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On March 1st, 2024, consultations on the National e-Invoice System (KSeF) conducted by the Ministry of Finance (MF) reached their end.. During the consultations, entrepreneurs, accountants, tax advisors and the IT industry raised many demands and problems related to KSeF.

The most important topics included:

  • Introducing the possibility of voluntarily issuing invoices in KSeF also for consumers (B2C).
  • Concerns related to the obligation to provide the KSeF invoice number or collective payment identifier (ID) when paying for invoices issued in KSeF - in the case of foreign entrepreneurs and when using other payment instruments.
  • The concept of introducing the initial phase of KSeF offline - this would involve issuing an offline invoice and sending it to KSeF at a later date (e.g. after a few days). Representatives of the Ministry of Finance confirmed that this solution is worth considering. It could reduce the load on the system and allow for its appropriate adjustment and correction of any errors during its operation.
  • The need to issue binding legal explanations in connection with the introduction of the KSeF. The Ministry of Finance announced the issuance of clarifications regarding the fixed establishment (FE). According to the regulations, entities only registered for VAT in Poland, but not having a fixed or permanent establishment in Poland, do not have to join KSeF. In practice, however, doubts arise as to how the definition of FE should be understood.
  • The question is whether there will be any changes in the KSeF invoice scheme. Despite signals from the Ministry of Finance that it does not intend to change it, this matter is not entirely settled.
  • There were also demands regarding the date of introducing mandatory KSeF. The dates proposed by the consultation’s participants were between June and September 2025.

As announced, the Ministry of Finance is to announce a new date for the entry of KSeF into force at the turn of April and May 2024, after analysing the results of the audit and consultations.  In the period between June-July 2024, draft changes to the regulations are to be introduced.

We would like to emphasize that the implementation of the system and its elements is very time-consuming.  Therefore, we encourage you not to postpone any related work  for the next months and continue adapting your organization to KSeF requirements.

Due diligence in VAT – what do auditors ask about?

VAT due diligence may be defined as a series of actions a taxpayer should take, which will then be evaluated by tax authorities in the context of VAT settlements related to conducted business activity. Maintaining due diligence in transactions with contractors is crucial for the correct calculation of the goods and services tax, enabling the assessment of the taxpayer's right to deduct input tax.

Due to regulations not providing a clear definition of "due diligence,” the Polish Ministry of Finance, on April 25th, 2018, published a document entitled "Methodology for assessing the due diligence behavior of purchasers of goods in domestic transactions" (hereinafter: Methodology), which is a collection of guidelines for tax authorities. It is significant that this document was directed to those authorities, but at the same time, it was made publicly available to taxpayers to assist them in formulating principles for assessing their contractors and counterparties.

Although due diligence in VAT has no regulatory definition, tax authorities require it for retaining the right to deduct VAT.

IMPORTANT

Why VAT due diligence?

According to findings of the Methodology, revoking input tax deduction rights is justified whenever a taxpayer commits fraud or the abuse of tax. However, the right of deduction may also be denied where the taxpayer was aware or could have guessed that their transactions involved VAT fraud.

An important issue is to assess whether the taxpayer exercised due diligence when concluding the transaction, considering objective circumstances indicating a violation of tax law or attempted fraud.

How to exercise due diligence in VAT?

The Methodology indicates three options for exercising due diligence:

  • Carry out the activities recommended in the Methodology.
  • Undertake other activities which, although not mentioned in the Methodology, indicate compliance with due diligence.
  • Use the split payment mechanism when paying the supplier, which provides the broadest protection against the risk of tax fraud – yet does not guarantee 100% security.

As stated by the Ministry of Finance, the scope of verification of a conducted transaction depends on its size, value, and the type of contractor (whether it is a new or existing business partner). According to the Methodology, initiating a transaction with a counterparty means entering into a commercial agreement with an entity with whom the taxpayer has not previously cooperated, or continuing cooperation with a specific counterparty but in a new scope of activity. The Methodology assumes that when verifying a "new counterparty," two types of criteria should be considered: formal ones, such as negative verification of the counterparty's VAT payer status or lack of registration in appropriate registers, and transactional ones, for example, significant differences in delivery terms compared to market norms.

The Methodology also indicates that transactions concluded with a regular contractor should be verified, although with a lower risk of tax fraud. However, tax authorities should consider formal criteria, such as regular verification of the VAT taxpayer status or possession of the necessary licenses, and transaction criteria, such as significant price differences without economic justification.

The Methodology guidelines indicate that the existence of circumstances crucial in assessing due diligence do not always mean that the taxpayer did not exercise due diligence properly. For this reason, tax authorities may also take into account other transactional circumstances that they consider relevant in a given case.

How to answer the auditor's question on due diligence?

To affirmatively answer the auditors' questions on whether we are performing due diligence for VAT, we must be familiar with the due diligence methodology or, with the help of experienced specialists, conduct a "VAT audit" - i.e. assess the situation of the entity in terms of, among other things, VAT due diligence. However, commissioning an accounting office to provide VAT services is not apt in claiming the fulfilment of due diligence. Due diligence requires the possession and critical assessment of information about contractors that emerge during cooperation and can only be possessed by the taxpayer.

Auditors' inquiries about due diligence serve as a "last call" for companies that have not yet addressed this issue to catch up on any overdue matters. With the introduction of the National System of Invoices, if a counterparty is identified as improperly settling VAT, tax authorities will immediately have a list of purchasers of their goods/services deducting VAT as a result—in real time. It will be easy for authorities to act against us; hence, it is essential to ensure that instead of open doors to enforcement decisions, they encounter the barrier of "due diligence."

In an announcement on March 12, 2024, the Ministry of Finance stated that the reduced VAT rate for basic food products will not be prolonged past March 31, 2024. The Ministry of Finance's decision was based on recent inflation readings and the foreseen price dynamics of basic food products covered by the temporary 0% VAT rate.

As a reminder:

The reduced VAT rate on basic food products was in effect since February 1, 2022. It was introduced after an inflation reading for January 2022 of 9.2% (Y2Y).

At the end of 2023, the Minister of Finance issued a decree prolonging until March 31, 2024, the 0% VAT rate for food goods listed in items 1-18 of Appendix 10 to the VAT Act, other than those classified according to the Polish Classification of Goods and Services in the grouping of food services (PKWiU 56).

Download PDF file here.

At the beginning of this year, the MF announced that mandatory KSeF will not take effect on June 1st, 2024, as initially panned. This decision was reached due to numerous inaccuracies regarding the process, along with errors and IT problems that precluded the timely launch of the system.

At the beginning of February, the MF announced tax consultations which would answer the questions and concerns of entrepreneurs. The Ministry accentuated that the meetings were held to improve the current functionality of the system and reduce the costs of implementing and using KSeF.

Tax consultations - consumer invoices

During the consultations, the business community, accountants, tax advisors and the IT industry all voiced numerous demands related to KSeF. This included introducing the possibility of voluntary invoicing in KSeF for consumers. This is due to the difficulty for businesses to distinguish whether their buyer is a taxable person or a consumer, hence, in issuing the apt invoice.

In the current version of the KSeF assumptions, transactions with individuals who do not conduct business will be excluded from mandatory KSeF.

Important

However, current draft legislation does not provide answers how sellers are to distinguish between these two entities, shifting the associated risk onto entrepreneurs. At this point it should be emphasized that a failure to issue an invoice in KSeF despite such an obligation will be sanctioned.

