The obligation to use split payment (1 November 2019)

update:  18 July 2019

We are writing to inform you that the Polish Prime Minister Mateusz Morawiecki has publicly declared that the introduction of the mandatory split payment mechanism in certain industries will be postponed. Instead of the originally planned 1 September, it will go live two months later, that is, on 1 November 2019.

This declaration answers numerous objections of enterprises as to the effective date. They have been voicing mainly the problems with adapting finance and accounting software to the new legal requirements.

Please note that the PM's declaration is only about the effective date. As regards the legal solutions and the industries to which the mandatory split payment applies, the government plans no changes to the draft legislation which we have already discussed.

We will keep you posted on further developments of this VAT legislation. Please do not hesitate to contact us in case of any questions or doubts.

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15. July 2019

New regulations on mandatory split payment for certain transactions will come into force as soon as 1 September 2019.

Pursuant to the bill which landed in the lower chamber of the Polish parliament (Sejm) on 9 July 2019, goods and services which have so far been taxed in the reverse charge procedure are now supposed to be taxed on general principles but invoices exceeding PLN 15 thousand (gross) will have to be paid in the split payment procedure.

According to the bill, the mandatory split payment mechanism will apply to:

• steel products;
• waste and scrap and recycled materials;
• electronic equipment and certain accessories (processors, mobile phones, computers, tablets, inks, toners, HDDs and SSDs);
• spare parts and accessories for cars and motorcycles;
• fuels for combustion engines, heating oils and lubricating oils;
• construction services.

An additional obligation which is to be introduced to the act is to add the words “split payment” to invoices.

You will be allowed to pay collectively for all invoices received from the same supplier during a month.

Another obligation imposed by the bill and important from the taxpayer’s point of view is that taxpayers covered by the split payment laws (that is all, regardless of the place
of establishment) must have a bank account in the Polish currency.

The bill provides for a reimbursement of the costs of maintaining the bank account to taxpayers not established in Poland or not having a fixed establishment in Poland.

Please note in particular that failure to comply with the obligations imposed by the bill will involve stringent sanctions:

• in the case of a buyer who does not use the split payment mechanism despite being obliged to do so – sanctions in the form of:
  - disqualification of the expense from tax-deductibility (from January 2020),
  - an additional tax liability of 30% of the VAT amount shown in the invoice if the seller fails to pay the entire tax amount shown in that invoice;
  - a criminal sanction, i.e. a fine of up to 720 day-fine units (in 2019 this may reach up to PLN 21.6 million);
• the seller who does not include the mandatory split payment note on the invoice he issues – consequences in the form of an additional tax liability of 30% of the VAT amount shown in the invoice.