Split payment in the case of the sale of subscriptions

Service-Tax

Split payment entered into force in the Polish tax system from July 1, 2018. It was optional in the first period. Currently, in some industries, split payment is mandatory. Despite the fact that it has been in operation for a long time, taxpayers still have big problems with its application.

Split payment - regulations

Pursuant to Art. 108a paragraph. 1 of the act on tax on goods and services - hereinafter: the VAT act - taxpayers who received an invoice with the amount of tax shown, may apply the split payment mechanism when paying the resulting amount due.

Pursuant to Art. 108a paragraph. 1a of the VAT Act (effective from November 1, 2019) when making payments for the purchased goods or services listed in Annex 15 to the Act, documented by an invoice in which the total amount due is equal to or higher than PLN 15,000, taxpayers are obliged to apply split payment mechanism.

The taxpayer obliged to issue the invoice referred to in art. 106e paragraph. 1 point 18a, is obliged to accept the payment of the amount due resulting from this invoice using the split payment mechanism (see Article 108a (1b) of the VAT Act).

The application of the split payment mechanism consists in the following:

  • the payment of the amount corresponding to all or part of the tax amount resulting from the invoice received is made to the VAT account;

  • the payment of all or part of the amount corresponding to the net sales value resulting from the invoice received is made to a bank account or to an account in a cooperative savings and credit union for which a VAT account is kept or is settled in another way.

Sanctions from the VAT Act for paying an invoice outside the split payment mechanism

If it is found that the taxpayer made the payment in violation of the mandatory split payment mechanism, the head of the tax office or the head of the customs and tax office determines an additional tax liability in the amount of 30% of the tax amount for the purchased goods or services listed in Annex 15 to the Act, shown on the invoice to which the payment relates. In relation to natural persons who are liable for the same act for a fiscal offense or for a fiscal offense, no additional tax liability is established.

Thus, in the event of failure to apply the split payment mechanism, the taxpayer must take into account very troublesome financial consequences.

The above sanctions do not apply if the supplier or service provider has settled the entire amount of tax resulting from the invoice, which was paid in violation of the split payment regulations.

VAT invoice with obligatory split payment

The taxpayer obliged to use split payment must issue an invoice that will inform the buyer about this fact. Let us remind you that the taxpayer is obliged to issue an invoice documenting:

  • sale, as well as delivery of goods and provision of services referred to in art. 106a, point 2, made by him for the benefit of another taxpayer of the tax, value added tax or a tax of a similar nature, or for the benefit of a non-taxable legal person;

  • mail order sale from the territory of the country and mail order sale within the territory of the country to an entity other than indicated in point 1;

  • intra-Community supply of goods to an entity other than indicated in point 1;

  • receipt by him of all or part of the payment before performing the activities referred to in points 1 and 2, except in the case when the payment concerns the intra-Community supply of goods or activities for which the tax obligation arises in accordance with art. 19a paragraph. 5 point 4.

In the case of invoices in which the total amount is equal to or higher than PLN 15,000, for the supply of goods or services to the taxpayer, referred to in Annex 15 to the Act - the invoice should contain the words "split payment mechanism".

Thus, taxpayers should mark invoices specifically. If it is found that the taxpayer has issued an invoice in violation of paragraph 1 point 18a, the head of the tax office or the head of the customs and tax office shall establish an additional tax liability in the amount corresponding to 30% of the tax amount for the supply of goods or the provision of services listed in Annex 15 to the Act, shown on this invoice. In relation to natural persons who are liable for the same act for a fiscal offense or for a fiscal offense, no additional tax liability is established.

The above sanction does not apply if the payment of the amount corresponding to the tax amount for the supply of goods or provision of services listed in Annex 15 to the Act, indicated on the invoice, was made using the split payment mechanism. Start a free 30-day trial period with no strings attached!

Split payment in the case of the sale of subscriptions

In many cases, the taxpayer selling subscriptions to computer programs also transfers the equipment to operate them.

Example 1.

The taxpayer sells subscriptions to the ERP (accounting and warehouse) program. An entrepreneur buys access to the program by paying a monthly subscription. The program allows you to read invoices and other documents from scans. Thus, its functions help entrepreneurs to quickly record documents. In order to acquire new customers, the taxpayer provides a scanner along with the subscription. Should the obligatory split payment be used in this case?

In this case, the taxpayer is not obliged to use the obligatory split payment. In the example, the subject of sales made by the entrepreneur to customers are services consisting in issuing software by downloading an application (paying a subscription), which do not fall within the scope of item 95 of Annex 15 to the Act - PKWiU 58.29.29.0 - "Packages of other utility software - SSD disks only".

Importantly, the delivery of scanners is also not a delivery of goods from Annex 15 to the VAT Act.

When scanners are shipped that only have a built-in scan function, they will not fall within the scope of pos. 60 of Annex 15 to the Act - PKWiU 26.20.18 - "Computers and other automatic data processing machines", which grouping includes PKWiU 26.20.18 defined as "Devices performing at least two of the following functions: printing, scanning, copying , faxing ".

Thus, in such a situation, neither the service nor the goods are included in Annex 15.

In summary, taxpayers still have to check what services or goods are sold and whether they are listed in Annex 15.