By Dr. Robert Lewandowski, attorney at law (radca prawny) from the legal firm DLP Dr Robert Lewandowski & Partners sp. k.
In July 2018 the Polish Legislator introduced into the Polish legal system the so-called split payment which refers to the mechanism of divided payment of VAT within settling invoices subject to VAT and which also applies to pre-payments. The main purpose of the new changes are designated to limit tax fraud among entrepreneurs. As the general rule and the initial concept beyond this regulation, the split payment of VAT should be voluntarily and every entrepreneur holding bank account received an additional (dedicated) bank account for VAT purposes, however, the use of split payment bank accounts was used by entrepreneurs reluctantly.
As from 1st November 2019, the split payment of VAT will be binding and encompass among other things some goods and services (for instance construction services, sale of secondary raw materials) enlisted within appendix 15 to the new tax regulation. However, not all transactions on the market will be subject to the split payment and this will depend on the value inherent for the transaction in question. For instance, if goods or services provided within appendix 15 will be lower than PLN 15 000 within a transaction, VAT split payment will not apply and remains still voluntarily. There may be some doubts as to the interpretation of the term “transaction value” and the term should be rather constructed as the value of the entire receivables and obligations resulting from a contract concluded between entrepreneurs. Therefore if the value of a contract for delivery of goods or services will amount to 100 000 PLN in total and payments will be provided through many invoices subject to less than 15 000 PLN each, then payments for all invoices issued within this transaction should be made within split payment of VAT as the entire value of the contacts exceeds the amount of PLN 15 000.
The new law imposes also an obligation on companies which provide goods and/or services subject to split payment of VAT to open a bank account with a bank or recognized credit institution. The invoice issued within the split payment system should also include a visible reference that the payment will be provided within the “mechanism of split payment”. The Polish legislator has also foreseen penalties for entities in the event of their failure to adhere to the new regulations in the amount of 30% of the tax amount in question.
Should you seek any further questions on this matter please contact us at the following email address: office@drlewandowski.com
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