Tax Partner at RSM Poland
In my last post on the blog, I answered the most frequently asked questions that may crop up when analysing the benefits and drawbacks of the split payment mechanism. If you answered ‘yes’ to the fundamental question whether to use the split payment or not, this post will help you prepare for the proper introduction of the SPM in your organisation. But stay calm, even if you have made this decision, it does not mean that it is written in stone, as the purchaser has the freedom of deciding on how often and how he is going to apply the SPM.
IS EVERY ENTREPRENEUR OBLIGED TO HAVE A VAT ACCOUNT?
Yes, the bank has an obligation to open a dedicated VAT account for every entrepreneur who has a business account in a given bank (or a personal account in a SKOK (Cooperative Savings and Credit Unions))*. There is no way to avoid this; however, the very opening and running a VAT account is free of charge and does not require any applications or additional contracts. A VAT account is not an independent bank account; it functions only in connection with a business account kept for business purposes. A VAT account cannot be opened e.g. for a current account (hereinafter referred to as ROR) used in business operations.
CAN I HAVE MORE THAN ONE VAT ACCOUNT IN A GIVEN BANK?
Yes, all you have to do is apply to the bank for additional VAT accounts. As a rule of thumb, irrespective of the number of accounts kept in a given bank, the taxpayer shall have only one VAT account opened automatically and linked to all accounts kept in a given bank. And there is nothing standing in the way of an entrepreneur having more than one VAT account in a given bank. Every additional VAT account is opened and kept free of charge; let us bear it in mind, however, that money transfers made in the SPM regime cost as much as any other transfers. Therefore, handling many VAT accounts is going to generate additional costs and may prove burdensome.
DO I HAVE TO PROVIDE MY VAT ACCOUNT NUMBER TO THE TAX OFFICE AND MY BUSINESS PARTNERS?
No, a taxpayer is under no obligation whatsoever to notify the tax office about his VAT account number on a tax identification number form or any other way. And there is no obligation to inform your business partners about your VAT account number.
CAN I MAKE A PAYMENT TO MY BUSINESS PARTNER’S CURRENT ACCOUNT USING THE SPM?
No, any payment in the split payment regime can only be made to the supplier’s business account. If a purchaser makes a payment to a ROR type account applying the SPM, this transfer will be rejected and the payment will not be made (the money will be returned to the purchaser’s bank account). This means you cannot apply the split payment regime for settlements with an entrepreneur who only has a current account.
DOES MAKING A PAYMENT UNDER THE SPM MEAN THAT I HAVE TO MAKE TWO SEPARATE TRANSFERS (ONE TO A REGULAR ACCOUNT AND THE OTHER TO A VAT ACCOUNT)?
No, you just have to make one transfer through choosing a special transfer message. The split payment option is provided by the bank in the same way as when paying social security contributions and taxes. The transfer message must include:
- the VAT amount (or a part thereof);
- the gross sale amount (or a part thereof);
- the invoice number that is being paid;
- the supplier/service provider’s VAT number.
If you fail to complete any of the above fields, the transfer will not be made. If you complete the transfer message correctly, the bank will automatically split the payment and transfer the amount of VAT indicated in the message to the supplier’s VAT account, and the remaining amount to the business account.
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CAN I MAKE A PAYMENT UNDER THE SPLIT PAYMENT MECHANISM WITHOUT AN INOVICE?
No, any payment under the SPM requires a corresponding invoice. The Ministry of Finance explains that owing to such a payment design in the split payment system, the tax office will be able to trace a given VAT amount to a specific invoice. The design of the transfer message is such that the entrepreneur must provide the invoice number anyway.
HOW TO PROCEED WITH CORRECTING INVOICES?
If you have received a correcting invoice from your business partner increasing/reducing both the taxable base and the amount of tax already before paying the original invoice, it is possible to make a payment under the SPM resulting from both invoices using a single transfer message. In the transfer message, you have to enter the original invoice number indicating the gross amount and the VAT amount resulting from the correcting invoice connected to this invoice.
IS IT POSSIBLE TO MAKE BULK TRANSFERS UNDER THE SPM?
No, you can make a payment for one invoice only in a single transfer under the SPM. Making a bulk transfer is technically possible, though, as you can enter one VAT invoice number and the amount of tax actually resulting from 200 invoices, because the bank does not verify the correctness of the entered data. I do not recommend this, however, as it involves many risks. Firstly, the taxpayer is going to lose all the privileges resulting from this form of payment. The tax authority may challenge the right to deduct the tax paid this way. What is more, if the supplier fails to pay VAT on these additional invoices, the purchaser may be held jointly and severally liable for VAT (this pertains to sensitive goods mentioned in Appendix no. 13 to the VAT Act). The problem with bulk transfers can be solved by ordering the bank to make a ‘transfer package’, provided that the accounting system is connected with the banking system. In such a case, the entrepreneur may generate a ‘package’ with information about these 200 invoices, and then the bank itself will make 200 transfers under the SPM. However, you would have to pay extra for this solution, as it means generating 200 separate transfers (even if in one series).
HOW TO TRANSFER FUNDS FROM A VAT ACCOUNT TO ANOTHER VAT ACCOUNT OR A BUSINESS ACCOUNT?
The entrepreneur may, at any time, request the head of the tax office to approve a transfer of funds from his VAT account to the business account linked with this VAT account. A request for the release of funds must include the following:
- VAT account, from which the funds are to be released;
- business account /account in a SKOK to which the funds from the VAT account are to be transferred (it can only be a business account /account in a SKOK for which this VAT account is kept);
- amount of funds accumulated on the VAT account that is to be transferred.
The head of the tax office shall, within a maximum of 60 days (from the day of request receipt) either approve or deny the transfer of funds from the VAT account. If the tax office does not identify any risks, they shall release the accumulated funds. When can the authority refuse? If the entrepreneur has tax arrears of VAT or if there is a justified concern that the tax will not be paid. The funds accumulated on the VAT account that are to be released upon request are not being blocked on the account. In the time in which the head of the tax office is considering the taxpayer’s request, he may continue to manage the accumulated funds in accordance with the rules and principles concerning the VAT account. If on the date of the release of the funds, the amount on the VAT account is lower than the one requested by the entrepreneur, the bank will simply transfer the amount that is available. The funds accumulated on one VAT account may be transferred to another VAT account within the same bank. There is no option, however, of transferring funds between your VAT accounts created in different banks.
I will try to answer the remaining questions in the next part of our series; therefore I encourage you wholeheartedly to follow our website.
*All the aspects discussed above and concerning banks (business accounts) apply to SKOKs, as well (personal accounts in SKOKs).
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