Split Payment in SAP


Split Payment in SAP

On July 1, 2018, a new legal regulation, called the Split Payment (in Polish “Mechanizm Podzielonej Płatności – MPP”), has been introduced in Poland.How it affects your ERP?


On July 1, 2018, a new legal regulation, called the Split Payment (in Polish “Mechanizm Podzielonej Płatności – MPP”), has been introduced in Poland. Since the “Split Payment” term already exists in our economic reality, we will rather use it than the polish language version for the purpose of this document. The Split Payment Mechanism is based on dividing the payment for a good or service between two bank accounts of the supplier. The net amount is paid by the buyer to the supplier's first bank account, and the amount of VAT is transferred to the second dedicated VAT account. The VAT account itself is created free of charge by the bank in which the client has a settlement account.


One can assume that the mechanism is voluntary, but this voluntariness is only apparent – this results from the fact that the decisive party here is the buyer of the good or service (the customer). The supplier is not able to reject a payment based on the Split Payment Mechanism. However, the Minister of Finance does not exclude possibility of adjusting this procedure at the level of civil law contracts between partners. In practice this means that the supplier may indicate in the contract with the buyer that he or she does not accept payments made by the Split Payment method and such a remark complies with Polish law.


The main objective of the Split Payment Mechanism is to reduce tax fraud. The implementation of this assumption is possible due to the fact that the client has a very limited access to the dedicated VAT account (or accounts). If the VAT account holder would like to transfer a part of the funds from the VAT account to his or her settlement account, it is required to submit a proper request to the head of the tax office. The official has up to 60 days to process such a request and there are circumstances in which he or she can reject it. Such a decision can, of course, be appealed against. However, as a matter of fact, for many companies this may mean potential problems with liquidity due to the limited possibility to spend funds deposited on their VAT accounts.


It is worth noting that the burden of an actual division of payments into the net amount that goes to the supplier's settlement account and the amount of VAT that goes to the dedicated VAT account is placed on the bank. At this point, the question of a suitable preparation of a payment medium to be transferred to the bank from which the payment is made appears. This obligation applies to all SAP users. Moreover, it is worth noting that Split Payment makes the payment process more difficult due to the fact that it does not handle batch payments; in other words, 1 SP invoice = 1 bank transfer, and, thus, 500 SP invoices = 500 bank transfers.


Therefore, one of the first steps related to the adaptation of the SAP system to the Split Payment Mechanism should be the analysis of the method of generating the payment medium. Some companies use older media based on a dedicated payment program. The disadvantage of this program is that it has not been supported by SAP AG since 2005. A more recent approach is based on the use of the Payment Medium Workbench (PMW) Mechanism. The PMW Mechanism, in turn, is based on the Data Medium Exchange Engine (“DMEE”) – a tool that enables easy creation and managing payment medium formats.


The payment generation method is important since it determines the options that can be used to adapt the SAP system. Due to the lack of support from SAP AG, customers using an older method of the payment medium generation are forced to adjust their system individually with the help of qualified IT consulting companies. The scope of work in such cases assumes, among other things, extension of the standard program generating the payment medium with an additional functionality (include), which will make it possible to generate a payment medium containing all the necessary information. The transfer message must contain information about:


  • Gross sales amount (or a part of it),
  • VAT amount (or a part of it),
  • the number of the invoice related to the split payment,
  • VAT identification number (NIP) of the supplier.


Clients using PMW Mechanism can choose official solution for handling of the Split Payment Mechanism. Its implementation is carried out by means of dedicated notes (see: 2607042 SAP note) containing required instructions. SAP actively supports its solutions and often publishes various modifications, improvements and patches after their release. The same applies to the Split Payment Mechanism, so it is worth to be up to date. The 2654294 note is a very good source of information. Thanks to its form of FAQ (Frequently Asked Questions = a set of the most commonly asked questions with answers), the note clearly and readably explains the most significant questions related to the solution implementation.  Additionally, it should be considered that during the implementation of SAP notes, the order of uploading and the sequence of activities performed within the framework of specific notes are very important. Therefore, the official FAQ should be analyzed thoroughly prior to undertaking any activities in order to avoid unnecessary difficulties.


The official SAP solution was designed for the most popular payment format in Poland – ELIXIR. However, not all Polish banks use it. Therefore, if our bank uses a different format than ELIXIR, e.g.: MTMS, the implementation will not bring the desired result. In such a scenario, it will be necessary to adjust the system on an individual basis. Thus, the new functionality must provide all the above information and integrate it into the payment medium according to its specifications. The adjustment process involves analyzing the configuration of client banks and verifying the standards used by them. 


In addition to handling outgoing payments, there are several other important areas. One of them is the issue of bank account statements, to which a functionality that covers handling of operations related to the Split Payment Mechanism should be added. Another issue is a possibility to control clients to be involved and to be excluded from the Split Payment Mechanism. This matter is significant due to the fact, that one may be contractually obliged not to pay the other party by means of the Split Payments Mechanism. The possibility to exclude such a party from the SP significantly reduces the risk of mistake. And, last but not least, there is still a question of reporting that enables companies quickly and conveniently analyze to whom and how much it pays with the use of Split Payment Mechanism. Most often, for the purpose of this requirement, a dedicated Z-type (client) report presenting all the required information is created.


Summing up, the degree of difficulty in adjusting the SAP system to handle the Split Payment Mechanism depends to a large extent on the specificity of a particular customer. Any work should therefore be preceded by a thorough business evaluation, with particular emphasis on banking area. Such a process may require support of qualified consultants.