Invoice number or payment ID

Another problem that needs to be clarified is the obligation to indicate the KSeF invoice number or the collective payment identifier (ID) when paying for invoices issued in KSeF. It is not entirely clear whether this obligation also applies to foreign entrepreneurs and how, for example, to provide such a collective ID in the situation of other payment instruments, where, for example, it is the seller who debits the buyer's account in the so-called direct debit, while the payment ID can be generated by the buyer.

KSeF in an offline version?

During the consultation process, several suggestions were made to improve the implementation of KSeF. One suggestion which received a lot of attention was the idea of an initial phase of implementing KSeF offline. The MF announced that it would be reviewing this idea. The concept would be to issue offline invoices and send them to KSeF later (a few days). MF representatives considered this a very interesting proposal, which could reduce the load on the system and allow it to be adjusted accordingly and correct any errors while it is up and running.

Other requests

Participants attending the consultations also raised the need to issue binding legal clarifications in connection with the introduction of the KSeF. The MF announced the issuance of clarifications regarding fixed establishment (FE).

According to the legislation, entities registered for VAT in Poland without an FE, do not have to join KSeF. In practice, however, doubts arise as to how the definition of an FE should be understood.

It is difficult to predict at this point whether there will be any changes to the scheme itself, despite signals from the MF that it does not intend to make changes to the scheme.

New date

The MF is expected to give a new effective date for introducing KSeF in late April/early May, after analyzing the results of the KSeF audit. For the time being, the new date is unknown. It is also unclear whether KSeF will be implemented in stages. An overwhelming number of communities affected by KSeF are calling for simultaneous implementation of KSeF for everyone, on a single date. This is related, among other things, to the problem of establishing the criteria by which the stages would be divided, in the context of ease of identification by invoice issuers. Various proposals were made, including the size of the entity, the amount on the invoice, etc.

During the consultations, there were also calls for not implementing changes on January 1st, 2025, due to the accumulation of various year-end obligations. The dates proposed by stakeholders were spread between June and September 2025, but it is unclear whether these demands will be considered. Instead, draft amendments to the legislation are expected to be ready by June-July. Should you have any questions about the National e-Invoicing System and its impact on your business -

The Court of Justice of the European Union (CJEU), in judgment C-442/22 from January 30, 2024, ruled that an employee of a VAT taxpayer who issues a false invoice indicating VAT by using the identity of their employer as the taxpayer without their knowledge and consent, should be considered as the person indicating VAT within the meaning of Article 203, unless the taxpayer did not exercise due diligence reasonably required to control the actions of their employee.

Until now, Polish administrative courts have expressed that the employer is almost absolutely liable for false invoices, including those issued by dishonest employees.

The Company’s Case

The case concerned a company that was a VAT payer and conducted, among other things, the retail sale of fuel at a gas station. As a result of the inspection, tax authorities discovered that for several years the company had been issuing invoices to entities other than those which actually conducted the transactions, and which illegally deducted the VAT indicated on those invoices.

In relation to the dishonest employee who was behind the entire scheme, a tax-criminal proceeding was initiated. The tax authority instructed the company (as the employer) to settle the tax resulting from the invoices, stating that the company is responsible for the actions of its employees. The first-instance court upheld the tax authority's decision, while the Supreme Administrative Court expressed doubts and submitted a question to the CJEU.

Court of Justice of the European Union’s judgement

According to the CJEU, the taxpayer's liability for invoices issued using their data and instruments is not in line with the intention of the EU legislature. However, to exempt the taxpayer from liability, it is necessary to have good faith and to exercise the due diligence required to control the actions of subordinates.

According to the judgment, the significance for taxpayers lies in the proper organization, implementation, and application of appropriate internal procedures within their businesses, ensuring the adequate division of delegated responsibilities and supervision over employees authorized to issue invoices on behalf of the employer.

KR Group offers comprehensive support by preparing appropriate regulations and mechanisms to ensure that taxpayers maintain due diligence in VAT during their daily business operations.

A revolution?

Implementing JPK_CIT is expected to be a revolution tantamount to the introduction of the JPK (Jednolity Plik Kontrolny) system, but in the context of Corporate Income Tax. This will empower authorities to systematically detect inconsistencies in taxpayers' settlements, enabling more precise elimination of expenses which do not constitute deductible costs, or identifying revenues unrecognized for tax purposes.

According to Article 9(1c) of the CIT Act, which is to enter force on January 1, 2025, taxpayers maintaining accounting books will be required to submit them to their tax office after the end of the tax year, within the deadline for filing the CIT-8 or CIT-8E declaration (usually by the end of the third month following the end of the tax year). In other words, the first JPK_CIT will be submitted in 2026.

JPK_CIT regulations

Provisions concerning JPK_CIT have been modified in recent years. At first, this obligation was to enter force as early as 2023 and consist of monthly or quarterly submission of JPK_CIT to the tax authorities. Initially, the regulations were to apply immediately to most corporate income taxpayers - with the exception, for example, of entities subjectively exempted from CIT based on Article 6(1) of the CIT Act. The scope of data due for reporting was made more specific by the Minister of Finance by the Ordinance of November 29, 2023, on additional data supplementing the accounting books to be submitted under the CIT Act.

JPK_CIT

The new obligations concerning the introduction of JPK_CIT will be implemented according to a specific schedule for tax years starting after:

  • December 31, 2024 - for large CIT taxpayers (revenues exceeding 50 million EUR) and tax capital groups.
  • December 31, 2025 - for other CIT and PIT taxpayers required to submit JPK_VAT.
  • December 31, 2026, for all other groups.

The draft regulation defines the scope of additional data which must supplement the JPK_CIT. According to the document published by the Minister of Finance, the transferred data will have to be supplemented with:

1. identification data of the taxpayer's counterparty and its Tax Identification Number (NIP) (if granted) and:

  • First Name and Surname (when the counterparty is a natural person, not conducting business).
  • First name and Surname, as well as an additional designation which the entrepreneur includes in the company (when the counterparty is a natural person, running a business) or the full name of the counterparty (in other cases).

2. in the case of invoices serving as accounting evidence – the identification number of the invoice in the National e-Invoicing System (if assigned)

3. tags identifying account numbers, listed according to the dictionary of tags identifying account numbers for:5

  • banks – specified in attachment 1 to the regulation.
  • insurance companies and reinsurance companies – specified in attachment 2 to the regulation.
  • entities referred to in Article 3(2) of the Act of April 24, 2003, on public benefit activities and volunteering (Journal of Laws of 2023, item 571), preparing financial statements in accordance with attachment 6 to the Act of September 29, 1994, on accounting (Journal of Laws of 2023, items 120, 295, and 1598) – specified in attachment 3 to the regulation.
  • investment funds – specified in attachment 4 to the regulation.
  • brokerage houses – specified in attachment 5 to the regulation.
  • cooperative savings and credit unions – specified in attachment 6 to the regulation.
  • other entities – specified in attachment 7 to the regulation.

4. data confirming the acquisition, creation, or deletion of the fixed or intangible asset from the register:

  • for invoices constituting accounting evidence, the number identifying the invoice in KSeF (if assigned).
  • information on the type of proof of purchase, creation or deletion from the records.
  • the taxpayer's counterparty identification number.

5. amount, type and sort of difference between the balance sheet result and the tax result.

6. the amount and type of taxable income in respect of taxpayers taxed on company income on a flat rate basis.

KSeF and JPK_CIT

The draft regulation also pertains to the National e-Invoicing System. It will require indicating the invoice identification number in KSeF (for invoices serving as accounting evidence). According to the Ministry of Finance's draft regulation, JPK_KR will also be required to include differences in revenues and costs for balance sheet purposes compared to revenues and costs for tax purposes, as well as the basis for income tax assessment in the case of opting for the flat-rate tax on company income (so-called Estonian CIT) by taxpayers.

