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Practical aspects of applying a split payment for Polish VAT payers

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The European Union (EU) countries are losing billions of euros in value added tax (VAT) every year because of VAT fraud and inadequate tax collection systems. The issue of how to improve the VAT collection process has been hotly debated. As a result, EU countries have been introducing several measures to increase VAT compliance and make their VAT systems more fraud-proof.

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 applied?

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 regulations, including:

  • To pay invoiced VAT to the VAT account of the invoice issuer; and/or

  • 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 goal.

This article was prepared for International Tax Review by Lidia Adamek-Baczyńska, tax adviser and partner, and Olga Palczewska, seniorconsultant, at Doradztwo Podatkowe WTS&Saja. Doradztwo Podatkowe WTS&Saja is the exclusive member firm of WTS Global in Poland.


Adamek Lidia_WTS Poland 100 x 90

Lidia Adamek-Baczyńska

Palczewska Olga_WTS Poland 100 x 90

Olga Palczewska

Doradztwo Podatkowe WTS&SAJA Sp. z o.o.

ul. Roosevelta 22

60-829 Poznań

T: (+48) 61 643 45 50      

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