Germany is Poland’s close western neighbor and one of its largest and most significant economic partners. Polish entrepreneurs eagerly establish cooperation with German companies. However, before doing so, in order to avoid exposing the company to damage resulting from cooperation with an unreliable partner and to avoid personal liability before Polish tax authorities for failing to exercise due diligence in selecting a contractor, it is advisable to conduct a preventive economic investigation of the company. This is especially important now, after the outbreak of the war in Ukraine and the introduction of high sanctions by the EU, as well as by Germany and Poland, for trading in certain goods and services, including violations of the trade ban with specific entities. How to check a German contractor?
Exercising due diligence in contractor verification
In today’s times, establishing a company is very easy. In many countries, this can be done without leaving your home, via the Internet. Therefore, one can never be sure who is truly behind the created name and registry entry until it is verified. Verification involves commonly used actions in economic intelligence, primarily consisting of checking the reliability and currency of the contractor’s documentation, including the National Court Register (KRS), Tax Identification Number (NIP), National Official Business Register (REGON), as well as permits and certificates necessary for conducting a specific type of business.
Verification can be carried out by obtaining information from the relevant individuals and institutions, such as: registration courts, Social Insurance Institution (ZUS), tax offices, national and international chambers of commerce. It is worth gaining knowledge about the history of the activity and its owners, including opinions about the company, also by searching the Internet or asking other entrepreneurs, contractors of this entity, as well as the interested party directly. It should be remembered that failure to exercise due diligence in the selection of a contractor carries legal consequences, e.g., accusations of conscious involvement in irregularities, and the resulting tax and legal sanctions.
Economic cooperation with Germany
Poland and Germany concluded a Treaty of Good Neighborliness and Friendly Cooperation on June 17, 1991, which entered into force on January 16, 1992. In May 2004, Poland joined the European Union, and Germany was one of its strongest advocates. On December 19, 2004, an agreement between the Republic of Poland and the Federal Republic of Germany on the avoidance of double taxation in the field of income and wealth taxes came into force. Along with Poland’s membership in the EU, all quantitative and tariff restrictions on trade with Germany were lifted, and access to the German labor market was fully liberalized in May 2011. According to information from the Ministry of Development, Labor and Technology from 2020, for 20 years, the Federal Republic of Germany has remained Poland’s top trading partner. These conditions, and above all, the fact that Germany is currently the largest economy in Europe and the fourth-largest in the world, make many Polish companies want to cooperate with German companies. However, Polish entrepreneurs, when embarking on such cooperation, should first conduct economic intelligence, i.e., verify the company and their future contractor from across the western border. Below, we suggest how to check a German company.
Officially, over 870,000 Poles live in the Federal Republic of Germany, although local statisticians estimate that there are over 2 million people with “Polish migration background” in Germany. This is the second-highest number of migrants in Germany, after Turks. In the past year, 2021, the Federal Republic of Germany remained Poland’s largest trading partner, while Poland is Germany’s fifth most important foreign market after China, the Netherlands, the United States, and France. Bilateral trade in goods increased by EUR 23 billion in 2021 compared to 2020 (+18.9%) and amounted to EUR 146.7 billion.
National and EU Sanctions
For over a year now, Polish companies have been more cautious in their dealings with foreign, including German, business partners due to the Russian military aggression in Ukraine. On June 23, 2023, the European Union imposed its 11th package of sanctions on Russia. Poland has also imposed additional sanctions, targeting key individuals in Russia and companies from both Russia and Belarus. Trading goods and services with Russian and Belarusian companies is prohibited. Polish entrepreneurs who violate this face a financial penalty of up to 20 million PLN and even up to 15 years of imprisonment. However, Russian and Belarusian entrepreneurs have learned to circumvent international bans by using complex holding structures established in other countries, where it is difficult to detect the true ownership structure.
Detailed information about the types of economic transaction restrictions imposed by the EU on Belarus and Russia can be found on the European Council’s websites: https://www.consilium.europa.eu/. In the Official Journal of the EU, at this address: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0269-20220721, you will find a list of individuals and entities subject to sanctions. The Polish Ministry of Internal Affairs and Administration also maintains an updated register of entities subject to sanctions, where you can check a contractor, their connections, reasons for inclusion in the register, and the applied sanctions: https://www.gov.pl/web/mswia/lista-osob-i-podmiotow-objetych-sankcjami.
In the first step of verifying a German company, you can check whether it appears in any of the aforementioned registers. Another valuable source of information is Council Regulation (EU) 2022/576 of April 8, 2022, amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilizing the situation in Ukraine.
Economic Intelligence: How to Verify a German Contractor?
You can entrust the verification of a contractor to a professional economic intelligence agency, which specializes in carrying out such tasks. A private detective in Warsaw, Poznan, Wroclaw, or other cities will know how to obtain the necessary information for verifying your current or future contractor.
