Split payment (mechanizm podzielonej płatności, MPP) is a VAT payment method used in Poland where the bank automatically splits your transfer into two streams: the net amount goes to the seller’s current account, and the VAT amount goes to a separate, ring-fenced VAT account. Split payment is mandatory when a gross invoice exceeds PLN 15,000, includes at least one item listed in Annex 15 of the Polish VAT Act, and the transaction is between two VAT-registered businesses. Below you’ll find the current rules, the list of goods and services covered, penalties for non-compliance, and practical strategies to protect your cash flow.
What is split payment and how does it work?
Split payment is a mechanism for settling VAT invoices where the bank automatically divides the transfer into two streams: the net amount and the VAT portion. The legal basis is Articles 108a–108f of the Polish Act of 11 March 2004 on Tax on Goods and Services (the VAT Act).
How does a split payment transfer work?
The buyer initiates a transfer using a dedicated split payment message available in online banking. The message requires four pieces of information: the gross amount, the VAT amount, the invoice number, and the seller’s NIP (Polish tax ID). The bank then automatically routes the net amount to the seller’s settlement account and the VAT portion to their VAT account.
The VAT account is a sub-account automatically created by the bank for every business settlement account. You don’t need to apply for it — the bank opens it as soon as you set up a company account. The funds in the VAT account belong to you, but you cannot use them freely.
Who can use split payment?
Split payment is available exclusively to VAT taxpayers in B2B transactions. Private individuals cannot initiate a split payment transfer. The split payment message can only be processed in Polish zloty (PLN) — even if the invoice is denominated in a foreign currency.
When is split payment mandatory?
Mandatory split payment in 2026 applies when all three conditions are met simultaneously: the gross invoice value exceeds PLN 15,000 (or its equivalent in a foreign currency), at least one line item on the invoice appears in Annex 15 of the VAT Act, and both parties to the transaction are VAT taxpayers.
The three conditions for mandatory split payment
- Gross invoice amount exceeds PLN 15,000 — the threshold is based on the total gross value of the entire invoice, not any individual line item. If the invoice totals PLN 14,999, the obligation does not apply — even if every item is listed in Annex 15.
- At least one line item from Annex 15 — a single item from the “sensitive” goods or services list is enough. When triggered, mandatory split payment applies to the full invoice amount, not just that one item.
- B2B transaction — both the seller and the buyer must be VAT taxpayers. This includes entities that are VAT-exempt (either by subject matter or by threshold).
A common mistake we see at Progress Holding is clients looking only at individual line items rather than the total gross invoice amount. If an invoice totals PLN 18,000 gross — with PLN 15,000 for monitors (not listed in Annex 15) and PLN 3,000 for processors (listed in Annex 15) — split payment is mandatory for the entire invoice.
What goods and services does Annex 15 cover?
Annex 15 of the VAT Act lists approximately 150 items of goods and services considered “sensitive” from a VAT fraud perspective. The main categories include:
- Electronics — computers, laptops, hard drives (HDD/SSD), processors, integrated circuits, phones, TVs, cameras, gaming consoles
- Metals and metal products — steel, gold, silver, copper, aluminium, metallurgical products, steel pipes
- Plastics — sheets, films, strips, and plates made of plastics
- Fuels — petrol, diesel, liquefied petroleum gas (LPG), biofuels
- Motor vehicle parts — combustion engine parts, batteries
- Waste and secondary raw materials — scrap metal, waste paper, glass waste, metal waste
- Coal and coal products — hard coal, lignite, briquettes
- Construction services — building works, electrical installations, plumbing, heating, gas, plastering, painting
The full list is available in Annex 15 of the VAT Act. Before any major transaction, check whether your goods or services appear on this list.
What are the penalties for not using mandatory split payment?
