Tax Flash No. 9/2017

Ordinance no. 23/2017 regarding the VAT split payment mechanism was published in Official Gazette 706/2017

Starting 1^st of January 2018, the taxable persons and the public institutions that are registered for VAT purposes in Romania must open and use at least one VAT bank account for receiving and paying VAT, as the case, regarding the supplies of goods/services taxable in Romania, with the exception of certain operations specifically provided by the law.

The VAT accounts will be opened by default by the units of the State Treasury of the competent fiscal authority and/or by the banks for their clients that are registered for VAT purposes.

It is mandatory to communicate the VAT account to the suppliers as well as to the beneficiaries; otherwise, the beneficiaries have to perform the payment by using the supplier’s VAT account opened by the State Treasury.

The taxable persons and the public institutions, irrespective whether they are VAT registered, are liable to pay the VAT amount in the supplier’s VAT account, except for the taxable individuals that are not VAT registered and that are not liable to register for VAT purposes.

During the period between 1^st October – 31^st December 2017, the VAT split payment mechanism is optional. The taxable persons opting to apply it, that notify the competent authority in this respect, will be able to apply this mechanism after being inscribed within the Registry of the taxable persons that apply the VAT split payment mechanism.

The taxable persons opting for the VAT split payment mechanism during 1^st October – 31^st December 2017 are granted the following facilities under the conditions provided by the ordinance:
- 5% reduction of profit tax/microenterprise income tax for the fourth quarter of the fiscal year 2017;
- the annulment of late payment penalties related to VAT, outstanding at 30^th September 2017.

In case of partial payments or advance payments, it shall be considered that such include VAT that shall be determined through the gross-up method in order to be paid accordingly in the VAT account of the supplier. Should an invoice contain operations subject to different VAT rates or VAT regimes, the amounts paid will be allocated to the normal VAT regime, having in view the descending order of the VAT rates.

The cases for crediting, respectively debiting the VAT accounts, as well as the possibility of performing the transfers from the VAT accounts including error cases, further to checks from the fiscal authorities, are provided. Those transfers shall be approved by the fiscal authorities in maximum 3 working days as of the submission date of the request.

For the specific cases provided by law when is not imposed the VAT payment in the related accounts, the transfer of these funds to the supplier’s VAT account must be done within maximum 7 working days from the cashing date.

The application of the VAT split payment mechanism is provided for cases such as assignment of receivables and of the amounts put at the disposal of the supplier within a guaranty or escrow account or any other similar account.

The contraventions and the level of the fines that might be imposed by the competent fiscal authorities further to the failure of observing the provisions regarding the VAT split payment mechanism are provided, as follows:
- if the correction of the VAT payments is done in the cases provided by the ordinance within maximum 7 working days from the date of the erroneous payments, no sanctions apply;
- if the correction of the VAT payments is done in the cases provided by the ordinance up to 30 days from the date of the erroneous payments, the sanction is set at 0,06% per day from the VAT amount, applicable from the date of the erroneous payments;
- if the correction of the VAT payments is done in the cases provided by the ordinance after a 30-day term from the date of the erroneous payments, the sanction is set at 50% of the VAT amount, respectively 10% of the VAT amount, depending on the contravention;
- failure to communicate the VAT to clients is subject to a fine comprised between lei 2,000-4,000.

The payment of the contraventions mentioned above up to 48 hours from the date they are levied halves their amount.

Tax Flash