Last updated: 10 February 2020
The split payment mechanism for VAT (also known as « VAT split ») will be definitively removed starting with February 1, 2020 according to the provisions of the Government Emergency Ordinance no. 78 /2020 published in the Official Gazette no. 1031/23.12.2019. Subject to sharp criticism by the Romanian business community when entered into, this mechanism entailed the launching of infringement procedures against Romania by the European Commission, on grounds of its running against both EU’s VAT laws and the principle of the freedom to provide services within the Union.
For the record, the split payment mechanism for VAT had been introduced in October 2017 as an alternative VAT collection mechanism being optional for companies and then became mandatory for companies under insolvency with substantial debts on VAT payment.
The main changes brought by the GEO no.78/2019 are with respect to the following:
REMOVAL OF THE SPECIAL REGISTER OF THE PERSONS APPLYING VAT SPLIT MECHANISM
According to the GEO no. 78/2019, starting with the month of December 23, 2019, the tax bodies shall no longer make records in the Special Registry of the persons applying VAT split mechanism, registry held by the National Agency for Fiscal Administration (« NAFA »). We remind you that such registry gathers public information about VAT payers as well as other information that any interested party may access by using the VAT number of the target company. Further on, starting with February 1, 2020 no other company is to be recorded in the said Registry.
STATE OF THE CREDITORS OF THE « VAT ACCOUNT » UNTIL FEBRUARY 1, 2020
« The VAT account » is a separate blocked VAT account used exclusively for payment and cashing of VAT by companies applying VAT split payment mechanism, an account which, according to the legal provisions, could not be subject to forced recovery of VAT due to the State Budget neither on grounds of certain enforcement orders related to VAT pertaining to acquiring goods and/ or services. It is to be noted that until February 1, 2020 the amounts available on the VAT account may be subject to forced recovery by any creditor, irrespective of the nature of the receivables intended for recovery.
REMOVAL OF THE « VAT ACCOUNT » AND THE TRANSFER OF THE AVAILABLE AMOUNTS TO THE CURRENT ACCOUNT OF THE COMPANIES
The taxpayers applying the split payment mechanism for VAT or those supplying goods or providing services to public institutions had to open a “VAT (dedicated) account” with the State Treasury.
Further to entering into of the GEO 78/2019, the amounts available on this VAT account shall be transferred until February 10, 2020 at the latest, to the current account of the holder, as following:
- For companies having applied the split payment mechanism for VAT holding both a VAT account and a current account opened with the Treasury
The amounts available in the VAT account shall be transferred automatically and with no other prior formalities by the Treasury branches in the territory, to the current account opened by the respective company with the same branch of the Treasury.
- For companies having applied the split payment mechanism for VAT holding a VAT account and a current account opened with another credit institution
The concerned companies must provide to the branch of the Treasury the VAT account is opened with the current bank account as well as details about the name of the bank, so that the amount available on their VAT account can be transferred by the Treasury to the current account.
Should the company fail to provide the current bank account number, the Treasury shall communicate to the tax body the list of the companies in such situation. The tax body shall, within 10 days since receiving of the list, notify the concerned companies with respect to providing the current bank account in order for the amounts available in the VAT account opened with the Treasury be transferred to.
It should also be noted that starting with February 1, 2020 the VAT accounts opened with the Treasury can no longer be used for other operations than the transfer of the amounts to the current bank accounts of the taxpayers holding them.