VAT Split Payment Mechanism Upheld by Advocate General in Insolvency Case

• Poland enacted a split payment mechanism in 2018 to address the issue of tax authorities not receiving VAT amounts
• Customers purchasing supplies over €3,500 had to pay associated VAT into a separate supplier bank account
• The account could only be used to pay VAT on goods/services purchased by the supplier or pay tax liabilities
• Advocate General Kokott considered a claim by administrators of an insolvent business to access the restricted account
• AG Kokott found Poland’s split payment mechanism compatible with the EU Principal VAT Directive
• The mechanism did not deny the business immediate input tax recovery or infringe on the Charter of Fundamental Rights
• The mechanism was deemed appropriate in combatting VAT fraud and was not excessive in its restrictions.

Source: taxscape.deloitte.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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