NEWSLETTER - November 2013

Dear Readers
We would like to present you the November issue of the newsletter by Wermczuk Bobeł & Partners, attorneys-at-law.

We particularly recommend the article on the planned changes to the code of commercial companies and partnerships regarding non-nominal shares and lower minimum amount of initial capital in a limited liability company.  

Furthermore, this issue of the newsletter features an article presenting amendments to the VAT act which pertain to the occurrence of tax liability and which will come into effect on 1 January 2014.    

We also discuss the resolutions of the Supreme Court regarding the obligation to pay social security contributions in case of sending an employee on secondment abroad as well as matters relating to electronic order for payment (EOP) proceeding.  

We wish you a pleasant read,

WBW Team

Amendments to the Code of Commercial Partnerships and Companies - non-nominal shares and lower minimum amount of initial capital in a limited liability company

In the previous issue of our newsletter we reported on the planned amendment to the Code of Commercial Partnerships and Companies (CCPC) as well as other acts regulating commercial companies law. The previous article focused mainly on the expected improvements, i.e. increased number of activities which can be conducted on-line. Unlike the present legislation, which provides for online registration of limited liability companies, the new regulation will allow online registration of general partnerships, limited partnerships as well as limited joint-stock partnerships

The amendment also provides for other solutions not only of procedural but also substantive nature. The draft amendment aims at making Polish commercial companies more attractive in comparison to companies in other European countries. In this article we would like to present the new concepts to be implemented, i.e. non-nominal shares and lower minimum initial capital in a limited liability company.

At present, the ownership structure and shareholders' rights are based on the shares they possess in the initial capital of the company; each share has its nominal value which should be at least PLN 50. The lawmakers plan to introduce a completely new concept of non-nominal shares which are not in any way linked to the initial capital. The subion amounts on such shares will be added to the share capital which is to be classified as basic capital under the Accounting Act. The share capital will appear side by side the initial capital (mixed model) or on its own, in case of adopting an alternative mode.

It is also planned to lower the amount of minimum initial capital to as little as PLN1. At present, the minimum amount of initial capital is PLN 5,000. We should bear in mind that the present solution regarding minimum amount of initial capital has been criticised for many reasons.  First of all, the present amount does not secure the interest of company's creditors; it is also insufficient to launch business activity. Therefore, since the notion of minimum initial capital has no practical use, its amount can easily be lowered even more.

We would like to point out that more changes in commercial law are planned. We intend to present them in the coming issues of the newsletter.  

Jerzy Kozerski, lawyer

Vital changes to VAT tax system to come into effect on 1 January 2014

On 1 January 2014, amendments to the VAT tax system will come into effect, aiming at conforming Polish regulations to the EU directives. The most significant changes relate to the occurrence of tax liability and invoice issue time as well as change in the definition of a tax base.

At present, as a rule, tax liability occurs at the time of the delivery of goods or service provision. When these actions are confirmed by invoices, tax liability occurs at the time of their issuance, however not later than 7 days after the delivery of goods or service provision. In accordance with the new regulations, tax liability will occur at the time of delivery of goods or service provision, regardless of the date of issuance of an invoice.

In case of services rendered in parts or continuous services, tax liability will occur at the time of provision of services, i.e. at the time of provision of this part of service for which a payment has been agreed.  The service for which consequent due dates and settlements have been determined should be considered rendered as of the due date for each payment, until the provision of the service has been entirely completed. However, if the taxpayer receives the whole or part of the remuneration (i.e. advance payment, instalment, deposit, construction down payment) before the delivery of goods or service provision, the tax liability will occur on the date of its receipt.

Furthermore, it should be pointed out that by introducing the amendment the occurrence of tax liability in case of some types of business activity has been altered. The affected sectors include construction and installation services, distribution of electricity and heating, telecommunications services, tenancy, lease, leasing, regular legal or office services. In these cases, the tax liability will occur at the moment of issuing an invoice. If a service provider fails to issue an invoice or delays its issuance, the tax liability will occur on the day on which an invoice should have been issued or on the payment day.   

The amendment will also introduce considerable changes in time limits within which a taxpayer is obliged to issue an invoice. In accordance with the new regulation, the taxpayer must issue a VAT invoice until the 15th day of the month which follows the month of delivery of goods or service provision, which is different from the currently binding regulations under which a taxpayer is obliged to issue an invoice within 7 days from the delivery of goods or service provision. The new regulations also involve the issue date of advance payment invoices. As of the beginning of 2014, the taxpayer will be able to issue such invoices until the 15th day of the month which follows the month in which he or she received the entire or part of the payment from the purchaser. What is more, the taxpayer will also have the right to issue an invoice up to 30 days prior to the receipt of the advance payment (which, at present, is not possible). It is also worth mentioning that the amendment provides for certain exceptions form the general practice of invoice issue. This way, the taxpayer will have to observe different due dates when it comes to provision of construction services (30 days from the performance of services); delivery of printed books (60 days from the delivery of goods), printing books (90 days from performing the activity); delivery of printed books and newspapers (120 days from the first delivery of goods).       

