Split payment continues to expand

The split payment mechanism in the tax on goods and services is from 1 July 2018 VAT on a voluntary basis[1]. However, the Ministry of Finance concluded that it did not interface with another mechanism – the reverse charge.

Therefore, he decided to introduce a split payment in selected industries in place of the so-called reversed VAT – a system in which the buyer and not the supplier is obliged to settle this tax. The Ministry estimates that more than half will have to adapt to such a change one million VAT payers.

It has therefore been confirmed to some extent that entrepreneurs are expected that the split payment mechanism will be a requirement introduced by the State[2].

Introduction

On 16 May 2019 on the website of the Government Legislative Centre published a draft amendment of the VAT Act and some other laws 3 , concerning the compulsory replacement of the reverse charge mechanism by split payment, the essence of which is to pay by the purchaser all or part of the net sales value to the clearing account of the supplier or service provider, and the amount corresponding to all or part of the tax resulting from the invoice received, to its separate VAT account[4].

The justification for the regulation indicates that the objective of the reverse charge is to prevent VAT fraud, but in practice not only fails but creates problems and irregularities[5]. The new rules are to further seal the tax system and eliminate the carousels on the tax on goods and services.

Amendments are possible after Council Implementing Decision (EU) Directive 2019/310 to 18 February 2019, authorising Poland to introduce a specific measure derogating from Article 226 Directive 2006/112 on the common system of value added tax[6].

Mandatory split payment – what goods and services, what transactions?

The split payment mechanism will therefore replace the reverse VAT burden for the acquisition of goods and services listed to date in Annex 11, 13, 14 the VAT Act – i.e. those to which VAT has already been applied inverted, as well as subsequent VAT, as defined in the newly created Annex 15 7 .

The justification for the project points out that the introduction of subsequent categories of goods subject to reverse charge would not make much sense, since tax fraud would have found other areas, other industries in which they could extort VAT after such decisions.[8].

The guarantee deposit will be liquidated, which, according to the Ministry of Finance, does not take the test either – it is not an effective safeguard tool for entities involved in VAT carousels that carry out transactions in goods subject to joint responsibility.

It may now be lodged with the tax office by the entity supplying the goods in question In Annex 13 to the VAT Act Act – it provides a security for payment of the tax, together with interest on late payment in respect of these supplies and resulting from the payment of the guarantee of tax arrears[9].

Split payment will be mandatory if the one-off value of the transaction, regardless of the number of payments resulting from it, exceeds 15,000 PLN or the equivalent of that amount. Payment of ZUS contributions, income taxes, excise duties and customs duties can be adjusted from the VAT account[10].

The impact assessment of this regulation lists the following services and goods covered by the split payment mechanism: services for the transfer of greenhouse gas emission allowances; construction and construction and assembly services; steel and steel products; metals and articles thereof; precious metals and articles of these metals, jewellery, pearls, precious stones; electrical machinery and equipment and parts and accessories thereof; electronic equipment and parts and accessories thereof (tablets, laptops, notebooks, mobile phones, cameras, digital cameras, processors, video game consoles and devices, memory devices, semiconductor devices); fuels; coal and carbon products; waste materials, scrap, waste; animal and vegetable oils and fats; inserts into equipment, including cassettes, toners, ink, and the like; plastics and articles made from them, particularly stretch films; parts and accessories for motor vehicles and motorcycles.

Penalties for non-compliance with the obligation to apply split payment

According to the draft invoices documenting transactions concerning the goods listed In Annex 15 (as the Ministry of Finance points out – particularly sensitive to tax fraud) should include an endorsement: "the mechanism of split payment" 11 .

In the absence of such a designation, the head of the tax or tax office shall fix an additional tax liability equivalent to 100% amount of tax shown on this invoice[12]. The same penalty will be imposed on purchasers of the goods if they do not apply the split payment mechanism when payment of the invoices is made.

In turn, income tax payers will not be able to include the cost of obtaining revenue in the part in which the payment will be made without split payment[13]. A taxpayer who, contrary to the obligation, will pay the amount of duty resulting from the invoice without the split payment mechanism, will be fined until 720 daily rates.

The Act is to enter into force except for certain provisions, 1 September 2019

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