The country’s president signed the new legislation on optional VAT split payment in Poland at the end of 2017. The law introduces an option to split the payment of a VAT invoice into two separate payments.
In December 2017, the President of Poland signed legislation amending the Goods and Services Tax (VAT) Act (“VAT Act”) to introduce what is called a split payment mechanism. The provisions introducing split payment in Poland for VAT transactions will become effective on 1 July 2018.
How does it work?
The split payment mechanism is based on the assumption that an invoice is paid by the customer onto two separate bank accounts:
- the net amount is paid to the supplier’s business account,
- the VAT amount is paid directly to a dedicated account of the supplier, called a VAT account.
Taxable persons will not be obliged to open separate bank accounts for the purpose of collecting and paying VAT. The bank will automatically open a VAT account for each taxable person in Poland as a subaccount under the person’s existing account(s). This applies also to foreign entities registered for VAT in Poland and having Polish bank accounts.
Split payment will be applicable only to payments made in PLN via PLN accounts operated by Polish banks.
Why is split payment in Poland differs from others?
The Polish split payment mechanism differs from the ones which have been implemented in Italy and Romania. First of all, the scope of the Polish split payment mechanism is much wider than in Italy: it will be applicable to all VAT registered businesses in Poland. However, unlike the Romanian split payment mechanism, the Polish one will be optional. The choice whether or not to apply it will generally be at the discretion of the customer. Thus, if so instructed by the recipient of an invoice, the bank will split the payment amount so that VAT will be transferred by the bank directly to supplier’s VAT account while the net amount will be transferred to its business account.
What does it mean to business?
Under this new mechanism, although funds on the VAT account will belong to the supplier, the supplier will not be able to use them freely. Such funds may be spent only in specific ways mentioned in Polish regulations, including:
- to pay invoiced VAT to the VAT account of the invoice issuer,
- to pay VAT to tax authorities.
Transfers from a supplier’s VAT account to its business account will require specific approval from Polish tax authorities.
In this situation, businesses are advised to consider if and how the split payment mechanism may affect their cash flow, procurement and payment procedures, as well as the operation of their accounting system. Also, suppliers who do not wish their customers to make split payments would have to consider how to achieve their goal.
Incentives for businesses to opt in
Split payment in Poland will not be mandatory. However, certain incentives will be offered to encourage taxable persons to choose the split payment mechanism, e.g. a 25-day VAT refund deadline.
If you would like to know more about the split payment in Poland, please visit the homepage of WTS&SAJA Sp. z o.o., the exclusive representative for Poland of WTS Global.