From 1 November split payment mandatory for selected transactions

Mandatory split payment mechanism MPP which entered into force 1 November 2019, will cover goods and services mainly subject to the reverse charge, i.e. transfer of the VAT settlement obligation from the seller to the buyer or tax liability.

The application of the compulsory MPP will enable the State budget to be protected against the risk of non-payment of VAT by the supplier, with second and the parties will release the counterparties from the risk of being involved in schemes that aim to extort this tax and increase the tax security of the transactions.

What will be covered by mandatory MPP

In particular, payments for:

• • fuel,
• • steel, steel products,
• • scrap, waste,
• • precious metals (e.g. gold, silver) and base metals (e.g. copper),
• • stretch film,
• • tablets, smartphones, consoles,
• • construction services,
• • parts and accessories for motor vehicles,
• • coal and coal products,
• • electrical machinery and equipment and parts and accessories thereof.

In addition to goods and services, generally covered by the current reverse tax burden and liability, due to the identified irregularities, the mandatory MPP will also cover other transactions. Their detailed list shall include Annex 15 to the VAT Act.

Inventories for amounts below 15,000 PLN will be settled on a general basis

When mandatory MPP is used

When invoices for transactions meet the following cumulative conditions:

• • the total charge that results from the invoice (i.e. the gross value of the entire invoice) exceeds 15,000 PLN,
• • Even one the invoice item concerns sensitive goods or services (defined in Annex 15 to the VAT Act),
• • the seller and buyer are VAT payers.

Inventories for amounts below 15,000 PLN will be settled on a general basis.

The issuer of the invoice to which the mandatory MPP is to be used must include an endorsement of the ‘shared payment mechanism’ which signals the obligation to apply this mechanism. The VAT payer who receives a VAT invoice with the endorsement of the ‘shared payment mechanism’ must pay the resulting charge in the MPP by means of a special transfer message. This applies only to the amount of receivable for the acquisition of goods or services which are covered by the compulsory MPP.

For infringements of the provisions introduced (mandatory invoice marking and payment in MPP) there are VAT penalties (additional tax liability of 30% the amount of tax shown on this invoice), in income taxes (loss of the right to charge expenses for the cost of obtaining income), as well as penalties laid down in the Tax Penal Code.

For whom necessary corporate accounts

Due to the entry of compulsory MPP, active VAT payers who provide services or supply goods (from Annex 15 VAT laws) and their purchasers will be required to hold a corporate bank account. Transactions covered by compulsory MPPs must be executed by clearing accounts established for business activity, i.e. corporate accounts.

Facilitation for all MPP users

Tax payers, both using voluntary and compulsory MPPs, from 1 November they can count on important business facilities. It's a possibility:

• • payment from the VAT account, in addition to VAT and VAT on invoices received from counterparties, also income tax, excise duties, duties, import VAT and ZUS contributions,
• • the use of an advance payment mechanism before the invoice is issued,
• • payment transfer one message for more than one invoice,
• • the use of MPPs for reciprocal deductions and offsettings.