Key legal changes in 2019 for the factoring industry

The year 2018, dubbed by me the "Year of Compliance," is behind us, due to the huge number of legal changes affecting the obligation of businesses to establish a real compliance system. The year 2018 saw the entry into force of, among others, the RODO Regulation, the amendment to the VAT law on Split Payment, the regulations on JPK, the amendment to the Civil Code shortening the statute of limitations, the laws implementing STIR and PSD2, the new AML law. The full list of changes can be viewed in this entry. It was a tough year. However, many have managed to adapt to the changes without negatively impacting operations.

2019 promises to be a more modest year, unlikely to be a record year, but there will be quite a few changes. Below I will try to outline the most important ones in order of relevance to the factoring industry.

# CHANGES MOST IMPORTANT FOR FACTORING INDUSTRY

• AML. 13.01.2019 marks the deadline for drafting and implementing your own AML/CFT risk assessment under the new law. I have written about the law, including its scope and obligations HERE;
• Bailiff Enforcement. On 1.01.2019, 2 new laws regulating the work of judicial officers came into force, and there has been a revolution in their work which, in my opinion, will negatively affect the effectiveness of the work of judicial officers, including the position of factoring companies as creditors, and significantly restricts the freedom of choice of a judicial officer. I encourage you to read the entire article I published a few days ago - available HERE;
• Law on reducing payment congestion (adopted draft dated 14/09/2018) - which significantly affects the industry in terms of, among other things, shortening b2b payment terms to 60 days, speeding up injunction proceedings, introducing mandatory reporting of reports on applicable payment terms in commercial transactions, etc. I have written in detail about the law HERE. The draft is in the consultation stage and I expect it should be passed in 2019;
• Law on the National Register of Debtors - Unfortunately, to the most important extent for the industry (free national online debtors' registry) it will not come into force until 1.12.2020, as I have written about in detail HERE;
• RODO and credit/factoring risk assessment. Work is underway on a government bill clarifying and implementing new regulations related to RODO. The draft also envisages changes to the banking law in the form of introducing a closed catalog of personal data used to assess credit risk. It is unclear at this point how much the bill will hit the industry (fintechs in particular) - whether it will be limited to consumers (if so, whether it will also apply to members of bodies), and whether it will apply only to banks, and whether it will apply to b2b relationships;
• Liability of collective entities. Final work is underway on a bill that could revolutionize the compliance system in corporations. I wrote about the bill HERE;
• 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 2019, the further fate of this bill should become clear. I wrote about the bill HERE;
• Prosta Joint Stock Company. Work is underway to introduce a new commercial company dedicated to start-ups. The creation of such a company will be a revolution for business, including the factoring industry, which will have to include the new entity in its own rules for accepting factoring applications, granting limits and sub-limits, paying advances, etc. We wrote about the PSA HERE. Work on the project is at the legal committee stage, and you can follow it HERE.

# KRS AND ACCOUNTING

• Shorter retention period for approved annual financial statements (SF) - 5 years from the end of the year in which the SF was approved. Entry into force of the amendment: 1.01.2019 r.;
• SF for 2018 will be drawn up only in electronic form and accompanied by a qualified electronic signature / ePUAP trusted profile. Entry into force: 1.10.2018 r.;
• SF to KRS will be submitted not only by a member of the management board, but also by a proxy, attorney, legal counsel, foreign lawyer with a Polish PESEL. We wrote about this change in detail HERE;

# LABOR AND SOCIAL SECURITY LAW

• Elimination of the obligation of periodic safety training For the least accident-prone industries, especially administrative and office workers, employed by the employer up to max. 3 risk categories;
• No obligation to hire a health and safety specialist for an employer up to risk category 3 with no more than 50 employees (previously: 20). This facility will cover a significant number of players in the factoring market;
• Reducing time storage of employee records from 50 to 10 years; Employee records will be able to be stored electronically;
• Obligation of the employer to communicate to the employee upon termination of the employment contract new information in addition to the labor certificate (concerning, among other things, the storage of employee files).

