Compulsory split payment, however, only from 1 November 2019

On Tuesday, the 23rd July, of this year, Parliament adopted amendments to the VAT Act, introducing a compulsory split payment mechanism for selected categories of goods and services.

The compulsory split payment mechanism will apply to transactions concluded between entrepreneurs whose value exceeds the amount of PLN 15,000.

In the case of such transactions, the purchasers of goods or services will be required to pay for the purchased goods by a split payment mechanism, i.e. the net amount to the supplier’s basic account, and the VAT amount to its separate VAT account.

The split payment mechanism, which until now was a voluntary mechanism, will become a compulsory mechanism from the 1st of November, in relation to the delivery of selected groups of goods and services, specified in detail in the Annex to the VAT Act. The compulsory split payment will apply to, among others, supplies of coal, steel products, non-ferrous metals, electronics, car parts, secondary raw materials, fuel, as well as construction work.

Failure to comply with the new requirements will led to the imposition of sanctions, including the  determination of an additional tax liability and the removal of the possibility to consider the expenditure paid without the split payment mechanism as a tax cost. At the same time, the level of sanctions was limited in relation to the original wording of the draft amendments, and some of them will come into force only from the next year.

From the 1st of November, taxpayers will also be able to settle liabilities due to other taxes, as well as receivables to ZUS, based on the funds accumulated on the VAT account.

The introduction of the compulsory split payment mechanism is intended to further reduce VAT fraud. It cannot be ruled out that the mechanism will be extended to further categories of goods and services in the future.

If you are interested in discussing how the amendments to the VAT Act could affect your tax situation, we invite you to contact us.

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