Obligation to submit reports on the applicable payment terms
The Act of 19 July 2019 amending certain acts to reduce payment gridlocks introduces a number of solutions to improve the situation of micro, small and medium-sized enterprises in trade, including the obligation to publish a report on the terms used in commercial transactions by certain entities. The fulfillment of this obligation will have to be ensured by the managers of the entities covered by it, including the trustee and administrator appointed in the restructuring proceedings.
The Act of 19 July 2019 amending certain acts to reduce payment gridlocks (Journal of Laws of 2019, item 1649; hereinafter: “The Congestion Act”), according to its title, provides for a number of solutions to solve the problem of delays in payments between entrepreneurs, which are most severely felt by micro, small and medium-sized entrepreneurs.
As we read in the justification of the bill, as much as 78% of entrepreneurs in total receive late payment. However, the percentage of overdue receivables in large enterprises is much lower than in micro, small and medium-sized enterprises (hereinafter: “SMEs”) (large – 15.7%, micro – 21.5%, small – 22.4%, medium – 24 %). The average period of overdue repayments is the longest in the group of micro-entrepreneurs and is 3 months and 12 days, while in the group of large companies it is 2 months and 21 days1.
The act on congestion is an attempt at a comprehensive response to the phenomenon of failure to meet payment deadlines in trade, introducing a number of solutions aimed at combating this problem in various branches of law.
In income tax, it introduces the so-called bad debt relief, i.e. the possibility of reducing the tax base by the value of receivables classified as receivable for the payment of a cash benefit that has not been settled or disposed of.
Unjustified extension of payment deadlines for delivered goods or services rendered has been included in the catalog of acts of unfair competition in the Act on Combating Unfair Competition. A delay in payment may therefore result in the entrepreneur’s civil liability. The Act also introduces procedural facilitations for entrepreneurs whose contractors are late with payment. In the security proceedings, the plaintiff will not have to demonstrate a legal interest in providing security, in the event that the payment for a commercial transaction is sought, the value of which does not exceed the amount of PLN 75,000. PLN, and at least 3 months have elapsed since the deadline for payment of the claimed amount.
Obligation to submit reports
Above all, however, the act on congestion introduces significant changes to the act of 8 March 2013 on payment deadlines in commercial transactions (also in relation to the title of the act), changing it to the act on counteracting excessive delays in commercial transactions (Journal 2013, item 403, as amended; hereinafter: “The Act on delays in commercial transactions”)).
The act provides for shortening the payment terms in commercial transactions in which the debtor is a public entity to a maximum of 30 days. In transactions where the debtor is a large entrepreneur, and the creditor is a micro, small or medium-sized entrepreneur, it cannot exceed 60 days, and the contractual clause specifying a longer period will be invalid.
Compliance with payment deadlines will have to be reported by entrepreneurs.
According to the added art. 13a, added to the Act on delays in commercial transactions, managers of specific entities submit, by electronic means, to the minister competent for economy, by January 31 of each year, a report on the payment deadlines used by these entities in the previous calendar year in commercial transactions.
This obligation will apply to managers:
- tax capital groups, regardless of the amount of generated revenues;
- taxpayers other than tax capital groups, the value of which earned in the tax year exceeded the equivalent of EUR 50 million converted into PLN at the average EUR exchange rate announced by the National Bank of Poland (Article 27b (2) of the Corporate Income Tax Act ( “Updp”)).
The manager of the entity is considered to be a member of the management board or other management body of this entity, and if the body consists of more than one person – members of this body and a general partner managing the partnership’s affairs (in the case of a joint-stock limited partnership).
The manager is also the liquidator, receiver and administrator appointed in the restructuring proceedings.
The said report contains, in addition to the basic identification data of the submitting entity, the following data:
- value of cash benefits received and paid in the previous calendar year within:
- not exceeding 30 days,
- from 31 to 60 days,
- from 61 to 120 days,
- exceeding 120 days – from the date of issuing an invoice or bill confirming the delivery of goods or the performance of a service, and
- the value of cash benefits not received or not fulfilled in the previous calendar year by the date specified in the contract and the percentage share of these benefits in the total value of cash benefits due to this entity in that year.
The minister responsible for economy makes the reports publicly available in the Public Information Bulletin, on the website of the office supporting this minister.
The provisions of the Act do not apply to debts subject to proceedings conducted pursuant to the provisions of the Bankruptcy Law and the Restructuring Law (Article 3 (1)).
Managers appointed in restructuring proceedings and trustees in bankruptcy proceedings must therefore take into account only the deadlines for settling current liabilities (after opening the restructuring proceedings or announcing bankruptcy). However, they do not have to monitor, if the debtor in bankruptcy or liquidation has exceeded the payment deadline of the receivables covered by the arrangement.
Time limits and sanctions
The amended provisions entered into force on January 1, 2020, while in accordance with Art. 20 paragraph 5 of the Payment Backlogs Act, entity managers submit the first report for 2020, i.e. by January 31, 2021.
The reports also include data on cash benefits within the meaning of the act on counteracting delays resulting from commercial transactions within the meaning of this act concluded before January 1, 2020.
This means that the statement will include relevant cash payments made in 2020, even if they result from contracts concluded in 2019 and earlier.
Although entrepreneurs and other entities that are required to submit a report have a lot of time before they have to fulfill this obligation for the first time, they should not neglect the proper preparation of the report. The Act provides for criminal liability in the form of a fine for failure to submit the report on time and obstructing or preventing the fulfillment of this obligation.
1 Uzasadnienie rządowego projekt ustawy o zmianie niektórych ustaw w celu ograniczenia zatorów płatniczych, Druk nr 3475 (Justification of the governmental bill amending certain acts to reduce payment gridlocks, Form no. 3475).