Optional e-invoicing in Poland

A new type of invoicing has been in operation in Poland on a voluntary basis since 1 January 2022, namely electronic invoices issued using the National e-Invoice System (KSeF). E-invoices are generated in xml-format by the local financial and accounting software in accordance with the logical structure published by the Polish Ministry of Finance, and then are sent to KSeF where the purchaser may download them after a verification process in which a unique number is assigned to each e-invoice. When implementing voluntary e-invoicing in Poland, the authorities announced that, as a second step, e-invoicing will become obligatory.

The first draft law on mandatory e-invoicing in Poland

On 1 December 2022 saw the Government Legislation Centre publish a bill to amend the VAT Act and certain other legislation, according to which, as of the beginning of 2024, e-invoicing in Poland will be obligatory. As compared to the current legislation, the solution proposed in the bill is wider in terms of entities obliged to use it and the subject matter covered. The main assumption behind implementing mandatory e-invoicing is to provide tax authorities with insight into all issued invoices and thus facilitate the detection of invoice irregularities. The currently used forms of invoice (paper or electronic, e.g. PDF files) will have marginal importance after the introduction of obligatory e-invoices.

Importantly, in accordance with the bill, electronic invoices will have to be obligatorily used by taxable persons based in Poland or having a fixed establishment in Poland. Entities not covered by the obligatory electronic invoicing system will be able to use e-invoices optionally or to continue issuing invoices based on the current Polish VAT Act (outside KSeF). These entities will also receive invoices from suppliers as agreed with them (including outside the KSeF system).

The e-invoicing requirement will cover the activities that currently require an invoice in accordance with the VAT Act. Therefore, as a rule, entities subject to the e-invoicing requirement will only issue invoices via KSeF. Any invoice issued by such entities outside KSeF will not be considered an invoice according to Polish VAT regulations. Only in the case of KSeF malfunction (after the failure is removed, there are seven days for sending invoices to KSeF) or a crisis (emergency related to geopolitical situation) can invoices be issued outside KSeF. A failure to comply with e-invoicing regulations will trigger severe penalties.

Latest updates and postponement of deadlines

After an intensive public consultation, on 22 February 2023 the Government Legislation Centre published a new draft of the bill. It provides a framework for implementation of the mandatory e-invoicing in Poland. The most important provisions that have changed over the previous version of the proposal:

• Commencement date of mandatory e-invoicing in Poland has been deferred from 1 January 2024 to 1 July 2024.

• New deadline for entities with VAT exemptions to use obligatory e-invoices will be 1 January 2025.

• New deadline until invoices issued via cash registers and of cash receipts will be treated as invoices will also be 1 January 2025.

• Commencement of penalties for issuance of e-invoices outside KSeF in breach of obligation, for issuance of e-invoices not in accordance with required template, and for failure to timely submit invoices issued during KSeF malfunction or in off-line mode will also be postponed to 1 January 2025.

• KSeF e-invoices will not be obligatory in the case of business-to-consumer transactions and motorway toll, bus, train etc. tickets.

• As of 1 July 2024 any invoice changes can only be made by issuing correcting invoices.

• The use of off-line mode in invoice issuance has been extended to include also unavailability of KSeF for reasons on the part of the taxable person – e-invoices to be issued offline according to required template and submitted to KSeF on next business day.

• More precise regulations on the use of exchange rates to translate the taxable amount and VAT on e-invoices – you can use the published midrate applicable on the last business day prior to the issuance date on the invoice. This rate can be used on condition the e-invoice is issued via KSeF not later than next day after it is issued through the accounting software.

• No changes to regulations on invoice issuance before chargeability of tax – e-invoices can still be issued even 60 days prior to the chargeable date. 

Fixed establishments 

Applying the mandatory e-invoicing in Poland also to persons having fixed establishments in the country for VAT purposes exceeds the range of entities first specified in the Council Implementing Decision, which allowed Poland to impose the e-invoicing obligation only on entities based in Poland. But according to unofficial information from the Polish Ministry of Finance, this obligation was later confirmed with the European Commission after the issue was raised during public consultations. It will be introduced together with measures supporting taxable persons in correctly determining if they have fixed establishments in Poland (plans are to publish official tax guidance or a public tax ruling).

If you would like to know more about e-invoicing in Poland, or need any tax advice regarding the country please visit the homepage of WTS&SAJA Sp. z o.o., the exclusive representative of WTS Global for Poland and contact their experts.

