Update: | Compliance Alert - Council Proposal regarding split payment mechanism published |
Date: | 2025-01-29 |
On January 14, 2025, a Proposal for a Council Implementing Decision was published to permit Poland to continue using its split payment mechanism for VAT payments. It authorizes Poland to continue to derogate from Article 226 of the VAT Directive and enable a mandatory split payment mechanism for the VAT payment on specific supplies of goods and services.
The split payment mechanism aims to combat VAT fraud by dividing B2B payments. The VAT amount is deposited into a restricted VAT account under tax authority supervision, while the net payment goes to the supplier's regular bank account. Since Poland was last granted derogation, the mandatory split payment mechanism has contributed to the decrease in fraud and tax evasion.
Currently, Poland is authorized to use the mandatory split payment mechanism until February 28, 2025. The Proposal aims to extend the derogation by an additional three years until February 28, 2028.