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6 September 2017

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Romania Publishes Final Ordinance for Introduction of VAT Split Payment System

On 30 August 2017, Government Ordinance No. 23/2017 was published in Romania's Official Gazette. The Ordinance introduces the country's new split payment system for value added tax (VAT). Key points of the split payment system include:

  • All VAT registered persons must use separate VAT accounts for receiving and making VAT payments;
  • The split system applies for all supplies of goods and services considered made in Romania, with the exception of supplies under special VAT schemes, such as the scheme for travel agents and second-hand goods, as well as supplies subject to reverse charge;
  • VAT accounts will be opened with the treasury unit of the tax office where the taxpayer is registered, or taxpayers may opt to open a VAT account with a commercial bank if the bank can support the new system;
  • VAT registered persons should communicate their VAT account details to their suppliers and customers for the purpose of the split payment, although details of accounts opened with the tax office will also be made publically available;
  • Funds deposited in the VAT accounts may generally only be used to pay VAT to the tax authority and to supplier's VAT accounts, and certain other limited situations; and
  • VAT registered person that make VAT payment in the wrong account will have 7 days to correct the error or be subject to a fine equal to 0.06% of the VAT due per day until corrected.

The split payment system is optional from 1 October 2017 and is mandatory from 1 January 2018. Registered persons that opt to adopt the split payment system from 1 October to 31 December are eligible for certain benefits, including a 5% reduction in corporate income tax and the waiver of any late VAT payment penalties for VAT payable as of 30 September 2017.

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