A buyer who fails to use mandatory split payment risks an additional tax liability of 30% of the invoice VAT, the loss of the right to deduct the expense as a tax-deductible cost, and joint liability for the seller’s unpaid VAT. A seller who fails to include the “mechanizm podzielonej płatności” (split payment mechanism) annotation on the invoice faces a penalty of up to 30% of the VAT amount and fiscal criminal liability.
| Penalty | Who it applies to | Legal basis |
|---|---|---|
| Additional tax liability — 30% of VAT | Buyer (failure to pay via split payment) | Art. 108a(7) VAT Act |
| Additional tax liability — 30% of VAT | Seller (missing invoice annotation) | Art. 106e(12) VAT Act |
| Expense disallowed as tax-deductible cost | Buyer | Art. 22p(1)(3) PIT Act / Art. 15d(1)(3) CIT Act |
| Joint and several liability for seller’s VAT | Buyer | Art. 108a(5) VAT Act |
| Fine up to 720 daily rates (fiscal offence) | Buyer | Art. 57c(1) Fiscal Penal Code |
| Fine up to 180 daily rates (fiscal offence) | Seller (missing annotation) | Art. 62(1) Fiscal Penal Code |
When is the 30% penalty waived?
The 30% penalty will not be imposed on the buyer if the seller has correctly settled the full VAT amount from the invoice — even if the buyer paid via a regular transfer instead of split payment (Art. 108a(8) VAT Act). However, this does not exempt the buyer from fiscal criminal liability. The penalty also does not apply to the seller if the buyer used split payment despite the missing annotation.
How does split payment affect cash flow?
Split payment restricts cash flow because the VAT amount locked in the VAT account cannot be used freely for day-to-day operations. For businesses with high turnover in sectors covered by mandatory split payment (construction, electronics trade, fuels), the blocked amount can reach several hundred thousand zloty per month.
What can you use VAT account funds for?
Funds held in the VAT account can only be used for a strictly defined set of purposes:
- Paying output VAT to the tax office
- Paying PIT, CIT, and excise duty
- Paying ZUS social insurance contributions
- Paying VAT to another contractor (another split payment transfer)
- Paying late-payment interest on the above obligations
- Paying customs duties
You cannot use VAT account funds to pay rent, employee salaries, marketing invoices, or any other expense outside this list. This means a business can have a large VAT account balance while simultaneously lacking funds in its current account to pay suppliers.
How to release funds from your VAT account
If you cannot use the VAT account funds for any of the above purposes, you can submit a free application to your local tax office head (naczelnik urzędu skarbowego) to release the funds. In the application, specify the amount you wish to transfer to your settlement account. The tax office has 60 days to issue a decision.
The tax office head will refuse to release funds if you have outstanding tax liabilities (not just VAT — also PIT, CIT, excise, customs), if there is a justified concern that tax obligations will not be met, or if an additional tax liability has been assessed against you. You have 14 days to appeal a refusal to the regional tax administration chamber. The detailed procedure is described on the biznes.gov.pl portal.
In our experience at Progress Holding, most positive decisions arrive within 3–4 weeks of filing. The 60-day deadline is the maximum, not the norm. It’s advisable to file well in advance — before your current account balance drops below a safe level.
What are the benefits of voluntary split payment?
Using split payment voluntarily — for transactions not covered by the mandatory requirement — offers three key benefits: an accelerated VAT refund within 25 days (which the tax office cannot extend), protection from joint liability for a contractor’s VAT, and evidence of due diligence in case of a tax audit.
Accelerated VAT refund — 25 days instead of 60
The standard deadline for a refund of excess input VAT over output VAT is 60 days. If you request the refund to your VAT account, the tax office must transfer the funds within 25 days — and cannot extend this deadline (Art. 87(6a) VAT Act). This makes a significant difference, especially if your business regularly reports excess input VAT (e.g., exporters or companies making large capital investments).
Protection from joint liability
Even for transactions below PLN 15,000 involving Annex 15 goods, the buyer bears joint liability for the seller’s VAT (Art. 108a(5) VAT Act). Voluntarily paying via split payment eliminates this risk. For the tax office, it serves as evidence that you exercised due diligence — which is especially important if your contractor turns out to be involved in a VAT carousel fraud.
