Tax Partner at RSM Poland
Last time I focused on answering a lot of technical questions that have emerged in the wake of introducing a new form of settlement, namely the split payment mechanism. In today’s post, I will continue with this topic, hence we will take a closer look at the remaining issues that raise doubts.
How do I send my payment to the tax office?
The operating principles behind sending your VAT payment due to the tax office are the same as before; you have to use a standard tax transfer template offered by the bank, where you have to select an appropriate tax form symbol, e.g. VAT-7, VAT-7K. The bank will first collect funds from your VAT account. However, if the funds accumulated on the VAT account are not sufficient to pay the tax bill, the bank will collect the amount that is missing from your business account. The situation is the same if there are no funds on the VAT account. In such a case, the bank will collect the entire amount from the basic account. This means you cannot pay your VAT bill using the split payment transfer template; any such transfer will be returned to the sender.
Is it possible to make advance payments on the basis of a pro-forma invoice under the SPM?
No, the split payment mechanism can be applied only to transactions documented with an invoice. However, it is usually the case that the entrepreneur makes an advance payment on the basis of a pro-forma invoice prior to the supply of goods or provision of services, and only then receives an invoice. In such a case, the SPM cannot be applied, because a pro-forma invoice is not an invoice within the meaning of the provisions of the VAT Act (hereinafter referred to as the VAT Act). In order to make an advance payment using the split payment mechanism, the entrepreneur must know the invoice reference number; otherwise, he cannot complete the wire transfer template correctly.
How do i proceed if the invoice includes different VAT rates?
Under the SPM, in order to make a payment of part of the amount of the invoice that documents the purchase of goods or services with different VAT rates applied, the entrepreneur has to calculate the amount of VAT due himself. The bank will transfer the amount indicated by the purchaser in the transfer template to the seller’s account.
Is it possible to make instalment payments under the SPM?
It depends. If the entire amount has been invoiced in a single invoice document – yes, the entrepreneur may apply the SPM when paying every instalment. What you need to do is enter the reference number of this invoice in the transfer template, providing the gross amount of the instalment and the amount of tax included. This also applies to cases in which an invoice includes transactions with different VAT rates applied. Under the split payment scheme, it is not possible, however, to make a payment that pertains to instalments resulting from agreements and arrangements made with suppliers under which there are new deadlines and repayment amounts resulting from many different invoices. The reason behind this is that in such a scenario the payment cannot be traced to a specific invoice reference number that must be provided in the transfer template at all times.
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What should I do if I transferred a miscalculated tax amount to the VAT account of my business partner?
The assumption behind the SPM is that the purchaser has the right to pay the amount indicated in the invoice either in its entirety or in part. For this reason, the bank is under no obligation whatsoever to check if the amount of VAT provided in the transfer template is the same as the one indicated in the invoice. If you have transferred an amount that is higher than the tax due, there is no option of refunding the overpaid amount from the VAT account. The entrepreneurs should agree among themselves that the seller will return this amount from his business account to the purchaser. It is a different story, however, if the paid amount arises from an invoice to which a correcting invoice has been issued; in such case the overpaid amount can be refunded from the VAT account.
What should I do if I transferred the amount of tax to the vat account of the wrong business partner?
If the purchaser makes an erroneous transfer under the SPM scheme to the account of an entrepreneur other than the supplier or service provider, both entrepreneurs, the purchaser and the entrepreneur who has received the payment alike, shall be jointly and severally liable for any tax due on this payment. It means that the tax authority will have the right to claim VAT from the recipient of an undue transfer should the supplier fail to account for the tax for any reason. Therefore, it is in the interest of both entrepreneurs to ensure that the tax reaches the appropriate VAT account and is paid to the tax office. In order to be released from the joint and several liability, the recipient of an undue transfer should immediately return the money to the VAT account of the entrepreneur who has transferred it.
Can I request a tax refund to be deposited to my VAT account?
Yes, the SPM offers an option of having a refund of the surplus of the input tax over output tax deposited to the VAT account within an expedited deadline of 25 days running from the date of VAT return. The term of 25 days is the maximum deadline, and it cannot be extended by the head of the tax office. The entrepreneur who has not made any payments under the SPM at all can request a refund to be deposited to their VAT account, as well. In order to have a tax refund deposited to your VAT account, you have to tick a relevant box in the VAT-7 or VAT-7K return form (under item 68), and provide the amount you wish to be transferred to the VAT account (under item 58). Here we would like to draw your attention to the fact that some accounting systems automatically tick the box under item 58; therefore, it is a good idea to check what you are actually requesting. If the refund is deposited to the business account, the deadline and the rules and principles remain the same as before. What is important, you can choose only one type of refund. This means that the entrepreneur cannot request (within a single tax return) a part of the surplus to be deposited to the VAT account and the remaining part to the business account. Therefore, if the entrepreneur’s VAT return shows a surplus of the input tax over output tax, the entrepreneur has the right to:
- request the tax refund to be deposited to his VAT account (by ticking an appropriate box in the VAT return) within an expedited deadline of 25 days, or
- request the amount of the difference to be refunded to his business account within a standard term of 60 days.
Therefore, if you are not making any payments under the SPM scheme, having your tax refund deposited to the VAT account will not be a good thing, because the options of using the funds accumulated on the VAT account are greatly limited.
Does any payment received under the SPM cancel bad debt relief?
No, even if the purchaser transfers only the amount of tax to the business partner’s VAT account, and does not transfer the net amount, the seller can still enjoy bad debt relief. The Ministry of Finance assures that the SPM is an additional payment method that does not affect bad debt relief in any way. After 150 days from the date of payment, the seller may recover the tax that has already been paid to the tax office. The part of the payment that has been transferred under the SPM shall be proportionately settled for bad debt relief to be applied. The transferred amount, equal in value to the VAT indicated in the invoice, shall be proportionately counted towards VAT and a partial payment of receivables. In such a case, the seller will apply the bad debt relief in the part corresponding to the unpaid receivables. The purchaser shall, in turn, adjust (i.e. reduce) the input tax he has deducted.
Is this all as regards doubts that arise in the wake of the introduction of the split payment mechanism? Unfortunately, not. I will soon discuss the remaining ones along with the benefits of using the SPM; therefore I warmly encourage you to follow our blog.
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