The summer of 2024 will mark the starting point of a revolution for VAT payers in Poland. Following global and EU trends, Poland will introduce mandatory structured invoicing for B2B transactions.
From July 2024, all invoices issued under Polish VAT rules will be issued through the Polish tax administration’s system, the KSeF (National e-Invoicing System), and will no longer be issued and sent directly to contractors. The new system will cover all B2B transactions where the seller is established in Poland or has a fixed establishment in Poland. This requirement also applies to invoices issued to foreign entities, but since foreign entities will not have access to the system, sellers will need to provide them with a visualization (with a QR code) of the invoice that is within the system (e.g., in pdf).
The invoice will be issued in a special structured form containing more than 300 elements, which means that it will no longer be possible to issue invoices in paper or electronic form, except in special situations, such as system blackouts.
The new rules will apply without any phased implementation. They will be applicable to all VAT taxpayers with a registered office or fixed establishment in Poland, regardless of whether the seller is a large company or a natural person.
For some categories of VAT-exempt entities and for transactions subject to VAT exemption (e.g., financial services), the use of the system will be postponed until January 2025. Nevertheless, these entities will receive structured invoices from July 2024, regardless of whether they are exempt or not, so in practical terms, those entities will be affected by the system from next summer.
Failure to comply with the obligations may result in sanctions of up to 100% of the amount of VAT shown on the invoice, or 18.7% of the gross amount of the invoice (if no VAT is shown on the invoice). The rules for the implementation of these sanctions will also be postponed until 2025.
All entities affected by these requirements (including purchasers affected by the new rules, such as foreign entities with a fixed establishment in Poland that receive invoices with Polish VAT) will need to make the necessary updates to their ERP systems and change their business procedures in order to be able to issue and receive invoices from Polish entities. Such changes may include assigning different access rights to people who are authorized to enter the system and those who are authorized only to verify invoices.
How Businesses Should Prepare for the Change
First, despite the fact that the regulations will mainly affect companies’ finance and billing systems, the changes will also have a direct impact on their core business. In the worst-case scenario, if the relevant changes are not implemented, business operations will be halted as it will not be possible to issue invoices and thus collect payment from buyers. Therefore, both finance teams and those responsible for the core business itself should be involved in the implementation.
Second, since the use of the new system is only applicable to foreign entities with a fixed establishment in Poland, it is more important than ever that companies are clear as to whether or not they have a fixed establishment. Since the rules regarding fixed establishment are notoriously complex, it may be advisable to seek legal counsel. On the other hand, foreign entities without a fixed establishment should agree with their vendor on how the visualization of the invoice will be sent.
Moreover, as tax authorities will have direct and continuous access to the invoices, they will be able to verify the correctness of the invoices issued without the need for separate tax proceedings.
The new invoicing system triggers some problematic situations that the taxpayer will have to face. For example, one of the biggest concerns being discussed in the market is the documentation of expenses incurred by employees on behalf of the taxpayer. From July 2024, an employee will no longer receive an invoice (on paper or by email) to include in their expense claim. Rather, the vendor will invoice the company via the system. Without additional discussions between the vendor and the buyer about the information presented on the invoice, the buyer will not be able to determine which employee has borne such costs. Such problematic issues can present significant challenges in the practical implementation within organizations. With little time left to implement the relevant changes, it remains to be seen how these challenges will be addressed.
By Cezary Przygodzki, Partner, and Mateusz Machalski, Counsel, Dentons