VATupdate
Favicon VATupdate

Looking back @2021 #11: Split Payments

What is VAT Split Payment?

Under the VAT Split Payment mechanism, invoices paid to the supplier’s account are divided into two parts:

  • The net price of the commodity is paid directly to the supplier’s business bank account.
  • The VAT amount is paid to the supplier’s dedicated VAT account.

It is mainly introduced to combat fraud

Italy and Poland are the countries in the European Union where the system is applied

  • In Italy, the split payment mechanism is applied to goods and services provided to public bodies as well as companies included in the Financial Times Stock Exchange ( FTSE MIB index). As per the split payment scheme in Italy, customers pay the net amount to the supplier’s bank account and VAT amount to the VAT bank account allocated to them by the authorities.
  • In Poland, the customers will have to make the payment only to the bank who will then divide the payment between the supplier account and the allocated bank account. However, the Polish authority has not mandated the application of split payment mechanism and businesses can choose to not apply it.

Highlights in 2021

  • VAT Split Payment mechanism remains a complexity for business to manage. Further guidance has been issued by tax authorities.
  • VAT Experts suggest VAT Split Payment as an efficient means to combat fraud.
  • Poland reduces the threshold for the mechanism to apply
  • United Kingdom and Slovakia are assessing potential implementation
  • (Note that Romania abolished the VAT Split Payment mechanism per February 1, 2020)

Newsitems posted in 2021 related to Split Payments 

European Union

Italy

Poland

Slovakia

United Kingdom

Latin America


Check also the previous articles on ”Looking back @2021”

  1. Brexit
  2. E-Commerce VAT Directive launched in the EU per July 1, 2021
  3. Next to the EU, 14 countries implemented VAT on E-Commerce, another 7 will implement in 2022
  4. Saudi-Arabia is the first country in the Middle East launching E-Invoicing, UAE may follow
  5. The concept of Fixed Establishments remains a major risk, and even why?
  6. Intrastat: Major updates applicable as of Jan 1, 2022
  7. Implementation/changes E-Invoicing & Real Time Reporting during 2021
  8. ECJ cases decided in 2021 on ”Taxable Amount”
  9. Increased focus on Fighting Climate Change – Carbon tax

  10. 48 ECJ VAT Cases decided (incl. orders) in 2021

Sponsors:

www.vatupdate.com

Advertisements:

  • VAT news
  • VAT News
  • VAT news
  • VAT news
  • VAT news