1. The Act on Trade Restrictions on Sundays
Poland’s “Act on Trade Restrictions on Sundays, Public Holidays, and Certain Other Days” came into force on 1 March 2018. In 2019, trade is banned on three Sundays of every month, throughout the country. In 2020, it will be banned on all Sundays.
The most important negative effects of the Act on Trade Restrictions on Sundays, introduced one year ago, are as follows:
- The increasingly difficult situation of small businesses, due to a decline in profits.
- Tense relations between landlords and tenants:
- according to PwC’s estimates, small and medium-sized tenants are suffering losses of around 10-15%
- landlords were, and still are, reluctant to hold talks with ten-ants, despite tenants’ attempts to renegotiate their leases
- according to a PwC analysis, most tenants have been forced to reorganize the operation of their warehouses and delivery schedules.
- The uncertainty of the legal situation in the distribution and logistics sector:
- Poland’s National Labor Inspectorate (PIP) has expressed the opinion that even when a considerable distance separates a store and a warehouse where goods are stored, these two facilities still fall under the scope of the trading ban. Such an interpretation is in conflict with the literal wording of the Act and is creating a sense of legal uncertainty in the distribution and logistics sector and necessitating costly, and largely needless, reorganization of the operations of such facilities.
- The Act on Trade Restrictions on Sundays continues to arouse many interpretational doubts, which is why businesses often have their own interpretation of unclear provisions. When courts interpret the applicable Act, they put an end to such debate about the proper definition of such notions as postal facilities, the permitted activity of newsstands, and retail outlets at train and bus stations; courts tend to agree with an interpretation of the provisions that is favorable to businesses.
2. The Excise Duty Rate on Alcoholic Beverages and Tobacco Products
According to the official statement of the Ministry of Finance, from 1 January 2020 excise duty rate on alcoholic beverages and tobacco products will increase by 3%.
As a result, the state budget revenues in this respect are to increase by over PLN 900 million. It should be emphasized, that no specific draft amendment has yet been published in this area. The last change in the excise tax rate for alcoholic beverages took place on January 1, 2013 and amounted to 15%. This increase caused a major crisis in the alcohol industry and a drop in sales.
3. Online Cash Register
The new Regulation of the Polish Minister of Finance on Cash Registers (Journal of Laws of 2019, Item 816), hereinafter the Regulation, has been in effect since 1 May 2019. The Regulation requires taxpayers to acquaint the individuals who operate fiscal cash registers with the principles of correct recordkeeping and to collect statements from such individuals confirming that they have acquainted themselves with the principles of keeping correct records of business transactions using fiscal cash registers.
The statements should be made no later than on 31 May 2019 for individuals who operated fiscal cash registers before 1 May 2019. For those who operated cash registers starting from 1 May 2019, the statements should be collected before the beginning of the operation of fiscal cash registers.
In addition to the requirements listed above, the Regulation introduces the obligation to assign specific VAT rates to specific letters used on receipts (A = 23%, B = 8%, C = 5%, D = 0%, E = exempt, F and G = other rates and the so-called “technical zero”) and changes allowing the use of so-called online cash registers, among other provisions.
4. VAT Taxation of Vouchers
Poland adopted respective regulation as of January 2019, implementing so called EU Voucher Directive. Beforehand, there were no specific VAT rules dedicated to vouchers in Poland. New rules introduce changes to the existing fiscal practice and therefore require specific attention of businesses dealing with vouchers, to include retailers.
The most relevant change comes with the introduction of the Single Purpose Voucher (“SPV”) definition and the requirement to tax it upon first transfer. There are many loyalty programs existing in the Polish market within which SPVs (vouchers, where the supplier’s identity and the amount of VAT due upon future supply is known right from the beginning) are issued and released to customers.
In this context, retailers must carefully investigate VAT implications of any new campaign involving vouchers whereas with respect to the events launched historically and continued in 2019 detailed analysis of terms & conditions, nature of vouchers and fiscal arrangements is highly recommended.
5. Retail Tax
The General Court of the European Union (EU Court) in the judgment of 16 May 2019 (Judgment) annulled the decision of the European Commission (Commission) regarding Polish regulations on the tax on retail sales, adopted on 6 July 2016.
Pursuant to the provisions of the Act, the taxable base is revenue from retail sales. The revenue surplus over PLN 17 million monthly is subject to taxation.
6. The Single-Use Plastics Directive & Waste Legislation
Measures relating to environmental protection and ecology have been priorities for the EU for quite some time. One of the most important issues highlighted in the EU provisions is reducing the use of plastics both by businesses and by consumers.
This is reflected in:
- the waste package, which came into force on 4 July 2018
- the Single-Use Plastics Directive, approved by the European Parliament on 27 March 2019.
The waste package imposes new obligations on the member states in waste management and treatment. It also sets new recycling targets. The new provisions are aimed above all at preventing waste generation whenever possible, and otherwise encouraging waste recycling and recovery.
The waste package introduces new and ambitious targets for recycling municipal waste and preparing it for reuse: 55% by 2025, 60% by 2030, and 65% by 2035. By 2035, the amount of municipal waste that ends up landfilled must be reduced to 10% of the total municipal waste generated. The waste package must be implemented within two years of its entry into force, i.e. by 5 July 2020.
The Single-Use Plastics Directive aims to reduce the impact of certain plastic products on the environment. It chiefly targets 10 single-use plastic products most often found on European beaches or in the seas.
