The Icelandic National Security Council in October 2022 acknowledged that the Russian attack on Ukraine poses the greatest threat to security in Europe since World War II. Icelandic authorities are therefore very strict about complying with EU economic sanctions imposed in connection with the war in Ukraine. Therefore, Polish entrepreneurs must be vigilant when establishing cooperation with counterparts from this Nordic island. How to check a company from Iceland and protect yourself from possible sanctions?
Exercising due diligence in verifying the counterparty
In today’s world, setting up a company is very easy. In many countries, this can be done without even leaving home, via the Internet. Therefore, one can never be sure who is really hiding behind the created name and entry in the register until it is verified. Verification involves actions commonly used in business intelligence, consisting first and foremost of checking the reliability and currency of the counterparty’s documentation, such as 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 activity.
Verification can be done by obtaining information from the appropriate individuals and institutions, such as registry courts, the Social Insurance Institution (ZUS), tax offices, or national and international chambers of commerce. It is worth delving into the history of the business and its owners, including opinions about the company, by searching the Internet, asking other entrepreneurs, counterparts of this entity, as well as the interested party directly. It should be remembered that failure to exercise due diligence in selecting a counterparty carries legal consequences, e.g., being accused of knowingly participating in irregularities, and the resulting further tax and legal sanctions.
Economic cooperation with Iceland
Since May 1, 2004, the framework for economic cooperation with Iceland has been governed by the provisions of the Agreement on the European Economic Area, following Poland’s accession to the European Union. Two years later, Iceland lifted restrictions on the access of Polish citizens to its labor market. Additionally, a bilateral agreement on the avoidance of double taxation and prevention of fiscal evasion regarding income and property taxes from June 19, 1998, is binding. Despite strong cooperation with Continental Europe, membership in the Schengen Area, Iceland has officially abandoned efforts to join the EU.
In 2021, Iceland ranked as Poland’s 76th largest export partner and 59th largest import partner. Poland primarily exports electromechanical products, metallurgical products, mainly iron, steel, and aluminum, agricultural and food products, as well as chemical products, including pharmaceuticals and plastics, to Iceland. Conversely, Iceland exports metallurgical products, including aluminum and aluminum products, as well as fish to Poland. As of the end of 2021, there were 17 entities with Icelandic capital operating in Poland. The Ministry of Development and Technology declares a very good political atmosphere and excellent economic cooperation between Iceland and Poland. This provides the basis for further growth in bilateral trade. In December 2022, Iceland launched its official representation in Warsaw. The Embassy of the Republic of Poland has been operating in Iceland since 2013. Poles constitute the largest group of immigrants there, numbering over 20,000.
National and EU Sanctions
In connection with the violation of Ukraine’s territorial integrity, the European Union imposed 11 sets of sanctions on Russia by June 23, 2023. Poland also imposes additional sanctions. These sanctions target key individuals in Russia, as well as companies from both Russia and Belarus. Trading goods and services with Russian and Belarusian companies is prohibited. Polish entrepreneurs face financial penalties of up to PLN 20 million and up to 15 years of imprisonment for violating these sanctions. However, Russian and Belarusian entrepreneurs have learned to circumvent international bans by utilizing complex holding structures established in other countries, where the true ownership structure is difficult to detect.
As reported by the Polish Institute of International Affairs, in the face of Russia’s advanced war against Ukraine, Iceland closely cooperates with the EU and its allies in implementing all sanctions imposed on Russia. Detailed information about the types of transactions covered by the EU ban with Belarus and Russia can be found on the European Council’s websites: https://www.consilium.europa.eu/. In the Official Journal of the European Union at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0269-20220721, there is a list of individuals and entities subject to sanctions. The Polish Ministry of Internal Affairs and Administration also maintains an up-to-date register of entities subject to sanctions, where one can check the counterparty, its connections, reasons for inclusion in the register, and the applied sanctions: https://www.gov.pl/web/mswia/lista-osob-i-podmiotow-objetych-sankcjami.
Therefore, the first step in verifying a company from Iceland can be to check if it appears in any of the aforementioned registers. Another source of useful information is Council Regulation (EU) 2022/576 of April 8, 2022, amending Regulation (EU) No 833/2014 concerning restrictive measures in relation to Russia’s destabilizing actions in Ukraine.
On August 3, 2023, the European Union expanded the scope of sanctions imposed on Belarus to combat circumvention of regulations. The new measures amend Regulation (EC) 765/2006 concerning restrictive measures in relation to the situation in Belarus. The changes ensure closer alignment of EU sanctions targeting Russia and Belarus and help ensure that Russian sanctions cannot be circumvented by Belarus. These measures expand the export ban to Belarus on a range of highly sensitive goods and technologies contributing to Belarus’s military and technological strengthening. The Council also imposes an additional export ban on firearms and ammunition, as well as goods and technologies suitable for use in aviation and aerospace industries. The changes also align sanctions against Belarus with the system of sanctions against Russia. These restrictive measures were introduced in an accelerated manner due to the urgent nature associated with combating the circumvention of regulations concerning certain highly sensitive goods and technologies.
