Michaela Merz

Poland – Introduction of split payment mechanism as per 1 of April 2018

Leave a comment

I would like to thank Wojciech Śliż, Director Ministry of Finance, for discussion and information in connection with this topic.

In order to decline the VAT Gap the Polish government adopted split payment mechanism (SPM) on September 19 and sent it to the Polish parliament. The intention behind this matter is to Increase confidence of business environment – limiting the need for detailed verification of contractors, eliminating the risk of joint and several liability, decreasing fraud as well as to ensure transparency of VAT settlements. Using SPM brings number of the benefits. Taxpayers using SPM avoid VAT sanctions (the penalty in the VAT Act is 30% and 100% of the tax liability) as well as increased interest on tax arrears (for arrears detected by the tax authorities vendors pay 1.5 times higher interest on such tax arrears). Taxpayers using SPM will not be jointly liable (concerns sensitive industries like fuel, steel products HDD’s).

Principles of the system

  • SPM applies only to transactions between VAT-payers (B2B)
  • SPM is voluntary
  • SPM initiative remains solely with the buyer
  • VAT account („r-VAT”) is a private account→ r-VAT and the funds collected belong to the vendor
  • r-VAT is free→ payment by SPM does not increase banking fees

How it operates?

  • r-VAT openes automatically by law for each business account → no need for vendors actions
  • SPM executed by a single money transfer → convenient use of SPM transfer sheet made available by banks
  • The payer does not need to know the vendor’s r-VAT number → the transfer is made through to usual business account of the vendor
  • Payment of the VAT amount to the supplier’s r-VAT only when connected with specific invoice

How the split payment mechanism works

 

 

 

 

 

 

 

 

 

 

 

 

r-VAT can be credited with:

  • payment of whole or part of the amount of VAT paid to the vendor
  • transfer of funds from r-VAT belonging to the same vendor in the same bank
  • refund resulting from the correction invoice
  • VAT refund by the tax office
  • transfer the amount of VAT in case of an erroneous transfer –from the recipient of erroneous transfer

No other funds than those from the above list may be collected on r-VAT!

r-VAT can be debited with:

  • payment of whole or part of the VAT amount for goods or services on r-VAT
  • VAT corrections to the buyer’s r-VAT of goods or services
  • payment of VAT, additional liability, interest for late payment to the tax office
  • payment of VAT by vendors accomplishing intra-community acquisition of goods of motor fuels to taxpayers conducting tax warehouses
  • transfer the amount of VAT in case of receiving an erroneous transfer–to the right vendor or to the issuer of erroneous received transfer
  • transfer of funds between r-VATs belonging to the same vendor in the same bank
  • transfer of funds to a settlement account on the basis of a decision of the head of the tax office
  • transfer of funds to the state budget
  • execution of seizure of funds for enforcement of VAT amount due

Release of funds from r-VAT

  • Request to the head of the tax office to transfer funds from r-VAT to the standard settlement account → maximum 60 days for audit
  • If there are no grounds for refusal → consent for the transfer from r-VAT to the settlement account
  • If the negative conditions indicated in the law are met, the head of the tax office refuses to authorize the transfer from r-VAT to the settlement account

Factoring

  • SPM transfer to a person other than the supplier allowed –(unfettered use of factoring)
  • joint and several liability of the third party receiving the payment (e.g. a factor) –up to the amount received on the r-VAT → if the supplier has not paid VAT, but
  • joint and several liability excluded when payment (of the amount received on r-VAT) is made further by the third party (e.g. a factor) to the r-VAT of the supplier

How errors are handled?

In case of error transfer:

  • joint and several liability of the third party receiving the payment up to the amount received on the r-VAT → if the supplier has not paid VAT
  • joint and several liability excluded in case of return of received payment to the vendor’s r-VAT from which payment was received → immediately upon receipt of information of such payment

Split Payment Mechanism –Faster refunds

Faster VAT refunds on r-VAT

  • Application for VAT refund to the tax office → in convenient and easy way together with the VAT return
  • VAT refund made within 25 days deadline → faster disposing of funds (payment of VAT to suppliers, payment of VAT to the tax office)
  • The 25 days deadline for VAT refund cannot be extended
  • Input VAT does not have to result from invoices paid under the SPM

Example of VAT refund for export / ICS


 

 

Cash flow

  • The SPM may affect the financial liquidity of vendors → no possibility of free disposal of funds received on the r-VAT
  • In various industries and various businesses the effect will be different
  • Tool to compensate for the effect → Discount for early payment of tax to the Tax Office from the r-VAT.

Gradual introduction of SPM

The general intention is to introduce SPM in Poland in the following three main steps:

1) voluntary SPM
2) voluntary SPM + Targeted Obligatory SPM for certain industries
3) obligatory SPM for every trader (if still needed).

 

Bildquelle: Jerzy / pixelio.de

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s