Proposed Legislative Amendments Aimed at Reducing Payment Backlogs

Published 25 October 2018 by GESSEL

On 20 September 2018, the Polish authorities invited public consultations concerning draft legislative proposals geared at reducing payment backlogs in the Polish economy. The brunt of the regulations as now proposed (advocated by the Ministry of Entrepreneurship and Technology) would fall on large business entities, the less scrupulous of which have been known to abuse their comparative clout vis a vis small and medium-sized enterprises (SMEs).

The more important changes would comprise:

  • Institution of a 60-day deadline for remittance by a large entity to an SME, with any contractual provisions stipulating a longer payment deadline to be rendered invalid by operation of the law;
  • Reduction to 30 days of payment deadlines in transactions involving a public entity – the only entities which, by way of an exception, would benefit from payment deadlines of up to 60 days would be health care providers;
  • An obligation for large companies (defined for these purposes as ones with annual revenues in excess of EUR 50 mln) to submit to the Ministry of Finance annual summaries of how many invoices the given company settles within 30 days, 60 days and 60 days (these figures would be published);
  • Introduction to the legislative Act regarding competition and consumer protection and the legislative Act regarding counteraction of abuse of contracting advantage in agricultural and food products dealing of express language to the effect that imposition of exceedingly long payment periods is illegal;
  • A tax break for holders of “troubled receivables” in the context of corporate income tax and personal income tax (tax relief of this sort is already available in the case of VAT).

It is hoped that these legislative amendments might improve the situation of creditors, especially the smaller / weaker parties in asymmetrical dealings and businesses which contract with public entities. To bring its point home, the Ministry of Entrepreneurship and Technology is calling for introduction of steep fines for untimely payments, corresponding to 5% of the overdue amount. “It is not our intent, however, to penalise everybody – only those who cause payment backlogs. If a given company has fallen victim to immoral settlement practices of its business partners, it will not suffer at our hands”, as Jadwiga Emilewicz, Minister of Entrepreneurship and Technology, emphasised yesterday. For the most part, the new legislative provisions are slated to come into effect on 1 June 2019.