Split Payment: New Solution For VAT Gap?

The Polish Ministry of Finance is working on a new solution that is to tighten the VAT gap, i.e. the difference between the expected and actual VAT revenue. The state budget is losing billions of PLN each year due to dishonest taxpayers. Splitting the goods and services tax is to increase tax collection and make entrepreneurs feel safer. According to the information from the Ministry, the new regulations on VAT are planned for 2018.

The system of split payment is already functioning in such European countries as Italy and the Czech Republic. The idea is to separate a payment for goods or services into two parts: the net amount and the value-added tax. The two amounts go to two different bank accounts. The net amount is transferred to the seller, while the VAT tax is deposited in a special bank account that is to be opened for every entrepreneur. The VAT gap account will also be used by trading companies to pay due taxes and receive refunds from tax offices.

For the authorities, this means a lower risk of tax remaining unsettled. The buyer choosing the split payment method will be exempted from sanctions in case the seller fails to settle the tax. Lower late interest on fiscal liabilities is another incentive. What is in it for the seller? The tax credit is a likely option. Needless to say, the new solution will apply only to B2B transactions. Split payment is to be voluntary for most industries with some exceptions (e.g. for the electronics industry) likely to be introduced in the future.

The Ministry of Finance hopes the new tool will add 82 billion PLN to the state budget in ten years. Officials want to fight the so-called “missing trader” frauds, in which companies vanish without a trace without paying their fiscal obligations. The solution needs to be accepted by the EU Commission, but government officials are confident this will not be a problem.

What This Means for Businesses in Poland

Tax policy changes in Poland have direct implications for both domestic and foreign-owned businesses. Companies operating in Poland must stay informed about regulatory developments to optimize their tax position and maintain compliance. The Polish tax system includes CIT (19% standard, 9% for small taxpayers), VAT (23% standard rate with reduced rates of 8% and 5%), and various sector-specific levies.

For international entrepreneurs and investors, understanding the Polish tax landscape is essential for business planning. Poland offers several attractive incentives including the Polish Investment Zone (up to 15 years of CIT exemption), R&D tax relief (up to 200% deduction), and the IP Box regime (5% effective CIT rate on qualified intellectual property income). Professional tax advisory can help identify the most beneficial structure for your specific situation.

The interplay between Polish domestic tax law and international tax treaties is particularly important for foreign-owned entities. Transfer pricing regulations, withholding tax provisions, and anti-avoidance rules (GAAR) require careful navigation to ensure both compliance and optimization.

If you are doing business in Poland or considering entering the Polish market, Zalewski Consulting can help. Learn more about our tax advisory services in Poland, or contact us for a free consultation.