Security in the KSeF era
Since 1 February 2026, Poland’s National e-Invoice System (KSeF) has been operational. In the context of split payment, this means the split payment transfer message must include additional data derived from KSeF. Accounting and banking systems should be updated to automatically generate correct transfer messages. Progress Holding helps clients integrate KSeF with their payment processes — contact us if you need support.
How to manage cash flow with mandatory split payment
Managing cash flow under mandatory split payment requires deliberate planning of cash flows that accounts for the separation of funds between your current account and your VAT account. Businesses in “sensitive” sectors should treat the VAT account balance as a component of working capital with restricted availability.
5 practical strategies to protect your cash flow
- Use your VAT account balance to pay VAT, PIT, CIT, and ZUS — instead of paying these obligations from your current account, direct them from the VAT account. This is a “natural” release of funds without needing to apply to the tax office.
- Submit release applications well in advance — don’t wait until you run out of funds. Plan cyclical applications, e.g. quarterly, factoring in the 60-day processing period.
- Negotiate payment terms with contractors — if your suppliers also operate in sectors covered by mandatory split payment, you can pay them via split payment and “pass along” the VAT instead of accumulating it in your own account.
- Request an accelerated VAT refund to your VAT account — the 25-day deadline is shorter than the standard 60 days. Once the refund arrives in your VAT account, you can immediately use those funds for further split payment transfers or tax obligations.
- Monitor your VAT account balance in your accounting system — most modern accounting software allows you to track the VAT account balance alongside your current account balance, giving you a complete picture of available funds.
Having conducted hundreds of cash flow analyses at Progress Holding, we know that construction firms and electronics traders have an average of 15–20% of their working capital “frozen” in the VAT account. Actively managing this balance — including planning release applications — shortens the frozen period and helps avoid difficulties in meeting current obligations.
How to correctly annotate an invoice subject to mandatory split payment
The seller is required to include the annotation “mechanizm podzielonej płatności” (split payment mechanism) on any invoice that meets the three mandatory split payment conditions. This obligation arises from Art. 106e(1)(18a) of the VAT Act. The absence of the annotation does not relieve the buyer of the obligation to pay via split payment — but it does protect the buyer from the 30% penalty.
Practical tips for sellers
- Configure your invoicing system to automatically flag invoices containing Annex 15 items above the PLN 15,000 threshold.
- In KSeF, the “mechanizm podzielonej płatności” annotation is a field within the e-invoice structure — make sure your software populates it correctly.
- If you issued an invoice without the annotation when it should have been included, the buyer is still obligated to pay via split payment. The missing annotation does not “switch off” the buyer’s obligation.
Practical tips for buyers
- Review every invoice above PLN 15,000 for Annex 15 items — regardless of whether the seller included the annotation.
- When in doubt, pay via split payment voluntarily — it’s safer than risking the 30% penalty.
- Train your procurement and accounting staff — they are the first to see invoices and decide on the payment method.
Real-world experience from Progress Holding
Based on providing accounting services to over 250 companies at Progress Holding — including several dozen in sectors covered by mandatory split payment (construction, building materials, electronics) — we have identified four of the most common mistakes that result in real financial losses.
Mistake 1: ignoring the PLN 15,000 threshold on consolidated invoices
35% of new clients who come to us from the construction industry do not check the total gross amount on consolidated invoices. A single construction service worth PLN 8,000 net (PLN 9,840 gross) does not require split payment. But if five such services appear on one invoice, the total exceeds the threshold and split payment becomes mandatory.
Mistake 2: missing annotation on sales invoices
Around 20% of clients transitioning to our services did not have their invoicing system properly configured. Invoices were being issued without the “mechanizm podzielonej płatności” annotation, even though they related to Annex 15 goods above the threshold. This exposes the seller to the 30% VAT penalty and fiscal criminal liability.