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In autumn 2017 Latvian government started working on amendments in the Latvian Taxes and Duties Act with the aim of introducing the recommendations with respect to TP documentation in Latvia stemming from the BEPS project outcomes. Currently the draft law amendments are approved by the Latvian parliament in the first round.

It is planned to review the draft law amendments in the second round on 4 September 2018, and after the third round the draft law will come into force. Taxpayers will be obliged to prepare master and local files as from financial year starting in 2018.

In addition, the tax law amendments should also introduce other changes, e.g. the definition of related party, deadlines for the submission of TP documentation, penalties for inaccurate TP documentation in Latvia, etc. The country-by-country reporting requirements in Latvian tax law were introduced on 4 July 2017.

Content of the TP documentation in Latvia

Currently Latvian tax law defines the content of the TP documentation. After amendments are introduced, qualifying taxpayers will be obliged to prepare master file and/or local file in line with the content set by the OECD Guidelines. This change will bring clarity and will result in a less administrative burden for multinational enterprises.

Although the Latvian State Revenue Service (SRS) generally request taxpayers to submit any tax related information in Latvian, the master file may be submitted in English. However, the SRS has rights to ask for the translation that has to be submitted within 1 month after the request from the SRS. The local file should be prepared in Latvian.

The obligation to prepare and submit master and local file

Essential novelty is the new thresholds set to determine the TP documentation preparation and submission obligations. Currently article 15.2 paragraph 2 in the Taxes and Duties Act states that TP documentation in Latvia must be prepared by the taxpayer if its annual turnover exceeds EUR 1.43 million, and related-party transactions exceed EUR 14,300 annually.

In accordance with the new amendments, the thresholds will be increased materially, as depicted in the table below:

The TP documentation in Latvia must be revised and updated every year. However, if the situation of the company does not change significantly it is allowed to update only certain sections of the documentation and financial data used in the analysis. The whole TP documentation must be revised once in 3 years. Additionally, the analysis is not required for transactions below EUR 20,000.

The SRS will be allowed to request TP documentation in Latvia to analyse risks and to provide consultations

Interesting novelty in the draft law is an article that allows the SRS to request from the taxpayer TP documentation with the aim to „verify the risks of TP adjustments, to advise on possible TP adjustment risks, to offer voluntary adjustment of the corporate income tax (CIT) return or to invite taxpayer to initiate the advance agreement procedure (APA)“. In this case the TP documentation in Latvia should be submitted to the SRS within 90 days from the day of the request (with a possibility to extended the deadline by 30 days).

New penalties regarding TP documentation in Latvia

In case a taxpayer does not comply with the TP documentation submission and if it significantly violates the TP documentation preparation rules, the SRS will be allowed to apply penalty up to 1% form the related party transaction value (for which the taxpayer is obligated to prepare the TP documentation), but no more than EUR 100,000. As a significant violation qualifies incomplete TP documentation (requested information is not included in the TP documentation) meaning that it is not possible to make a conclusion whether the agreed price is arm’s length.

Adjusting CIT returns and APA

The draft law provides that taxpayers will be allowed to make adjustments in the CIT declaration for 5 years (currently 3 years), if adjustments results from the TP adjustments. Such amendment is introduced to align it with the TP audit period, namely, TP may be audited for 5 years.

Starting from 1 January 2019 it will be possible to conclude the APA not only for the planned related-party transactions, but also for transactions already carried out during 5 previous years.

Considering that TP audits can be quite complicated, the amendments eliminate any deadlines for making decision in TP audits. After the changes enter into force, TP audits would continue for indefinite period.

Transactions with Latvian related parties

Before analysing whether the company has to prepare the TP documentation in Latvia it is necessary to understand whether the transaction partner qualifies as a related party. Related party definition is included in article 1 paragraph 18 of the Taxes and Duties Act. The main change is that local companies which are associated with participation of less than 50% (currently 90% and certain companies using specific tax reliefs qualify as related parties) will not be considered as related parties.

Summary

The new tax law amendments bring major changes for taxpayers having transactions with related parties. The content of the TP documentation and the obligations to prepare and submit the TP documentation in Latvia will change significantly. Thereby many taxpayers will have to reconsider their TP documentation practices and plan regular TP documentation updates.

If you would like to know more about the TP documentation in Latvia, please visit the homepage of Sorainen, the Latvian partner firm of WTS Global.

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A Introducing master and local file in the TP documentation in Latvia as of 2018 bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.