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
- Lamensch @ European Parliament – Possible solutions to tackle fraud, solutions that involve new technologies (May 26, 2021)
- Analysis of the impact of the split payment mechanism as an alternative VAT collection method (2017)
- Management of public housing assets – Mandate without representation without representation – Liability – Right to deduct – Split payment payment
- Developments in Italia – Cosa succede in Italia?
- Italy Publishes Lists of Companies Subject to VAT Split-Payment for 2022
- Split payment, lists ready for 2022
- Ruling #424: Recovery of VAT in the context of a transaction governed by the split payment mechanism
- Ruling #424: Split payment and VAT refund
- Split Payment for VAT and advance payment of the amount due in public procurement: some reflections
- No Split Payment if the contracting authority is of a private nature
- Italy Publishes Lists of Companies Subject to VAT Split-Payment for 2021
- Guidance about the scope of Split Payment
- Lowering of the limit for B2B cash transactions to PLN 8000
- VAT Split Payment – 20 things that you have to know
- Modifications in the split payment mechanism (SPM)
- JPK V7M/K – the Polish version of SAF-T – faces January 2022 updates
- JPK V7M/K Schema Changes from 1 January 2022 – Split payment marker removed
- SLIM VAT 2 – entry into force on October 1, 2021 and January 1, 2022.
- Changes to the Polish VAT law as of July 2021
- Split payment also applies to corrective invoices
- All types of compensations allowed in split payment
- Draft amendments to VAT act: Notification of bank accounts to authorities, Changes to the tax guarantee, Split Payment
- Open consultation Landfill Tax Review: call for evidence – Reference to VAT Split payment
- UK continues to explore VAT split payments on foreign e-commerce
- Exploring potential VAT challenges posed by the sharing economy
- UK explores VAT spments by payment service providers on ecommerce trade by non-resident
Check also the previous articles on ”Looking back @2021”
- E-Commerce VAT Directive launched in the EU per July 1, 2021
- Next to the EU, 14 countries implemented VAT on E-Commerce, another 7 will implement in 2022
- Saudi-Arabia is the first country in the Middle East launching E-Invoicing, UAE may follow
- The concept of Fixed Establishments remains a major risk, and even why?
- Intrastat: Major updates applicable as of Jan 1, 2022
- Implementation/changes E-Invoicing & Real Time Reporting during 2021
- ECJ cases decided in 2021 on ”Taxable Amount”
- 48 ECJ VAT Cases decided (incl. orders) in 2021