Split payment, or split payment mechanism, is a financial solution aimed at improving VAT collection. Therefore as a result, it is aimed at reducing the tax gap. The technical preparation for this solution is now ready. Furthermore banks have the possibility to divide incoming payments into their customers’ subaccounts. Will split payment contribute to closing the VAT gap? Time will tell! We will provide you with a simple explanation of how it will work to avoid problems while doing business.
You can also read about the Split Payment mechanism on the official government website – Split Payment.
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Who will divide the payments
In practice, payments are to be divided automatically by the bank. If a payment marked as VAT appears on the account, the bank will automatically allocate a part of the money to the subaccount. The funds on this subaccount can only be used to pay VAT to the tax office. Ultimately, this is to prevent fraudsters from extorting VAT by producing false invoices and using them to make payments.
Split Payment – The First Steps
Initially, the system is to be optional and aims to familiarise businesses with the automatic tax collection taking place in bank accounts. It is also intended as a trial period for civil servants and banks. Of course, during the implementation of this solution, there may be some cases that the legislator has not thought about and it will be necessary to prepare a special service for them.
What does this solution give us?
The mechanism is aimed at implementing certain guidelines in relation to the functioning of the Polish economy. Below is a list of these guidelines:
- stabilization of budget revenues from VAT,
- reducing tax fraud,
- ensuring certainty of trade between traders,
- avoiding fraud and extortion in the case of VAT reimbursed by the authorities,
- reduction of tax risk for entrepreneurs,
- exclusion of joint and several liability of entrepreneurs for VAT payments,
Is this a popular solution?
Such solutions already exist in the Czech Republic and Italy. Practice shows that they do not make it difficult for entrepreneurs to do business and provide stable and predictable budget revenues. Of course, there are other elements that may initially be difficult to handle in the case of split payments. This will certainly be factoring (we have already written about it before) and debt assignment. We should also consider whether such funds will be subject to debt collection and what will happen when the invoice is corrected for a smaller amount? All these problems will have to be solved in the nearest future!
Factoring, a split payment
For many stakeholders it is obvious that factoring will have an impact on split payment payments. If we receive this kind of revenue as the tax office will catalogue it in case there are two recipients of payment for an invoice. More about factoring can be found here – Factoring!