Tax consultations

Until January 12, 2024, the Ministry of Finance held a tax consultation on the new logical structure of JPK_CIT. The consultation raised concerns about the difficulty for taxpayers to adapt to JPK_CIT due to the parallel implementation of KSeF. The consultees also reported an overly detailed scope of the information to be reported, requiring a major overhaul of IT solutions companies already have in place.

The new reporting requirements for the initial taxpayers are expected to come into effect as early as 2025. It is advisable to start preparing for the planned changes as soon as possible.

In January 2024, another favorable individual interpretation of tax regulations (ref. 0114-KDIP2-1.4010.609.2023.3.KW) was issued, in which the Director of the National Fiscal Information confirmed that the expenses incurred by the applicant company for training its employees who independently conduct business activities and provide services to the company on a business-to-business basis meet the statutory conditions for recognition as tax-deductible costs for this company.

Latest favorable individual interpretation of tax regulations

The expenses of the company operating in the IT and marketing industry concerned training related to the scope of services provided to the company as well as training the subject of which may affect the overall development of the desired competences of a given colleague necessary in cooperation with the company, e.g. in the field of communication, negotiations financed from funds the company's current assets.

The issue of training for colleagues providing services to a given Company on a B2B basis, as our practice shows, affects CIT companies from a wide range of industries and sizes.

Important

This is another recently issued favorable individual interpretation by the Director of the National Fiscal Information on this matter, including, among others: on August 18, 2023, under reference number 0111-KDIB1-1.4010.294.2023.3.KM, on September 11, 2023, under reference number 0111-KDIB1-3.4010.346.2023.2.JG, on October 6, 2023, under reference number 0114-KDIP2-2.4010.401.2023.2.ASK, on October 10, 2023, under reference number 0111-KDIB1-1.4010.396.2023.2.KM, on October 10, 2023, under reference number 0111-KDIB1-2.4010.362.2023.2.END, and on November 6, 2023, under reference number 0114-KDIP2-2.4010.468.2023.3.RK.

It is worth taking advantage of a tax interpretation in this respect

We suggest, in connection with the above favorable tax interpretations, that it is worth considering taking advantage of the possibility to request an individual interpretation of the tax legislation in this respect and to benefit from its protective function.

Should you have any further questions, please contact our tax advisors who can help you prepare and submit your tax interpretations.

Judgment of the Provincial Administrative Court in Warsaw

The dispute follows a request for individual interpretation by an entity in the construction industry. The company, for the purpose of its business activities, purchased several properties, signed a contract with a notary, paid the amount due, but did not receive an invoice from the seller. Given the above, the Company raised doubts as to whether, due to the lack of an invoice, it could deduct the VAT paid.

In the request for interpretation, the Company indicated that the lack of a traditional invoice does not deprive it of the right to deduct VAT, because in this context it is sufficient to have a sales contract. It contains all the elements that are important for a classic invoice and are specified in the VAT Act. According to the Company, in the current situation, depriving the Company of the right to deduct tax would violate the principle of VAT neutrality.

The tax authority deemed the Company's position presented in the application for interpretation as incorrect. The tax office pointed out that sales agreements cannot be treated as VAT invoices, making it impossible to consider them as documents entitling VAT deduction.

In response to the issued individual interpretation, the Company filed a complaint with the Provincial Administrative Court in Warsaw. The court disagreed with the tax authority's stance and revoked the interpretation. As of today, the written justification for the judgment has not been published. However, orally explaining the reasons for the decision, the Provincial Administrative Court in Warsaw indicated that there are no obstacles for the Company to deduct VAT based on the sales agreement executed before a notary public.

The CJEU ruling turned out to be crucial

According to the court, it does not follow from Article 106e(1) of the VAT Act that the document giving rise to the tax deduction must be titled as an invoice within the meaning of the VAT Act, since what is important is its content. The Provincial Administrative Court in Warsaw cited the theses of the CJEU judgment of September 22, 2022, C-235/21, cited by the Company in its complaint, according to which, for a contract to be considered an invoice, the will of the parties to the contract to become an invoice is irrelevant.

According to the CJEU, for a document to be recognized as an invoice within the meaning of Article 203 of Directive 2006/112, it must meet two conditions:

  • It must indicate VAT
  • It must contain the information listed in Section 4 of Chapter 3 covered by Title XI of Directive 2006/112 ("Data to be included on invoices"), which is essential for the tax authority to determine whether the substantive conditions for the right to deduct VAT have been fulfilled

The judgment of the Provincial Administrative Court in Warsaw may certainly please entrepreneurs, but in our opinion it is too early to say that it will cause the tax authorities to change their pro-fiscal position in the near future.

Taxpayers face the challenge of implementing KSeF and, most importantly, selecting IT tools that will effectively issue e-invoices and integrate with the system provided by the Ministry of Finance.

The introduction of the mandatory National e-Invoice System may bring both short- and long-term benefits (e.g., streamlining the invoice archiving process). Undoubtedly, implementing KSeF may pose a threat to taxpayers, especially for companies that rely on simplifications in VAT settlements. Therefore, it is worth looking at the National e-Invoice System from the perspective of correct invoice circulation within a company, as well as VAT settlement, and changes that need to be implemented within the organization to avoid potential disputes with tax authorities.

Goals of introducing KSeF

The primary goal of introducing the National e-Invoice System is to create an "invoice database" to which tax authorities will have access.

According to the justification for the amendment to the VAT Act and the derogation decision of the Council of the EU, the goal is to "better combat VAT fraud and evasion" and increase the automation of tax administration activities by enabling automatic verification of consistency between declared and paid VAT.

This system won’t be the only control tool at the disposal of the tax authorities, as they already have JPK, the White List of Taxpayers, VIES and STIR. However, it should be noted that the introduction of KSeF will allow tax authorities to access (and thus control) invoices in real time. Tax authorities will have the ability to automatically control the data contained in the JPK, without having to contact the taxpayer.

What possibilities does KSeF give tax authorities?

The introduction of a mandatory KSeF will allow tax authorities to identify suspicious transactions more easily (e.g.: VAT carousel).

Important: Contrary to the announcements of the Ministry of Finance, this will also impact the situation of fair taxpayers.

Access to e-invoices will grant tax authorities the ability to carry out verification and inspection activities without notifying the taxpayer of the initiation of such measures. Additionally, tax authorities will have access to e-invoices during customs and tax audits. This significantly limits the taxpayer's ability to influence the proceedings (as well as the opportunity for self-control through the submission of corrections to incorrect JPK).

At the same time, tax authorities will have the ability to define the goals of potential tax and customs audits more precisely (which, one may fear, will not be limited to VAT alone but will also encompass CIT and TP).

It can be assumed that the introduction of obligatory KSeF will significantly change the frequency and nature of tax inspection activities and audits conducted by tax authorities (as was the case with the introduction of JPK). Nevertheless, we will only have the opportunity to see what such verification activities will look like in the new "post-KSEF reality" (the introduction of JPK had a significant impact on the quantity and quality of VAT verification activities).

How should taxpayers prepare for the implementation of the KSeF?

The implementation of the National e-Invoice System within an organization should be preceded by a detailed analysis of potential tax risk areas and the simplifications used in VAT settlements (e.g., verification principles of contractors, applied exchange rate calculation methods, issuance of corrective invoices, settlements with foreign taxpayers, including the inclusion of transactions for VAT purposes in the WDT scheme).