Another vital modification is the rephrased definition of a tax base. Under the currently-binding regulations, a tax base is turnover, i.e. amount of sales reduced by the amount of VAT due. As of 1 January 2014, a tax base will be any payment that an entity which delivers goods or provides services has received or is supposed to receive from a purchaser, a customer or a third party, including any funds, subsidies or similar payments which directly influence the price of goods or services provided by the taxpayer.      

Marcelina Slapa, lawyer

Business trip vs. secondment  - the issue of social insurance contributions

Despite having their permanent offices in Poland, most business entities, especially from the construction and IT sectors, conduct extensive business operations abroad. As a consequence, companies often send their employees to work abroad for several months. The problem arises whether such journey should be categorised as a business trip or secondment. This distinction is vital when it comes to calculating the amount of social security contributions and contribution assessment basis.      

This matter was an object of litigation in the court case between a Wrocław-based company from the construction sector and the Social Security Institution. The company maintained that it is admissible, from a legal point of view, to send an employee to work abroad and to treat such a journey as a business trip and, as a result, pay him or her both remuneration (based on which social security contributions are made) and subsistence allowance (without paying social security contributions) which is several times higher than the remuneration. The Social Security Institution did not agree with this stance and maintained that in the above-mentioned situation sending an employee to work abroad should be treated as secondment. This excludes the possibility to pay out subsistence allowance on account of a business trip and creates an obligation to pay social security contribution on the entire amount paid out to the employee.       

The courts of both instances as well as the Supreme Court in its judgement of 14 November 2013 (case no. II UK 204/13) adjudicated the case in favour of the Social Security Institution. Although the Supreme Court agreed with the Social Insurance Institution on the legal nature of work abroad as secondment and not a business strip, it revoked the judgement of the court of appeal and directed it to judicial review owing to infringements in the course of calculating contribution assessment basis on the employee’s remuneration by the Social Security Institution.     

Daria Pawelczak, trainee solicitor

Useful information on electronic order for payment proceeding - recent decisions of the Supreme Court 

In recent months, the Supreme Court (SC) has addressed the issue of electronic order for payment (EOP) proceeding several times.
As a brief reminder, electronic order for payment is a particular kind of civil proceeding in which one can pursue claims for payment. This kind of proceeding is processed mainly in the ICT system operating EOP. A lawsuit (as well as any further pleadings of the plaintiff) is filed only by electronic means; also the defendant can send official letters this way. Court letters are also served to the plaintiff (and the defendant if he himself sends a letter to the Court in an electronic manner) by means of the ICT system operating EOP. Most importantly, a lawsuit filed in this proceeding requires that the plaintiff only point out (and not deliver) evidence, whereas court fee is four times cheaper than fees determined on general terms. EOP is regarded faster and cheaper than “traditional” proceedings.

The defendant who files a suit in an EOP proceeding intends to obtain an order for payment issued by e-court. However, in some cases the proceeding is transferred to a court of general jurisdiction (e.g. a court having its jurisdiction over the seat of the defendant) and it is changed to a traditional proceeding. This happens e.g. in situations when an e-court finds that there are no grounds for issuing an order for payment or when the defendant objects to it.

In such case the presiding judge requests the plaintiff to remove the defects mentioned in art.  50537 § 1 of the Code of Civil Procedure (e.g. by submitting a power of attorney or paying the fee). If the plaintiff fails to remove such defects on time, the court dismisses the case.

The above-mentioned process of transfer from electronic to traditional proceeding was the subject matter of two decisions recently made by the Supreme Court.

In its resolution of 21 November 2013 (case no. III CZP 66/13), the Supreme Court resolved the issue whether filing an application in EOP proceeding which ended in its dismissal under art. 50537 § 1 line 2 of the Code of Civil Procedure (i.e. in case of failure to remove defects) interrupts the limitation period. The Court stated that in such a situation, despite dismissal of the case, the limitation period is interrupted, which means that it runs anew.

In its resolution of 10 October 2013 (case no. III CZP 56/13), the Supreme Court stated that in case of filing an objection to an order of payment issued in an EPO proceeding, the court fee for filing the suit (paid in ¼ of the total amount) does not need to be paid up to the full amount (of the remaining ¾).

Nastazja Lisek, legal advisor trainee

This Newsletter is for general informational purposes only. It is not intended and shall not be treated as professional advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.

Previous issues