The new regulations meant to combat payment backlogs will enter into force on 1 January 2020 under the Act of 19 July 2019 on Amendments to Selected Other Acts (Ustawa z dnia 19 lipca 2019 roku o zmianie niektórych ustaw w celu ograniczenia zatorów płatniczych). The regulations will introduce shorter payment deadlines in transactions in which the creditor is an SME, and the debtor is a non-SME (asymmetrical transactions).
The amended laws aim to award stronger legal protection to small enterprises (having a weaker market position) doing business with large enterprises, and improve financial liquidity on the market by facilitating the recovery of debt from large enterprises.
The key implications of the amendments have been discussed below.
Shorter payment deadlines
The new regulations introduce a ban on payment deadlines exceeding 60 days in transactions where the creditor is a SME. Where the debtor is a public entity, the payment deadline is reduced to 30 days (except for debtors which are medical facilities, in which case the payment deadline is 60 days).
According to the regulations, parties to a transaction will be allowed to agree on a payment deadline longer than 60 days, however, only in the case where such extension is not grossly unfair to the creditor and concerns a contract made by non-SME with SME. The burden of proving that a deadline longer than 60 days is not grossly unfair to a creditor lies with the debtor. This solution is designed to deter debtors from pushing for excessively long payment deadlines and lead to reduction of payment deadlines used in business transactions.
Where the payment deadline is longer than 120 days (counted from the delivery of invoice for a given product or service to the debtor) and is grossly unfair to the creditor, the creditor will have the right to terminate or rescind the agreement.
New obligations of large enterprises
Under the new regulations, by 31 January large enterprises will be obligated to prepare an annual report of payment deadlines used in business transactions made in the previous calendar year and provide it electronically to the Minister of the Economy. The obligation covers tax capital groups (irrespective of revenue generated), as well as entities not in tax capital groups with over EUR 50m in revenue in the previous fiscal year.
Moreover, non-SME will be also obligated to provide their contractors with a statement of large enterprise status no later than upon contract execution. The form of the statement should be consistent with the form of given transaction. A large enterprise failing to provide the report and statement is liable to a fine.
New rights of the UOKiK President
Under the new regulations, the President of UOKiK (Office of Competition and Consumer Protection) has new rights, including the right to:
– asses the likelihood of excessive payment delay of an enterprise;
– open ex officio proceedings against non-public entities in delay with payment to contractors;
– impose a fine on an enterprise, where overdue payments, as well as payments settled with delay exceed (in total for 3 consecutive months):
• PLN 5m in 2020-2021;
• PLN 2m from 2020.
Data necessary for the assessment of likelihood of delay will be obtained by the UOKiK President from the Head of the National Revenue Administration, however, such assessment may be requested by anybody (also a non-enterprise) suspecting that a given enterprise fails to pay its contractors.
Payment delay fines
A fine for payment delay is equal to the sum of fines imposed individually for each overdue payment or payment settled with delay which was due during the period covered by proceedings, excluding payments the deadline of which expired 2 years prior to the opening of the proceedings. The individual fines referred to above are calculated based on the formula specified in the act:
IF = PV × n/365 × SI
Where IF is the individual fine, PV is the value of overdue payment or payment settled with delay, n is the number of days of delay, and SI is statutory interest rate.
How to avoid getting fined?
In certain situations, the UOKiK President will have the discretion to choose whether or not to fine an enterprise, giving it only an official warning instead. Official warning may be given in the following situations:
– where the value of overdue payments or payments settled with delay by a party to the proceedings, for which individual fines would be imposed, does not exceed or is equal to the value of payments not received or received with delay by the party to the proceedings during the period covered by the proceedings (when calculating the value of payments not received or received with delay, the payments the deadline of which expired 2 years before the opening of the proceedings are not taken into account);
– where excessive delay is caused as a result of force majeure;
– in other justified circumstances.
As a result of the new regulations, a new unfair competition act – unreasonable extension of payment deadlines related to delivered products or rendered services – was included in article 3 section 2 and article 17g of the Act on Combating Unfair Competition of 16 April 1993 (Ustawa z dnia 16 kwietnia 1993 roku o zwalczaniu nieuczciwej konkurencji) and article 7 section 3 subsection 4 of the Act on Combating Unfair Use of Contractual Advantage in Agricultural Products and Food Transactions of 15 December 2016 (Ustawa z dnia 15 grudnia 2016 r. o przeciwdziałaniu nieuczciwemu wykorzystywaniu przewagi kontraktowej w obrocie produktami rolnymi i spożywczymi). What is more, under the new law, a creditor who was not paid on time will have the right to deduct the sum stated in the invoice in question from taxes, which may result in the increase of the debtor’s taxable amount.
The amended regulations are lawmakers’ attempt to offer stronger legal protection to SME, who otherwise have no other choice but to wait for payment from large companies for months on end. The new rights vested in the UOKiK President and severe fines herald further changes in the range of tools available to prevent large enterprises from abusing their market position and running business at the expense of small enterprises.
If you are interested in getting further details of the changes discussed above, please feel free to get in touch with us.
Attorney-at-law / Senior Associate
+48 22 420 59 59
Trainee Attorney-at-law / Associate
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