It is widely known that small businesses for many years relied on the handling of amounts derived from VAT, which affected the account after the customer paid for the goods or service. A distant deadline for paying the tax to the Tax Office allows you to trade these amounts and thus increases the company’s financial liquidity. However, the current government has introduced a change in the use of split payment in selected industries, which may lead to a loss of financial balance for many entities and their bankruptcy.
Split payment-what is it?
The full name is split payment VAT, and in Polish it is a split payment mechanism consisting in separating VAT from the amount constituting the net price for the goods or services purchased. In practice, it is to look like this: the customer can pay the net amount to the entrepreneur’s account, and the amount of VAT to another account. It will also be an account belonging to the same company, but the funds that flow there will not be available to it.
How to set up a split payment VAT account?
The new law requires banks and Skokom to open new business accounts with the automatic opening of a free VAT account. They are also required to set up such an account for each company account by June 30, 2018, also free of charge. This operation is to be carried out as part of the bank’s internal regulations, without concluding additional contracts or sending annexes. Keeping accounts for VAT settlements is also to be exempt from any fees and commissions.
What operations are possible on a VAT account?
The amounts that will be in the split payment VAT account will not be available to the entrepreneur from now on. Payment cards will not be issued for VAT accounts, and you will not be able to take these measures at a bank branch. However, all amounts of VAT resulting from the purchase of goods and services offered by customers, returns of overpaid or unduly calculated tax, etc. will be received there, as well as transfers from the Tax Office to settle this tax for a given period.
Who is required to split payment?
Poland asked the European Commission for permission to use this mechanism, because it was one of the ideas of the current government to seal the tax system in our country. Mainly it was about entities that used to date reverse VAT or tax payment based on joint and several liability. The industries where the mechanism is to be used include construction, trade in steel, fuels or electronics.
Controversy around a new solution
The design raises many doubts and voices are heard from everywhere that it was developed quickly and with disadvantages. There is a voluntary principle here, i.e. the buyer decides whether the payment will be divided. Such freedom to fuel conflicts and suggestive assessment of the seller, because customers will make decisions under the influence of emotions. There is also a suspicion that ideas will arise to convince clients to make a single payment by means of additional giveaway or discounts. This may be beneficial for buyers, but lead to sick situations in the market for the sale of goods and services. The second doubt is the lack of solutions for cash settlements.
In addition, it cannot be hidden that entrepreneurs felt discriminated against. In this way, they are deprived of the possibility to trade amounts constituting VAT for some time, while at the same time allowing banks. Thanks to split payment, VAT will gain powerful funds that they can trade for many months.