In Poland, issuing invoices and paying them require to check firstly “how the payment should be made”. To safeguard against liability in uncertain transactions and secure state budget the split payment mechanism has been introduced.

The split payment mechanism (‘MPP’) functions as a payment-oriented system designed for B2B transactions especially for a trade with sensitive goods.

Split payment mechanism assumes that the bank transfer is automatically divided into:

  • net amount transferred to standard bank account and
  • VAT amount which is credited to a dedicated bank account of the seller (‘VAT account’ – see our article on VAT account – how to release the funds?).

Failure to meet the obligations related to the split payment mechanism may lead to imposition of tax sanctions on both the seller and the purchaser.

Scope of MPP

Theoretically, each and every B2B invoice including Polish VAT may be paid through split payment mechanism. This mechanism cannot be used in B2C transactions.

Mandatory MPP should be however used for domestic B2B supplies of certain goods and services (listed in appendix no. 15 to the VAT Act): construction works, steel, scrap, electronics (devices / parts / accessories), gold, non-ferrous metals, petrol, plastics, parts / accessories for motor vehicles, coal products, documented with an invoice totaling in excess of PLN 15 000 (gross).

However, MPP does not apply  for (i) transactions executed under a public-private partnership agreement, given that the seller was a private entity at the time of delivery, (ii) cases involving offsetting, as specified in the Civil Code.

Invoice with MPP and payment

In a case of mandatory MPP, the seller is required to state “mechanizm podzielonej płatności” on the invoice and to accept a split payment.

What can by surprising and somehow misleading, on the invoice only standard bank account of the taxpayer will be presented. VAT account is not visible on the invoice as the banks are transferring the funds automatically when MPP notice is used.

Paying with MPP, the purchaser needs to use dedicated transfer message, accompanied by special fields like:  VAT sum, total sales value (gross), invoice number or period where invoices where issued (or advance payment notice), and the supplier’s VAT number.

Foreign bank accounts

Foreign entities that the split payment mechanism applies to are required to open a bank account in Poland. Without Polish bank account, making payment with MPP is not possible.