Poland 2018: Voluntary VAT Split Payment

21.08.2017

On August 1, 2017, the Polish Ministry of Finance (MF) published an update to the draft amendment to the Value Added Tax (VAT) and to other relevant Acts, in particular the Banking Law of 29 August 1997.

VAT in Poland 2018

In short the following tax changes regarding VAT are expected to come to force in Poland next year:

  • Two different bank accounts for invoice payments (VAT account, general account)
  • Opt-in voluntary mechanism
  • Benefits for choosing VAT split payments
  • Only B2B sector covered and only bank transfers

With the introduction of a split payment mechanism in the VAT Act, the Polish Government hopes to reduce the VAT gap and increase the state revenue.

How does the VAT split payment works?

The split payment mechanism requires the VAT payer to establish two separate bank accounts:

  • a company bank account and

  • a VAT bank account. 

Payment for purchased goods or services may be split between these two accounts if the purchaser decides to opt-in to the split payment mechanism; the purchaser would thus pay the value added tax into the VAT account with the remainder net sales value paid to the supplier’s company bank account.  The supplier would have very limited access to the VAT account and thus, generally, would be unable to dispose of those funds freely. 

Moreover, the ability to voluntarily opt-in to the split payment mechanism means that it can be used selectively and thus, not every invoice will have to be subject to it (the split payment mechanism).

Polish Banking Law: VAT Account

As part of the draft amendment, provisions have been introduced to the Banking Law that require banks and credit unions to set up a VAT account for all VAT payers possessing a company bank account.

Additionally, the new updated draft amendment addresses the concern raised during the public consultation stage by the Polish Bank Association regarding foreign currency. This issue has been remedied and now it requires any payment into a VAT account under the split payment mechanism to be made in Polish Zloty.

VAT split payment only for B2B transactions

The VAT split payment mechanism will only apply to transactions between VAT payers (B2B transactions).  While, as mentioned above, the split payment mechanism is voluntary, the incentives for opting in may, in practice, result in constructively requiring its application by all VAT payers. 

Incentives for all VAT payers in Poland

These incentives for all VAT payers include the following:

  1. exemptions from sanctions and from joint and several liability as well as
  2. an accelerated (within 25 days) input tax surplus refund deadline.

Access to Polish VAT accounts

While the funds accumulated on the VAT account will always be the property belonging to the VAT taxpayer, such taxpayers will have very limited access to the funds collected on their VAT account(s). Generally, VAT taxpayers in Poland will only be able to use their VAT account to make transfers to other VAT accounts and to make VAT liability payments to the tax office.

Due to the fact that the draft amendment’s objective is to close up the loopholes in the VAT system and to ensure greater tax revenue stability, the Polish Ministry of Finance has clarified that it will not be possible to pay off other taxes using the VAT account.

Further information about the planned VAT split payment

It should be emphasized that there is no possibility of using the split payment mechanism where payment is made by any other means than by bank transfer (e.g., cash payment, credit card).

At the moment, public consultations on the published draft amendment are in progress. the MF hopes these changes will take effect on April 1, 2018.

If you would like some more information about these new changes regarding the VAT in Poland, please do not hesitate to contact our local tax experts in Poland!