Changes In VAT- Split payment

What does the split payment mean?

A split payment mechanism is when the buyer of the goods or services sends the seller a net payment and the VAT due is paid into a special account. The bill assumes that the mechanism will be able to be used voluntarily, with the buyer making the decision. If the buyer wishes to use the split payment mechanism, the seller will be obliged to accept it.

Split payment benefits

What benefit does a split payment offer? From the point of view of the buyer, the transaction is more secure, as it guarantees that, in the event of any legal complication, the joint and several liability rules will not apply.

Although the original version of the bill introducing split payments assumed that they could only be used for one-off transactions, the new version also allows for multi-phase transactions, such as instalments. A further result of the changes, is that the split payment mechanism will be introduced from April 1 and not January 1, 2018, as originally planned.

From the point of view of taxpayers, the most important issue is the disposal of the funds collected on a special VAT account, as they will only be able to be used to pay VAT due or to pay to a counterparty in a reverse charge transaction. The money deposited in a VAT account will be transferable to one's own account within 60 days instead of the 90 days as stated in the original bill.

The bill assumes that the transfer of funds from the VAT account to the company account will be possible only after the consent of the head of the tax office has been obtained. As a rule, this consent should be automatic unless there are "justified doubts" regarding the taxpayer – in which case the funds may be blocked until the doubts are resolved.

According to the bill on split payments, banks will be obliged to create special VAT accounts for each active VAT payer. The fees for operating these accounts and performing operations within them will not be able to be higher than for those applicable to standard settlement accounts currently used by the taxpayer.