Mandatory split payment prolonged
On 14 January 2025, the European Commission adopted a draft Council Implementing Decision allowing Poland to extend the mandatory split payment mechanism for three more years.
Consequently, the mandatory split payment will be in force until 28 February 2028.
As a reminder, the split payment mechanism was introduced to tighten the tax system. In practice, split payment means that the payment is divided into a net amount, which is paid into the seller’s account, and a VAT portion, which goes into a special bank account. The funds deposited in this account can only be used for certain purposes specified in the law.
Mandatory split payment currently applies to a number of so-called “sensitive” transactions listed in Annex 15 of the VAT Act, if their gross sales value exceeds PLN 15,000. In the case of such transactions, the note “split payment mechanism” must appear on the invoice.
The request to extend the mandatory split payment in Poland was accompanied with a report proving that in 2018 (i.e. before the regulation came into force) the total value of VAT fraud had been almost PLN 5.2 billion, while in 2022 it fell to less than PLN 1.7 billion. A significant decrease in the number of carousel frauds has also been demonstrated: in 2018 they caused the state budget to lose around PLN 4.5 billion, while in 2022 only PLN 111 million was lost.
According to the figures presented, the mandatory split payment mechanism in Poland, which applies to the supply of certain goods and services, has contributed to a significant decrease in the volume of VAT fraud. It was further emphasized that this instrument has enabled the Polish authorities to reduce the time needed for tax refunds to less than twenty days, which has had a positive influence on the liquidity of businesses.
The request was granted and therefore, from 1 March 2025 to 28 February 2028, the obligation to use the split payment mechanism in respect of certain taxable activities will continue in Poland.
As a side note, Poland has also received approval to amend Annex 15 of the VAT Act regarding the symbols used therein. Currently, the PKWiU (Polish Classification of Goods and Services) is used, but there are plans to replace it with the Combined Nomenclature (CN).
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