Poland: European Council Proposes Extension of Split Payment Scheme on Certain B2B Supplies

On 15 January 2025, the European Commission published a proposal to extend Poland’s split payment scheme on business-to-business (B2B) supplies for certain goods and services, in derogation of Article 226 of the VAT Directive (2006/112). 

The proposed extension aims to combat VAT fraud by requiring VAT payments on selected high-risk goods to be transferred to a separate, blocked account of the supplier, helping to offset their VAT liabilities against their VAT balance with the tax authority. 

The split payment scheme, which has been in place in Poland for several years, targets specific goods and services that are particularly susceptible to VAT fraud. 

Under the scheme, the VAT amount on invoices for certain goods is paid directly to a designated account rather than to the supplier’s general account. This mechanism helps prevent fraud and ensures that VAT is properly collected and accounted for. 

Due to the success of the scheme in reducing VAT fraud, the European Council has put forward a proposal to extend it until 28 February 2028. 

This extension seeks to provide continued protection for Poland’s VAT system while further mitigating the risk of tax evasion. 

The extension of the split payment scheme applies to the following goods and services, which are particularly vulnerable to fraud: 

• Transfer of allowances to emit greenhouse gases 
• Construction and assembly works 
• Steel and steel products 
• Metals and products made from metals 
• Precious metals and products made of precious metals, including jewellery, pearls, and precious stones 
• Certain electric and electronic products (e.g., tablets, laptops, notebooks, mobile phones, digital cameras, processors, video game consoles, memory devices) 
• Fuels
• Coal and coal energy products 
• Certain used materials, scrap, and waste 
• Animal and vegetable oils and fats 
• Cartridges for devices (including toners, inks, and similar items) 
• Plastics and plastic products, particularly stretch films 
• Parts and accessories for motor vehicles 

These goods have been identified as high-risk in terms of VAT fraud, and the split payment scheme is designed to better control the flow of VAT on these specific products. 

If the proposal is approved, businesses in Poland will continue to be required to adhere to this system when transacting in the identified goods and services. 

This extension is expected to further streamline the process, ensuring the integrity of the VAT system and continuing to protect against fraudulent activities. 

The extension is set to last until 28 February 2028, providing certainty for businesses and tax authorities alike.

Poland’s success in reducing VAT fraud through its split payment scheme has prompted the European Commission to propose extending the program. This will help safeguard tax revenues and maintain a fair business environment, particularly for industries where fraud risk remains high. Businesses involved in the affected sectors should stay informed about the changes and be ready for the continued implementation of this VAT control mechanism.

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