Key legal changes in 2019 for the factoring industry

 2019 is behind us, being another year full of legal changes for the factoring industry (including Split Payment, White List, AML, etc.). You can review the full list of 2019 changes in this entry. It was another tough year in terms of regulatory changes. The year 2020 finally promises to be a bit calmer, although it is already clear that we will see at least some significant changes for the industry. Below I will try to outline the most important ones - subjectively according to the importance of significance for the factoring industry.

1. White list (White list of VAT taxpayers)

We have written about the VAT White List on several occasions, including. here i here. It is worth remembering, however, that it is only from January 1, 2020 that the sanctions provided for by the law came into effect, i.e. if the person paying the FV from January 1, 2020 pays for the FV an amount over 15.000 PLN to a bank account of the counterparty other than the one specified in the list (even when this other account is indicated on the FV), then the person making the payment (1) will not be able to include the amount in the part in which the payment exceeds the amount of 15,000 PLN (regardless of the number of transfers made) in the BUI, (2) will bear the risk of joint and several liability with his counterparty for the unpaid VAT on the transaction.  The above means that as of 1.01.2020:

• You can expect an increased number of inquiries from counterparties in factoring for White List assignment accounts. In extreme cases, there may be so-called direct payments;
• Expect to see an increased number of payments by Split Payment transfers (which protect against the negative effects of not having accounts on the VAT White List);
• The factor's bank accounts indicated on the FV should be visible on the White List;
• The factor's bank account for factoring advances should be visible on the White List;
• Factoring clauses should be clearer and make it clear that the account indicated on the invoice is that of the Factor;
• Silent factoring under the escrow account formula loses its raison d'être due to the lack of disclosure of such an account on the White List;
• As part of the standard procedure for establishing a relationship with a new counterparty (also a factoring company), the factoring company should include downloading the status of the Inventory (PDF) as of the date of signing the contract.

Some of the above-mentioned issues should be reflected in the relevant amendments to the factoring agreements / regulations.

2. Law on payment congestion

On January 1, 2020, the following came into force Law of July 19, 2019 on amending certain laws to reduce payment congestion, i.e., a package of regulations to reduce payment congestion. We wrote about the changes here. For the factoring industry, the change in regulations means, among other things:

• Reduce payment terms on reported FVs to 60 days, which may entail shorter billing periods / costs for financing;
• Uncertainty about the actual maturity date of VAT invoice receivables - (1) potential disputes over maturity dates, including the interest accrual period, reporting receivables for collection, including insurance, (2) at the stage of concluding a new contract with receivables not overdue (may in fact be past due), (3) as well as when taking over a factor from another factor;
• Higher interest for delay in commercial transactions - NBP reference rate + 10 pp (with the current reference rate of 11.5%);
• Higher compensation for recovery costs (important for micro-factoring) - subject to some doubts about its adjudication in some assignments of receivables - especially when compensation is traded independently;
• Material legal risks (e.g., withdrawal from the contract);
• Risks on factoring companies using excessively long payment terms (unfair competition act / administrative penalties);
• Simplifying the collateral procedure for cash receivables not exceeding PLN 75,000 from a commercial transaction overdue by 3 months.

The above calls for systemic changes in factoring agreements.

3. Central Register of Actual Beneficiaries;

Law of 1.03.2018 on the prevention of money laundering and financing of terrorism (the so-called AML Act) was introduced. Central Register of Actual Beneficiaries (CRBR), which has been in effect since October 13, 2019, and applies to commercial companies, among others. Factoring companies operating in the form of commercial companies (which is the rule) are required to determine the beneficiary and report it electronically to the CRBR by April 13, 2020, under pain of financial sanctions. Besides, the CRBR is a very convenient and useful tool for factoring companies in terms of complying with AML obligations. The search engine is available here: https://crbr.podatki.gov.pl/adcrbr/#/wyszukaj.