The most important way to verify a contractor and their potential connections to Belarus or Russia is to determine the ultimate beneficiary and then check whether they are on the sanctions list maintained by the Ministry of Internal Affairs and Administration. You can make these determinations in the Central Register of Ultimate Beneficial Owners maintained by the Minister of Finance: https://crbr.podatki.gov.pl/adcrbr/#/wyszukaj
A readily accessible way to obtain information about a business partner is to search the resources of the Internet. Checking a company, whether it has a website, and what opinions exist about it could lead to publications about it. If we want to be certain and avoid conducting this ourselves, we can entrust the task to a detective agency specializing in professional economic intelligence. There are more sources of information than just the World Wide Web. For example, one could contact the Embassy of the Republic of Poland in Berlin with inquiries about a specific entity. Have complaints from other entrepreneurs reached the embassy regarding this German contractor? Perhaps, according to the diplomatic mission’s knowledge, the German contractor has a poor reputation? Similar information can be obtained from Polish-German chambers of commerce.
Direct Inquiry to the Contractor
In case of difficulties in determining the ownership structure of a business partner using available registers, another method of verification in the context of economic intelligence is to directly ask the contractor for confirmation of who their ultimate beneficiary is. Of course, to authenticate the response, one can request the German entrepreneur to provide documents confirming their declarations.
Polish and EU Registers
The Ministry of Entrepreneurship and Technology, as the minister responsible for the economy, maintains a register of representations of foreign entrepreneurs in the Public Information Bulletin. If we find our contractor’s representation in this register, we can assume that the contractor still exists and conducts business.
Another such register where you can check a contractor is the European Union’s VAT taxpayer register and the EORI register. Companies and individuals wishing to engage in commercial activities within the EU must use the EORI number as their identification number in all customs procedures. The VAT Information Exchange System (VIES), operated by the European Commission, allows you to check if a particular entity is registered as conducting intra-community transactions. This is essential, among other things, to apply a 0% VAT rate to a transaction. If VIES does not confirm the registration of the contractor, you can request verification from the tax authority of the country where the contractor is based. It is also worthwhile to check whether the company has the necessary permits and certificates if they are required in a particular country.
The Register of Insolvent Debtors allows you to check whether a given contractor is on its list. There are also economic information agencies that have detailed information about business activities. BIK, or the Credit Information Bureau, established by the Polish Bank Association, collects data on the credit history of bank customers, credit unions, and even non-bank lending companies.
German Business Registers
The main source of data about foreign entrepreneurs is their national registers, equivalent to Poland’s CEIDG and KRS. The registers of economic activity of individual EU countries are compiled on the “european e-justice” portal. How to check a company in Germany? The Ministry of Justice of North Rhine-Westphalia maintains a commercial register for all federal states of the Federal Republic of Germany, called the Gemeinsames Registerportal der Länder.
Through this portal, you can conduct economic intelligence by gaining access to all local German registers: the commercial register, the register of associations and partnerships, as well as announcements related to these registers. These registers allow you to verify companies operating in Germany (www.handelsregister.de).
What information can be obtained from the register?
The portal allows searching by company name, keywords, registration number, and the main address of the company. There is also an option to include deregistered companies in the search. Results include the company’s name, number, location, and status. Registered documents filed with the registry since January 1, 2007, are available for purchase to those with an approved account at the German registry portal.
Unternehmensregister is another state register of companies. It provides information about insolvency, settlements, financial reports of companies, as well as entries (submitted documents) made to the federal official gazette (www.unternehmensregister.de). Information there is primarily in German (information about capital markets is partially available in English or other languages). Unternehmensregister is linked to Gemeinsames Registerportal der Länder and allows searching for information in both registers.
In the Gemeinsames Registerportal der Länder, when verifying a German company, information can be searched using two functions: “regular search” and “advanced search.” In Unternehmensregister, only one search function is available. It should be noted that most of the information is available in German. Difficulties may arise due to the different characters unique to the German alphabet. In the registry, you can search for registered companies and corporations even if you do not know the specific registration number.
The German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht), known as BaFin, maintains a register that offers a database of notifications about transactions in companies listed on the stock exchange in Germany, securities transactions published no earlier than a year ago, and includes the names of those reporting and publishing companies (https://portal.mvp.bafin.de/database/DealingsInfo).
The German Chamber of Industry and Commerce (IHK) in Berlin provides information about over 96,000 companies. Data can be searched by company name, type, or sector of activity. The database is regularly updated based on information provided by member companies of the chambers of industry and commerce. However, completeness and accuracy of data cannot be guaranteed. Therefore, liability for any damages resulting from using this data is expressly excluded (https://firmen.berlin/sites/fitber/welcome.aspx).
Better to Verify Your Contractor
Before conducting transactions or establishing cooperation with a contractor from Germany, it is better to conduct economic intelligence and thoroughly check them, especially to ensure they are not linked to Belarus or Russia. Violation of the prohibitions imposed on certain types of transactions with these countries and specific individuals and companies may result in a financial penalty of up to PLN 20 million and a prison sentence of 3 to 15 years. In addition, verifying the contractor and exercising due diligence in their selection is a requirement that always applies when conducting business activities, imposed on entrepreneurs as professional market participants.
Do you now know how to check a company from Germany? If not, or if you need more detailed information, we can help. Please feel free to contact us.