Split payment was introduced into Polish law to reduce the VAT gap. When paying for an invoice via bank transfer, the VAT amount is transferred to a special sub-account of the payment recipient, from which the funds can only be used for a legally defined purpose.
Only VAT funds may be deposited into the VAT account. It may be debited for a specific purpose, including payment of VAT from a received invoice, payment of VAT, PIT, CIT, excise tax, customs duties, ZUS (Social Insurance Institution) and KRUS (Agricultural Social Insurance Fund) contributions. At the taxpayer's request, the head of the relevant tax office may decide to consent to the transfer of funds held in the VAT account to a bank account maintained for business purposes. However, consent will not be granted if:
- there is a justified concern that the tax liability will not be satisfied, in particular when the taxpayer persistently fails to pay the due liabilities related to this tax or undertakes activities consisting in the disposal of assets that may hinder or frustrate enforcement, or
- during tax proceedings conducted against the taxpayer, there is a justified concern that tax arrears will be determined or an additional tax liability will be established, or
- verification of the validity of the application submitted by the taxpayer indicates that there is a justified fear of tax arrears.
If a decision refusing to transfer funds is issued, the taxpayer has the right to file a complaint.
This method is only available for transactions between businesses. Any payment can be made using it, regardless of the amount or the goods or services for which it is made. However, since 2019, the legislature has introduced the obligation to pay using the split payment method when the invoice amount exceeds PLN 15,000 (or its equivalent in foreign currency) and the payment is for the purchased goods or services listed in Annex 15 to the VAT Act (including construction works, coal, steel products, mobile phones, and computers). Failure to use the mandatory split payment method has also been penalized in the Fiscal Penal Code and is punishable by a fine of up to 720 daily rates.
In addition to the sanction, the legislator also introduced incentives to use the split payment method.
- Taxpayers purchasing goods and services specified in Annex 15 to the VAT Act who paid for them using split payment are not jointly and severally liable with the entity making the supply for its tax arrears.
- In relation to taxpayers paying using split payment, the provisions on additional tax liability do not apply up to the amount corresponding to the amount of tax resulting from the received invoice paid using split payment.
- If a taxpayer applying the split payment mechanism has a tax arrears in the value added tax, the increased interest rate shall not apply if the taxpayer has indicated in the submitted tax return the amount of input tax of which at least 95% results from received invoices that were paid using the split payment mechanism.
- If the VAT liability is paid in full from the VAT account earlier than the tax payment deadline, the taxpayer may reduce the tax amount. The reduction is calculated by multiplying the tax liability amount as stated in the tax return by the National Bank of Poland reference rate applicable two business days before the tax payment date, and by the number of days from the date the VAT account was debited, excluding this day, to the date on which the tax payment deadline expires, including this day, divided by 360. The tax reduction amount is rounded to the nearest whole zloty, with amounts of less than 50 groszy rounded down and amounts of 50 groszy or more rounded up.
Although split payment is not mandatory in most transactions, it's worth considering the benefits of using it. Given the increasing oversight of payments by tax authorities (structured invoices, reduced cash payment limits), it's possible that the list of mandatory split payment cases may soon expand.
