Construction says that the split payment mechanism will lead to higher prices. However, some experts say that entrepreneurs will handle this perfectly because they will start issuing invoices in euros and will then not have to use the split payment mechanism. According to Zbigniew Makowski, deputy director of the Ministry of Finance's Goods and Services Tax Division, this will not be an attempt to circumvent the law if the taxation is a transaction based on imports of services.
– It is doubtful that invoicing, for example in Euros, is a circumstance that prevents the payment of the MPP payment method from being fulfilled. In accordance with Art. 358 (1) of the Civil Code, if the subject of the obligation, which is executed in the territory of the Republic of Poland, is expressed in foreign currency, the repayment may be in PLN. This is impossible only if the law, court order as the source of the claim, or a lawsuit hold the fulfillment of the service only in a foreign payment method – says Dr. Janusz Makarowski of the National Institute for Business Control.
Zbigniew Makowski, on the other hand, emphasizes that the key issue is not currency, but whether Polish VAT is shown in the seller's account. If not, i.e. we are engaged in importing services for example, then MPP does not apply. On the other hand, an invoice issued in Euros with Polish VAT, if the conditions for creating a split payment mechanism are fulfilled, must be paid in PLN in the MPP, in the part corresponding to the VAT amount.
– In art. 106 e paragraph 1 of the Law of 11 March 2004 on goods and services tax, it is advisable what the invoice should contain. Under paragraph 11, the tax amount is shown in PLN. When expressed in foreign currency, the conversion rules used to determine the tax base apply. Marking the price on an invoice, such as in euros, does not, in principle, prevent payments to the seller's account in PLN and does not fulfill the obligation arising from the provisions on the use of the shared payment method – adds Dr Makarowski.
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According to Dr. Damian Kaźmierczak, Chief Economist of the Polish Construction Employers Association, in large construction companies, split pay is definitely not an issue of serious concern to CFOs. Although they expect a moderate deterioration in financial liquidity, they are also pleased that the introduction of a mandatory split payment leads to the liquidation of a problematic reverse VAT mechanism.
– Many construction companies have been using split payments for a long time. In the case of executed public sector orders, payments received for works performed are split. Time has shown that there have not been many problems with maintaining liquidity in this industry or the spectacular bankruptcies caused by the introduction of MPPs – notes Łukasz Sęktas, a real estate expert and CEO of TIARA Development.
The biggest players fear, however, that the implementation of the MPP will lead to further prices for subcontracting services, as emphasized by Dr. Kaźmierczak. Small and medium-sized enterprises can quickly pass the risk of liquidity deterioration to general contractors. They did the same right after introducing a reverse VAT charge in 2017. In turn, a former construction contractor who wants to remain anonymous claims that many domestic companies will fail through solutions such as payment splits. Consequently, the entire economy will suffer.
– Some low-profit businesses with VAT-covered goods purchases may actually have problems with their day-to-day business. However, the specifics of the industry mean that many entities record excess input VAT overdue or show a relative balance. In the long run, split payment will even contribute to the development of domestic businesses as it will facilitate the work of honest players. However, I do not think that entrepreneurs want to outsource their activities to avoid MPP. The cost of such a solution would far outweigh the benefits, smatraukasz Sęktas said.
Dr Janusz Makarowski explicitly warns that the costs associated with the transfer of activities abroad would not be unjustified compared to the effects of compulsory split payments. By setting up a company outside Poland, an entrepreneur who wants to transact in Poland will in no way avoid registering as an active VAT taxpayer and issue invoices with that tax. Therefore, it will be required to accept payments using split payments.
– A change of tax residence may have negative organizational and financial consequences for a company that has never before operated in other economic and formal legal realities. In addition, most counterparties are unlikely to be prepared to bear the risk of the exchange rate. And he will decide to find such a business partner who will issue invoices in Polish zloty – an expert from the Polish Association of Employers in Construction predicts.
On the other hand, Dr Janusz Makarowski recalls that when setting up a company abroad, a Polish entrepreneur is obliged to register in the territory of another EU country for VAT purposes. It can make relative use of the institution of the tax representative. This requires EU and national law. In this connection, reference should be made to Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax. A KIKB expert concludes that moving construction companies outside Poland is not a realistic scenario, but of course it can happen. He adds that if this happens, this type of solution will be implemented to a small extent.
16 mins ago
xxxThis is compounded by the decline of Doing Buisiness.
17 mins ago
MichalEmployees also pay in euros. 3 € / h
17 mins ago
ityou can switch from cotton to a fixed rate of 5.5% and there is no problem with split payments
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