Economic Intelligence: How to Verify a Business Partner from Iceland
Verification of a business partner can be entrusted to a professional economic intelligence agency, which specializes in carrying out such orders on a daily basis. A private investigator in Warsaw, Poznań, Wrocław, or other cities will know how to obtain the necessary verifying information about the current or future business partner.
The most important way to verify a business partner and their potential connections with Belarus or Russia is to determine the entity that is the real beneficiary, and then check if it is listed on the aforementioned sanctions list maintained by the Ministry of Internal Affairs. This can be done in the Central Register of Ultimate Beneficial Owners maintained by the Ministry of Finance: https://crbr.podatki.gov.pl/adcrbr/#/wyszukaj
Environmental intelligence
A readily available method of obtaining information about a business partner is to search the resources of the Internet. Verify the company, check if it has a website, what opinions exist about it, perhaps you will come across some publication about it. If you don’t want to do this yourself for certainty, you can entrust the research to a detective agency specializing in professional economic intelligence. Because there are many more sources of information than just the World Wide Web. For example, you can contact the Embassy of the Republic of Poland in Reykjavík with a specific query about a particular entity, whether there have been complaints from other entrepreneurs, or perhaps, according to the knowledge of the diplomatic mission, the Icelandic counterpart has a bad reputation? Similar information can be provided by the Polish-Icelandic Chamber of Commerce.
Direct inquiry to the business partner
In case there are difficulties in determining the ownership structure of a business partner using available registers, another method of verification within economic intelligence activities is to directly ask them to confirm who their ultimate beneficiary is. Of course, to authenticate the response, you can ask the Icelandic entrepreneur to provide documents confirming their declarations.
Polish and EU Registers
The Bulletin of Public Information by the Ministry of Entrepreneurship and Technology, as the minister responsible for the economy, maintains a register of representations of foreign entrepreneurs. If we find our counterparty’s representation in this register, we can assume that they still exist and are conducting business.
Another such register where one can verify a counterparty is the European Union’s VAT taxpayer register and the EORI register. Companies and individuals wishing to conduct commercial activities within the Union must use an EORI number as an identification number in all customs procedures. The VAT Information Exchange System (VIES), a search engine operated by the European Commission, allows checking 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 counterparty’s registration, one can request verification from the tax office of the country where the counterparty is based. It is also worthwhile to check if the company has the necessary permits and certificates if they are required in a particular country. The EU Business Register (http://www.eubusinessregister.org/) enables searching for companies worldwide.
The Register of Insolvent Debtors allows checking if a particular counterparty is not listed. There are also economic information bureaus that have detailed information about companies’ activities. BIK, the Credit Information Bureau, established by the Polish Bank Association, collects data on the credit history of bank customers, credit unions, and also non-bank lending companies.
Icelandic Business Registers
The official Icelandic business register is maintained by the Directorate of Internal Revenue “Skatturin.” It provides information about: individuals, companies, and other entities conducting business activities, state institutions and companies, municipal institutions and companies, associations, organizations, and entities other than individuals responsible for managing assets or having any tax obligations, as well as other types of activities that the Tax Office/Business Register deems justified to register in official records. The business register provides information partly for a fee and partly free of charge in accordance with Icelandic regulations on the scope of information and fees for providing it. Information such as name, address, legal form, ISAT status code, VAT number, and sometimes beneficial owners, is publicly available on the Tax Office/Business Register website free of charge. Access to other information is subject to a fee. The Directorate of Internal Revenue’s website allows users to search for free information. The service is available in Icelandic and English. https://www.skatturinn.is/fyrirtaekjaskra
The Central Bank of Iceland has on its website (Fjármálaeftirlit – financial supervision) an overview of supervised entities, which includes companies and their addresses, as well as reports on their own and others’ financial activities, such as foreign assets of the Central Bank. The service is available in Icelandic and English. https://www.fme.is/
The commercial database SystemDay allows searching for companies, with the latest information from the company register, including the company’s legal status, registration data, directors’ and shareholders’ details, and current registered address. It offers detailed reports on companies registered in Iceland. The service is available in English. https://www.systemday.com/iceland-company-search/
It is worth thoroughly checking the counterparty
It is worth thoroughly checking the counterparty before entering into a transaction or establishing cooperation with a company from Iceland, especially to ensure they are not affiliated with Belarus or Russia. Violating the bans imposed on certain types of trade with these countries and specific individuals and companies can result in a financial penalty of up to PLN 20 million and imprisonment ranging from 3 to 15 years. Additionally, verifying the counterparty and exercising due diligence in its selection are requirements that always apply when conducting business activities, incumbent upon entrepreneurs as professional market participants.
Do you already know how to verify a company from Iceland? If not, or if you need to find more detailed information, we can assist you. Feel free to contact us.
