• ROMANIA: THE VAT SPLIT PAYMENT MECHANISM

ROMANIA: THE VAT SPLIT PAYMENT MECHANISM

11 October 2017

The VAT split payment mechanism requires that taxable persons and public institutions (whether VAT registered or not) must pay VAT related to their purchases of goods or services into a separate bank account specially opened by the supplier for collection of VAT. Under an exception, natural persons who are not registered for VAT purposes are not obliged to pay VAT into such a separate bank account.

By default, all taxable persons registered for VAT purposes (including non-residents that are directly registered in Romania, or registered through a fiscal representative) are required to open and use a distinct bank account for VAT amounts. The specific account must be separate from their other bank accounts. They must use the specific account to collect the VAT related to output transactions and to pay the VAT for input transactions and the VAT due to the state.

Taxable persons registered for VAT are obliged to transfer the VAT on the goods they delivered and services they supplied in transactions carried out for cash or charged to credit/debit cards into their own VAT account. This is because the buyer does not have to pay the VAT into a VAT specified account on such supplies. In such cases the taxable VAT registrant must transfer the VAT into their VAT account within seven days of receiving it from the buyer.

The VAT split payment mechanism applies to the taxable supplies of goods/services where the place of supply is in Romania, except for transactions subject to the reverse charge mechanism and transactions that fall within the special schemes provided by the Fiscal Code (such as the margin scheme).

From 1 October 2017, taxpayers have the option to apply the VAT split payment mechanism. With effect from 1 January 2018 it becomes mandatory. Tax incentives are provided for those opting to apply the mechanism from 1 October 2017.


The legislation includes penalties for noncompliance with the VAT split payment mechanism.

DAN BĂRĂSCU

VLAD MĂDĂRAS

Romania – Bucharest

dan.barascu@bdo.ro

vlad.madaras@bdo.ro