The Single-Use Plastics Directive stipulates that:
- from 2021, 10 single-use plastic products will be banned from the market and replaced with alternative products – namely cotton buds, cutlery (forks, knives, spoons, chopsticks), plates, straws, stirrers, sticks for balloons, food containers, and polystyrene cups
- from 2025, plastic caps and lids will only be allowed if they are designed to be permanently attached to the respective bottles and containers
- all plastic bottles will have to contain at least 25% recycled plastic from 2025 and at least 30% from 2030
- the target for the collection and recycling of single-use plastic bottles for beverages will be 77% by 2025 and 90% by 2029.
7. Split Payment
On May 16, 2019 the Polish legislator published draft of amendments to the VAT act aimed at introducing mandatory split payment mechanism for selected goods and services in Poland.
There are numerous sanctions that can be imposed for lack of compliance with using split payment when it is required.
8. Employee Capital Plans
Employee Capital Plans (“PPK”) – a new mechanism for accumulation savings for retirement, engaging not only employees, but also employers and the state budget.
A new law was approved in 2018 and came into force since the 1st of January 2019. The Employee Capital Plans are obligatory for almost all employers and voluntary for employees (employees have the right to opt out). According to the law on PPK only employers who on the day when they should start applying law on PPK have already PPE in the right form (3.5% contributions, at least 25% of employees who joined the PPE) and pay contributions, will be exempt from establishing PPKs. Money gathered in PPK are private.
Mandatory contribution of employers is 1.5% of the employee’s revenue, mandatory contribution of employees is 2% of his revenue and state – 250 PLN welcome contribution and 240 PLN per annum. Both, employer and employee may pay additional contribution. Employer in the amount of 2.5%, employee in the amount of 2%.
The system concerns all employed people, including employees, persons working within cottage industries, members of agricultural production cooperatives and cooperatives of agricultural collectives, persons performing jobs based on agency contracts or free-for-task agreements or another contract for service provision, members of supervisory boards, below the age of 55. Persons between 55 and 70 can join at their own request.
A new law on PPK applies to:
- enterprises with at least 250 employees since 1 July 2019
- enterprises with at least 50 employees since 1 January 2020
- enterprises with at least 20 employees since 1 July 2020
- enterprises with at least 1 employee, including public administration, since 1 January 2021.
Till these dates employers are obliged to choose financial institutions to manage PPK and then sign contracts for managing PPK and sign all employees to PPK.
The new law provides sanctions for employers for not performing the obligations related to PKK (fines ranging from 10 000 PLN to 1000 000 PLN, for not making a contract for PPK – up to 1.5% of payroll fund in the previous financial year).
9. Private Label Products
Sale of private label products generates a significant revenue in the total sale of most discount stores and, in the eyes of customers, distinguishes these type of stores from the others.
Polish law currently limits the volume of sales of private label products by the discount stores networks. In accordance with the relevant provision, introducing to trade by the discount stores networks private label products in the amount exceeding 20% of the turnover value constitute act of unfair competition. However, the ambiguity of said provision raises number of questions about the actual scope of this limitation and makes it difficult to apply in practice. Additionally, there are strong arguments for the incompatibility of the above provision with EU law.
Polish government recently expressed intention to further restrict or even entirely prohibit sales of private label products. Although no specific steps have yet been taken, it is even just the unclear legislation already in force that requires a cautious approach in the practice of the sale of private label products.
The development of an adequate legal approach, related business adjustments and consistent compliance with the developed principles are the key to mitigating legal risk while exploiting the economic potential of private label products.
10. Competitive Advantage
The direct objective of the act on counteracting the unfair use of contractual advantage in the trade in agricultural and food products is to eliminate unfair commercial practices in relations between entrepreneurs engaged in the production, processing and distribution of agricultural products and food due to frequent imbalance among the participants of the food supply chain.
Unfair commercial practices are understood, in particular, as:
- unjustifiable prolongation of the due date of payment for delivered agricultural and food products
- making a contract conditional upon the acceptance or fulfillment by the other party of a performance that is unrelated either by its substance or by customary practice to the object of the contract
- unjustifiable termination of a contract or threatening of its termination
- granting the right to terminate (or to withdraw) a contract solely by one party.
Furthermore, there must be a significant disproportion in the economic potential between the contracting parties (e.g. whether the commercial network has a much higher annual turnover than the annual sales value of its contracting party), as well as it must be difficult for the contracting party to find a different purchaser for its products. However, the term “significant disproportion” is not defined in the Act (likewise many other terms laid down in the Act). Thus, it is a subject of assessment on a case-by-case basis.
The Act came into force on 12 July 2017. As for the sanctions identified in the Act, the President of the Office of Competition and Consumer Protection may, by way of a decision, impose upon the purchaser or supplier a maximum fine of 3% of the turnover attained in the financial year preceding the year during which the fine is imposed where the purchaser or supplier infringed the prohibition laid down in the Act, whether intentionally or not.
As first decisions regarding unfair use of contractual advantage have been already issued and many proceedings are currently ongoing, contracts concluded between retailers and their suppliers (and performance of these contracts) should fully comply with the provisions of the Act. In particular, according to the initial summaries of the carried out inspections, the most common example of the infringement of the Act is exceeding the 60-day payment term, which is treated as unjustifiable prolongation of the due date of payment.