JGA and Raiffeisen Polbank provides training for entrepreneurs in the area of split payment

JGA, at the invitation of Raiffeisen Polbank, conducted workshops for the SME sector on the topic of split payment – a mechanism for divided payment.

The workshop was led by Partner Marcin Piątek. The split payment mechanism, in conjunction with increased activities of tax authorities and stricter regulations penalising actions resulting in unlawful reduction of public revenue, is intended by the legislator to strengthen the VAT system.

The essence of the split payment mechanism is to divide the price for goods or services into a net amount, which is paid by the buyer to the seller’s current account, and the value of VAT, which is to be deposited into a dedicated VAT account.

As a result, the payment of the VAT amount due will effectively take place on the day of payment for the goods. The split payment mechanism can be applied in B2B transactions settled via bank transfers. Settlements within the split payment system will not be possible for payments made by card or in cash. The buyer can decide whether to make payment for the service or goods in a traditional manner or by utilising the split payment mechanism. A taxpayer making VAT payment to the dedicated VAT account can expect a reduction in penalties provided for in Article 112b and 112c of the VAT Act. Joint and several liability of taxpayers is also excluded in this case.

The proposed solutions systematically restrict taxpayers from freely disposing of the VAT amount. The VAT amount indicated on the invoice, in the case of the buyer utilising the split payment mechanism, will be transferred to the seller’s VAT account and thus be “reserved” solely for settling that specific VAT. The restrictions set forth in the law regarding the use of funds accumulated in each taxpayer’s VAT account can, in practice, limit the financial liquidity of businesses.

The new regulations will come into effect starting from 1 July 2018.