information sources also include Council Regulation (EU) 2022/576 of April 8, 2022, amending Regulation (EU) No 833/2014 concerning restrictive measures in connection with Russia’s actions destabilizing the situation in Ukraine.
Economic Intelligence: How to Verify a Belgian Contractor?
You can entrust the verification of a contractor to a professional economic intelligence agency that specializes in carrying out such orders. A private detective in Warsaw, Poznań, Wrocław, or other cities will know how to obtain the necessary verifying information about your current or future contractor.
The most crucial way to verify a contractor and their potential connections with Belarus or Russia is to determine the entity that is their ultimate beneficiary, and then check whether it is listed on the sanctions list maintained by the Ministry of Internal Affairs and Administration. You can make these determinations in the Central Register of Ultimate Beneficiaries maintained by the Minister of Finance: https://crbr.podatki.gov.pl/adcrbr/#/wyszukaj.
Environmental Investigation
An accessible way to gather information about a business partner is to search the resources available on the internet. Verifying a company, checking if it has a website, examining reviews, and perhaps coming across any publications about it are potential steps. If you prefer not to do this independently, you can entrust this task to a research agency specializing in professional economic intelligence. There are more sources of information than just the World Wide Web. For instance, you can approach the Embassy of the Republic of Poland in Brussels to inquire about a specific entity, whether complaints from other entrepreneurs have reached them, or if, according to the knowledge of the Belgian diplomatic mission, the Belgian contractor has a poor reputation. Polish-Belgian chambers of commerce may also provide similar information.
Direct Inquiry to the Contractor
If difficulties arise in determining the ownership structure of a business partner through available registries, you can use another method of verification within the framework of economic intelligence. This involves directly asking the contractor for confirmation of who their ultimate beneficiary is. Of course, to authenticate the response, you can request the Belgian entrepreneur to provide documents confirming their statements.
Polish and EU Registries
The Ministry of Entrepreneurship and Technology, as the relevant minister for the economy, maintains a register of foreign entrepreneurs’ representations in the Public Information Bulletin. If you find the representation of your contractor in this register, you can assume that they still exist and are conducting business.
Another such registry is the European Union VAT taxpayer registry and the EORI registry. Businesses and individuals wishing to engage in commercial activities within the European Union must use the EORI number as their identification number in all customs procedures. The VAT Information Exchange System (VIES), a search engine operated by the European Commission, allows you to check whether a specific entity is registered for intra-Community transactions. This is essential, among other things, to apply a 0% VAT rate to a particular transaction. If VIES does not confirm the contractor’s registration, you can request verification from the tax office of the country where they are based. It is also essential to check if the company has the required permits and certificates if they are mandated in a specific country.
The Register of Insolvent Debtors allows you to check whether a particular contractor is on its list. There are also economic information bureaus that provide detailed information about business activities. BIK, the Credit Information Bureau, established by the Polish Bank Association, collects data on the credit history of bank customers, credit unions, and some para-banking loan companies.
Belgian Business Registries
The Belgian Business Register “Economie” is created through databases collected by the French Banque-Carrefour des Entreprises (BCE) and the Dutch Kruispuntbank van Ondernemingen (KBO). This registry is managed by the Belgian office in the Federal Department of the Economy. It was established to simplify administration and provide a way for the clear identification of businesses. The database covers all enterprises, as Belgian law mandates registration for all companies operating within its territory. It also includes a list of companies’ units or “organizational units,” which are the addresses where the company conducts its activities. The database also contains links to other databases. It encompasses not only companies but also other legal entities, including sole proprietors, public bodies, and in some cases, foreign companies.
Access to public information about companies is free, and only some of the more detailed data is paid. The free “Public Search” function allows you to search for data about all companies, regardless of whether they are currently active or have ceased operations, and whether they are legal entities or sole proprietors, as well as information about their units. You can search it by registration number, name, trade activity, or address. Pages with company overviews include information about directors, and at the bottom, links to the company’s annual financial statements and publications in the official journal. The register is available in four languages: English, French, German, and Dutch (register link: https://economie.fgov.be/en | direct link to the public search: https://kbopub.economie.fgov.be/kbopub/zoeknummerform.html?lang=en).
“Service Public Fédéral Justice” is also the official state database, maintained by the Belgian Ministry of Justice. It contains documents related to companies. For some companies, there are photos of documents available. You can find official announcements about changes in a company’s structure, address changes, and changes in key personnel. The search engine is available in French (http://www.ejustice.just.fgov.be/tsv/tsvf.htm).
“Trends Business Information” is a commercial database containing legal acts, credit reports, and annual financial statements. It gathers information about all companies and self-employed individuals in Belgium and worldwide. It provides data about existing customers, suppliers, or potential customers, tailored to the information-seeking entrepreneur’s activity. It is available in three languages: English, French, and Dutch (https://shop.trends-business-information.be/webshop/?lng=en#/).
It is better to thoroughly check a business partner before entering into a transaction, especially regarding their connections with Belarus or Russia. Violating the bans imposed on specific types of transactions with these countries and with certain individuals and companies can result in financial penalties of up to 20 million PLN and imprisonment ranging from 3 to 15 years. Besides, verifying a business partner and exercising due diligence in their selection are requirements that always apply when conducting business activities and rest on entrepreneurs as professional market participants.
Do you now know how to check a company from Belgium? If not, or if you need to find more detailed information, we can help. We invite you to contact us.