After conducting a thorough analysis, changes should be introduced, and the adopted principles should be adjusted to the applicable regulations and the tax authorities' interpretative guidelines.

What changes should taxpayers implement?

Considering the aforementioned changes, taxpayers should make adjustments to the procedure of issuing and accepting e-invoices and focus on implementing procedures that enable effective invoicing and VAT reconciliation.

Issues to be addressed:

  • Introduction of procedures for issuing e-invoices and their acceptance
  • Implementation of rules for internal control of invoices issued and received by the taxpayer (above all, ensuring effective flow of information between different departments in the organization e.g.: sales department or purchasing department)
  • Verification of accounting and IT systems for the possibility of accounting for VAT in accordance with applicable regulations (e.g.: regarding advance invoices, correction invoices)
  • Verification of the taxpayer's existing procedures for the circulation of documents (e.g.: concluded contracts, proofs of service performance)
  • Implementation of procedures for the responsibility of individuals in the organization
  • Conducting training for employees

…what's next?

Taxpayers have just over 6 months left to introduce the mandatory KSeF. It is worth using this moment to introduce new procedures and rules for VAT settlement, which will enable correct VAT settlement.

The purpose of the regulation amendment

The draft regulation by the Minister of Finance aims to extend until the end of 2024 exemptions from the obligation to apply the pay & refund mechanism in withholding tax concerning payments made through so-called technical payers for the payment of receivables from securities recorded in securities accounts or collective accounts exceeding the amount of PLN 2 000 000.

The new regulations are set to enter into force on January 1, 2024 and will extend the suspension of the aforementioned regulations by the end of 2024.

The technical payer

Technical payers are entities that maintain securities accounts or omnibus accounts. The obligation to apply the MPR through a technical payer was first exempted by regulation which took effect on July 1, 2022. The exemption was subsequently extended by a decree on December 28, 2022, with effect until December 31, 2023.

The Ministry of Finance indicates that the renewed extension of the exemption in question is related to the difficulties of payers in determining whether there are connections between entities and whether the receivables acquired by the taxpayer exceeded the threshold of PLN 2 000 000.

During the suspension period, statutory changes were and are to be prepared to define the tax collection, which would be adapted to the actual knowledge of the participants in this process and their ability to determine the conditions for the connection and the amount of the receivable.

Additional changes

The entry into force of the regulation also results in the suspension of informational obligations for entities making payments through securities accounts or collective accounts. These obligations involve providing information to entities managing securities accounts or collective accounts about exceeding the amount of PLN 2 000 000  and information about the existence of at least a 7-day relationship between them and the taxpayer prior to making the payment.

Due to the actual impossibility of applying the provisions regarding the use of the pay & refund mechanism in relation to technical payers, further suspension of the application of regulations should be considered beneficial.

With the introduction of electronic invoicing in Romania on January 1, 2024, we would like to present a few tips to help you get started in using the new RO e-Factura system.

How to register and use RO e-Factura?

To be able to use the e-invoice system, a taxpayer must:

  • Have an SPV account (Virtual Private Space) for the company in ANAF.
  • Register in the RO e-Factura (Romanian e-Invoice) system by completing and submitting form 084 to ANAF.
  • Use an invoicing software integrated with the RO e-Factura system.

Thus, taxpayers will be obliged to request registration in the RO e-Factura system and the registration will be approved starting with the first day of the month following the filing of form 084 to ANAF.

How to access the taxpayer account on SPV (Virtual Private Space)?

To be able to use the e-invoice system, a taxpayer must:

  • Have an SPV account (Virtual Private Space) for the company in ANAF.Register in the RO e-Factura (Romanian e-Invoice) system by completing and submitting form 084 to ANAF.
  • Use an invoicing software integrated with the RO e-Factura system.

Thus, taxpayers will be obliged to request registration in the RO e-Factura system and the registration will be approved starting with the first day of the month following the filing of form 084 to ANAF.

How to access the taxpayer account on SPV (Virtual Private Space)?

To access the SPV account, it is necessary to obtain a qualified digital certificate issued by a certified Romanian provider.

There are two methods to access to the SPV account (Virtual Private Space) by using your qualified digital certificate:

  1. A USB drive with the qualified digital certificate must be inserted in the computer when the taxpayer wants to send the issued invoices.
  2. Through a special protocol (OAUTH2) that allows several people to send invoices, without having the USB drive with the qualified digital certificate inserted in the computer.

Is there any deadline for sending invoices in RO e-Factura system?

ANAF provides a deadline of 5 working days from the date of issuing the invoice, but it must be noted that the deadline is no later than 5 working days from the deadline provided for issuing an invoice as per the Fiscal Code (the invoice is issued no later than on the 15th day of the month following the one in which the event generating the tax arises - date of delivery/performance).

Specifically, once the invoices is issued, the taxpayer will be obliged to report it within 5 working days. In the event that, for example, the company received an advance/prepayment and did not issue the invoice in the current month, the taxpayer must respect the deadline provided in the Fiscal Code for issuing invoices, respectively the first 15 days of the following month, respectively reporting it within 5 working days from the issuance date.

The date of delivery of the electronic invoice to the recipient is considered to be the date on which the electronic invoice is already available to them for download from the national electronic invoice system RO e-Factura. In this sense, the taxpayer will be notified about the electronic invoices received in the national RO e-Factura electronic invoice system.

Failure to comply with the reporting deadline of the invoice in the system constitutes a contravention and is punishable by a fine:

  • from 5,000 RON to 10,000 RON for legal entities classified as large taxpayers
  • from 2,500 RON to 5,000 RON for legal entities classified as medium taxpayers
  • from 1,000 RON to 2,500 RON, for other legal entities, as well as for natural persons

During the period between January 1 - March 31, 2024, not reporting the invoices in the RO e-Invoice system is not sanctioned.

After June 30th, 2024, only documents issued and received exclusively via RO E-Factura system will be considered as invoices.

The acceptance and posting in the accounting evidence by the recipient - a taxable person established in Romania - of an invoice issued by economic operators established in Romania, in the B2B relationship, without complying with the provision according to which the issuer has the obligation to transmit it via the system, constitutes a contravention and is sanctioned with a fine equal to the amount of VAT on the invoice.

Conclusions and recommendations:

Following the information provided above, we present the following recommendations:

  • Use an invoicing software integrated with the RO e-Factura system.
  • Obtain a qualified digital signature for your legal representative that will be used to access the SPV (Virtual Private Space).
  • Register the qualified digital signature in the SPV.
  • Register in the RO e-Invoice Register by completing and submitting form 084 to ANAF.
  • Use the RO e-Factura system as soon as possible in order to set up proper internal document workflows.

For any additional information, we are at your disposal.

Tax digitalization is gaining popularity within the EU, as proven by the “VAT in the Digital Age” directive, which you can read more about in this article. With the aim of controlling tax fraud, tightening the VAT gap, and reducing administrative costs, more countries are turning to tax digitalization. Poland plans on introducing mandatory e-invoicing (KSeF) in July 2024, for most taxpayers. Romania is following in the footsteps of Poland with the introduction of RO e-Factura with the beginning of 2024 for all B2B transactions.

How does the Romanian e-Factura work?

The RO e-Factura (Romanian e-invoice) is a tool for electronic invoicing, through which the tax authorities, implicitly the National Agency for Fiscal Administration (ANAF), decided to lay the foundations for fiscal digitization in Romania.

