Following the trend of Poland and Italy, the Romanian Ministry of Finance has published new legislation introducing the Split Payments of VAT, having the purpose of reducing VAT fraud.
According to the new tax provisions, this split payment mechanism will be implemented with an optional starting date of 1 October 2017 and mandatory starting date of 1st January 2018.
All taxable persons, (including non-established companies, but excluding private individuals) will be required to open distinctive and secure bank accounts which are to be used to receive VAT amounts from their clients and for paying VAT amounts to their suppliers. The non-VAT portion of income received or payments made will be paid to or from any regular bank account. Hence, all payments with VAT on them will have to be “split” and the appropriate different parts paid to the relevant bank account.
Split Payments will be applicable to all taxable sales which are considered to be made in Romania, including those made within special VAT regimes. Specific conditions will have to be considered for prepayments, payments related to different VAT rates and payments made by fiscal groups.
It will be possible to open VAT accounts for Split Payments at National Treasury or commercial banks, as long as the bank account will contain the characters “TVA”. Cash withdrawals will not be allowed however and only transactions within VAT accounts will be validated by banks. The VAT account dedicated to receiving VAT amounts will be available for transactions such as payments made by clients and VAT refunds upon specific request. Opposite, the VAT account dedicated to paying VAT will be available for payments made to suppliers, including prepayments and payable VAT to National Treasury (the result of fiscal period);
The Tax Office has also taken into consideration how to manage payments made in cash or via credit cards. For these, the VAT amount will have to be deposited to your own VAT account, within 7 days from the moment of collecting the amounts.
Penalties for non-compliance with this new regime include up to 50% of the VAT amount. This will be applicable in cases of not paying the VAT to the correct VAT account indicated by suppliers, not opening the distinctive VAT account and not depositing the VAT amounts received via cash or credit card payments.