On 16 June 2023, the Sejm passed an amendment to the Polish VAT Act, introducing a mandatory e-invoicing system (KSeF). The new legislation will now be sent to the Senate. We expect the legislative process to be completed this summer.

All taxpayers having their seat an fixed establishment in Poland must be ready to start using the National e-Invoicing System (KSeF) from July 2024. Entities planning to make purchases in Poland must also be prepared if they want to effectively conduct their business in Poland.

Changes in invoicing procedures

Currently, there are three types of invoices that businesses can issue. Paper and electronic invoices have been used for years to document B2B transactions, and starting 2022 it is also possible to issue structured invoices via the KSeF system. Unlike the two traditional forms of invoices, structured invoices are issued entirely within the KSeF system, without any exchange between the seller and the buyer.

The revolutionary change to be implemented in July 2024 is that structured invoices will become mandatory. In other words, it will no longer be possible to issue a paper or electronic invoice in a current form. Thus it will not be in line with the Polish rules to sent those invoices directly to the business customer i.e. outside of the KSeF.

Entities obliged to use the KSeF system

The original plan to require all VAT payers registered in Poland to use the KSeF system was finally dropped, but the system will become the only way of invoicing in B2B transactions (B2C transactions have been excluded from the system).

The bill, which is currently being considered by primary house of Parliament (the Sejm), requires that invoices be issued by entities that have their seat and fixed establishment in Poland. While it is relatively easy to determine the location of a seat, doing the same for a fixed establishment may be more challenging for foreign taxpayers, especially those who conduct business in Poland other than through a branch. It is important to note that invoicing foreign taxpayers must also be done using the KSeF, not only for local transactions, but also for export of goods and services as well as intra-Community supply of goods.

The proposed legislation will apply to all taxpayers from 2025, when the KSeF will also be mandatory for taxpayers exempt from VAT and taxpayers exclusively engaged in VAT-exempt activities.

Penalties for improper use of the KSeF system

KSeF brings not only obligations but also some benefits, such as the possibility of VAT refunds within 40 days instead of 60 days (as is the case currently) or the simplification of VAT settlements following invoice corrections.

However, the most important thing to watch out for is the risk of penalties for the improper use of the KSeF, which taxpayers will face since 2025. For invoices documenting a VAT-taxed transaction, the penalty will be 100 percent of the VAT amount stated on the invoice, and in the case of a VAT-exempt transaction, it will be 18.7 percent of the gross.

Form of invoices issued in the KSeF system

All invoices must be issued in the form prescribed by law. This new form contains more than 400 elements, including both mandatory and optionally conditional, as well as optional forms.

Consequences for businesses

The new requirements for companies are resulting in a number of significant changes at the operational level. Contrary to the expectations, these changes will not only affect the departments and personnel handling invoicing and accounting, but more importantly, those responsible for business-critical areas. Aside from the penalties and potential risks mentioned above, the impact on business operations should be a priority for management. In the worst-case scenario, companies may have to stop invoicing and selling altogether, while facing the additional risk of incorrectly deducting input VAT from purchase invoices.

Finding solutions to comply with the new rules in relationships with domestic and foreign business partners will be critical. Companies will also need to adapt their ERP systems to the new reality.

The mandatory adoption of the KSeF system is still a long way off, but due to the complexity of the required implementation process and the amount of work to be done, it is necessary to start training employees shortly and to make strategic decisions regarding current accounting systems and tax procedures well in advance of the upcoming changes. We encourage you to take a look at our Taxpayer's Toolbox to help you prepare for the new requirements.

Download National e-Invoicing System: Taxpayer's Toolbox