EXLIBRA - Co to jest split payment? Kogo obowiązuje mechanizm podzielonej płatności? 29.08.2019

What is split payment? Who is the split payment mechanism for?

Split payment functions in such countries as the Czech Republic, Turkey, Italy. From July 1, 2018, the so-called split payment mechanism can also be used for VAT invoice payments for  in Poland. From today’s article you will learn what split payment is and who it applies to.

What is split payment?

Split payment is defined as the mechanism of split payment, which consists in settling the payment for goods or services by transfer, where the payment does not go to a single recipient’s account, but instead it is divided into the net amount and VAT. The money received from the buyer is transferred to two separate bank accounts of the supplier – the net amount to a regular company account and the VAT amount to a designated VAT account.

The funds on the VAT account are indeed owned by the entrepreneur, but access to them is limited. They can only be used to settle VAT obligations arising in relation to the tax office, to pay part of the VAT to the contractor, and their withdrawal by the entrepreneur is only possible after submitting the application to the head of the tax office. This application should include the amount to be paid. Transferring funds from the VAT account to the settlement account takes place only after the head of the tax office has granted consent for it, and the latter has 60 days to consider the application submitted by the entrepreneur.

When can the split payment mechanism be used?

Split payment has been operating in Poland since July 1, 2018 and its application is voluntary. This will change from November 1, 2019, when the provisions imposing the obligation to use the split payment method for making specific deliveries or sales will come in force. However, we will write about this later in the article.

The split payment mechanism applies only to transactions between entrepreneurs and transactions carried out by transfer in Polish zlotys to other VAT payers. The split payment method cannot be used if you are a consumer who does not run a business, an entrepreneur who receives invoices without VAT or if the settlement is made in cash or by card. The split payment mechanism also cannot be used by entrepreneurs in the field of invoices covered by the reverse VAT charge mechanism in the construction industry or the so-called sensitive industries (electronics, steel, non-ferrous metals) until November 1, 2019.

The buyer decides about the application of the split payment mechanism, when, while making the transfer, he or she can pay the entire gross amount into one account or divide the payment into the regular account and the VAT account. Some invoices can be paid in the traditional way, and some with split payment. The seller may stipulate in the contract with the buyer that he does not wish to use the split payment method, and then the payment in the gross amount should be effected to a single account only.

Who will be subject to the split payment mechanism from November 1, 2019?

November 1, 2019 will bring many changes to the current split payment model. The most important of these will be the obligation to use the split payment mechanism for the supply of goods and services that are covered by the reverse charge regime and joint and several liability. This group includes: fuels, steel and steel products, scrap and waste, precious metals, e.g. gold or silver, and base metals, e.g. copper. The obligatory split payment will also cover payments for parts and accessories for motor vehicles, coal and coal products, machinery and electrical equipment, their parts and accessories, as well as tablets, smartphones, consoles and construction services. The full catalogue of items covered by the split payment method can be found in one of the annexes to the VAT Act.

It is worth noting that the obligatory split payment will only apply to invoices with gross value in excess of PLN 15,000 (or the equivalent of this amount) and listing transactions in the goods and services listed in the said Annex. Pursuant to these provisions, invoices for amounts below PLN 15,000 will be subject to settlement on general principles, however, the buyer will be able to voluntarily use the split payment method.

An important change for suppliers is the obligation to put a sign informing that due to the subject of the transaction and the value of sales, payment for the service should be made using the split payment mechanism directly on the invoice. Lack of such information will result in a fine of 30% of the tax amount indicated on the invoice.

Split payment mechanism – what do you need to know about it?

Are you among the entrepreneurs who will be obliged to make payments using split payment and are wondering how to make a transfer using split payment method? We have prepared an instruction, from which you will learn how to create a VAT account and how to use the split payment mechanism.

1. VAT Account

It is required to receive payments in the split payment method. Currently, there is no need to submit an application for opening a VAT account, as it is created automatically when opening a company bank account. One free VAT account is opened for each regular account set up for the company. Only funds that constitute VAT payments for invoices paid by bank transfer using the split payment mechanism, funds transferred between own VAT accounts within one bank, as well as funds refunding the VAT amount made by the tax office may be paid into this account.

2. Transfer using split payment mechanism

Payment using a split payment mechanism does not require two separate transfers. If you wish or need to pay for a service or goods using the split payment method, you can do it with a special transfer message that has been in use since July 1, 2018. In this message, you provide the amount of VAT, the gross amount for sales, the number of the invoice for which the payment is made, as well as the VAT number of the supplier. The sent transfer is automatically divided into the net amount and VAT and goes to two recipient’s accounts. The bank will transfer the VAT amount from your VAT account, and if it is higher than the account balance, the remaining part will be debited from a regular account, which will also be used to debit the net invoice amount.

One should keep two important things in mind, when paying with the split payment method. You settle each transaction separately. In the case of the split payment method, you cannot pay the liabilities from several invoices at the same time. You can only pay for one invoice with a split payment mechanism transfer at a time, and pay for each subsequent one with a subsequent split payment mechanism transfer. If the transfer returns to your company account, it means that the supplier indicated a private account on the invoice, and not a company account. In this case, you can pay for the service or good only with means of a traditional transfer.