The mechanism works as follows: when paying for a service rendered or goods purchased, the buyer splits the payment for the invoice into two parts:
- the net amount, directed to the counterparty’s basic account,
- the value of VAT, directed to a special VAT sub-account.
This payment method has been introduced to combat tax fraud. The money transferred to the VAT account can only be used to make payments to the Tax Office for VAT receivables. To use it in any other way, approval must be obtained from the Head of the Tax Office, who has 60 days to consider the request.
Split payment applies only to B2B transactions and only to payments made by bank transfer. Additionally, such transactions must be carried out in Polish currency.
How does split payment work?
At the beginning of July, banks were obligated to create special bank accounts. The opening of such accounts was not associated with any fees for entrepreneurs. Moreover, the costs of using them cannot be higher than in case of other accounts. The point is that additional fees should not discourage entrepreneurs from using the split payment mechanism.
Therefore, the changes associated with the use of this payment method will be minor and will primarily involve adapting the currently supported systems for making and recording such payments. The ordering of a split payment is very simple and requires only the specification of the net amount and the VAT amount in addition to the standard bank transfer data. There is no need to enter any additional account numbers, as the bank transfers the appropriate amount to the designated sub-account.
What does the change mean for businesses?
So much for theory, but what are the advantages and disadvantages of the new mechanism? To encourage entrepreneurs to use it, many conveniences have been introduced, including the following:
- VAT refunds will be transferred much faster – the waiting time will be reduced from 60 to 25 working days,
- If the amount of tax liabilities is paid earlier than the assumed tax payment deadline, the amount may be reduced. This means that entrepreneurs using the split payment mechanism are entitled to a so-called early settlement discount,
- There is no joint and several liability for the seller’s tax obligations,
- Increased interest for late payment does not apply to arrears resulting from unpaid VAT (assuming that at least 95% of the input VAT has been paid),
- Depending on the agreement negotiated with the bank, the VAT account may bear interest, and the accumulated interest is transferred to the entrepreneur’s main account.
Notwithstanding, when using the split payment mechanism, we must also be aware of the associated risks. Some of them apply only to sellers:
- Adverse effects on liquidity – funds collected in the VAT account cannot be used for purposes other than the payment of VAT. This may result in some difficulties in meeting current financial obligations. As mentioned above, withdrawals for other purposes will only be possible with the approval of the Head of the Tax Office.
Others apply only to payers using the split payment mechanism:
- Each payment to the VAT account must be posted separately; it is not possible to make a collective transfer even if the invoices concern only one counterparty. This may result in increased operating costs and more administrative duties.
Split payment in SAP
More and more companies decide to optimize their systems in terms of adapting to the July changes. Many of Hicron’s recent projects concern the issue of split payment. Companies implement two types of changes: concerning outgoing and incoming payments. Implementations for outgoing payments are based on the solution provided by SAP. In addition to the introduction of new bookkeeping notes, it is necessary to modify the forms of payment and the format tree responsible for the file generated for the bank.
For incoming payments, new operation codes, which are used for split payment by individual banks, must be mapped in the system. Each bank has adopted a slightly different approach, and so the configuration requires an individual approach for each bank. Additionally, it is necessary to create bank accounts where these statements are to be posted.
SAP systems are very flexible as far as modifications are concerned and can be adapted to the changes coming into force. For now, using the mechanism is voluntary, and the buyer can decide how they wish to settle their payments – using split payment or the traditional single account. However, suggestions have been voiced that the split payment may become mandatory. Whether this will come to pass – we will soon find out.