A European Council derogation decision allowed Poland to introduce a mandatory e-invoicing system starting from January 1 2024 and draft regulation stated this date. However, according to the latest announcements from the Ministry of Finance, it will be postponed to July 1 2024.
The latest plans of the Polish Ministry of Finance regarding obligatory e-invoicing were presented on its website but are still not reflected in the draft law.
The planned changes are significant for taxpayers, especially given that large companies have already started the implementation process, which is very complex and time consuming, and involves substantial financial investment.
The National System of e-Invoices
Polish e-invoices will be issued and received in real time in a standardised XSD format through a governmental clearing system, the National System of e-Invoices (Krajowy System e-Faktur, or KSeF).
Each invoice will be validated by the KSeF from a technical perspective. An e-invoice with any technical mistake will be rejected by the KSeF, as well as e-invoices issued by unauthorised entities. When validated positively, the e-invoice will be assigned a unique KSeF ID number and will be made available for the purchaser to download. All invoices will be accessible by the tax authorities.
The clearing model of e-invoicing is against the European Council proposal "VAT in the Digital Age" (ViDA). The same issue will arise in Italy. However, Poland and Italy are likely to receive a derogation due to implementing national e-invoicing before publishing the ViDA provisions (even in draft form).
In fact, e-invoicing has already been introduced in Poland as of January 1 2022 under a voluntary model. Not many taxpayers have switched to standardised e-invoices, although there are incentives to do so. The main benefit is the shorter period of VAT refund (40 days instead of 60 days).
Updates to mandatory e-invoicing in Poland
The first draft regulation regarding mandatory e-invoicing was published by the Ministry of Finance in December 2022 and submitted for public consultation. A lot of comments were raised by business organisations and tax advisers with regard to the technical aspects, but also some of the essentials of the system, such as the scope of obligatory e-invoicing.
From the information on the ministerial website, it seems that a lot of the comments submitted by businesses during the public consultation period were accepted. Apart from the postponement of the starting date for obligatory e-invoicing, other changes included:
An exclusion from obligatory e-invoicing for B2C transactions – this was one of the main problematic areas for the retail sector, especially with regard to in-store sales. However, for some entities providing mass services (for example, telecommunications, gas or electricity suppliers), it would be easier to implement e-invoicing for both B2B and B2C. It is likely that facultative e-invoicing for B2C will not be possible.
Small taxpayers exempted from VAT (below the threshold of PLN 200,000, approximately $45,000, yearly) will fall under the KSeF obligation half a year later – starting from January 1 2025.
An additional half-year postponement (till December 31 2024) for invoices issued from cash registers and for cash receipts as a simplified invoice (with the purchaser’s VAT ID and the value of up to PLN 450).
Specific railway tickets and toll receipts treated as invoices will not be covered by the obligatory KSeF.
The procedure for system failure – invoices issued offline, but afterwards submitted to the KSeF.
Sanctions for non-compliance with the KSeF will be softened and postponed till January 1 2025.
Problems with mandatory e-invoicing in Poland
The Ministry of Finance plans to retain the scope of taxpayers covered by the obligatory KSeF as defined in the draft provisions. The system will cover entities established in Poland or entities operating in Poland via a fixed establishment (such as a branch). In practice, the latter creates significant doubts, because the issue of having a fixed establishment is controversial in the EU, which is reflected in many judgments of the Court of Justice of the EU and the Polish administrative courts, and tax binding rulings issued by the tax administration.
The Ministry of Finance plans to issue explanatory notes specifically on the fixed establishment criteria to help foreign companies and their Polish contractors to assess whether a fixed establishment is created in Poland.
Foreign companies registered for VAT purposes in Poland not acting through a fixed establishment will not fall under mandatory e-invoicing. They will still be allowed to issue and receive standard invoices – in electronic form (such as a PDF) or even on paper.
One of the important practical issues while implementing changes in the process is the lack of an option to add attachments to invoices issued in the KSeF system.
There is a significant practical issue for large companies issuing large numbers of invoices to be sent to the central system in batches. The verification will not proceed in ‘real time’ and may take longer (even a few days). If one invoice fails verification, the whole batch of invoices will be rejected. Moreover, the system will not give any hint as to which invoice was incorrect.
For all taxpayers, one problematic issue is the date of e-invoice issuance, which is defined in the law as the date of submitting an e-invoice to the KSeF when positively validated. This date should be entered into the relevant financial systems for reporting purposes, but it may differ from the date of invoice issuance stated on the invoice itself. Although businesses submitted a lot of comments on the practical issues resulting from this provision, the Ministry of Finance is not willing to change the rule because it is committed to automatic verification of VAT settlements based on the clearance date.
Preparation is essential for taxpayers
The new e-invoicing system is a revolution in invoicing in Poland. Implementing the KSeF is a complex and time-consuming process that involves not only technical aspects, but also the inevitability of making significant changes to processes, internal procedures, contracts, and regulations.
Only comprehensive and early planning for the new e-invoicing implementation process will allow companies to prepare properly for the changes. Taxpayers should start to plan now, to ensure they will be ready on time.
The updated draft of the new legislation is expected soon. However, it will probably not be the final one.
It would be good to have a final version of the VAT Act introducing the obligatory KSeF provisions that will not be changed until its implementation, so all taxpayers would have a stable period in which to prepare for the new e-invoicing regulations.
