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Split payment: new solutions to VAT for entrepreneurs?

The Minister of Development and Finance proposes introducing a mechanism for split payments between entrepreneurs in the VAT Act.The Minister of Development and Finance proposes introducing a mechanism for split payments between entrepreneurs in the VAT Act.

According to the split payment mechanism, an entrepreneur, after receipt of a VAT invoice, will be able to split the payment into two transactions: the first - corresponding to the net amount to be paid into the supplier/service provider's account and the second - corresponding to the amount of VAT to be paid into a separate VAT account of the supplier/service provider.

From the entrepreneur's point of view the biggest restriction of this solution is the freezing of a considerable amount of cash in the VAT account - according to the project an entrepreneur will not be able to freely dispose of the funds collected in his VAT account, even though formally those funds will belong to him. The funds collected can only be used for other tax obligations of the entrepreneur or for VAT payments for other transactions between the entrepreneur and other VAT taxpayers.

The project allows other allocation of funds collected on the VAT account, but only with the consent of the head of the tax office expressed in the form of a decision.

The mechanism of split payments is planned to be used by entrepreneurs voluntarily. For this reason, the Minister has proposed several solutions aimed at inducing entrepreneurs to choose this way of settling invoices with contractors. The provisions of Section Xa of the VAT Act, which regulate the joint tax liability of the taxpayer with the entity delivering the goods, will not apply to users of the split payment mechanism. In addition to payments made by using the split payment, no additional penalties under art. 112b para. 1 pt 1 and art. 112c of the VAT Act will apply. These concern additional tax liability of 30% or 100% of input tax in the case of irregularities in the entrepreneur's tax declaration. Furthermore, if payment of VAT is made from the VAT account    before the due date, the amount of tax will be reduced by the amount calculated on the basis of the proposed formula (which will depend on the amount of tax, the reference rate of the National Bank of Poland and the date on which the tax liability is settled).

The draft Act is currently at the stage of evaluation, before being referred to the Parliament for further work. The change would be effective from 01.01.2018.

 

Source:draft Act amending the act on the tax on goods and services and some other acts dated 12.05.2017.