Mistake 3: paying VAT and ZUS from the current account instead of the VAT account
Many business owners automatically set up transfers to the tax office and ZUS from their current account. However, these same obligations can be paid from the VAT account — which releases funds without any application to the tax office. One of our clients had over PLN 180,000 sitting in their VAT account while simultaneously taking out a working capital loan for day-to-day expenses.
Mistake 4: never applying to release funds
Around 40% of the business owners whose accounts we take over have never submitted an application to release funds from their VAT account. They either didn’t know the option existed or feared it would trigger an audit. In reality, the application itself is not a reason for an audit — it is a standard procedure described in Art. 108b of the VAT Act.
How long will mandatory split payment remain in force in Poland?
Poland has received approval from the European Commission and the Council of the EU to apply mandatory split payment until 29 February 2028. After that date, a new derogation or a change in legislation will be required. Current information on the derogation status is available on the biznes.gov.pl portal.
Voluntary split payment (for transactions not covered by the mandatory requirement) does not require an EU derogation and can continue indefinitely.
Frequently asked questions
Does split payment apply to invoices in foreign currencies?
Yes. If a foreign-currency invoice exceeds PLN 15,000 when converted to zloty and relates to Annex 15 goods, the split payment obligation applies. However, the split payment transfer message can only be executed in Polish zloty. The buyer must convert the amount and make the transfer in PLN.
Does split payment apply to advance invoices?
Yes. Mandatory split payment also covers advance invoices if they document a payment towards the delivery of Annex 15 goods or services and the total transaction value (not just the advance) exceeds PLN 15,000 gross. In the transfer message, enter “zaliczka” (advance) in the invoice number field if the advance invoice has not yet been issued.
Can I split an invoice into several smaller ones to stay below the PLN 15,000 threshold?
No. Artificially splitting a transaction to avoid mandatory split payment is considered a sham arrangement and can be challenged by the tax authorities. The tax office examines the true nature of the transaction — if a single delivery is documented by several invoices below the threshold, the authorities may aggregate their values and impose penalties.
Can I use split payment voluntarily for invoices below PLN 15,000?
Yes. Any VAT taxpayer can voluntarily apply split payment to any B2B transaction — regardless of the amount or whether the goods appear in Annex 15. Voluntary split payment protects against joint liability, serves as evidence of due diligence, and accelerates VAT refunds to 25 days.
How long does it take to release funds from the VAT account?
The statutory deadline is 60 days from filing the application. In practice, positive decisions typically arrive within 3–6 weeks. The tax office will refuse if you have outstanding tax liabilities. The application is free — you submit it to the head of your local tax office. You have 14 days to appeal a refusal to the regional tax administration chamber.
Does split payment apply to cash transactions?
No. Split payment works exclusively with bank transfers made via the dedicated transfer message. Paying cash for an invoice covered by mandatory split payment does not fulfil the requirement — meaning you are in breach of the law and at risk of penalties. Additionally, B2B cash transactions above PLN 8,000 have been subject to a separate cash payment limit since 2024.
What every business owner should know about split payment
Split payment is a permanent feature of Poland’s VAT system — it will remain in force until at least 2028 and applies to every business trading in Annex 15 goods or services above the PLN 15,000 gross threshold. Penalties for errors can reach 30% of VAT plus fiscal criminal liability. At the same time, proactive use of split payment — including voluntary application — provides real tax protection and accelerated VAT refunds.
Treat your VAT account as a cash flow management tool: use it to pay VAT, PIT, CIT, and ZUS instead of drawing from your current account. Plan cyclical applications to release funds. Configure your invoicing system to automatically annotate invoices covered by mandatory split payment.
Need help setting up split payment, integrating with KSeF, or accounting services that account for your VAT account? Contact us at Progress Holding on +48 603 232 418 or by email at office@progressholding.pl. We’ll configure your payment processes to keep you compliant and your cash flow unblocked.
