Split payment instead of the reverse charge from November 1, 2019
October 8, 2019
The bill of VAT Act is introducing a mandatory split payment for fraud-sensitive industries starting from November 1, 2019. Used so far: a reverse charge method that covers goods and services in Annexes 11 and 14 and joint and several tax liability including goods listed in Annex 13 are to be replaced by extended Annex 15 and covered by the obligatory split payment mechanism. The reverse charge in domestic trade is to be withdrawn irretrievably along with the VAT-27 declaration.
When does the obligation of SPM (Split Payment Method) arise?
There must be 4 conditions met:
– tax liability, delivery of goods or providing services and the date of issuing the invoice falls after 31.10.2019,
– the gross value of transaction is over PLN 15,000 or the equivalent of this amount,
– at least one item on the invoice is included in Annex 15 to the amended VAT Act (Annexes 11, 13 and 14 withdrawn)
– The seller and the recipient are the taxpayers (B2B transaction, regardless of the VAT status of the recipient)
The range of split payment is going to also be extended to a number of goods that was not covered by either reverse charge or joint and several liability till now. Annex 15 contains 150 items and it will apply to sales of i.a.:
– parts and accessories of motor vehicles,
– coal and coal products,
– electrical machinery and equipment, their parts and accessories.
Additional invoice information about the split payment
In order to identify the mandatory split payment mechanism, you will need to include the information “Split Payment Mechanism” on your invoice. Lack of this phrase will result in high sanctions. Lack of this phrase does not release the buyer from the obligation to make a split payment.
For the lack of annotation about the mandatory SPM payment on the invoice, a sanction is to introduced in the amount of 30% of the tax liability indicated on this invoice. A catalog of cases in which sanctions can be waived will also be introduced.
If the buyer makes a payment omitting SPM, this will be subject to a fine of up to 720 daily rates or a fine for tax offense.
Advantages and disadvantages of split payment:
One of the main disadvantages of the new law is inability to freely dispose of own funds. They are “blocked” on the VAT account.
However, the ministry expanded the possibility of settling liabilities from the VAT account. In addition to the possibility of fulfiling obligations to suppliers with the SPM method, it will also be possible to regulate public law obligations, i.a.: income taxes, VAT, excise duty, customs duty, Social Insurance Institution contributions. There will be an opportunity implemented to make a money transfer with one communication for more than one invoice.
It is to be introduced a possibility of SPM under advance payments and of mutual compensation of receivables and deductions without SPM infringement.
As of January 1, 2020, there will be a change in the income tax, resulting in exclusion from tax costs of goods or services for which payments have been made omitting the split payment mechanism. This applies to transactions above PLN 15,0000.
Author: Ewa Kulesza
