Increase in financial limits under the Accounting Act

The draft bill amending the Accounting Act and certain other acts (hereinafter: the Accounting Act Amendment) aims to implement two EU directives:

1. Directive (EU) 2022/2464 of the European Parliament and of the European Council of 14 December 2022 relating to corporate sustainability reporting (text of the Act) - deadline for implementation is 6 July 2024
2. Commission Delegated Directive (EU) 2023/2775 of 17 October 2023 amending Directive 2013/34/EU of the European Parliament and of the European Council as regards the adaptation of the size criteria for micro, small, medium-sized and large undertakings or groups (text of the Act) (hereinafter: the Delegated Directive) - deadline for implementation is 24 December 2024

New EU limits defining unit categories

The Member States follow a common definition of entities and groups based on the size of an entity. The Delegated Directive increased the balance sheet total and net sales revenue, two of the three criteria used to define entities. The criterion of the average number of employees during the financial year will not be increased!

• Increased EU financial thresholds defining an entity (2 of 3 stated thresholds required to be met)

By how much will the financial thresholds be raised?

The decision of EU authorities to raise the financial thresholds defining the different categories of entities, i.e. micro, small, medium and large entities, is a response to the high level of inflation in the EU in recent years. The aim is to protect smaller entities from being burdened, as a result of inflation, with requirements that apply to large entities, e.g. the obligation to have their financial statements audited.

The draft amendment to the Accounting Act, in terms of the implementation of the Delegated Directive, includes a proposed 25% increase and rounding up of the thresholds:

• defining the various categories of entities
• specifying the obligation to have the financial statements audited

What other financial thresholds will be raised?

An indirect consequence of raising the thresholds in the Delegated Directive is also to:

1. Increase by 25% the amount of net revenues from the sale of goods, products and financial operations, the exceeding of which triggers the obligation to keep accounting books and follow the Accounting Act for:

• natural persons
• general and civil partnerships owned by natural persons
• inherited enterprises
• partnerships
• inherited enterprises operating in accordance with the Act on Succession Administration of Undertakings of Natural Persons and other Facilitation of Business Succession

If the amendment to the Accounting Act is adopted by the Sejm, the new limit determining the obligation to keep accounting books for the aforementioned entities will be EUR 2,500,000 million.

2. Increase by 25% of the criteria of net sales revenue and total assets of the balance sheet, the fulfilment of which allows entities to apply certain simplifications (e.g. classification of finance leases according to criteria set out in tax law rather than the Accounting Act)

What is the current limit for the obligation to keep accounting books in Poland?

According to the Accounting Act, the accounting books are required to be kept by:

• natural persons
• general and civil partnerships owned by natural persons
• inherited enterprises
• partnerships
• inherited enterprises operating in accordance with the Act on Succession Administration of Undertakings of Natural Persons and other Facilitation of Business Succession

if their registered office/place of Management is located in Poland and their revenue for the previous tax year amounted to at least the equivalent in Polish currency of EUR 2,000,000. The revenue limit for 2023, which determines the obligation to keep accounting books, amounts to the equivalent of PLN 9,218,200.

Important: this limit is to be converted into Polish currency at the average exchange rate announced by the National Bank of Poland, on the first working day of October of the year preceding the financial year. In 2023, this was the exchange rate on 2 October, i.e. PLN 4.6091/euro (table no. 190/A/NBP/2023).

How much is the new limit for determining the obligation to keep accounting books to amount to?

If the amendment to the Accounting Act is adopted by the Sejm, the new limit determining the obligation to keep accounting books will be EUR 2,500,000 million.

When will the new financial limits under the Accounting Act come into force?

The draft amendment to the Accounting Act is expected to be adopted by the Council of Ministers in Q2 2024. Poland is required to implement the EU Delegated Directive, on the basis of which the limits are to be increased, by 24 December this year.