European Commission urges Romania to abolish the split VAT payment mechanism

The European Commission has asked Romania to stop using the split VAT payment mechanism. The Commission decided on November 8 to send a letter of delay to Romania for the application of a split VAT payment mechanism.

Starting January 1, 2018, Romania has been applying this alternative VAT collection mechanism where VAT is paid in a separate account, which creates a major administrative burden for trustworthy businesses operating in the country. This provision is mandatory for some businesses, which have to open a separate, blocked VAT bank account.

Their customers must divide the bill by paying VAT separately in the supplier’s VAT account. The taxpayer may use the amount collected in the special VAT account exclusively for VAT purposes to the Treasury and its suppliers. The measures contravene both the EU’s VAT rules (Council Directive 2006/112/EC) and the freedom to provide services (Article 56 TFEU).

The Letter of Delay follows a Communication adopted today follows another document adopted today by the Commission rejecting a request by Romania to derogate from EU rules in this area because of concerns about the principle of proportionality and compatibility with the treaty. If Romania does not take action within the next two months, the Commission may send a reasoned opinion to the Romanian authorities.

The European Commission seeks to bring to justice those Member States which have failed to fulfill their obligations under EU law through its monthly bundle of infringement decisions. These decisions, which address various EU policy areas and areas, aim to ensure the proper enforcement of EU legislation for the benefit of citizens and businesses.

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The main decisions adopted by the Commission in November include 40 letters of formal notice, 21 reasoned opinions and 8 referrals to the Court of Justice of the EU. At the same time, the Commission closes 107 cases where disputes with the Member States concerned have been resolved without the need for further proceedings by the Commission.

For more information on the EU infringement procedure, see full text of MEMO/12/12. For more details on all the decisions taken, please consult the register of defaulting decisions.