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How to Apply the Split Payment Mechanism – Explained by the Ministry of Finance

On its website the Ministry of Finance has published the long-awaited tax explanations about the application of the mechanism of split payment between value added taxpayers. We should remember that as of 1 July 2018 entrepreneurs are entitled (but not required) to make payments with the use of this type of settlement system. In our earlier posts e.g.: 11/20187/201820/2017 and also in our blog we wrote about what a split payment is, its major objectives and benefits which come from using the mechanism.

When publishing the document in question, the Minister of Finance used a relatively new right that could be exercised as of 1 January 2017 on the basis of Art. 14a, § 1, Clause 2 of the Tax Ordinance (Journal of Laws of 2018, item 800, as amended). The major purpose of official tax explanations is to address the doubts related with the application of the tax law provisions and to ensure their uniform application. Now, how do they differ from general interpretations? First and foremost, they differ in the fact that, apart from the law interpretation, they contain practical explanations with sample situations.

Long before the regulations concerning the mechanism of split payment (hereinafter referred to as “MSP”) came into effect, the Ministry of Finance noticed the need to explain them and announced the issuing of extensive explanatory notes in this area. What needs to be emphasized is the fact that compliance with the analyzed explanations will ensure that the same legal protection is warranted for a taxpayer as by tax interpretations. This means that a taxpayer that has followed the guidelines given in the explanations should not suffer any adverse consequences resulting from a different opinion of the tax bodies.

Not that much into finance and taxes but overwhelmed by documents you’re not sure how to read?

The major objective of the published explanations is to present the mechanism underlying a new form of settlement such as the mechanism of split payment. Explanations provide answers to numerous questions that have been raised in the course of public consultations, including, but not limited to,

  • The application of SPM to settlements made in forms other than bank transfer (e.g. by debit card);
  • Making collective transfers;
  • SPM payment of a partial amount of an invoice;
  • Incorporation of provisions in contracts or agreements that impose a ban on SPM settlements;
  • Course of action when corrective invoices have been issued;
  • Transfer of funds from a VAT account to another VAT account;
  • Release of funds from a VAT account;
  • SPM payment into an account held by an entity other than a supplier/ service provider.

The explanations have also addressed questions connected with a transfer message, allowance for bad debts, cash collection method, intra-supply of fuels, benefits from the application of the split payment mechanism, SPM in local government units, state administrative entities and also new specimen tax forms.

The fact that with its official tax explanations the Ministry of Finance has made an attempt to dispel any doubts related with the application of SPM should certainly be appreciated. However, there are still issues hanging in the balance. It has only been several weeks since the introduction of MSP. Yet, it is too early to decide whether split payment has met the expectations of the Ministry of Finance.

Soon, our experts will conduct a detailed analysis of the guidelines included in the explanations. We will consider them in terms of content and also technical and, above all, practical aspects. We will present to you a series of posts where we will answer your most frequently asked questions regarding the application of the split payment mechanism. We would be happy if you follow our blog.


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If you have any questions or need to discuss the topic, you are strongly encouraged to contact our expert, Przemysław POWIERZA:


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