SPLIT PAYMENT OF VAT: THE MAIN CHANGES APPLICABLE AS OF 1 JANUARY 2018

SPLIT PAYMENT OF VAT: THE MAIN CHANGES APPLICABLE AS OF 1 JANUARY 2018

Government Ordinance no. 23/2017 concerning the split payment of VAT, which has been largely criticized by the Romanian business community, has been approved at the end of 2017 by the Parliament, thus becoming Law no. 275 as of 27 December 2017, published in the Official Journal no. 1036 as of 28 December 2017.

Therefore, from 1 January 2018, new rules are applicable, as the split payment of VAT was more limited. The main amendments introduced by Law no. 275 of 27 December 2017 refer to the following aspects:

PERSONS FOR WHOM THE SPLIT PAYMENT OF VAT IS COMPULSORY

From 1 January 2018, taxpayers and public institutions registered for VAT purposes are obliged to use the split payment mechanism if they are in one of the following situations:

a) On 31 December 2017, they have VAT debts superior to: (i) 15,000 Lei (approximately 3,260 Euros) for large taxpayers; (ii) 10,000 Lei (approximately 2,174 Euros) for medium-sized taxpayers; (iii) 5,000 Lei (approximately 1.087 Euros) for the other taxpayers, if such obligations are not paid until 31 January 2018;

b) As of 1 January 2018, they have VAT debts superior to: (i) 15,000 Lei for large taxpayers; (ii) 10,000 lei for medium-sized taxpayers; (iii) 5,000 Lei for the other taxpayers, if such obligations are not paid within 60 days from their due date;

c) Are subject to the legal provisions regarding insolvency proceedings.

PERSONS FOR WHOM THE SPLIT PAYMENT OF VAT IS OPTIONAL

Taxable persons and public institutions registered for VAT purposes, other than those for which the split VAT payment is compulsory, may opt for the split payment of VAT. In such a situation, they are obliged to notify the relevant tax authority.

DATE FROM WHICH THE SPLIT PAYMENT OF VAT IS APPLICABLE

Taxpayers registered for VAT purposes who are obliged or who decide to opt for the split payment of VAT will apply this mechanism the day after they are registered in the Register of Persons who apply the split payment of VAT, for invoices/documents issued in accordance with the law and for down payments received from that date.

The Register of Persons who apply the split payment of VAT is public and listed on the website of the National Tax Authority (https://www.anaf.ro/RegPlataDefalcataTVA/).

DATE OF REGISTRATION IN THE REGISTER OF PERSONS WHO APPLY THE SPLIT PAYMENT OF VAT

• Persons who decide to opt for the split payment of VAT and persons subject to the legal provisions concerning insolvency proceedings after 31 December 2017 – no later than 3 days from the date of the notice;

• Persons who, on 31 December 2017, had VAT debts – from 1 March 2018;

• Persons who, from 1 January 2018, have VAT debts – from the first day of the second month following the month when the VAT obligations are due.

Are automatically registered in the Registry of Persons who apply the split payment of VAT:

• Persons who, at 31 December 2017, were subject to the legal provisions regarding insolvency proceedings – from 1 March 2018;

• Person who, starting with 31 December 2017, are subject to the legal provisions regarding insolvency proceedings – from the first day of the month after the month when the tax authority acknowledges that the taxpayer registered for VAT purposes failed to notify the application of the split payment method.

WAIVER OF THE SPLIT PAYMENT OF VAT

In some cases, it is possible to waive the split payment of VAT. The waiver of the split VAT payment is made by filing a notification to that effect with the relevant tax authority. The deletion from the Register of persons who apply the split payment of VAT is made by the relevant tax authority no later than 5 business days from the notification.

INCENTIVES FOR PERSONS WHO OPT FOR THE SPLIT PAYMENT OF VAT AFTER 1 JANUARY 2018

Taxpayers who decide to opt for the split payment of VAT after 1 January 2018 benefit from a 5% reduction of the tax on profit or the income tax for small-sized companies for the period when they apply the split payment mechanism.

DEADLINE FOR THE TRANSFER OF VAT INTO THE VAT ACCOUNT

Companies applying the VAT split payment system have a period of 30 business days (instead of the 7 days initially provided by Ordinance no. 23/2017) from the date of receipt of the price of the goods/services delivered to transfer the VAT into the VAT account, opened with the Treasury and/or the bank.

The VAT account can be enforced only for the payment of VAT due to the State budget, as well as based on enforceable titles, according to the law, for the VAT relating to the acquisition of goods and/or services.

SANCTIONS

Non-compliance with the obligations resulting from the VAT split payment mechanism is punishable by a fine of between 2,000 Lei (approximately 435 Euros) and 4,000 Lei (approximately 870 Euros).