Tax alert 38 – Potential amendments to be brought to the VAT split payment mechanism

Amendments envisaged to be brought to the VAT split payment mechanism

Based on the recent discussions held in the Chamber of Deputies, please find below the main amendments envisaged to be brought to the Government Ordinance 23/2017 regarding the VAT split payment mechanism.

These amendments are still subject to parliamentary debate.

The main amendments are the following:

Taxable persons registered for VAT purposes are required to open and use at least one VAT account if they fall under one of the following situations:

  1. as of 31 December 2017 they have outstanding VAT liabilities, except for those for which the enforcement  procedure is suspended according to art. 235 from the Fiscal Procedure Code, exceeding the thresholds of RON 15,000 for large taxpayers, RON 10,000 for medium taxpayers, RON 5,000 for other taxpayers, unless the respective liabilities are paid until 31 January 2018
  2. starting with 1 January 2018 they have outstanding VAT liabilities unpaid within 60 days of the due date, except for those for which the enforcement  procedure is suspended according to art. 235 from the Fiscal Procedure Code, exceeding the thresholds of RON 15,000 for large taxpayers, RON 10,000 for medium taxpayers, RON 5,000 for other taxpayers
  3. they are under insolvency procedure

Persons not registered for VAT purposes, irrespective of whether they qualify as individualas or legal persons, established / not-established in Romania are not required to perform payments in the supplier’s VAT account if the supplier applies the VAT split payment mechanism.

Certain operations have been exempted from the applicability of the VAT split payment mechanism, such as:

  • payments performed on behalf of other person
  • financing granted by credit institutions and non-banking financial institutions in case of assignment of receivables
  • payments in kind
  • compensations

The possibility to perform payments concerning other tax liabilities from the VAT account besides the VAT paid to the state budget is introduced.

The supplier is allowed to correct an erroneous payment performed by the beneficiary in another account than the VAT account without any penalty being applicable at the level of the beneficiary.

The 50% sanction of the amount wrongly paid was replaced with a 0,06% / day penalty.

In case of amounts secured in a warranty account / escrow account / any other similar accounts at the supplier’s disposal, upon their release, the latter is required to transfer the related VAT into his own VAT account within 30 working days.

Taxpayers registered for VAT purposes not applying the VAT split payment mechanism are liable to pay split from its current account the value of the VAT related to the acquisitions performed from taxpayers applying this mechanism in the VAT account of the latter. The tax incentive concerning the 5% decrese of the profit tax / incomes of microenterprises will be granted for the entire period in which the VAT split payment mechanism was optionally applied.

 

What can we do?

Our recommendation is to consider adjusting the IT systems,  as well as the cashing and payment processes. Also, it is recommended to check the taxpayer’s files in order to identify potential errors concerning the payment of VAT liabilities.

Our team of tax specialists will closely monitor this subject and we will revert with news as soon as more information is available.

 

Author:

Costin Manta – Tax Senior Manager



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