On the 1st November 2019 the obligatory split payment mechanism was introduced. This mechanism replaced the previously applicable VAT reverse charge mechanism. Under reverse charge mechanism, the recipient or the buyer of goods or services mentioned in Appendix no. 11 and 14 to The Goods and Services Tax Act of 11 March 2004 (‘VAT Act’) was obligated to pay the tax (this system particularly concerned subcontractors for construction services).
The current split payment mechanism consists in the fact that in transactions between entrepreneurs, the payment made is divided between two accounts – the net amount is transferred to the regular bank account, and VAT amount is transferred to the VAT account associated with the regular bank account. The split payment mechanism will be mandatory if all the following conditions are met:
– the transaction is carried out between VAT taxpayers,
– the value of the transaction, regardless of the number of payments, exceeds PLN 15,000 or its equivalent,
– the transaction relates to supplies of goods and services listed in Appendix no. 15 of the VAT Act (this Appendix includes in particular, goods and services previously subject to the reverse charge mechanism in accordance with Appendix no. 11 and 14 to the VAT Act, e.g.: construction works associated with constructing residential and non-residential buildings; works related to the installation of: electrical, plumbing, ventilation, air-conditioning and gas installations; finishing works).
For transactions not exceeding PLN 15,000, the split payment mechanism is voluntary.
The invoice documenting the transaction covered by the mandatory split payment mechanism must include the annotation: “mechanizm podzielonej płatności” (“split payment mechanism” in Polish).
The lack of annotation mentioned above will result in a fine being imposed on the seller in the form of an additional tax liability in the amount of 30% of the VAT amount resulting from that invoice. The same fine may be imposed on the buyer who, despite the obligation to use the split payment mechanism, makes the payment in a different way. The sanction will not be imposed if the seller, despite omitting the split payment mechanism, will account the whole VAT amount resulting from the invoice. A payment made without the mandatory split payment mechanism will result in inability to include this payment in the tax-deductible costs. In addition, omitting the split payment mechanism, may also result in the imposition of a fine based on the Penal Fiscal Code.