Obligatory VAT split payment from September 2019

July 5, 2019 Poland

The Ministry of Finance has prepared draft amendments to the VAT Act that will introduce the obligatory split payment for selected goods and services. The obligatory split payment will replace the obligatory reverse charge mechanism used in current regulations.

The split payment will be mandatory for every B2B transaction exceeding PLN 15 000 that involves any of 150 goods and services listed in a new annex no. 15 to the VAT Act, including the following:

• coal,
• steel products, non-ferrous metals, precious metals, scrap,
• waste, recyclable materials,
• electronic devices (incl. smartphones, tablets, laptops, game consoles, hard drives),
• inks, toners,
• cars & motorcycles parts; sale of such parts,
• building and construction services.

The obligatory split payment will not exclude the possibility to apply this mechanism to other goods and services; this will remain, however, voluntary.

The new regulations will require that taxpayers performing such transactions (both buyer and seller) maintain a bank account in a bank in Poland. This account will have to be in PLN as split payments must be performed in Polish currency. There will also be a new form of invoice layout which will need to include information about the split payment regime.

Taxpayers who do not fulfill the new obligations will be exposed to severe penalties. A seller issuing an invoice contrary to the new layout can be liable to an additional penalty of 30% of the VAT value. A buyer that does not pay the invoice applying the split payment procedure can be liable to an additional penalty of 100% of the VAT value. Additionally, the cost of such invoice will not be tax deductible for income tax purposes.

The new regulations also bring some benefits that can simplify running a business. Although taxpayers are not allowed to use funds gathered on the VAT account for their current business needs, which can negatively impact cash-flow, it is worth to noting that these funds can be used to pay other public duties such as customs, income taxes or social security; currently they can be used only for VAT settlement. Another facilitation is collective payment; the new law allows taxpayers to settle all invoices from a certain period with a single payment. Such actions are not currently possible.

The new regulations are planned to come into force from 1 September 2019.

How ASB can help you?

ASB can analyse whether your business is subject to the new regulations and, if so, advise how to implement changes step-by-step in order to avoid penalties.

If you have questions, please contact one of ASB Tax specialists:

Matthew O`Shaughnessy
Head of Tax
E: moshaughnessy@asbgroup.eu

Łukasz Bączyk
Tax Director
E: lbaczyk@asbgroup.eu

Jarosław Szajkowski
Senior Tax Consultant - Tax Adviser
E: jszajkowski@asbgroup.eu

Photo: Willian Justen de Vasconcellos