For many years now, Poland has been introducing solutions aimed at the digitization of VAT.
Since January 2017, EC sales lists have been required to be submitted in electronic form only.
The standard VAT return has been replaced by SAF-T, i.e. an electronic VAT register submitted to the tax authorities in XML format on a monthly basis by all taxpayers (regardless of the scale of their business). The next step in this direction is the introduction of mandatory electronic invoicing to operate in Poland as the National e-Invoice System (KSeF).
Optional e-invoicing in Poland and a step towards the mandatory system
The National e-Invoice System (KSeF) is an ICT system for issuing, sending, receiving and storing structured invoices, i.e. invoices issued in XML format using interface software to comply with a template published by the Ministry of Finance.
Work on this system has been going on in Poland for many years, and the first milestone was the introduction of electronic invoicing via KSeF on a voluntary basis on 1 January 2022. However, since the implementation of KSeF is a very big challenge for taxpayers (adjustment of financial and accounting systems, IT works, procedures, etc.), as practice shows, not many taxpayers have decided to implement this solution so far.
On 11 August 2023, an act introducing mandatory KSeF from 1 July 2024 was published for active VAT taxpayers based in Poland and foreign entities having a permanent place of business in Poland.
Latest updates and postponement of deadlines
However, after the autumn parliamentary elections in Poland and the change of government, during the press conference held in January 2024, Minister of Finance Andrzej Domański informed about "critical errors" in the code regarding the functionality and efficiency of the e-invoice system, which stops its entry into force from July 2024. He also assured that the Ministry of Finance, taking care of the stability of economic transactions, does not want to allow it to become paralyzed. A tender for an external audit of KSeF and further consultations was announced.
As of now, no legislative changes have even been proposed. The press conference of the Minister of Finance is probably the first step towards appropriate changes to the Act.
This does not mean, however, that the mandatory KSeF system in Poland will not be introduced – it was only postponed (probably by a few months) in order to verify the technical issues, and not the legitimacy itself of the implementation of the mandatory KSeF in Poland.
Invoicing after the entry into force of mandatory KSeF
E-invoices are generated in XML through local financial and accounting software in accordance with the logical structure published by the 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.
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. Once KSeF is introduced, the currently used forms of invoice (paper or electronic, e.g. PDF files) will have marginal importance. Electronic invoices will have to be obligatorily used by taxable persons based in Poland or foreign entities having a fixed establishment (FE) in Poland.
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 issue only invoices via KSeF. Any invoice issued by such entities outside KSeF will not be considered an invoice according to Polish VAT regulations. Only in case of KSeF malfunction (after the failure is removed, there are 7 days for sending invoices to KSeF) or a crisis situation (emergency related to geopolitical situation) can invoices be issued outside KSeF.
A big challenge for taxpayers
A failure to comply with e-invoicing regulations will trigger severe penalties. By gaining a few extra months to implement KSeF, taxpayers should make good use of this time. Practice shows that at the time of KSeF implementation there were numerous business problems (e.g. regarding the settlement of prepayments paid collectively or employee expenses) and many taxpayers were concerned about being able to prepare for the implementation of KSeF on time.
Therefore, extra months should be used to prepare for mandatory KSeF both from the IT side (adjustment of financial and accounting systems) and from the tax side (new procedures, granting appropriate authorisations, analysing the impact of KSeF on the settlement of transactions given the business model applied).
