The Ministry of Finance has published a draft act introducing an obligatory split payment mechanism for certain goods and services. New regulations are supposed to enter into force already as of 1 September 2019. The draft act has been adopted by the Council of Ministers and sent to Sejm.
The split payment mechanism was introduced to the Polish legal system on 1 July 2018. At present it is entirely voluntary. However, the presented draft act provides for the obligatory split payment regime for any supply of goods and provision of services listed in the new Appendix 15 to the draft act, replacing Appendices 11, 13 and 14.
Which goods will be covered by the obligatory split payment?
The scope of goods and services covered by the obligatory split payment mechanism shall be based on groups defined in the Polish Classification of Goods and Services (PKWiU 2008, and for computers and other machines for automatic data processing with reference symbol 26.20.1: PKWiU 2015, by way of exception; at this point it should be emphasised that legislative works are under way to replace the reference to PKWiU 2008 with a reference to the Combined Nomenclature (CN) in the case of goods and to PKWiU 2015 in the case of services.
Goods and services included in Appendix 15 to the draft act, as subject to the obligatory split payment mechanism, can be broken down into the following categories:
- electronic equipment,
- steel products and scrap,
- base metals, precious metals and jewellery,
- waste and recyclables,
- fuels and oils,
- chemical products and plastics,
- automobile and motorcycle parts,
- services of transferring greenhouse emissions allowances,
- construction services.
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Who will be covered by the obligatory split payment mechanism?
The introduced obligatory split payment regime shall apply to transactions of supply of goods and provision of services only between taxpayers (B2B), provided that the value of such transactions exceeds PLN 15,000 gross. Just like it is the case now, this regime will cover only online bank transfers; hence, it shall not apply to other forms of payment.
As a result, taxpayers who supply goods and perform services included in Appendix 15 to the draft act are obliged to hold a settlement account in a bank operating on the territory of Poland. Only such banks are subject to the Polish jurisdiction and are technologically prepared to handle split payments.
Under the split payment mechanism, tax payments shall be made only in Polish zloty. Thus, we recommend that you analyse your trade contracts, the reason being that it may be necessary to make some changes in the settlements between the parties.
Reverse charge and joint and several liability
Following the introduction of new Appendix 15 to the draft act, earlier Appendices 11 and 14 will become obsolete as the reverse charge mechanism applied to the supply of goods and provision of services indicated in these Appendices shall be replaced with the split payment mechanism.
However, the draft act stipulates that for transactions below PLN 15,000 gross, the purchaser of goods indicated in Appendix 15 shall be jointly and severally liable with the vendor for any tax arrears related the purchase, unless he or she applies the split payment regime.
Sanctions for a failure to apply the split payment mechanism
If the vendor is found to have failed to include a ”split payment mechanism” note in the invoice despite the fact that the transaction is subject to the obligatory split payment mechanism, the tax authority shall impose an additional tax liability on the vendor in the amount of 30% of the tax shown in the invoice.
The sanction in the amount of 30% of the tax shown in the invoice shall be imposed on the purchaser, as well if they pay for such invoice outside the split payment regime despite the obligation to pay the VAT indicated in the invoice within the split payment regime. In addition, the amount of such transaction shall be excluded from tax deductible costs for income tax purposes.
The authors of the draft act have also provided for an amendment of the Penal and Fiscal Code, namely the act of rendering a payment outside the split payment mechanism shall be penalised. Pursuant to the draft act, it may be a fine in the amount of up to 720 daily rates, i.e. a maximum of as much as PLN 21,600,000. The final amount of the fine shall be decided upon by the court.
Therefore, it is highly recommended that you prepare your accounting systems for making effective payments to VAT accounts, as well as for issuing correct invoices with a note on the obligatory split payment regime.
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Should you have any questions or need to discuss the topic, we encourage you to contact out expert, Daniel WIĘCKOWSKI: