A Warsaw-based IT services company was processing a routine batch of invoices when its finance director flagged a problem. Several payments to Polish subcontractors had been made without using the split payment mechanism – yet the invoices fell squarely within the mandatory regime. The tax authority had already opened a preliminary inquiry. The exposure was real, and the timeline for correction was closing fast.

Poland's VAT split payment mechanism – mechanizm podzielonej płatności (MPP) – divides a payment into two streams: the net amount to the supplier's regular account and the VAT portion to a dedicated VAT account. Mandatory MPP applies to B2B transactions in Polish zloty that exceed PLN 15,000 gross and cover goods or services listed in the VAT Act annex. Failure to use MPP where required triggers a 30% sanction on the VAT amount shown on the non-compliant invoice.

This case study traces how the client identified its exposure, corrected the payments within the statutory window, and restructured its procurement process to prevent recurrence. Three transferable lessons emerge for any company operating in Poland – whether a domestic entity or a foreign investor's subsidiary dealing with KSeF Poland obligations and broader Polish tax law compliance.

What was the background to the MPP breach?

The client – a mid-sized IT services firm with subsidiaries in Mazowieckie – had grown its subcontractor base rapidly through 2024. Its accounts-payable team processed several hundred invoices each month. The compliance gap arose from a single process failure: the team was checking invoice amounts against the PLN 15,000 threshold but was not cross-referencing the goods and services classification codes (PKWiU) against the mandatory annex to the VAT Act.

The annex covers a wide range of categories. Construction services, steel products, electronic goods, fuel, and certain IT hardware all appear on the list. Several of the firm's subcontractors supplied hardware alongside software licences. The bundled invoices pushed the gross value above PLN 15,000. That combination – listed goods, bundled invoice, threshold crossed – triggered the mandatory MPP obligation.

How did the legal and tax strategy address the exposure?

The first step was a rapid classification review. Our tax advisory team in Warsaw mapped each of the eleven invoices against the PKWiU codes and confirmed which fell within the mandatory MPP scope. Two invoices were reclassified as outside the annex after a closer reading of the service descriptions – reducing the live exposure to nine invoices and approximately PLN 144,000 in VAT at risk.

We secured a reversal of the preliminary sanction assessment for a client in the Mazowieckie region (autumn 2025), after demonstrating that the classification error was procedural rather than intentional and that the client had self-reported before any formal audit notice was issued. Polish tax law provides for a reduction – and in some cases elimination – of the 30% sanction where the taxpayer corrects the breach voluntarily and before a tax authority decision crystallises.

The correction mechanism involved the client's suppliers issuing corrective payment instructions and the client routing the outstanding VAT portions through the dedicated VAT account (rachunek VAT) within 14 days of the remediation plan being agreed. KAS acknowledged the voluntary correction. The formal inquiry was closed without a penalty decision. This outcome depended entirely on speed: had the client waited for the audit notice, the sanction reduction option would have been forfeited.

  • Confirm PKWiU codes on every invoice before payment – not just the gross amount.
  • Maintain a standing cross-reference list of annex-listed categories relevant to your sector.
  • Set an accounts-payable workflow rule that flags bundled invoices above PLN 15,000 for MPP review.
  • Correct MPP breaches before any formal audit decision is issued to preserve sanction reduction rights.

For foreign investors running Polish subsidiaries, the same logic applies. A German holding company whose Polish entity sources IT hardware locally faces identical MPP exposure – a point we address in our analysis of KSeF obligations for cross-border operators.

What process changes prevent recurrence?

After resolving the immediate exposure, the client asked us to design a durable compliance framework. The core change was structural: MPP classification was moved upstream, from the payment stage to the purchase-order stage. Every purchase order above PLN 12,000 net – a conservative buffer below the PLN 15,000 gross threshold – now triggers an automatic PKWiU check against the annex.

We also worked with the client's finance team to produce a sector-specific annex summary covering the categories most relevant to IT hardware and construction-adjacent services. This internal reference document is updated whenever the VAT Act annex is amended. The 2024 amendments expanded the annex to include additional categories of electronic components – a change that had caught several of the client's peers off guard.

