Tax customs & excise /

Multilateral setoffs of reciprocal claims release the parties from applying the split payment mechanism

We wrote recently about the problem of multilateral set-offs of reciprocal claims in the context of the provisions on the mandatory split payment mechanism, which has been in force in Poland since November 1, 2019.

According to the regulations, only the bilateral offsetting of reciprocal claims was releasing the buyer from applying the mandatory split payment mechanism for the transaction. Thus, it has become risky to conclude agreements on multilateral set-offs of claims.

Meanwhile, on January 1, 2021, an amendment to Art. 108 sec. 1d of the VAT Act was implemented. Pursuant to the new wording of the provision, as of this year, each set-off of reciprocal claims will release the parties to the transaction from the obligation of using the split payment mechanism. Thus, entrepreneurs can apply multilateral set-offs of reciprocal claims without fear of negative fiscal consequences.

Author team leader DPG Tax
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