Str. Av. Petre Cretu nr. 58, sector 1, Bucuresti, Romania

According to Law no. 275/2017 for the approval of Government Ordinance no. 23/2017 regarding the VAT split payment, which was published in the Official Gazette on 28 December 2017, the VAT split payment mechanism will be compulsory for taxable persons and public institutions registered for VAT purposes according to Art. 316 of the Code Tax, if they are in one of the following situations:

a) on 31 December 2017 there are overdue tax liabilities representing VAT higher than:
– RON 15,000 for large taxpayers,
– RON 10,000 for medium-sized taxpayers,
– RON 5,000 for the rest of the taxpayers.
And if these obligations are not paid until January 31, 2018.

The registration in the Registry of persons applying the VAT split payment is made by the competent fiscal body, starting with March 1, 2018.

b) as of January 1, 2018, there are overdue tax liabilities representing VAT, not paid within 60 working days from maturity, exceeding:
– RON 15,000 for large taxpayers,
– RON 10,000 for medium-sized taxpayers,
– RON 5,000 for the rest of the taxpayers.

In this case, the registration of the persons who apply the VAT split payment is made by the competent fiscal body starting with the 1 st day of the second month following the one in which they met the deadline of 60 working days from the maturity of the VAT obligations outstanding.

The persons referred to in (a) and (b) may waive the application of the VAT split payment mechanism after a period of at least six months from the date when they are no longer in any of the situations referred to in paragraph (1) by submitting a notification to that effect to the competent tax authority. The removal from the Register of the persons who apply the VAT split payment is made by the competent fiscal body, within maximum 5 working days from the date of the notification.

c) are subject to national law on insolvency and insolvency prevention procedures.

The registration of the persons who apply the VAT split payment is made by the competent fiscal body with the date of 1 March 2018 for the persons subject to the national legislation on insolvency and insolvency prevention procedures on 31 December 2017.

The persons registered for the purposes of VAT provided in paragraph (1) lit. (c) falling under the legislation on insolvency and insolvency prevention procedures after 31 December 2017, shall notify the competent tax authority of the application of the VAT split payment by the 1 st day of the month following the one they came under legislation on insolvency and insolvency prevention procedures.

If the companies in the said situation do not submit the notification to the competent fiscal body, the registration in the Register of the persons who apply the VAT split payment shall be made by the fiscal body with the 1 st of the month following the one in which it establishes that the taxable person registered in the VAT purposes are under the incidence of the national law on insolvency and insolvency prevention procedures.

The persons referred to in paragraph (1) lit. c) may waive the application of the VAT split payment mechanism after no longer aplying the legislation on Insolvency and Insolvency Prevention procedures if they are no longer in any of the situations referred to in paragraph (1) by submitting a notification to that effect to the competent tax authority. The removal of the persons who apply the VAT split payment is made by the competent fiscal body within maximum 5 working days from the date of the notification.

Taxable persons and public institutions registered for VAT purposes under Article 316, which are not in the above situations may opt for the VAT split payment mechanism by notifying the tax authority in this respect.

They may waive the application of the VAT split payment mechanism at the end of the tax year but no earlier than one year from the date on which they entered in the Register of persons applying VAT split payment, unless they are in one of the situations referred to in par. (1), by submitting a notification to that effect to the competent tax authority. The removal from the Register of the persons who apply the VAT split payment is done by the competent fiscal body, within maximum 5 working days from the date of the notification.

Taxable persons who opt for the application of the VAT split payment scheme after January 1, 2018 benefit from a 5% reduction in corporate income tax / micro-enterprise income tax for the period in which they apply the scheme. From January 1, 2018, people who opted to apply the VAT deduction mechanism in 2017 benefit from the same facility.

The VAT split payment applies to all supplies of goods / services subject to VAT according to the provisions of the Fiscal Code, for which the place, according to the provisions of Art. 275 or 278 of the Fiscal Code shall be deemed to be in Romania, performed by the persons referred to in paragraph (1) and (2). The VAT split payment does not apply to the following transactions:

a) the operations for which the beneficiary is the person liable to pay the tax according to art. 307 par. (2) – (6) or art. 331 of the Fiscal Code;
b) the operations subject to the special regimes provided for in art. 310-315 and art. 3151 of the Fiscal Code.

In determining the VAT to be paid into the provider’s / supplier’s VAT account, in the case of the partial payment of the consideration for the supply of goods or the provision of services and the payment of an advance, each payment shall be deemed to include the related VAT determined by applying the increment of 19 x 100/119 in the case of the standard quota and 9 x 100/109 or 5 x 100/105 in the case of reduced quotas. Beneficiaries who partially pay an invoice in which operations are subject to multiple VAT rates and / or more than one tax regime are obliged to allocate the amounts paid in priority to operations subject to the normal charging regime in descending order of quotas.

By exception, if the contract / customer states that the amount will be allocated to a certain part of the invoice, the beneficiary will allocate the amount paid in this respect.

The VAT split payment mechanism also has implications for taxpayers that do not apply the scheme, since taxable persons registered for VAT purposes, with the exception of public institutions, are required to pay the VAT equivalent of the purchases of goods and services in a VAT bank account of supplier / provider applying the VAT split payment mechanism.

By exception, taxable persons and persons not established in Romania in respect of VAT who are not registered and are not required to register for VAT purposes under the Fiscal Code, are not required to pay the VAT equivalent of the purchases of goods and services in the distinct account opened by the supplier / provider.