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Split payment mechanism


As of 1 July 2018, the VAT regulations implementing the split payment mechanism are coming into force. Consequently, payment for purchased services or goods may be made both ways: the net value will be on a standard basis paid to the supplier’s bank account, while the value of the tax may be transferred to the supplier’s special account – a VAT bank account.

The funds deposited on the VAT account may be used only to pay VAT liabilities to the tax office or to settle the input tax on an invoice received from a contracting party. According to the Act, the mechanism will be applicable only to transactions effected in favour of other taxable persons, namely to B2B transactions. Consequently, there is no impact on consumer purchases.

Upon its entry into force, the application of the split payment mechanism will be voluntary. Entrepreneurs may decide on their own with which customers they want to use this method of settlement and which invoices will be paid in this way.

We may assume, however, that the functionality of the split payment mechanism will result in the fact that most taxable persons will be interested in its application. Probably there will be the so called “snowball effect” – a taxable person who will have received payment to the VAT bank account, in order not to freeze the received funds, will pay his liabilities in the first place with the funds deposited on the VAT account.

As announced by the Ministry of Finance, works are underway on implementing obligatory application of split payment for specific industries, prone to loss of tax.

In accordance with the new regulations, the banks have to open VAT account by 30 June and adjust their systems for servicing and settlement of such payments by 1 July.

In order to encourage entrepreneurs to use the new solution, the legislator has envisaged interesting “incentives”:

  • The ability to reduce the amount of tax to pay if the tax is paid from the VAT account before the statutory deadline. The taxable person may reduce the VAT liability by the amount calculated based on the formula specified in the Act, depending on the amount of liability, the NBP reference rate prevailing two business days before the date of payment and the date on which the liability is finally paid.

Example: VAT liability for September 2018, payable by 25 October, amounts to PLN 10,000,000. By deciding to pay 11 days before the deadline, using the funds deposited on the VAT account for that purpose, the taxable person may save over PLN 4,100 of tax.

  • The exemption, under conditions envisaged in the Act, from the application of the penalty rate of interest of 150% as specified in the Tax Code, if the amount of input tax results from 95% of invoices that have been paid using the split payment mechanism, and penalty rates of VAT of 20%, 30% and 100%;
  • The ability to get VAT refund within the expedited period of 25 days from the date of filing the settlement, if a request for refund of tax excess to the VAT account is attached by the entrepreneur, unfortunately the expedited refund will be transferred to the VAT account;
  • The exclusion, with due regard of statutory conditions, of joint and several liability of the purchaser (envisaged for purchasers of certain groups of goods), if a given invoice is paid using the split payment mechanism.

We have to remember that split payment results also in freezing of some part of funds, especially painful for those taxable persons who regularly disclose the excess of input tax over output tax. Unfortunately, the authors of the proposal have not envisaged the possibility to pay other public dues  from the VAT account if there are free funds available thereon.


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Michał Drzastwa, Tax Consultant