Split TVA. Applicable provisions from 2018

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The VAT SPLIT- Ordinance, published in the Oficial Gazette No.1036 of 28 December 2017, establishes that the VAT split mechanism is mandatory only for companies in insolvency and for those which register VAT debts, over a certain limit (at the end of 2017 and then starting in January 2018).

At the same time, payment of VAT to a different account than the special one may be corrected within 30 days of the wrong payment date, instead of seven days, while the forced execution of the VAT account will be possible only for payment VAT due to state budget

Thus, in its final form applicable from January 1, 2018, Governmental Ordinance OG No. 23 states that the Split VAT system should only be applied by public and private companies in insolvency or having VAT debts, the other companies being able to apply the optional system

The VAT split Ordinance establishes that the obligation to use the mechanism belongs to the companies that:

  • At the end of 2017, they had debts to pay more than 15,000 lei (big companies), 10,000 lei (medium companies), 5,000 lei (small businesses and individuals) if they were not paid in January 2018;
  • Starting with January 1, 2018, they have more than 60 days of VAT due from more than 15.000, 10.000, and 5.000 de lei respectiveley;
  • Is subject to insolvency law.

Thus, economic operators that have incurred debts higher than the ceilings mentioned on 31 December 2017 and will not pay the VAT due by January 31, 2018 will apply the split VAT system starting March 1, 2018

With regard to companies subject to insolvency law at the end of 2017, they will fall within the scope of the VAT split payment mechanism as from 1 March 2018.

Companies not registered for VAT purposes

It is important to note that, according to the Law no. 275/2017, companies not registered for VAT purposes will not apply the VAT deductible payment system, even when they purchase goods and services from persons applying the mechanism.

Thus, non-VAT paying companies and self-employed individuals, in the case of authorized individuals, will not have to make two payments when they make acquisitions from companies applying the VAT split payment system.

Therefore, the obligation to pay the VAT equivalent of the purchases of goods and services in a special VAT account of the supplier or supplier applying the VAT split payment mechanism will only be reimbursed to companies registered for VAT purposes.

At the same time, some of the situations where the VAT-splitting payment system will not apply are also clarified.

Thus, compensations and payments in kind will not be subject to Split VAT, a provision also applicable to financing through factoring agreements

Withdrawing from the Split VAT system:

The Law No. 275/2017 for the approval of the split VAT ordinance also establishes the conditions in which the companies will be able to withdraw from the deducted payment mechanism of split VAT.

Companies that choose to optionally apply the system will be able to give up the mechanism at the end of the fiscal year, but not earlier than one year from the time they were entered in the Registry of persons applying for the split VAT payment.

Practical, once a company choses to experiment with the system, it will do it for at least a year. Subsequently, within a maximum of five days from the filing of a notification to that effect, it will be removed from the above mentioned Register and will no longer apply it

In the case of companies that will register VAT due at the end of the current year and the beginning of the next year, the quoted document sets out the possibility of leaving the system at least six months after the date when the taxpayer is no longer in one of the situations listed above

Also in this case, the deletion shall be made within the same period of five days from the date of the notification.

As for insolvency companies, they will be able to renounce to the application of the Split VAT system after going out of the legislation on insolvency and insolvency prevention

Amounts collected in a different account than VAT

According to the law No. 275/2017, companies that will apply the Split VAT system will have 30 working days in accordance with the law, instead of seven, from collecting the value of the supplies of goods/ services. During this time interval the companies can file the VAT related to the amounts collected in its own VAT account, an account opened with the Treasury and / or the bank. More specifically, we are talking about 

  • VAT related to the receipts by using credit/ debit cards;
  • VAT that was not paid to the VAT account by the beneficiaries who do not apply the system;
  • VAT related to payment instruments issued before the date on which the supplier / provider applies the split VAT payment and received after that date

Regarding taxable persons who choose to apply the VAT split payment mechanism after January 1, 2018: they will benefit of a 5% reduction of the corporate income tax / income for the entire period of applying.

In addition, from 2018 there will benefit of the same facility also those who have opted for the application of the VAT deduction mechanism by the end of 2017

The execution of the VAT account will be possible only for the payment of the VAT due to the state budget, as well as on the basis of certain enforcement titles for the VAT related to the acquisitions of goods and / or services.

Thus, the VAT account will not be enforced for the payment of other tax liabilities, as initially established by the Government, provided that for the payment of these obligations can be executed forced also other accounts of the taxpayer.

 

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