# COMMERCIAL COMPANIES LAW (Changes as of January 1, 2019)

• Shareholders' Assembly: (1) the possibility of cancellation of the AGM by a shareholder requesting its convening (Article 236 § 3 of the Code of Commercial Companies), (2) the obligation to attach a power of attorney to represent a shareholder at the AGM to the minute book, (3) it will be possible to vote remotely also on the resolutions of the AGM, except those adopted by secret ballot.
• Impediments to the resignation of the "last" member of a limited liability company / S.A. body. A resigning member of the board of directors of a limited liability company, who is the only member of the body, is obliged to submit his resignation to the shareholders by simultaneously convening a shareholders' meeting. Such resignation will not be effective until the day following the day for which the shareholders' meeting was convened (Article 202 § 6 of the Code of Commercial Companies). This solution serves to prevent companies from being left with an unfilled board of directors, unable to act, including taking part in judicial and enforcement proceedings. This also applies to the supervisory board (if appointed);
• Reimbursement of advance dividends (Article 195 § 11 of the Companies Act) - new rules for reimbursement in the event of a loss or less profit than the advances paid;

# TAX LAW

• Receivables Packages. On 1.01.2019, an amendment to the CIT and PIT Law came into force, providing that bundles of receivables will be treated uniformly. In a situation where at least 100 receivables are acquired in a single transaction, without separating the purchase price of individual receivables, the income is the excess of the income derived from the receivables included in the package over the cost of acquiring the entire package;
• VAT bad debt relief for the creditor after just 90 days (instead of 150);
• Status of "small taxpayer" up to EUR 2,000,000 income (previously EUR 1,200,000) as of 1.01.2020, which means favorable CIT taxation for such entities, preferences in depreciation, the possibility of paying quarterly advances to PIT and CIT. This change may involve many players in the factoring industry;
• Preferential rate of CIT (9%). will be available to small taxpayers and taxpayers starting a business when revenues generated in the current tax year (earlier in the preceding year) did not exceed the PLN equivalent of EUR 1,200,000;
• Exit tax - Tax on unrealized gains - the rates and rules for its collection are known;
• IP BOX - preferential taxation of income from qualified intellectual property rights at the rate of 5%, as long as the taxpayer carries out activities directly related to the creation, development or improvement of the intellectual property right;
• MDR - obligation to report electronically to the head of KAS within 30 days tax schemes by "promoters" who create, share, implement tax schemes;
• When issuing tax decisions, KAS authorities will be able to "incidentally" determine additional tax liability under, among other things, tax avoidance clauses (in there small clauses), transfer pricing provisions, withholding tax, within the framework provided by the Tax Code (value limitations);
• New fiscal crimes and offenses: failure to comply with the obligation to file information on the preparation of transfer pricing documentation, submission of transfer pricing documentation; failure to report tax schemes, submission of an untrue statement conditioning exemption from WHT or reduction of the tax rate.

# CONCLUSIONS.

No businessman in the industry should pass by the above-mentioned changes indifferently. The changes being introduced are in large part a continuation of the 2018 changes building the compliance system in corporations. The trend of directing financial responsibility towards managers is emerging. Thus, there is no escape from compliance. There are also quite a few changes requiring adjustments to employee documentation. It is also necessary to prepare for completely electronic filing of accounting records with the National Court Register. Those who do not yet have a qualified signature or ePAUP should set one up immediately. On the plus side, there is a package of simplifications for SMEs, especially regarding employee issues, including health and safety, as well as an amendment to the Commercial Companies Code removing several discrepancies. Unfortunately, the tax system remains unreadable and opaque, and the powers of the KAS authorities are gradually increasing. Also of concern are the changes to bailiff enforcement, which in my opinion will hit its effectiveness and limit the freedom of action for creditors.

I have omitted some of the changes, or abbreviated them - so I encourage you to read the full article aimed at the general business community also HERE.