Split VAT in Romania
SPLIT VAT
The substance of this procedure is presented in the following example:
The company ABC SRL is VAT payer.
The company sells goods to the company CLIENT SRL, which is VAT payer, for the price of 1,000 RON + VAT 19% (190 RON), total invoice 1,190 RON.
The goods have been bought from the company SUPPLIER SRL, which is VAT payer, for the price of 800 RON + VAT 19% (152 RON), total invoice 952 RON.
All the three companies will have to open a bank account to be used only for the VAT payments:
CLIENT SRL pays 1,000 RON to ABC SRL in its old account;
CLIENT SRL pays 190 RON representing the VAT, in the VAT account of ABC SRL;
ABC SRL pays 800 RON to SUPPLIER SRL in its old account, from its old account;
ABC SRL pays 152 RON representing the VAT into the VAT account of SUPPLIER SRL. This payment can be done either from its VAT account, or from its old account. In case the payment is done from the VAT account, the balance of the VAT account will be 190 RON – 152 RON = 38 RON, e.g. the VAT to be paid to the State Budget.
1. Which entities are obliged to apply the Split VAT system?
The entities obliged to apply this system are:
any tax payer, registered as VAT payer
the State Institutions,
nonresident companies having Romanian VAT code
Very important: the companies not registered as VAT payer will apply this system when they will pay the invoices to the suppliers which are VAT payers.
Only the regular physical persons are not in this system.
2. Which is the starting date of the Split VAT system?
This system is compulsory to be applied as of 01.01.2018, for the invoices issued and the advances collected after 01.01.2018.
In the period 01.10.2017 – 01.01.2018, the system is optional and can be applied by the entities under this system.
3. Where the entities will open the VAT accounts?
The entities which will have amounts to be collected from the State Authorities will have to open the VAT account at the State Treasury.
The entities working only with private entities will be allowed to open the VAT account at the banks and/or at the State Treasury.
Very important: the entities are allowed to open more than one VAT account.
4. Which are the transactions falling under this system?
Split VAT is to be applied for all the VAT taxable operations whose place of the goods delivery or services providing is considered to be in Romania.
”Reverse charge” transactions are not under the split VAT system.
Important: the system is not to be applied by the special regimes for their specific activities: travel agencies, second hand stores, agriculture.
5. How the system is to be applied for partial payments?
In case of partial or advance payments, each paid amount is considered as having included VAT – in order to calculate the VAT will be used the „increased percentage” (suta majorata) method.
Important: in case of partial payment of an invoice including products or services with different VAT quota, the priority rule is given by the descending VAT quota.
Very important: the value of VAT for the partial payments is calculated as follows: 19 x 100/119, 9 x 100/109 or 5 x 100/105.
6. Which will be amounts to be collected in the VAT account?
The VAT account will be used for collecting:
the VAT related by the sell of goods or/and services;
VAT deposit for the sales collected in cash or by card;
transfers from other VAT acocunts;
transfers from the current account opened at the same bank or at the State Treasury;
amounts reulted from the correction of material errors, etc
7. Which will be payments to be done from the VAT account?
The VAT account will be used for paying:
the VAT to be paid in the VAT account of the supplier;
the VAT to be paid to the State Budget;
transfers in another VAT account of the company;
corections of VAT for which the reimbursement is done in other VAT account;
reimbursement in the current account of the company, within the limit of the initial fededing;
8. Which is the procedure to be applied for the cash collection or card collection?
The entities applying the split VAT system collecting the invoices in cash or by card, must deposit the related VAT in its VAT account within 7 working days.
9. Which are the sanctions?
The law considers as contravention following facts:
the payment of the VAT to the suppliers in other account than the VAT account of the supplier, in case the corection of this ayment is not done within 7 days. The penalty is 0.06%/day from the wrongly paid amount, starting the day of wrong payment;
the payment of the VAT in other account of the suppliers than the VAT one, in case the error is not corrected within maximum 30 days. The penalty is 50% of the wrongly paid amount;
in case the company does not communicate the VAT account to the suppliers and clients, the penalty is 2,000 RON to 4,000 RON;
using the amounts from the VAT account in other way that the above described is sanctioned with a penalty of 50% of the wrongly used amount.
10. Which are the facilities granted to the entities that will chose to use the system between 01.10.2017 – 01.10.2018?
The entities which will choose to use the system between 01.10.2017 – 01.01.2018 will receive a 5% discount to be applied at the following base:
a) microenterprise tax for the 4th trimester of 2017;
b) profit tax for the 4th trimester of 2017;
Another facility is the cancelling of the late payment penalties of VAT whether the companies have debts to the State Budget representing VAT to be paid as of 30.09.2017.
11. Are the banks allowed to create VAT accounts by default?
The banks are authorized to automatically open VAT accounts for the companies. This accounts will have in their structure the letters ”TVA” and ”RO”.
The banks will notify the tax payers regarding the opening of these accounts. The entities will have the right to use or not these accounts – in case such account is not used for 90 days, it will be automatically closed.
The entities will not be allowed to withdraw cash from these accounts.