After issuing an invoice, it is sent in electronic format to ANAF SPV - Virtual Private Space. After verifying and validating information contained in the invoice, ANAF signs and confirms its registration. After validation, the invoice becomes official and cannot be modified, deleted, or cancelled.

Can invoices uploaded to RO e-Factura be corrected?

Corrections related to products, quantities, or prices, as well as adjustments related to the reception of products by the customer, may be done by issuing a new invoice.

In this case, a new invoice is issued, referring to the initial invoice, which will modify some positions and possibly add new positions to the document. This newly issued invoice will be sent in RO e-Factura as a "Credit note" or "Correction invoice.”

Who must use the RO e-Factura system?

Currently, the system applies to:

  1. B2G (Business to Government) - reporting of all purchases of goods/services made by the state from privately-owned companies.
  2. B2B (Business to Business) - targets traders (legal entities) making deliveries of goods classified as having a high risk of tax evasion.

Starting with January 1st, 2024, the e-Invoice system will apply to all taxpayers, taxable persons established in Romania, whether they are registered for VAT purposes, in B2B transactions carried out on Romanian territory. Practically, all invoices issued and received regarding B2B transactions carried out on the territory of Romania will be sent and received in the ANAF integrated system.

Important!

This legal provision also applies to non-residents taxable persons registered for VAT in Romania.

Exempted from these legal provisions are supplies of VAT-exempt goods provided for in art. 294 para. (1) lit. a) and b) and para. (2) of the Fiscal Code. Therefore, taxpayers will not report transactions not carried out strictly on Romanian territory, such as exports, imports, or intra-community purchases/supplies.

Taxable persons established in Romania, regardless of whether they are registered for VAT purposes, have the obligation to submit invoices issued in RO e-Factura system between January 1, 2024, and June 30, 2024, regardless of whether the recipients are registered in the RO e-Invoice Register.

During this period, the suppliers mentioned above will be obliged to send the issued invoices to the recipients either by email or in physical format, except for situations in which both the supplier and the recipient are registered in the RO e-Invoice Register.

With the entry of the obligatory National e-Invoice System (KSeF) into force, there will be some significant changes to the process of correcting and settling invoices.

It is worth mentioning a few important changes as for the method in which invoices are corrected.

  • As a rule, all invoices covered by obligatory KSeF will be corrected with corrective invoices in a structured form. This also applies to invoices issued prior to mandatory KSeF going into force.
  • Invoices exempt from mandatory issuance via KSeF will be corrected in their existing form.
  • The possibility of correcting data on the invoice by using a credit note issued by the purchaser (both for invoices issued in KSeF and outside the system) will disappear.
  • It will be permitted, mainly for technical reasons, to correct an invoice down to zero and re-issue the invoice, a situation that will occur if the wrong TIN is used on the contractor's invoice.

A while back, the Ministry of Finance introduced the so-called VAT SLIM package, which, according to the legislator, was supposed to bring relief to taxpayers concerning corrective invoice settlement. As is often the case, instead of relief, taxpayers experienced a lot of confusion and complexity in the system of settling and correcting invoices. However, once obligatory KSeF comes into force, the so-called 'simplifications' introduced in the form of reconciliations and the fulfilment of corrective conditions as factors for determining how corrective invoices are settled in minus, will become obsolete. So, as for invoices sent to buyers in a form other than a structured invoice, we will return to the confirmation of receipt of the corrective invoice.

As a reminder!

A structured invoice is an invoice issued through KSeF with an assigned number identifying it in the system.

Correction invoices - output tax

Currently, under Article 29a(13) of the VAT Act, the correction of output VAT takes place in the accounting period for which the taxpayer issued the corrective invoice. Of course, it must be made evident from documentation held by taxpayers that they agreed on the conditions for the reduction of the taxable base for the supply of goods or services specified in the corrective invoice, and that these conditions were met, and the invoice is consistent with the held documentation.

Once mandatory KSeF comes into force, there will be significant changes that, in our view, will simplify the system considerably, as the events that will determine when corrective invoices are settled will be much more defined than those currently in force. However, in order to correctly account for a corrective invoice in the correct period, it is necessary to determine which of the following categories we are dealing with.

Corrective invoices - structured

In the case of issuing corrective invoices reducing the taxable amount (in minus) in relation to the taxable base specified on the issued invoice where the tax is indicated, the reduction is made for the accounting period in which the taxpayer issued the corrective invoice in the form of a structured invoice.

Invoices other than structured corrective invoices

When issuing a corrective invoice in minus in a different form than a structured invoice, the reduction of the taxable base, in relation to the base specified on the issued invoice with the indicated tax, shall be made for the accounting period in which the seller received confirmation of receipt of the corrective invoice from the buyer of goods or services.

Corrective invoice transferred outside the KSeF system

If the corrective invoice has been forwarded outside of the KSeF system, e.g. due to the fact that it has been issued to a foreign taxpayer who is not obliged to use the system, (e.g. an entity with its registered office or fixed establishment outside Poland), or when this fixed establishment is located in Poland but is not involved in transactions documented by these invoices (FE), the reduction of the taxable base is made for the accounting period in which the seller received confirmation of receipt of the corrective invoice from this buyer.

Adjustments issued during malfunctions/unavailability of KSeF.

The in minus settlement of corrective invoices issued during the period of malfunction/unavailability of KSeF shall be made during the period of the event that occurred first, i.e. sending the invoice to KSeF after the technical difficulties ceased or upon the confirmation of receipt of the corrective invoice.

Important!

The aforementioned rules apply accordingly in the case of a mistake in the tax amount on the invoice and when issuing a corrective invoice showing a higher tax amount than due.

Correction invoices without VAT

The requirement to have a confirmation of receipt of the corrective invoice by the buyer of goods or services does not apply in the case of:

  • export of goods and intra-Community supply of goods
  • supply of goods and services for which the place of taxation is outside the territory of the country
  • the sale of: electricity, heat or cooling energy, fixed gas, distribution services for electricity, heat or cooling energy, distribution services for fixed gas, telecommunication services and services listed in items 24-37, 50 and 51 of Appendix 3 to the Act
  • when the taxpayer did not receive a confirmation of receipt of the corrective invoice by the buyer of goods or services despite a documented attempt to deliver the corrective invoice, and when there is documentation confirming that the buyer of the goods or services knows that the transaction was carried out in accordance with the terms and conditions specified on the corrective invoice.

In the case of import of services and supply of goods under the reverse charge mechanism, as well as intra-Community acquisition of goods, the correction in minus is made in the settlement for the settlement period in which the reason for reducing the tax base occurred.

IMPORTANT! In other cases, corrections to the taxable base and output tax remain unchanged!

In the case of correcting invoices in plus, the date when the reason for the correction occurred will continue to be decisive.

Corrective invoices for input tax

Corrective invoices - structured

In the event of reducing the taxable amount, the purchaser of goods or services is obliged to reduce the amount of input tax for the settlement period in which they received the corrective invoice in the form of a structured invoice. If the taxpayer has not reduced the amount of output tax by the amount of input tax specified in the invoice which the correction concerns, and they are entitled to such a reduction, the reduction of the amount of input tax shall be considered in the settlement period in which the taxpayer makes the reduction.

Structured corrective invoices made available to foreign taxpayers outside KSeF

In the case of an in minus adjustment, if the taxpayer issued a corrective invoice to a foreign taxpayer  (not established nor with an FE in Poland) in the form of a structured invoice and made this invoice available to this purchaser in a manner other than through KSeF, the purchaser of goods or services is obliged to reduce the amount of input tax in the settlement period in which the seller issued the correction invoice in the form of a structured invoice. If the taxpayer issues an invoice other than a structured invoice and makes it available to the purchaser who is the aforementioned foreign entity in a manner other than by means of KSeF, the purchaser of goods or services is obliged to reduce the amount of input tax in settlements for the period in which they received the correction invoice.