4. Prosta Joint Stock Company

On March 1, 2020, an amendment to the Commercial Companies Code was to take effect, introducing the following a new type of company - a simple joint stock company (PSA), which is an interesting form of activity dedicated to so-called start-ups providing, among other things, for a minimum share capital of PLN 1.00, very high flexibility in terms of: share trading, contribution, formation of company bodies, preference of shares. Therefore, it should be expected that sooner or later this type of entity may appear as a factoring applicant or recipient. These types of companies especially intensively may begin to operate in the IT sector. Initially, such companies may enjoy limited confidence.

EDIT 8.01.2020. - NOTE: As reported by the Ministry of Development, at the last minute it was decided to make a delay in the new regulations on PSAs which are currently scheduled to come into force only on March 1, 2021 - the entry into force of the regulations on the Simple Joint Stock Company. This is a consequence of the postponement of the introduction of electronic registration proceedings.

5. Dematerialization of SA and SKA shares

Shares of joint-stock and limited joint-stock partnerships will cease to be in the form of a document, resulting in the complete removal of paper shares from economic circulation and their replacement with shares in digital form. In connection with this change, the shares will be subject to either entry in the shareholder register created on the grounds of the amendment or registration with the National Securities Depository. Some of the information will also be available on the SA/SKA websites which will be mandatory. This change, in conjunction with the CRBR, will increase the transparency of SAs and SKAs - these companies will be easier to verify in terms of beneficiaries of real and actual shareholders. It will thus be easier to verify the relationship between the factor and the recipient.

6. Change in the way entries are made in the KRS

As of 1.03.2020, it will only be possible to submit an application to the KRS via the ICT system (online). No more paper applications.

7. Bad debt relief in PIT and CIT

On the basis of art.18 f Corporate Income Tax Laws As of January 1, 2020, a solution has been introduced whereby the creditor may reduce the tax base by the amount of the receivable if it is not paid or disposed of in any form within 90 days of its due date (as specified in the contract or invoice). The debtor, on the other hand, is required to increase taxable income by the unpaid amounts to the creditor. It will be possible to take advantage of the new "bad debt relief" for commercial transactions in which the due date for payment expires after December 31, 2019.

8. Elimination of declarations and the new VAT JPK

In 2020, VAT returns will be replaced by a new JPK_VAT file, which will include the VAT return (replacing the VAT-7, VAT-7K and VAT-27 returns) and VAT records. The new obligations to send JPK_VAT will come into effect on April 1, 2020 for large taxpayers (more than 250 employees and a turnover exceeding €50 million, or more than 250 employees with total balance sheet assets exceeding €43 million) and on July 1, 2020. - for others. The above means that factoring agents (where such an obligation has been stipulated) will no longer send VAT returns to the factor for review. It will be advisable to make appropriate changes in this regard. The role of professional software for reading JPK files will increase.

9. Individual tax bill

Starting January 1, 2020, only an individual tax account, also known as a micro tax account, will be used for PIT, CIT and VAT payments. The existing tax office accounts for PIT, CIT and VAT payments will be active only until December 31, 2019. After that date, payments should be made to the individual tax account.

10. Law on the National Register of Debtors

We wrote about the change in detail here. The data contained in the NCR will be widely available and public. They will be used by individuals or financial institutions, including factoring companies. This will make it possible to verify factoring companies, their body members, partners or guarantors. It will make it possible to determine whether such persons are/were subject to restructuring or bankruptcy proceedings, or whether a ban on business activity has been issued, or whether enforcement proceedings have been discontinued due to ineffectiveness of enforcement, or whether the debtor has been in arrears with alimony payments for more than 3 months. The database itself is not to be launched until the latest day of 1.12.2020 r.

11. Liability of collective entities

In 2020, the fate of the new bill on The bill will revolutionize the activities of entrepreneurs in Poland by requiring them to implement a real compliance system to minimize liability risks. It will therefore prove necessary to organize the company's structure, establish rules of responsibility for individual structures, regulate the rules of giving discounts to customers, accepting and giving gifts, introduce an anti-corruption code, prevent the creation of so-called bribery funds, etc. The law also applies to factoring companies.

12. Anti-Corruption Code

The law on openness in public life has been "frozen." The draft, as it stands, includes a significant number of factoring companies as at least medium-sized entrepreneurs and stipulates the obligation to adopt internal anti-corruption regulations. In 2020, the further fate of this bill should become clear.