The lowdown on split payments – New VAT mechanism for business enterprises

The split payment mechanism is presently being vaunted as one of the measures for improving tax collection in Poland. This model for VAT settlements has engendered considerable controversy among business enterprises, as demonstrated by the questions addressed to the Ministry of Finance from various quarters, including parliamentary deputies. As pictured by the Ministry of Finance, the new mechanism for VAT remittance will counteract tax fraud; in Q1 2019, it is to become mandatory for sectors applying the reverse charge VAT formula and, among other fields, dealing in automotive parts.

The laws now in force envisage implementation of split payments in the Polish tax system as of 1 July 2018. The main idea is that payment for goods purchased, or services rendered, is to be divided into two parts, with the net amount credited by the purchaser / payee to the seller’s account, and the remainder (the VAT amount) – to a separate VAT account. Implementation of this solution will require adjustments to the inter-bank settlements system; for their part, the banks have declared that they will open free-of-charge accounts for this purpose (…)

The full text of this article is available for download in Polish. If you are interested in an English-language version or in discussing the issues raised herein with one of our lawyers, please contact: kontakt@gessel.pl