Other than structured corrective invoices

In the case of a reduction in the taxable base, if the taxable person issued an invoice other than a structured invoice, the purchaser of goods or services is obliged to reduce the amount of input tax in the return for the period in which they received the corrective invoice.

Corrections issued outside KSeF that were subsequently sent to KSeF (e.g. during a period of KSeF malfunction/unavailability).

In the case of a reduction in the taxable base, if the taxpayer has issued an invoice other than a structured invoice, the buyer of the goods or services is obliged to reduce the amount of input tax in the settlement period in which they received the corrective invoice. When the date of receipt of the corrective invoice by the buyer is after the date of assignment of the number identifying that invoice in the National e-Invoice System, the date of receipt of that invoice shall be the date of the assignment of that number.

Our comment

The draft changes to the settlement of corrective invoices, in our opinion, is a step in the right direction. Since the Fiscal Office will, as it were, be able to monitor taxpayers' settlements in real time, there is no reason for an unclear and highly controversial system based on reconciliation and fulfilment of correction conditions.

The system will, however, require a little more commitment from taxpayers as well, at least initially. It is important to bear in mind the differences in the concept of issuance versus receipt of a structured invoice. It will not always be the same date and it may determine the period for which the correction invoice should be accounted for. Additionally, the date of issuance itself may be different because of the way in which it is issued, e.g. in principle issuing an invoice in KSeF means sending it to the system (provided the system does not reject it), but if the structured invoice was issued during a period of e.g. system failure, the date of issuance will be the date given by the taxpayer and not the date of sending it to KSeF, although in such a situation, the date of sending may determine the period in which it should be settled.

It is already worth analysing which of the described situations may apply to us and how we can collect information on events determining the period for settlement of corrections.

On December 1st, 2023, the Ministry of Finance published a new model of the CIT/M form, i.e. information on the amount of minimum income tax, serving as an attachment to the CIT-8 and CIT-8a returns. The minimum tax was introduced as part of the so-called "Polish Deal" in 2022. However, the Polish Parliament suspended its provisions for the period from January 1, 2022 to December 31, 2023.

Due to the expiry of the suspension period, on January 1st, 2024, the provisions on the minimum tax will come into force. We would like to remind you that the minimum tax applies to companies - CIT taxpayers taxed in Poland on their entire income and to tax capital groups that have suffered a loss or achieved a low level of profitability. We wrote more about the minimum tax here: blog.

Exemptions

The amendment of October 7, 2022, provides numerous exemptions in addition to those already provided. The amendment introduced new exemptions, which apply to:

  • small CIT taxpayers (essentially those whose annual gross revenues do not exceed EUR 2 million)

as well as taxpayers:

  • conducting a municipal economy, as referred to in Chapter 3 of the Act of December 20, 1996, on municipal management (Journal of Laws 2021, item 679)
  • whose majority of revenues were generated through the provision of healthcare services
  • whose revenues are mostly related to transactions in which the price, or method of establishing the price, is determined by laws or other normative acts
  • whose profitability in one of the last three tax years was above the 2% threshold
  • placed in bankruptcy, liquidation, or subject to restructuring proceedings.

Changes in the methodology

The amendment also introduces changes in the methodology of calculating loss and the share of income in revenue, through additional exclusions from:

  • tax costs of payments under a lease agreement, including depreciation charges on a fixed asset used under a so-called finance lease agreement (Article 17a(1) of the CIT Act, i.e., if depreciation charges are made by the lessee) - in addition to the previously excluded costs related to the acquisition, creation or improvement of fixed assets (such as tax depreciation)
  • revenue and tax expenses of the value of trade receivables sold to factoring entities
  • tax expenses 20 percent of the cost of salaries and social security contributions and contributions to employee equity plans
  • tax expenses from the increase in the value of electricity, heat and line gas on an annual basis
  • the value of excise tax (also taking into account the turnover of excise goods), retail sales tax, gaming tax, fuel surcharge and emission fee

Changes in the method of calculating the tax base

Based on the amendment of October 7, 2022, there has been a change in the method of calculating the tax base (the rate has been reduced from 4 %to 1.5%), along with the introduction of an alternative tax base, namely:

  • the tax base is the sum of: 1.5% of operating income (i.e., income other than income of a capital nature) and excess passive costs, i.e., debt financing costs, and excess intangible service costs or
  • The tax base is 3% of the value of income earned by the taxpayer in the tax year from a source of income other than capital gains, and the taxpayer shall inform about choosing such a method of determining the tax base in the return filed for the tax year for which such a choice was made
  • the taxpayer will be able to decide whether they choose to calculate the tax base in accordance with paragraph a or b. It is also important that the reference to deferred tax, which was highly imprecise, has been deleted from the calculation of the tax base.

The new version of the CIT/M form is available on the website of the Ministry of Finance.

We will keep you informed about any future changes in minimum tax regulations.

As of December 31st, 2023, the right to deduct input VAT accrued in earlier years will be time-barred.

On December 31st, 2023, the following shall become statute-barred:

  • the right to deduct input VAT, which arose in 2019 and 2018 in the case of intra-Community acquisition of goods (ICA) and the reverse charge mechanism (RCh)
  • liabilities due to the excess of output VAT over the input VAT, the payment obligation of which arose in 2018

If the taxpayer fails to reduce the amount of tax due by the amount of input tax within the time limits specified in art. 86 sec. 10, 10d, 10e and 11, the taxpayer may, in accordance with art. 86 sec. 13 of the VAT Act, reduce the amount of due tax by correcting the tax return for the period in which the right to reduce the output tax arose. This correction may only be done no later than 5 years from the year when the right to reduce the amount of tax arose.

This provision shows that the input tax from which the right to reduce the output tax arose in 2019, and for ICA and RCh in 2018, may be settled by correcting the relevant declaration and submitting it to the Tax Office by the end of 2023 at the latest.

According to the Tax Ordinance, the the statute of limitations  expires five years from the end of the calendar year in which the tax payment deadline expired. This means that all liabilities arising from the tax due in 2018 (excluding December for which the due date is January 2019) expire by the end of 2023.

Remark!

The tax statute of limitations expiring on December 31st, 2023 (Sunday) is postponed to Monday, January 2nd, 2024, i.e., the first business day.

We recommend verifying whether all invoices giving the right to reduce the tax due by the input tax for the  aforementioned periods have been included in the client's settlements We would also like to inform you that if you need to submit an application for overpayment, this application must be submitted by the end of the year. Submitting the application in the following year will result in its rejection (Art. 79 of the Tax Ordinance).

Download the PDF file here.

A growing number of new technological innovations are driving companies to find ways to improve their processes, increase efficiency and reduce costs while adapting to changes in the law.

Benefits of automating the invoice accounting process

One such solution is the use of e-invoicing to automate the process of invoice circulation and the booking of purchase invoices. What specific benefits for businesses does this bring about?

