26 February 2019

Green light for split-payment obligation

The Polish authorities have received the consent of the EU’s Council for Economic and Financial Affairs to introduce an obligatory VAT split-payment system that will apply to entrepreneurs from certain industries. The mechanism aims to plug existing leaks in the tax system. ECOFIN’s decision of 18 February 2019 permitted Poland to apply the obligatory split-payment system from 1 March 2019 until 28 February 2022. The decision’s Appendix lists 152 goods and services to which the new mechanism may be applied, including those currently subject to the reverse charge mechanism or a purchaser’s joint and several liability, and those to which no specific solutions currently apply (e.g. the sale of motor vehicle components).

The decision means that the obligatory split-payment mechanism could apply from 1 March to taxpayers trading in, among others, fuel, scrap, gold or electronics. However, it most likely that the applicable domestic law will enter into force on the anniversary of the introduction of the optional split-payment system (i.e. on 1 July 2019). The Ministry of Finance announced that the new law will include a wide range of amendments to rectify perceived errors with the optional system, such as applying the new mechanism to foreign currencies payments, but also allowing different public law liabilities to be settled from the VAT account.

We will regularly keep you informed of any further legislative actions in this area, to enable you to prepare for the new payment mechanism.

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