On 23 January 2019, the European Commission published a draft derogation decision enabling Poland to introduce a mandatory split payment mechanism for selected goods and types of business operations.
The project assumes that Poland has the right to use the obligatory split payment in the period from March 1, 2019 to February 28, 2022. Please find below the most important information resulting from the draft derogation decision:
- the obligatory split payment applies only to transactions made between VAT registered taxpayers (B2B), which are subject to VAT in Poland;
- the obligation to use the split payment mechanism will cover selected goods and services;
- the obligatory split payment will only cover transactions settled with bank transfers;
- foreign entities settling transactions by means of bank transfers transactions subject to VAT in Poland will be obliged to open a bank account in Poland;
- an obligation to include information on the invoice on the use of a compulsory distributed payment mechanism will be introduced.
List of goods and services* in scope of the mandatory split payment:
- steel products, precious metals, non-ferrous metals;
- waste, scrap, recyclable materials;
- electronics – including: processors, smartphones, phones, tablets, net-books, laptops, game consoles, inks, toners, hard drives;
- fuels for cars, heating and lubricating oils;
- greenhouse gas emission rights;
- construction works;
- carbon;
- trade of parts for cars and motorcycles.
* the split payment mechanism can be applied,(as mandatory) to 152 product and service groups defined in accordance with the Polish Classification of Products and Services (PKWiU) from 2008
Next Steps
The Polish Ministry of Finance announced that it plans to implement a compulsory mechanism for divided payments in mid-2019. At present, there is no draft national legislation that would implement the decision of the European Commission.
What do you need to consider as a VAT registered taxpayer in Poland beforehand?
Firstly, it is necessary to determine to what extent the new regulation will affect your business.
Significant doubts may arise, for example, referring to the type of activity (trade in parts) and not specific goods. Our experience also indicates that the grouping of PKWiU does not always identify goods or services in a sufficiently unambiguous way.
The next step is to assess the scale of the phenomenon (% of sales / purchases will involve split payment) and verify what actions will be necessary to implement this mechanism. Account should be taken of finance (liquidity of the company), accounting processes (correct distribution, changes to compulsory elements on invoices, payment methods), settlements (implementation of the split payment obligation), legal aspects (contractual obligations regarding the method and mode of payment).
Should you have any additional questions, please contact:
Kinga Zawora
Office: +41 58 792 2262 | Mobile: +41 79 339 9895
Email: kinga.x.zawora@ch.pwc.com
Image source: unsplash.com
Michaela Merz 
It would be better what the Split Payment entails. Is it splitting taxable and tax amounts and paying tax amount a supplier bank account accessible only by government?
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Dear Kayhan – thanks for the raised question!
The blog post includes only general information in connection with the planned change in Poland (not amended yet by the legislative proceedings, however Poland is authorised by the European Commission to introduce the split payment mechanism). Nevertheless, Polish VAT taxpayers since 1 July 2018 have had a chance to exercise the system on a voluntary basis and get acquainted with it.
Please more detailed and practical information in connection with the functioning of the split payment mechanism in Poland:
– the invoice issued by the supplier needs to contain information concerning the application of the mandatory split payment with clear indication of the payment method i.e. bank transfer (article 226 of the VAT Directive clearly indicates those elements);
– the supplier needs to have, in addition to his regular bank account, a separate blocked VAT account (opened automatically by the Polish bank);
– the client, who is also a taxable person in Poland and who receives the corresponding invoice transfers the net amount and the VAT amount to the supplier by performing one payment, using the special transfer “scheme” that is made available by Polish banks. However, due to the fact that the net and the VAT amount are inserted manually, banks do not verify the correctness of those amounts. Additionally, the bank transfer includes the invoice number (including invoice or correcting invoice), the supplier’s Polish VAT number. The net amount will be afterwards transferred as the payment of the counterpart’s invoice (i.e. to the regular bank account), while the VAT amount will be transferred to the supplier’s dedicated VAT account.
Therefore, the VAT amount gathered on the dedicated (“blocked”) VAT account can be used for (among others):
– payment of the amount corresponding to the amount of VAT due to the purchase of goods or services on the VAT account of the supplier – that is, to pay for VAT shown on the invoice, received from the supplier or service provider who is using the split payment mechanism; or
– payment of the VAT liability to the Polish Tax Authorities.
If the dedicated VAT account will collect funds that the VAT payer will not be able to use to pay the VAT liability to the Tax Authorities or to pay VAT to his contractors using the split payment mechanism, then the taxpayer may ask the Head of the Tax Authority to pay the VAT refund within the given time frame (for the purpose of free disposal of these funds) from the VAT account to the settlement account associated with that account.
We hope it helps!
Kind regards, Michaela & Kinga
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