The split VAT system is in place. How does it work?

The VAT split payment system has been in place since March 1 and it applies to around 18,000 companies in insolvency and companies with debt to the state budget. But the law affects more businesses and the way the VAT is payed between partners and suppliers.

All the companies that have delayed their VAT payments to the state budget for more than 60 days, and the amount exceeded RON 15,000 (for large companies), RON 5,000- 10,000 (for SMEs), were automatically included in the split VAT system. Practically, the VAT is payed in a separate account for every invoice issued.

For example, the amount owed for March 2018 will be due on April 25. If the payments aren’t made by July 23, 2018, the company will be required to oblige to the split VAT system starting September 1. The companies in insolvency are required by law to register automatically.

There are also companies with no financial problems which can choose to follow this system of VAT payments and can notify ANAF about their intentions. All companies have the obligation to notify all their suppliers and partners about this change in order for the VAT payment to be made in a separate account.

According to ANAF, around 388 companies chose to be introduced in the split VAT system, and more than 11.000 were automatically included because of their debt to the state budget.

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Also, around 7,000 companies are in insolvency. The law may be eliminated by the end of this year if the European Commission doesn’t approve an exemption from The EU’s common system of value added tax (VAT). The request was issued by the Romanian Government last month and the response will arrive in approximately eight months.