Legal Eye: Time is money... after 30 days
Time can fly, heal all wounds, and serve as the wisest counselor. But for business, time's greatest attribute is its perceived fungibility with money. It is this last property that the Law on Commercial Payment Terms addresses.
Befitting the rule that time is money, the law allows a supplier of goods or services to impose statutory interest on a payment due if the term of payment is longer than 30 days. This is true even if the supplier and purchaser agreed to a longer term of payment.
Let's say that my law firm regularly orders computer equipment from a shop around the corner. As we are a good customer, the shop allows us to pay within 60 days after delivery. Despite our agreement, the shop may (and probably should) assess my firm with statutory interest starting from the 31st day after delivery of the equipment until we pay.
Payment terms
The law is ostensibly designed to protect small and medium-sized businesses from being coerced into accepting longer terms of payment. Without going into the philosophical or political aspects of the law (Paul Fogo presented a concise discussion of those issues in a Legal Eye article from last year), it does have a number of practical implications and limitations that you should keep in mind if you are considering extended payment terms.
Most importantly, the law only applies to transactions between Polish businesses. In my example, when I buy computers for my firm from a shop in Warsaw, this transaction falls within the ambit of the law. It does not apply to consumer transactions (e.g. when I buy a computer for my daughter from the shop). Here we could agree to extended payment arrangements. The law also does not pertain to transactions where the buyer or seller is not a Polish company. Thus, if I order my computer from a company in England, for example, the law is irrelevant.
Conditions of sale
Even if the law applies to your situation, the supplier must fulfill two conditions before it may impose statutory interest. First, the goods or services must have been delivered. And second, the supplier must have given you an invoice. If, for whatever reason, you have not yet received an invoice by that 31st day, the supplier may not charge interest until you have it in hand. Once you have that invoice in hand, however, the supplier may commence assessing interest as of the 31st day after delivery without giving you any additional notice.
In all fairness, lest anyone think that the law is merely a weapon for suppliers, please keep in mind that this is a two-edged sword. Although the law appears to suggest that suppliers may choose whether they wish to demand interest or not, I am told that tax authorities tend to interpret the legislative intention as establishing a procedural rule that requires a supplier to demand interest. In fact, a supplier's failure to impose interest in the event of long payment terms could, at least hypothetically, give rise to a number of problems, such as tax authorities deeming that income tax is due on the profit the supplier should have made if it assessed the statutory interest.
Finally, the statutory interest here should not be confused with late-payment interest. While statutory interest (currently 13.5 percent per annum) is still high, it is still less than statutory late payment interest, which currently amounts to 16 percent per annum.
Judith Gliniecki is an attorney with Rymar and Partners
Befitting the rule that time is money, the law allows a supplier of goods or services to impose statutory interest on a payment due if the term of payment is longer than 30 days. This is true even if the supplier and purchaser agreed to a longer term of payment.
Let's say that my law firm regularly orders computer equipment from a shop around the corner. As we are a good customer, the shop allows us to pay within 60 days after delivery. Despite our agreement, the shop may (and probably should) assess my firm with statutory interest starting from the 31st day after delivery of the equipment until we pay.
Payment terms
The law is ostensibly designed to protect small and medium-sized businesses from being coerced into accepting longer terms of payment. Without going into the philosophical or political aspects of the law (Paul Fogo presented a concise discussion of those issues in a Legal Eye article from last year), it does have a number of practical implications and limitations that you should keep in mind if you are considering extended payment terms.
Most importantly, the law only applies to transactions between Polish businesses. In my example, when I buy computers for my firm from a shop in Warsaw, this transaction falls within the ambit of the law. It does not apply to consumer transactions (e.g. when I buy a computer for my daughter from the shop). Here we could agree to extended payment arrangements. The law also does not pertain to transactions where the buyer or seller is not a Polish company. Thus, if I order my computer from a company in England, for example, the law is irrelevant.
Conditions of sale
Even if the law applies to your situation, the supplier must fulfill two conditions before it may impose statutory interest. First, the goods or services must have been delivered. And second, the supplier must have given you an invoice. If, for whatever reason, you have not yet received an invoice by that 31st day, the supplier may not charge interest until you have it in hand. Once you have that invoice in hand, however, the supplier may commence assessing interest as of the 31st day after delivery without giving you any additional notice.
In all fairness, lest anyone think that the law is merely a weapon for suppliers, please keep in mind that this is a two-edged sword. Although the law appears to suggest that suppliers may choose whether they wish to demand interest or not, I am told that tax authorities tend to interpret the legislative intention as establishing a procedural rule that requires a supplier to demand interest. In fact, a supplier's failure to impose interest in the event of long payment terms could, at least hypothetically, give rise to a number of problems, such as tax authorities deeming that income tax is due on the profit the supplier should have made if it assessed the statutory interest.
Finally, the statutory interest here should not be confused with late-payment interest. While statutory interest (currently 13.5 percent per annum) is still high, it is still less than statutory late payment interest, which currently amounts to 16 percent per annum.
Judith Gliniecki is an attorney with Rymar and Partners
