The possibility of using the split payment system for payments from July 1, 2018

From July 1, 2018, every buyer who has received an invoice for a purchased product or service will be able to conclude payment through the so-called split payment mechanism. In practice, this means that the net amount is sent to a regular bank account, and the remaining part to a separate VAT account. 

Why do we need a split payment mechanism?

Split payments are primarily intended to limit the phenomenon of the so-called tax carousel. Making a payment in two parts will make it impossible to retain VAT, which is owed to the tax office, for one's own benefit. The split payment mechanism is thus intended to limit fraud and tax fraud at the initial stage i.e. at the time of concluding the transaction.

What exactly is the split payment mechanism?

The split payment mechanism in Poland is a payment system in which the amount of VAT, which is separated from the gross amount due to the seller, is transferred to a separate bank account, called a VAT account, to which the seller has limited access. The remaining net amount goes into the seller's settlement account.

Even though the Ministry of Finance has spoken about the voluntary nature of this type of mechanism, in practice this voluntary application appears to be one-sided. It will depend on the buyer whether, after receiving the invoice from the seller, he decides to pay the payment in the traditional way, or to use the so-called transfer message, and therefore a special template that will be made available by the bank. The buyer is not obliged to obtain permission from the seller, moreover - he does not have to inform the seller about his choice.

On this basis, it can therefore be unambiguously stated that the voluntary nature of the split payment system as suggested by the Ministry of Finance only applies to the side of the buyer. The seller can therefore receive a payment split between a settlement account (net amount) and a special VAT account (tax amount), even if he does not choose this type of payment method. The Ministry of Finance also informed that on May 7, 2018, an application was approved that would allow for the introduction of a compulsory mechanism of split payments in our country.

How can one make a payment under the split payment mechanism?

Payments under the split payment mechanism are made using the aforementioned transfer message made available by the banks. This message is intended only for making payments in the split payment mechanism. The transfer effected in this way results in the payment of the due tax to the VAT account. According to art. 108a para. 3 of the VAT Act, a payment under the split payment mechanism must be made in Polish zlotys and include a transfer message, indicating the following:

- the amount equal to the whole or part of the tax amount resulting from the invoice that is to be paid using the split payment mechanism;
- the amount equal to all or part of the gross sales value;
- the invoice number to which the payment relates;
- NIP number.

On the buyer-taxpayer's side it is necessary to fill in one document, i.e. the transfer message, on which two amounts should be indicated: the amount of gross sales value and the amount of tax. The further steps required to transfer the amount paid by the buyer to the appropriate accounts are the responsibility of the bank. It is worth noting that the split payment mechanism also applies to pre-paid invoices. In this case, the invoice number should be indicated in the transfer message. The regulations allow one to issue invoices even 30 days before receiving the advance payment. However, the split payment mechanism does not apply to pro forma invoices – these types of invoices can not be paid by the buyer using the split payment system.