To reach this goal Poland has introduced a split payment
mechanism. The provisions introducing a split payment for VAT
transactions will become effective on July 1 2018.
How does it work?
On a practical level, the split payment mechanism changes
the regular VAT collection regime by introducing a split
between the net amount and the VAT. The main idea behind this
mechanism is that an invoice is paid by the customer into two
separate bank accounts:
- The net amount is paid to the supplier’s
business account; and
- The VAT amount is paid directly to a dedicated account of
the supplier, called a VAT account.
In practice, a single payment will be made and it will be
divided by the bank. VAT accounts will, however, be opened only
for accounts operated by Polish banks. Therefore, in order to
participate in this mechanism the purchaser and the supplier
will each have to hold an account in a bank that is subject to
the Polish banking regulations.
Moreover, a split payment will be applicable only to
payments made in PLN (at least with regard to VAT). Therefore,
if the invoice is issued and paid in a foreign currency, the
conditions to apply a split payment mechanism will not be met.
However, if contractors stipulate that the net amount is to be
paid in a foreign currency and the VAT amount is to be paid in
PLN, a split payment may be applicable.
No need to open separate bank accounts
Taxable persons will not be obliged to open separate bank
accounts for the purpose of collecting and paying VAT. The bank
will automatically open a VAT account for each taxable person
in Poland as a subaccount under the person's existing
account(s). This applies also to foreign entities registered
for VAT in Poland and having Polish bank accounts.
Scope of the Polish split payment mechanism
The Polish split payment mechanism differs from the ones
that have been implemented in Italy and Romania where split
payment was introduced under a limited regime.
First of all, the scope of the Polish split payment
mechanism is much wider than in Italy: it will be applicable to
all VAT registered businesses in Poland. However, unlike the
Romanian split payment mechanism, the Polish one will be
optional. The choice whether or not to apply it will generally
be at the discretion of the customer.
How will the bank know that the split payment should be
Polish banks are obliged to adjust their systems to enable
payments under the split payment mechanism. In practice, it
will probably be an additional option to be chosen when making
a payment via a bank account. Thus, if so instructed by the
recipient of an invoice, the bank will split the payment amount
so that VAT will be transferred by the bank directly to the
supplier's VAT account while the net amount will be transferred
to its business account. While making a bank transfer under the
split payment mechanism, the purchaser will need to provide the
invoice number, supplier’s VAT number, and the net
and VAT amounts. It will not be necessary to indicate the
supplier’s VAT account number.
What does it mean to business?
Under this new mechanism, suppliers may suffer negative cash
flow consequences arising from being in a VAT credit position.
Although funds on the VAT account will belong to the supplier,
the supplier will not be able to use them freely. Such funds
may be spent only in specific ways mentioned in Polish
- To pay invoiced VAT to the VAT account of the invoice
- To pay VAT to the tax authorities.
Transfers from a supplier’s VAT account to its
business account will be possible, but specific approval from
the Polish tax authorities will be required.
Additionally, as application of the split payment mechanism
requires providing the details of each invoice to be paid (e.g.
VAT amount paid using the split payment, invoice no., tax ID of
invoice’s issuer), bulk payments may prove
impossible or will require adjustments to IT systems.
In this situation, businesses are advised to consider if and
how the split payment mechanism may affect:
- Their cash flow;
- Their procurement and payment procedures; and
- The operation of their IT/accounting environment.
Also, suppliers who do not wish their customers to make
split payments would have to consider how to achieve their
This article was prepared for International Tax Review
by Lidia Adamek-Baczyńska, tax adviser and
partner, and Olga Palczewska, senior
consultant, at Doradztwo Podatkowe
WTS&Saja. Doradztwo Podatkowe WTS&Saja is the exclusive
member firm of WTS Global in Poland.
Doradztwo Podatkowe WTS&SAJA Sp. z o.o.
ul. Roosevelta 22
T: (+48) 61 643 45 50