On the 1st of November 2019, the mandatory split payment mechanism was introduced in Poland. The obligation to use the split payment mechanism applies to payments for goods and services listed in Annex 15 to the Polish VAT Act, when the following conditions are jointly met:
- the amount of the invoice is equal to or higher than PLN 15,000 gross,
- the payment is made to an active VAT payer,
- the transaction takes place between entrepreneurs.
There is an exception to the above rule. There is no obligation to apply the split payment mechanism in case of a setoff of reciprocal claims.
Unfortunately, in accordance with the opinion of the Ministry of Finance (expressed, among others, in the individual tax interpretation, no. 0111-KDIB3-1.4012.626.2019.1.ICz, issued by the Director of the National Tax Information), only a setoff between two parties that are for each other the creditor and the debtor releases the parties from applying the split payment mechanism.
This is very bad news for many companies, especially companies from capital groups, which have been settling their reciprocal claims by multilateral setoffs so far.
The companies have two options in this situation, either to change the method of settling the reciprocal claims or to expose themselves to negative consequences in VAT and income tax.