A further process layer addressed the supplier side. The client introduced a standard MPP clause into its subcontractor agreements, requiring suppliers to flag any invoice that they believe falls within the mandatory MPP scope. This creates a shared compliance checkpoint and reduces the risk of a unilateral oversight on either side. Suppliers who issue invoices marked "MPP" are already signalling their own assessment – but that signal had previously been ignored by the accounts-payable team under time pressure.

The broader compliance architecture also considered the firm's ESG reporting obligations. Payment process integrity is increasingly reviewed under supply chain due diligence frameworks. Our ESG and compliance practice assisted in framing the MPP remediation as part of the client's wider governance narrative for its 2025 sustainability report.

For a tax advisor Warsaw-based team advising on transfer pricing or IP Box structures, the MPP compliance layer is a recurring theme. Intercompany transactions involving listed goods – for example, hardware transferred between related entities – can trigger MPP even where the parties are within the same corporate group. That intersection of Polish tax law and intra-group payment mechanics is where exposure most often goes undetected.

What are the transferable lessons for other Polish taxpayers?

Three lessons from this matter apply across sectors. First, the PLN 15,000 threshold is a gross figure – VAT included. A net invoice of PLN 13,000 with 23% VAT reaches PLN 15,990 gross and crosses the mandatory threshold. Many finance teams apply the threshold to the net amount and undercount their exposure by a consistent margin.

Second, the mandatory MPP obligation is invoice-specific, not transaction-specific. A single supplier relationship that generates multiple invoices – each below PLN 15,000 gross – does not aggregate to trigger MPP. But a single bundled invoice above the threshold for mixed supplies (some listed, some not) triggers MPP on the entire VAT amount shown, not just the VAT attributable to the listed component. That is a counterintuitive rule that catches companies operating in sectors where hardware and software are routinely bundled.

Third, voluntary MPP accounts carry a practical benefit beyond compliance. Funds held in a VAT account (rachunek VAT) can be used to pay VAT liabilities to the tax authority, pay VAT shown on incoming invoices under MPP, and – subject to approval from the relevant tax office – be released to the company's regular account. Companies with high VAT throughput can treat the VAT account as a managed liquidity tool rather than a compliance burden. That reframe changes the internal conversation from "why are we restricted?" to "how do we optimise this pool?"

Family foundation structures and transfer pricing arrangements involving Polish entities should also map their payment flows against the MPP annex. Distributions or intercompany charges that involve listed goods or services above the PLN 15,000 threshold are not exempt simply because the parties are related. KAS has issued guidance confirming that the mandatory MPP rules apply to intra-group transactions on the same basis as arm's-length payments.

To receive an expert assessment of your company's MPP exposure and payment compliance position, contact info@kordeckipartners.com.

Frequently asked questions

Q: Does the mandatory MPP apply to foreign companies making payments to Polish suppliers?

A: The mandatory MPP obligation applies to the payer where the transaction is settled in Polish zloty, the invoice exceeds PLN 15,000 gross, and the subject matter falls within the annex to the VAT Act. A foreign company with a Polish VAT registration making such payments is within scope. A foreign company without a Polish VAT registration is generally outside the MPP obligation, but the Polish supplier's own obligations may still be relevant to the transaction structure.

Q: How long does it take to release funds from a VAT account back to a regular account?

A: The tax office has 60 days from the date of the taxpayer's application to approve or refuse the release of funds from the VAT account. In practice, straightforward applications from companies with a clean compliance history are processed within 30 to 45 days. Delays occur where the tax office opens a verification inquiry into the taxpayer's VAT settlement position.

Q: Is there a common misconception about which invoices require the MPP annotation?

A: A widespread misconception is that only invoices explicitly marked "split payment" by the supplier trigger the mandatory regime. In fact, the obligation is statutory: if the transaction meets the three conditions (Polish zloty, above PLN 15,000 gross, listed goods or services), the payer must use MPP regardless of whether the invoice carries the annotation. The annotation is required from the supplier, but its absence does not relieve the payer of the mandatory obligation.

KORDECKI & Partners is a law firm based in Warsaw and Krakow, advising business clients across 30 jurisdictions. Our team combines expertise in Polish and international law with a practical approach to VAT compliance, MPP structuring, and tax advisory for domestic and cross-border transactions. We work with Polish entrepreneurs, foreign investors, and in-house legal teams. To discuss your situation, contact info@kordeckipartners.com.

Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. KORDECKI & Partners assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@kordeckipartners.com.