Romania 2018: VAT Split Payment

18. September 2017

The Romanian Government is to introduce a new mechanism for collecting VAT whereby every taxable person registered for VAT purposes in Romania is to be obliged to open and use at least one dedicated account (held either at an existing financial institution or one of the branches of the Romanian Treasury) for the collection and payment of VAT.

With the introduction of the new split payment mechanism in the VAT Act from 1.1. 2018, the Romanian Government hopes to reduce the VAT gap and increase the state revenue.

General rules for VAT purposes in Romania

Taxable persons registered for VAT purposes will collect the amounts corresponding to the VAT on the supply of goods and services in dedicated VAT accounts held in their own name. Moreover, each taxable persons will have the obligation, within a maximum of 7 days from the date when an invoice for the supply of goods and services was settled, to transfer to their own VAT account any VAT not paid into said account by this time.

In terms of VAT payments, each taxable person registered for VAT purposes will have the obligation to transfer the amount representing the VAT for the acquisition of goods and services from its own VAT account to that of the provider. In the case of taxable persons not registered for VAT purposes, the payment of the VAT on goods and services may be made from the taxable person’s current account to the corresponding VAT account of the provider.

As an exception to the rules regarding the collection and payment of the VAT on the supply of goods and services, any transactions settled in cash or by debit or credit card will not be subject to the mechanism described above.

Romania: New VAT Split mechanism in 2018

The Government Ordinance introducing the new mechanism also stipulates the manner in which a VAT account can be opened and used, as well as how it can be debited and credited. The new VAT split payment mechanism includes:

  • the conditions under which it is possible to transfer amounts from a VAT account to a current account
  • the way a VAT account can be debited or credited with amounts resulting from corrections (i.e. errors in the payment process, invoice corrections, adjustments to tax bases)
  • the stipulation that cash withdrawals from VAT account are forbidden
  • the obligations of financial institutions and branches of the Romanian Treasury in terms of the processing of transactions

The Romanian Ordinance provides significant fines for non-compliance with the split VAT payment mechanism.

The provisions of the Ordinance are applicable as of 1 January 2018. During the period 1 October 2017-31 December 2017, taxable persons may opt to apply for the split VAT mechanism. By doing so they will benefit from the following fiscal advantages:

  • A reduction of 5% in the corporate income tax/microenterprise income tax due for the fourth quarter of 2017 fiscal year
  • the waiving of various penalties for the late payment of VAT

New VAT split payment also in Poland

Polands Government has also announced to start with the VAT split payment mechanism beginning from 1. January 2018: Voluntary VAT Split Payment

Do you have questions about the new VAT Split payments?

If you have questions about the new subsidy in Austria do not hesitate to contact TPA’s expert in Romania:

Contact Claudia Stanciu, Tax Advisor at TPA Romania

 

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