  1. Lower error risk: E-invoices allow for automated data entry into the accounting system, reducing the risk of human errors associated with manually transcribing data from the invoice. FA(2) schema includes mandatory, optional, and facultative fields, so in the event that a taxpayer makes a mistake or forgets to fill in a mandatory field, the system will reject the invoice, providing an opportunity for correction.
  2. Automation of invoice accounting: The e-invoicing system enables the use of mechanisms that automatically assign cost centers in accordance with previously defined rules.
  3. Cost savings: Eliminating the costs associated with printing, delivering, and storing paper invoices (as the legislature exempts the taxpayer from the obligation to store invoices) can result in significant savings.
  4. Easier document management: E-invoices are stored electronically, making it easier to manage, archive, and search for them. Each structured invoice issued has a unique KSeF number, which can be found in the centralized system. Therefore, KSeF does not allow for duplicate invoices, as there is no technical possibility of losing them.

Automation vs. security

Automation of the workflow process and posting of purchase invoices requires appropriate safeguards, such as security of processed data and protection against unauthorized access. The company's existing business processes should be carefully analyzed and aligned with mandatory legal requirements resulting from the introduction of KSeF.

The Fa(2) schema, i.e. structured invoice elements, also contains optional additional fields in which you can use abbreviations, descriptions, and strings of characters agreed upon with the contractor to easily categorize invoices according to your needs.

Ensuring data quality will be necessary to align with the formats accepted by the e-invoice schema. The final file sent to KSeF is in the XML format. Since XML is created according to a specific logical structure, providing, for example, a date in an incorrect format (the rule being YYYY-MM-DD) will result in the rejection of the invoice by the system.

IT and technological solutions

There are solutions on the market that help entering data in a more user-friendly excel file format. It is possible to complete and send multiple invoices at the same time, as well as to perform technical and logical tests immediately. This function returns information on whether the data has been entered correctly, and whether there are any irregularities.

There are also solutions on the market that integrate KSeF with systems designed for the circulation of cost invoices and their booking. Together with a friendly interface, invoice division rules and extended search options, process changes to invoice circulation connected to KSeF may be a positive change within a company.

The changes are not huge. Changes indicate that for the time being the obligatory KSeF will not replace the obligation to send the SAF-T file to the tax office, which is mainly due to the fact that not all tax information will be collected in KSeF and it would not be possible to generate a correct VAT settlement on its basis (e.g. invoices to consumers will not be issued in KSeF).

What new information will therefore appear in the SAF-T?

First and foremost will be the invoice identification number in KSeF.In addition to the invoice number assigned by the taxpayer himself, the invoice will be marked with an additional KSeF number if, of course, such a number is assigned to it.

In addition, the draft assumes that taxpayers obliged to use KSeF will have to mark invoices issued during a KSeF failure or when, for reasons attributable to the taxpayer, it will not be possible to issue a structured invoice with a special marking "OFF "in the SAF-T.

On the other hand, where the taxpayer is not obliged to issue an invoice in KSeF and the invoice is issued electronically or on paper without using KSeF, the taxpayer will mark the invoice with the symbol 'BFK'.

The changes to the time limits for VAT refunds

The regulation will also be aligned with the changes to the time limits for VAT refunds, ie:

  • reduction of the basic refund period from 60 days to 40 days;
  • removal of the additional 40-day refund period.

The draft also includes minor adaptation changes.

Despite many doubts related to the mandatory use of structured invoices under KSeF, the new system will go into effect in Poland on July 1, 2024.

Part 1

Taxpayers have been facing many challenges since the introduction of the KSeF (voluntary application is possible since January 1, 2022). At first glance, it seems that this only concerned the format of electronic invoices. It quickly turned out that the preparation and introduction of KseF involves an in-depth analysis of internal processes in the taxpayer's organization concerning the issuance and receipt of invoices, communication with contractors, data collection, as well as the involvement of the IT department and employee training.

Moreover, in relation to our clients, entities based in Poland and foreign entities registered in Poland solely for VAT purposes, there are several substantive issues that also require analysis and preparation.

Fixed establishment

The obligatory use of the KSeF will apply to foreign taxpayers who do not have their registered office in Poland but have a FE in Poland that participates in the supply of goods or the provision of services. Considering the controversy in determining a fixed establishment, the mandatory use of KseF will bring about further concerns.

Becoming acquainted with criteria, which keeps changing over the years during practice by authorities and administrative courts, will allow you to determine the risk of having a FE in Poland and decide on whether to use KSeF (even in a voluntary form).

Transactions outside KSeF

From the point of view of foreign entities registered in Poland solely for VAT purposes which use KSeF (obligatory or optional), it should be considered that not all transactions will be documented in the KSeF system. This applies, for example, to ICA and import transactions.

In addition, in order to correctly complete the JPK-VAT declaration, taxpayers must also consider data from other sources - such as cash registers, sales invoiced to natural persons (consumers) or invoices received from entities that do not use KSeF.

This introduces the requirement to record data from various sources and aggregate them into the JPK-VAT declaration.

KSeF invoice date

Invoicing in the KSeF system means the introduction of additional dates that must be distinguished correctly for the VAT settlement to be correct.

From the VAT point of view, the essential date is the date identified at the time of sending the xml file with the invoice to KSeF. If the system does not reject the invoice, it will be assigned a KSeF number and will enter legal circulation. This date is visible on the UPO document.

However, in the event of a failure of the KSeF system or when converting amounts expressed in a foreign currency, the date of invoice issuance completed by the taxpayer in the process of preparing data for a structured invoice will be relevant for VAT.

Part 2

The uniform invoice structure and platform proposed by the Ministry of Finance provides several significant benefits (immediate and long-term) for entities obliged to use them.

Efficiency and time saving

Integration of the accounting system with the KSeF system allows for easy and quick issuing of invoices in accordance with one format while eliminating errors and the risk of "losing" the invoice. It increases the security of data transmission and facilitates archiving and storage for the period required by tax regulations.

An important aspect is also increased efficiency in the process of issuing and receiving invoices and the lack of additional costs related to printing, sending, and storing paper invoices.

The obligation to issue structured invoices also means exemption from the obligation to submit JPK_FA files at the request of the office.

Streamlining accounting processes

As part of preparation for the use of KSeF, the taxpayer should review the currently used processes for issuing and receiving invoices within their organization. The fundamental aspect is ensuring access to all data required in the structured invoice scheme. Any data gaps may lead to updates in purchase and sale processes. Of course, this will require the introduction of IT solutions or an extension of the functionality of existing tools.

Shortening the deadline for a VAT refund

The basic deadline for a VAT refund is 60 days from the date of submission of the JPK_VAT declaration. Shortening this period to 40 days will have a positive impact on the taxpayer's financial liquidity. However, this will be possible after meeting the conditions listed in Art. 87 section 5b of the VAT Act, i.e.:

  • all sales invoices are issued via KSeF, i.e., they are structured invoices
  • sales invoices document transactions such as:
    • domestic and foreign sales of goods and services
    • receipt of all or part of the payment, i.e., documented with an advance invoice
  • the surplus of input VAT to be refunded within 40 days resulting from JPK_V7 for the period in which the taxpayer applies for a faster VAT refund does not exceed PLN 3,000,
  • the surplus of input VAT resulting from JPK_V7 for the previous period, which was transferred to the current JPK_V7, does not exceed PLN 3,000,
  • for at least 12 consecutive months preceding the period for which the taxpayer submits JPK_V7, in which the entrepreneur applies for a faster VAT refund, the taxpayer:
    • is an active VAT payer,
    • submitted the JPK_V7 file for each period,
    • has a bank account or SKOK number that appears on the whitelist of

The Faster Directive

The Faster Directive, which is currently being drafted by the European Commission, includes provisions for a procedure to provide relief from excessive withholding tax that may be levied by a Member State on dividends from publicly traded shares and, where applicable, interest on bonds publicly traded and paid to registered owners who are tax resident outside that Member State.

