If the government's proposal is accepted by the European Commission, the split payment system will become mandatory in some industries. These are economic sectors where there is a high risk of VAT fraud, such as the financial and construction markets.
The current rules assume voluntaryness in this respect, i.e. the purchaser decides whether to pay in a traditional way or in a split payment system. Split payment in optional version will apply from July 2018 The government would like the mandatory split payment to become a reality in the beginning 2019
The split payment system is an example of a "double-edged sword" in tax law. This mechanism is intended to prevent VAT fraud, but with second there is a risk of liquidity disruption for entrepreneurs, especially those who do not have more "free cash".
The split payment system is an example of a "double-edged sword" in tax law. This mechanism is intended to prevent VAT fraud, but with second there is a risk of liquidity disruption for entrepreneurs, especially those who do not have more "free cash".
The essence of the split payment system is the ‘freezing’ of the amount of VAT which the trader receives together with the remuneration for the goods or services. Payment for the VAT invoice is made on two accounts at the same time. One bank account is subject to an appropriate charge (excluding VAT) and second the account amount of VAT alone. The VAT account may be used to pay the VAT due to the tax authority or to pay the amount of VAT to another trader (also to the VAT account in the split payment system).
The main disadvantage is to reduce the amount of free resources that can be used for current accounts. If an entrepreneur makes a direct payment (e.g. in a supermarket) which does not have a form of bank transfer, he must pay the whole amount including VAT without the possibility of using his own funds on a VAT account.