16 May Split Payment in Microsoft Dynamics NAV

The split payment mechanism will be binding for Polish companies starting from July 1, 2018. The amendment to the VAT Act that imposes the split payment mechanism results in modifications implemented within the Microsoft Dynamics NAV system.

What does split payment involve?

The split payment mechanism:

• is used to settle payments, enabling you to specify a VAT amount to be sent to a separate VAT account of a vendor and the remaining amount to be sent to the current settlement account;
• before the transfer is sent, the bank will transfer the VAT amount from a dedicated VAT account of the customer to a settlement account, and then it will send the gross amount from this settlement account;
• the bank that receives the split payment transfer will post the gross amount to the recipient’s account set on a bank transfer and then, it will send the VAT amount to a dedicated VAT account of the recipient.

Which companies can use split payment?

• only business entities that operate in the business-to-business model (B2B);
• the decision on if and how payments are to be split is made by the customer;
• the method of payment can be chosen only per invoice type i.e. only specific invoices can be paid by means of split payment;
• the customer is not required to obtain a consent of the vendor for such a transfer and the VAT amount is blocked on the vendor’s account;
• amounts transferred to the VAT account cannot be used to settle other taxes than VAT.

The most important issues:

• Starting from July 1, 2018, the amendment to the Act introduces:
  • an obligation for banks to provide their customers with dedicated VAT accounts combined with settlement accounts in PLN;
  • an obligation to prepare a new type of settlements for outbound and inbound bank transfers to incorporate the split payment mechanism.
• The amount deposited on the VAT account will belong to the vendor. However, the vendor will not be allowed to use the amount to settle other payments than VAT payments as provided for by the binding VAT regulations.
• The amount on the VAT account can only be deposited
  due to:
  • a payment order settled on a split payment basis,
  • a payment order settled on a split payment basis for a credit memo issued,
  • VAT settlements with a tax collector office (a credit amount due to the return of the overpaid VAT amount; decisions on the VAT amount to be returned to a taxpayer are made independently by heads of a tax collector offices),
  • payment from another VAT account of a VAT account owner that is kept at the same bank.
  • The descriptions used for bank transfers and bank statements have been defined precisely and contain references corresponding to each item.

/VAT/10n,2n / IDC/14x / INV/35x / TXT/33x

n – integer, x – free sign, VAT – VAT amount, IDC – vendor VAT reg. no (NIP), INV – no. of one invoice, TXT – free text, 33-character long

Modifications planned in Microsoft Dynamics NAV

Modifications will be available for system installations that use the additional Electronic Banking module. For the standard NAV PL system, this module is available for the following versions: NAV 2015 PL – for the (fix05) update, NAV 2016 PL and NAV 2017 PL.

As a result of the introduction of the split payment mechanism, modifications of the ERP system are being prepared. With these modifications, it will be possible to prepare outbound payments made via the Electronic Banking module and import bank statements as required by the new regulations.

• It will be necessary to create a separate template for each bank and such a template should be marked as a split payment transfer.
• Split payment transfers will be issued as previously i.e. from the Vendors Payments Worksheet for this template.
• In worksheet lines, a “VAT Transfer Amount” field will be added to be filled out by the user. Invoice statistics showing VAT amounts per documents will be available in a FactBox window.
• In addition, the transfer register will be used to record the value from the “VAT Transfer Amount” field. If a partial amount is paid, the program will display a message informing about the VAT amount that has been already transferred.
• The vendor’s VAT Reg. No. (NIP) will be entered from the vendor card when a transfer journal is created.
• Invoice No. will be entered from the vendor entry that is to be settled.
• Due to the requirement that only one invoice can be paid per one transfer, the options for aggregated transfer will be disabled per vendor and due date. It will only be possible to create an invoice per entry (1 entry – 1 transfer).
• When importing statements that include split payment transfers:
  • it will be required to create a new G/L entry for the VAT account and
    define split payment settlement for the entry in the setup;
  • receivable and payable amounts on the bank statement will be settled as previously in full gross amounts, and VAT amounts as internal credit transfers and directs debits to a G/L account for VAT settlement.
• The VAT account statement will not be imported, it will be used only to validate the transfers posted from the master account.

By the end of May 2018, the commercial terms and conditions for the split payment solution will be announced. The solution will be available for deployment starting from June 2018.