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Tax Alert: Note on netting from November 1, 2019!

Tax Alert: Note on netting from November 1, 2019!

From 1 November 2019 taxpayers purchasing goods such as electronics, fuels, steel, recyclable materials, car parts or construction services will in many cases be required to settle payments with the use of split payment mechanism. Not fulfilling this obligation may result in severe sanctions. The exception will be transactions settled by a set-off referred to in the Civil Code. Recent statements by the Ministry of Finance suggest that exemption from the split payment obligation may, however, not apply to multilateral netting.

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Tax Alert

From 1 November 2019 taxpayers purchasing goods such as electronics, fuels, steel, recyclable materials, car parts or construction services will in many cases be required to settle payments with the use of split payment mechanism.

According to the new legislation, in the event of a set-off referred to in Article 498 of the Civil Code, the provisions regarding obligatory split payment shall not apply to the extent that the amounts receivable are set off.

In a statement published in Gazeta Prawna on 14 October this year, in response

to a question about set-offs other than those provided for in the Code, the Ministry of Finance explained that "the above provision clearly indicates what type of deductions do not violate the provisions on the obligation to apply the split payment mechanism. In other cases, the payment should be made through the split payment mechanism”.

Based on the statement above, it can be concluded that in cases where the payment is made in a manner other than a typical set-off within the meaning of Article 498 of the Civil Code, the provisions on the mandatory mechanism of split payment will apply.

This means that taxpayers purchasing goods or services that will be subject to mandatory split payment and using multilateral netting or similar non-cash forms of settlement in their accounts (e.g. including undue liabilities) may be exposed to severe sanctions.

Under the new regulations, if it is determined that a taxpayer has made a payment without the application of a split payment despite such an obligation, the tax authority shall, as a rule, set an additional tax liability in the amount of 30 percent of the tax amount attributable to the purchased goods or services listed in Annex 15 to the Act, shown on the invoice to which the payment relates.

In addition, the Fiscal Penal Code will provide for a fine of up to 720 daily rates for payment without a split payment mechanism despite such an obligation (in minor cases - a fine for a fiscal offence).

Consequently, where you use multilateral netting or similar
non-cash payment methods in your settlements, a detailed analysis of the existence of the split payment obligation is necessary.

If you are interested in our support in this matter, please do not hesitate to contact us.

Tomasz BełdygaPiotr Żurowski, Agnieszka Laskowska,  Agnieszka Smolińska Wiśnioch

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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