Changes in Law in Order to Combat Excessive Payment Delays

On January 1^st, 2020, except for Article 11 which came into force on December 31^st, 2019, the Act of July 19^th, 2019, on Change of Some Acts to Combat Excessive Payment Delays (“Act”) came into force. The Act amended many acts, in particular:

1. Act of March 8^th, 2013, on Payments Terms in Commercial Transactions [since 1.01.2020 under changed name – “Act on Combating Excessive Delays in Commercial Transactions” (Act CED)];
2. Act of February 15^th, 1992, on Corporate Income Tax (Act on CIT);
3. Act of July 26^th, 1991, on Personal Income Tax (Act on PIT);
4. Act of April 16^th, 1993, on Suppression of Unfair Competition Act (SUCA).

The main goal of the amendment is to strengthen position of creditors, especially entities fromthe sector of micro, small and medium entrepreneurs.

The most important (but not all) changes introduced by the Act:

1. The Act on Payments Terms in Commercial Transactions has new name – “Act on Combating Excessive Delays in Commercial Transactions.
2. Payment term determined in an agreement is dependent on the status of entrepreneur being creditor and debtor.
3. If the debtor is a public entity, the maximal payment term is 30 days, and if the debtor is a public healthcare entity – 60 days
4. In other cases the term is also 60 day with the possibility to extend if it is not grossly unfair.
5. There is no possibility to extend the term if the creditor is micro, small or medium entrepreneur and the debtor is large entrepreneur.
6. A debtor being a large entrepreneur makes to the other party of the transaction a statement on having the status of large entrepreneur. The statement should be made in the same form as the form of the transaction, no later than in the moment of making the transaction.
7. Pursuant to the Appendix I to Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, micro, small and medium entrepreneurs are the entrepreneurs who employ not fewer than 250 employees and whose annual turnover does not exceed 50 million EUR or the annual balances sheet total does not exceed 43 million EUR. Other entrepreneurs are large entrepreneurs. Attention: There are detailed regulations on determining the status of entrepreneurs having a partnership enterprise or affiliated enterprises.
8. If the payment term was determined not consistently with the Act, the creditor who performed his obligation, after 60 days from delivery to the debtor an invoice confirming the delivery of good or performance of service, is entitled to statutory interest for delay in commercial transactions and compensation for costs of debt enforcement in the amount dependent on the value of the delayed payment.
9. The Act introduced additional information obligations: entities being tax capital group irrespective of the revenues, and companies whose revenues exceeded 50 million EUR (converted into PLN on the basis of the average EUR exchange rate announced by the National Bank of Poland) in the fiscal year, are obliged until 31^st January of each year to notify the Minister of Economy applied payment terms in the previous year. For not fulfilling the above obligation a fine may be imposed.
10. According to the Act, excessive delays in debts payments is prohibited. Everyone can report to the President of the Office of Competition and Consumer Protection a suspicion of the excessive delay. The President of the Office may, in a decision, impose an administrative financial penalty on the controlled entity.
11. The regulation on the basis of which the tax base may be decreased by receivable’s value charged into revenues, which was not payed or transferred within 90 days after the laps of the payment term determined in the invoice or agreement. Analogically, the tax base may be increase in case of debt which was not payed.
12. The provision was introduced, according to which not justified extension of payment terms constitutes an unfair competition act connected with the liability on the basis of SUCA.

To summarize:

• in general, an entrepreneur should make payment in commercial transactions no later than 30 days after receiving goof or service and the invoice – later payment is connected with the risk of the obligation to pay interest from the capital (irrespective of the term agreed in the agreement), and exceeding 60-day terms – the obligation of paying statutory interest in commercial transactions,
• an entrepreneur being large entrepreneur (every company should determine its status), is obliged inform his contractor about that by making the relevant statement,
• the board of a company being a tax capital group irrespective of the revenues, and companies whose revenues exceeded 50 million EUR, is obliged, until 31^st January of each year, to file electronically to the Minister of Economy a report about payment terms applied in the previous year,
• an entrepreneur may decrease tax base and loss by the value of receivables which was not paid or transferred (or is obliged to increase them by debts which was not paid).