Split Payment - the most important practical aspects for companies

Split Payment ("SP") i.e. the Split Payment Mechanism ("MPP") will take effect on 1.07.2018. As of that date, every entrepreneur with a business account (not a private account) should have a VAT account (sub-account) established by the Bank (SKOK) that maintains the account.

How will MPP affect the day-to-day operations of companies? Below is a bulleted list of practical aspects of MPP for the operations of entrepreneurs:

1. MPP is effective as of 1.07.2018;
2. The Bank automatically opens (probably has already opened) one free VAT account for the company's settlement accounts maintained in PLN. Upon request, the Bank may open more VAT accounts. If the company has accounts in several Banks - each of them will create a VAT account;
3. MPP concerns all entrepreneurs Poland, regardless of size and industry. It also applies to Municipalities and other local government units;
4. MPP cannot be used:

-consumer (non-business);
-entrepreneurs who receive invoices without the amount of VAT (e.g., from VAT-exempt taxpayers) - for these invoices;
-entrepreneur - with regard to invoices covered by the VAT reverse charge mechanism in the construction industry or so-called sensitive industries, e.g. electronics, steel, non-ferrous metals;

5. The use of MPP is fully voluntary. This means that you decide for yourself which invoice you will pay using MPP, in what proportion, and against which supplier (the mechanism can be used selectively or according to your own criteria);
6. Voluntariness does not apply to the recipient. When receiving an SPP transfer, there is no option not to accept it;
7. You can decide for yourself - I pay the gross amount by regular transfer or pay by SP transfer;
8. How to make a SP transfer? Split payments are made by using a special transfer message (form) provided by the Bank. After logging in to your account, you need to select such functionality in transfers (each bank introduces this formula along the lines of ZUS/tax transfers);
9. For the transfer, you must provide (i) the amount of VAT (or part), (ii) the gross value of the FV (or part), (iii) the number of the FV for which payment is being made, (iv) the TIN of the issuer of the FV. The Bank does not verify whether the correct data is provided in the transfer message;
10. If the SP transfer is made, for example, for the amount of PLN 100,000 net + VAT (PLN 123,000 gross)-if there are no missing funds in the accounts, then PLN 23,000 will be taken from the VAT account, and PLN 100,000 from the current account. If the full amount of VAT is missing from the VAT account - the Bank will take the missing VAT funds from the current account;
11. SP does not allow the execution of bulk transfers/packages of transfers, due to the need to provide the FV number. The above is a major inconvenience + may involve the Bank charging regulatory fees for each transfer individually. This will increase the cost of the account for companies making bulk transfers;
12. If the company makes a SP transfer to the account of the company using the private account (and not the company's) - the SP transfer will be rejected. A rejected transfer means an unpaid invoice. I wrote more about the problem of private accounts in companies here: https://jns.legal/rachunek-prywatny-split-payment/;
13. As of 1.07.2018, nothing changes in the issuing VAT invoices. In the FV, the current bank account number of the company is given without change. The VAT account number is not added. When paying a transfer to the company's account, the recipient's system will itself make a split payment to the VAT account. Thus, the recipient of the FV does not need to know the VAT account number of the issuer;
14. SP cannot be used for payment of invoices pro-forma, as this document does not constitute a VAT invoice, and therefore the invoice number cannot be provided with such a SP transfer;
15. SP can be used for payment with issued advance invoice;
16. You can pay SP VAT alone In a situation where the net amount was paid in cash. In this situation, the VAT amount equal to the gross amount of the payment should be included in the transfer message;
17. It is not possible to transfer the net amount alone Under SP;
18. MPP benefits for the SP transferor: reduced VAT to be paid (transferred VAT from the VAT account will be included in the new VAT return template), release of funds from the VAT account, reduction (but not exclusion) of the risk of a tax sanction for understating tax liabilities, reduction of the chance of being charged for participation in a 'tax carousel' - showing due diligence;
19. Disadvantages with MPP for the SP transferor.: need for thorough data verification, risk of rejection of the transfer, possible reluctance of contractors;
20. MPP benefits for the SP transfer recipient: basically none.
21. Disadvantages of MPP for the SP transfer recipient: reduced liquidity, reduced ability to use VAT account funds;
22. When is it a good idea to use MPP? Paying to new, unverified, suspicious contractors;
23. How to encourage a contractor not to pay through MPP? You can introduce a system of discounts for your contractors - for example, 3% discounts for payment by traditional transfer;
24. Can a contractor be contractually prohibited from payment by SP? In my opinion, you can, with the proviso that the payment of the SP despite the contractual prohibition will be effective and will constitute performance of the obligation and payment for the FV. However, it may give rise to other contractual consequences, such as the obligation to pay liquidated damages. Until the Courts begin to examine the first cases for payment of such penalties - we will not know whether such a reserved penalty will be effective or will not be considered invalid. In my opinion, such a penalty within reasonable limits should be effective;
25. The funds in the VAT account can be used to a limited extent:
    -Payment for services/goods in the VAT portion of the invoice to the contractor's VAT account,
    -Payment of VAT liabilities to the tax authority.

26. Payment payment card never occurs under MPP. Therefore, paying with a company card will not release the VAT amount from the VAT Account.
27. It is also possible to apply to the Head of the Tax Office for the following. return of funds from the VAT account.
28. Funds between VAT accounts can only be transferred within one Bank.
29. Regardless of the industry, especially in the initial period, most entrepreneurs will feel the costs and burdens of adjusting to MPP - especially adjustments to IT systems, accounting systems, changes to the chart of accounts, difficulties in administering transfers, reduced liquidity;
30. You will read about the impact of MPP on the factoring industry and the way VAT invoices covered by the assignment of receivables are paid soon on Factoring and the Law Blog.