Budimex will be using a split payment mechanism (the so-called ‘split payment’)

News date: June 11, 2018

In connection with the entry into force on 1st July 2018 of VAT provisions concerning split payment the BUDIMEX Group informs that payments made by BUDIMEX Group companies will be performed in accordance with the split payment rules.


Split payment applies only to situations when VAT is shown on the invoice, thus it will not apply to subcontractors of construction services issuing invoices using the VAT reverse charge procedure.


The split payment mechanism (the so-called ‘split payment’) was introduced by the Act of 15th December 2017 on the amendment of the Act on Value Added Tax and other selected acts (Journal of Laws from 2018, item 62). The regulations concerning this matter provide for the voluntary use of the split payment mechanism, although the sole initiative in this matter was left to the purchaser. According to multiple explanations of the Ministry of Finance, this was a purposeful solution intended to give the purchaser a tool for minimising tax risk and an opportunity to demonstrate that they exercised due diligence in the verification of their contractors. This is also confirmed by the content of ‘Methodology of Assessment of Due Diligence on the Part of Goods Purchasers in Domestic Transactions’.


The split payment mechanism is based on the division of payments for purchased goods or services into two separate accounts belonging to the seller. From the gross value being paid, which will be credited to the seller's bank account, the bank will automatically deduct the amount of the Value Added Tax and transfer it to a separate VAT account of the seller (from which they will be able to pay VAT to their contractors and settle their VAT liabilities towards the State Treasury). Making a payment using the split payment mechanism will be one of the stronger premises for demonstrating that the purchaser has exercised due diligence while entering into a transaction with a contractor. This is important for security in respect of settling the charged tax. The solution is intended to tighten collection of Value Added Tax.