Tax alert 39 – Main amendments brought to the VAT split payment mechanism

Law 275/2017 for the approval of Government Ordinance 23/2017 regarding the VAT split payment mechanism

The main amendments are the following:

  • VAT registered persons falling under one of the following situations are required to open and use at least one VAT account:
    • as of 31 December 2017 have outstanding VAT liabilities, except for those for which the enforcement procedure is suspended according to art. 235 of the Tax Procedure Code, exceeding RON 15,000 for large taxpayers, RON 10,000 for mid-sized taxpayers, RON 5,000 for other taxpayers, if these liabilities are not paid by 31 January 2018. The entry in the registry of persons applying the VAT split payment mechanism is done starting 1 March 2018.
    • starting with 1 January 2018 have outstanding VAT liabilities older than 60 working days as of the due date, except for those for which the enforcement  procedure is suspended according to art. 235 of the Tax Procedure Code, exceeding RON 15,000 for large taxpayers, RON 10,000 for mid-sized taxpayers, RON 5,000 for other taxpayers. The entry in the registry of persons applying the VAT split payment mechanism is done starting the 1st day of the second month following the one when the 60 working days deadline as of the due date occurred.
    • fall under the provisions of the national legislation regarding the procedure for prevention of insolvency and of insolvency. The entry in the registry of persons applying the VAT split payment mechanism is done starting 1 March 2018 for persons undergoing insolvency at 31 December 2017 and starting 1st day of the following month for persons undergoing insolvency starting 1 January 2018
  • The law provides rules for exiting the VAT split payment mechanism
  • Persons not registered for VAT purposes, individuals or legal persons not-established in Romania are not required to perform payments in the supplier’s VAT account who applies the VAT split payment mechanism.
  • Certain operations have been specifically excluded from the applicability of the VAT split payment mechanism, such as:
    • payments performed on behalf of another person
    • financing granted by credit institutions and non-banking financial institutions in case of assignment of receivables
    • payments in kind
    • compensations
  • The supplier is allowed to correct an erroneous payment performed by the beneficiary in another account than the VAT account.
  • The fine of 50% of the amount erroneously paid to a another account than the VAT account was replaced with a fine of 0,06% / day.
  • In case of amounts secured in a warranty account / escrow account / any other similar accounts at the supplier’s availability, upon their release, the supplier is required to transfer the related VAT into his own VAT account within 30 working days. The 30 working days deadline is applicable also for the transfer of other VAT amounts by the supplier in its own VAT account (e.g. cash and card payments received etc.).
  • Taxpayers not applying the VAT split payment mechanism are liable to make split payments from their current account to the VAT account of the suppliers applying the VAT split payment mechanism.
  • The tax incentive concerning the 5% decrease of the profit tax / income of micro-enterprises will be granted for the entire period during which the VAT split payment mechanism is optionally applied.

What can we do?

Our recommendation is  to consider adjusting the IT systems and 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.

EY Romania will launch an IT tool for checking the taxpayers applying the VAT split payment mechanism, as well as for inactive taxpayers or those applying the VAT at cash in system.

 

Author:

Costin Manta – Senior Manager, Indirect Tax

 



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