VAT split was introduced in Romania in October 2017 and it is mandatory starting with March 2018

Daniela Gavrilescu

The motivation for introducing the breakdown VAT payment mechanism (VAT split):

  • To increase the voluntary compliance with payment operators by ensuring they have the financial resources to pay VAT to the state budget;
  • To reduce the VAT fiscal evasion;
  • To ensure a fair competition environment by eliminating the benefits of economic operators with incorrect fiscal behaviour who do not pay VAT to the state budget.

 

The VAT payment mechanism does not change any fiscal rule in the field of VAT.
These are some examples of existing rules which do not change:

  • the rules for charging VAT;
  • rules for registration of transactions in the VAT declaration;
  • deadline for the VAT payment;
  • deadline for submitting the VAT declaration to the state budget;
  • rules for the reimbursement of VAT from the state budget.

There are no additional reporting obligations, or similar documents, required.

 

When does the VAT broken down payment mechanism apply?

From 1 October 2017 each company may choose to apply the mechanism (facilities are granted to those who choose to apply the mechanism).

The benefits are:

  • Cancellation of delay penalties related to the main tax obligations of VAT outstanding as of 30 September 2017, under certain conditions;
  • A 5% reduction in income tax / micro-enterprise income for the fourth quarter of the fiscal year 2017.

From 1 March 2018, along with the companies which have chosen to apply the VAT split system, the companies which have unpaid VAT over the limits mentioned by the law (RON 15.000 for big companies, RON 10.000 for medium companies and RON 5.000 for small companies) for more than 60 days from the due date will be forced to apply the VAT split system. The companies which are in insolvency procedures will also be forced to apply the VAT split system.

All VAT payers which are forced to apply the VAT split system will be registered by the fiscal authorities in the official Register of entities who apply for VAT, beginning 1 March 2018.

After registration, these companies have a VAT account opened by their commercial bank or by treasury, and they are obliged to include this VAT account on their invoices.

 

VAT breakdown payment mechanism

Operations for which the mechanism is applicable: taxable transactions in terms of VAT for the place of delivery or of the provision are considered to be within the terms of VAT in Romania.

Operations for which no mechanism applies: the operations for which the customer is liable for the VAT transactions subject to the special VAT regime - the regime of second-hand goods, travel agents scheme, scheme for farmers, etc.

The law stipulates that all VAT registered companies (regardless of the article under which the company was registered) will have to make the payment to the suppliers which are applying the split VAT mechanism by splitting it into 2 payments: value without VAT in the bank account of the supplier and value of VAT in the VAT account of the supplier. The obligation applies to the invoices issued, starting with the date of publication in the Register.

Considering the information above, all the VAT registered companies will have to take account of the following points beginning March 2018:

  • All suppliers must be checked on the online ANAF system before any payment, to verify if they are registered in the official Register and whether VAT split payment should apply; (The register is available at this address: https://www.anaf.ro/RegPlataDefalcataTVA/)
  • If the supplier which applies the VAT split system did not mention the VAT account or the VAT split system on the invoice, this does not mean that the payers are exempted from making the split payment;
  • This check has to be continuous (to all the payments) because the companies may enter and exit this system anytime;
  • The result of the check should be kept (printed or saved) to justify the payment with split or not;
  • If the supplier is applying the VAT split system, the payer has to be sure that they split the payment (cash payments or card are excepted), or, if not, correct it in 7 days to avoid the penalties (0.06% per day);
  • Partial payments are also done through the split.

If you require any further information on this newly introduced VAT system, we will be pleased to help.

 

XLNC MAGAZINE | No. 01 | May 2018

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