Last updated: 10 November 2017
Published in Official Journal no. 706 as of 31 August 2017, Government Ordinance no. 23/2017 on the VAT split payment mechanism allows taxable persons and public institutions to opt, from the October 1st, 2017 for the split payment of VAT. As of January 1st, 2018, this mechanism will be mandatory for invoices issued / down payments cashed after January 1st, 2018.
Although subject to changes that will be made by the Law approving Government Ordinance no. 23/2017, this Ordinance has given rise to substantial criticism from the Romanian business community.
CATEGORIES OF INDIVIDUALS REFERRED TO BY GOVERNMENT ORDINANCE NO. 23/2017
Any taxpayer (natural or legal person, private or public) has the obligation to pay VAT on goods and services purchased into a separate VAT account of the supplier/service provider.
Taxable natural persons who are not registered and who are not obliged to register for VAT purposes in accordance with article 316 of the Tax Code are exempted.
OPERATIONS SUBJECT TO THE SPLIT PAYMENT OF VAT
The split payment applies to all deliveries of goods/services subject to VAT, for which the place of delivery/supply of is in Romania, in accordance with the provisions of the Tax Code.
Are exempted, among others, operations subject to special regimes (e.g. the special exemption scheme for SMEs, the special regime for tourist agencies, the special regime for second-hand goods).
THE SPECIAL VAT ACCOUNT
Taxable persons registered for VAT purposes pursuant to article 316 of the Tax Code are required to open and use at least one bank account for VAT.
VAT accounts:
¬ Are automatically opened at the State Treasury;
The VAT accounts have already been opened at the State Treasury. They are listed on the Tax Authority’s website. Information published on the said website are: (1) the name of the account holder; (2) the tax number; (3) the IBAN of the VAT account; and (4) the Treasury unit where the account was opened.
¬ May be automatically opened by credit institutions for customers registered for VAT purposes (a request from the customer’s part is not necessary). VAT accounts can be opened at several credit institutions.
However, credit institutions are obliged to immediately communicate to customers the number of the said account, the conditions of use and the related costs. Customers have the right to keep the account or to unilaterally waive such account no later than 90 days from the date of disclosure of the above mentioned information by credit institutions.
The VAT account can be enforced only for the payment of VAT due to the State budget, as well as for the payment of other overdue budgetary obligations. The VAT account may also be enforced under statutory enforceable titles for VAT on the acquisition of goods and / or services. The VAT account may also be enforced - based on enforceable titles - for the VAT corresponding to the purchase of gods/services.
To make a transfer from the positive balance available on the VAT account, the taxpayer will need to obtain the prior approval of the Tax Authority. The Tax Authority has 3 business days to grant such approval.... It is forbidden to withdraw cash from the VAT account.
HOW TO OPT FOR SPLIT PAYMENT OF VAT
Taxable persons wishing to opt for the split payment of VAT must notify the relevant tax authority. They will begin applying the mechanism the next day after their recording in the Register of persons applying split payment of VAT, for invoices issued and down payments received from that date on.
The Register of persons applying split payment of VAT is public and is posted on the Tax Authority’s website. The registration of persons who apply the split payment of VAT is made by the relevant tax authority, no later than 3 days from the when the application is made.
FACILITIES FOR THOSE WHO OPT FOR SPLIT PAYMET OF VAT BEFORE 01.01.2018
Taxpayers who opt for the split payment of VAT between October 1st and December 31st 2017 benefit from certain tax facilities, as follows:
a. A 5% reduction of the tax on profit/micro-enterprise income tax for the 4th trimester of 2017. Taxable persons who must declare and pay the tax on profit annually will receive a 5% reduction of a quarter of the tax on profit for the 2017 fiscal year,
b. The cancellation of late-payment fees relating to VAT overdue on 30 September 2017.
SANCTIONS
The incorrect payment of VAT by taxable persons and public institutions in an account other than the VAT account of the supplier/provider can be remedied within 7 business days from the date when the erroneous payment has been made.
If the error is not corrected within the above deadline, a fine of 0.06% of the value of the VAT will be applied per each day, for a maximum number of 30 days.
After the 30-day period, a fine of 50% of the amount of VAT incorrectly paid into an account other than the supplier/provider’s VAT account will be applied.
Failure to comply with the obligation of taxable persons and public institutions registered for VAT purposes to communicate the VAT account to suppliers/service providers and to beneficiaries is punishable by a fine of between 2,000 Lei (approximately 444 Euros) and 4,000 lei (approximately 888 Euros).
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GRUIA DUFAUT Law Office
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