Excessive withholding tax

The draft Directive indicates that "excessive withholding tax" is to be understood as the difference between the amount of withholding tax levied by a member state on payments of dividends or interest on securities to non-resident owners at the general domestic rate and the lower amount of withholding tax applied in accordance with a double tax treaty or specific national legislation (reduced rate or exemption provided by CIT or double tax treaty rules).

Important: It appears that the provisions of the Directive will have a limited scope and will be primarily relevant for investors investing in publicly traded companies and securities.

Selected changes for everyone: tax residence certificates

Some of the changes to be introduced by the Directive may apply to all taxpayers, not just participants in regulated trading. The published draft proposal envisions the establishment of a common digital tax residence certificate. Digital tax residence certificates are to contain uniform content, irrespective of the issuing Member State, i.e., the Member State of tax residence.

The draft indicates that Chapter II of the Directive (on digital tax residence certificates) applies to all Member States for all persons who are residents in their jurisdiction for tax purposes. It seems  reasonable to expect the establishment of a common digital tax residence certificate of residency as a general mechanism that would also apply to, among other things, royalty payments or payments made outside the public trade.

Issuing tax residence certificate

The proposed regulations assume that Member States will be obliged to issue a digital tax residence certificate within one day, provided that they receive a specific set of information and provided that there are no exceptional circumstances justifying the delay.

Given the significant differences in form and content found in certificates of residence issued by different EU member states, the move to standardize the form, content and rules for issuing certificates of residence at the EU level and shorten the period for interested entities to obtain them should be seen as positive.

Financial market will be more regulated

The proposal also includes the establishment of a national register of certified financial intermediaries. In order to take advantage of the withholding tax relief procedures underlying the directive, investors will need to be able to work with financial intermediaries certified to provide these services. The directive also defines the conditions for registration, registration procedures and deletion from the register of certified financial intermediaries (CFIs).

Certified financial intermediaries will be subject to specific reporting obligations. In the Directive proposal, it is specified that the information provided to the tax authorities should enable the determination of the ultimate investor's identity and their potential eligibility for a reduced withholding tax rate at the source.

The Directive through the eyes of KR Group expert

Łukasz Kempa, Tax Director

In our opinion, there is a risk that the addition of another entity to handle withholding tax and the need to meet certain requirements to be recognized as a certified financial intermediary may make the whole process more difficult, prolonged and expensive (especially considering the above-standard requirements regarding the "real owner" criterion and the conduct of "real economic activity" presented by the Polish tax administration and presented, among others, in the Ministry of Finance's draft clarifications of September 25, 2023 regarding withholding tax collection).

WHT relief systems

The proposal provides for two withholding tax relief systems, i.e., the withholding allowance system and the prompt refund system.

Under the withholding relief system, the correct amount of tax is to be calculated by the withholding agent at the time of dividend/interest payment. The reduced tax rate or tax exemption is thus to be applied directly at the time of payment.

Under the quick refund system, tax is to be withheld at the higher rate applicable in the source country, but the excess tax is then refunded within a set time frame of a maximum of 25 days from the date of submission of the application or from the date of compliance with the reporting obligation, whichever of these dates is the later. This should take place within 50 calendar days from the date of payment.

Tomasz Śliwiński, Senior Tax Specialist

Both under the withholding tax relief system and under the quick refund system, the appropriate entities in the procedures would be CFIs acting on behalf of their investors. The idea of a 25day refund period can be considered very favorable; however, in our opinion, in the Polish context, without the creation of a comprehensive list of requirements for tax authorities to determine that due diligence by the payer has been observed and that the conditions for applying the preferential treatment are met, it is not very realistic.

The project assumes that Member States will be obliged to apply the provisions of the Directive from January 1,

E-invoice - a trending topic that has been the cause of a lot of controversy among taxpayers and consulting companies in recent months. Serving as the key to global digitization of tax settlements, it will soon replace traditional VAT invoices - both paper ones and those sent electronically between taxpayers, either in PDF format or as a scan.

E-invoicing - regulations

E-invoicing is nothing else than the electronic exchange of invoices in a structured format between two entrepreneurs. Poland is not the only country introducing regulations in this regard. E-invoicing continues to grow worldwide and applies not only to the Member States of the European Union, which are bound by the provisions of Directive 2014/55/EU, but also to countries such as Brazil or South Korea.

Two models of e-invoicing

There are two possible models for e-invoicing. The first one is "post-audit", in which entrepreneurs issue, send and store electronic invoices using various electronic systems. This model is carried out without the intermediation of tax authorities, although they are still able to verify these documents at any time but often only in a limited scope.

More far-reaching  in terms of fiscal authority supervision is the so-called "clearance model" in which three entities are involved - the seller, the tax administration and the buyer. Within this model, businesses use strictly defined government systems.

A structured invoice

An e-invoice must have a structured format, and very often, before sending it to the customer, the authorities must “clear” (validate) it. Subsequently, the invoice is assigned a unique number in the system. In some countries, the invoice has to be issued by the tax authority itself on behalf of the seller, after the seller has provided all necessary data. Thanks to these tools, the tax administration gains “real-time” control over the e-invoicing processes of each mandated taxpayer. This model is currently growing in popularity amongst European countries, such as Italy, France or Poland.

The implementation of the clearance model is associated with full transparency of taxpayers’ settlements – thus for national tax authorities the benefits are clear: new compliance tools to detect and reduce tax fraud. As a result, the tax offices will have access to very extensive information on both sales and purchase invoices of each taxpayer.  For companies using e-invoicing platforms, this does not immediately have to be associated with solely negative consequences.

KSeF within anorganization

E-invoicing introduced within an organization means reduced costs of exchanging and storing paper invoices (which should be considered a more eco-friendly solution too), eliminating human errors, as well as streamlining and standardizing the process of delivering invoices to contractors. In the long run, the clearance model will also allow for the elimination of VAT returns. However, this will only be possible upon the introduction of e-invoices as a mandatory requirement for all taxpayers.

Legislators across the world are working hard on the new regulations, setting the timeframes and the scope of entities subject to the e-invoicing mandate, which is considered at various levels, from B2B, to B2G and B2C transactions. Poland will join the group of countries with mandatory e-invoicing between entrepreneurs (B2B) starting from July 1st, 2024.

These changes concern people responsible for signing TPR declaration, as well as combining the statement on the preparation of local transfer pricing documentation with the TPR declaration into one document.

Before these changes were introduced, the statement on the preparation of local transfer pricing documentation and a TPR declaration were submitted separately. The declaration was usually signed by all members of the management board (according to the representation), and the TPR declaration could be signed by one person authorized to submit declarations on behalf of the company.

Currently, the statement on the preparation of transfer pricing documentation is part of the TPR declaration. It may be signed by the following entities:

  • a natural person - in the case of a related entity being a natural person,
  • a person authorized by a foreign entrepreneur as a branch representative - in the case of a related entity being a foreign entrepreneur with a branch operating in the territory of the Republic of Poland,
  • head of the unit within the meaning of Art. 3 sec. 1 point 6 of the Polish Accounting Act, i.e. a member of the management board or other governing body, partners or general partners managing the company's affairs, and if the entity is managed by a multi-person body - by a designated person who is part of this body.

The amendment to the tax regulations meant that from January 1st 2022 taxpayers may submit TPR information through a proxy. If the company would like to submit the declaration this way it is required that the proxy is a person with professional qualifications of a lawyer, legal advisor, tax advisor or an auditor.

As an authorized proxy, KR Group offers comprehensive support in the preparation of the TPR declaration and its filing.

Download PDF file here.

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