Everything you need to know about Poland's Split Payments regime
On July 1st, 2018, Poland is set to implement a Split Payments system for VAT, in the hope of preventing VAT fraud within the country.
How does Split Payments work?
The Net amount of B2B (business to business) payments are transferred to the regular bank account of the supplier, and the VAT amount is sent to the supplier's special VAT account. This system impacts B2B payments in PLN when the companies have local bank accounts. This includes companies not established in the country.
Should I open a special VAT Account?
No - Your bank will automatically open a VAT Account for you as a sub-account to your general one.
Is there extra information needed?
Yes - additional information about the supplier will be required when making a payment using the Split Payments regime. The supplier's VAT number, the Net and VAT amounts, and the invoice numbers will have to be indicated when making the transfer.
What are the benefits of using the mechanism?:
- If you are eligible for a VAT refund, it will be transferred to you within 25 days if you request it to be transferred to your VAT account.
- Your VAT liability will be decreased (using a formula prescribed by the authorities) if the payment is made from your VAT account and before the deadline the increased in VAT penalty rates will not apply.
Can I access the funds in the VAT Account?
The access to your VAT Account will be limited. If you require transfering money from your VAT account to your regular account you need to receive a permit from the Polish Authorities. to do so. They will have 60 days to consider your request. The funds can be used for the following purposes:
- To pay VAT to your suppliers. It should be noted that only the VAT amount could be paid via your VAT Account, the Net amount is paid from your ordinary account.
- To pay your VAT liability to the Authorities
This system of payment is not mandatory but at the discretion of the buyer.
Italy also recently announced an update regarding their VAT and invoicing, introducing Real-Time Electronic Invoice Verification Systems. Italy is aiming at reducing the VAT gap by adopting this “clearance model,” with tax authorities auditing and monitoring transactions in real-time.
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