Split Payment / MPP — A Practical Guide for 2026

What Is Split Payment

With a standard VAT invoice, you pay the full gross amount (net + VAT) in a single transfer to the contractor's account. Under the split payment mechanism:

• The net amount goes to the contractor's regular bank account
• The VAT amount goes to the contractor's special VAT account
• Funds in the VAT account can only be used to pay VAT — either to the tax office or to other contractors for the VAT portion of their invoices

The purpose is to combat VAT carousel fraud. VAT funds no longer circulate freely in the market.

Mandatory MPP — When It Applies

Split Payment is mandatory when BOTH of the following conditions are met:

1. The invoice exceeds PLN 15,000 gross
2. The goods or services are on the sensitive list (Annex 15 to the VAT Act)

The sensitive list includes, among others:

• Steel and iron scrap
• Aluminium, copper, lead, and other metals
• Mobile phones, laptops, tablets, gaming consoles
• Processors, hard drives, RAM
• Liquid fuels (petrol, diesel)
• Clothing and footwear
• Construction works (including plumbing, sewage, and installation services)

Voluntary MPP — When It Pays Off

Even when not required, you may choose to pay via MPP. Benefits for the buyer:

• No joint and several liability — if the seller turns out to be a VAT fraudster, you are not held liable
• No VAT carousel risk — the system blocks free circulation of VAT funds
• Better verification — some clients require MPP from all their suppliers

Benefits for the seller: none — sellers generally prefer not to receive MPP payments, as their VAT funds become locked in the VAT account.

The VAT Account — How It Works

The VAT account is a separate, dedicated account opened automatically alongside your main business bank account. Operations:

Inflows to the VAT account:

• VAT from sales invoices received via MPP

Outflows from the VAT account (restricted):

• VAT payments to the tax office (advance payments, declarations)
• VAT payments to other contractors (paying the VAT portion of their invoices via MPP)
• Requests to release funds (a lengthy procedure requiring tax office approval)

The VAT account CANNOT be used to pay for goods, salaries, or loans — it is reserved exclusively for VAT.

Penalties for Non-Compliance

Failure to use MPP when mandatory:

• Seller: an additional tax liability equal to 30% of the VAT amount on the invoice
• Buyer: loss of the right to deduct the entire invoice as a tax-deductible cost (not just the VAT portion) — this can mean tens of thousands of PLN

Labelling errors: omitting the annotation "mechanizm podzielonej płatności" (split payment mechanism) on the invoice when mandatory results in an additional tax liability.

In practice: the banking system (most banks) automatically suggests MPP for invoices involving sensitive-list items. Make use of this feature.

Frequently Asked Questions