Split VAT payment worsens liquidity of every sixth company

The split VAT payment mechanism has a negative impact on the financial liquidity of every sixth company using it, according to a study by the Register of Debtors BIG InfoMonitor.

The settlement mechanism, which has been voluntary since the middle of last year, from November 1 will be mandatory for industries particularly exposed to VAT irregularities, but the funds accumulated on the VAT account will be able to settle more liabilities than before. In the case of over 42% of micro, small and medium-sized enterprises, suppliers began to transfer the VAT due to a separate account. Split VAT payment is especially common in the trade industry and it is in this sector, along with transport, that complains about the negative impact of these solutions on financial liquidity are reported the most often.

The split VAT payment mechanism has been in force since July 1, 2018. Theoretically, entering this system is voluntary, but in practice, it largely depends on the buyers of goods and services whether the supplier will be included in such a solution. The buyer decides whether he pays the entire sum to one account or splits the payment into the net amount and the tax, with the latter being transferred to the suppliers’ tax office-controlled VAT account.

(ISBnews)