Companies could pay VAT only after invoices are paid

The government will announce this week a series of measures meant to foster economic growth, one of which will be the payment of VAT by sellers when invoices are cashed and not when they are issued, as is presently the case, said PM Victor Ponta last week.

If implemented, the measure could apply only to companies with an annual turnover of less than EUR 500,000 and for invoices paid by bank transfer and not cash. “We hope that on Monday we will be able to announce that the payment of VAT for invoices of up to EUR 500,000 will be made only when the bill is paid, provided that the payment is made through bank transfer, as otherwise it would encourage the black market,” said the PM.

The initiative is expected to be beneficial for companies with liquidity problems as in the current economic context many complain they have to pay VAT for invoices which are often paid very late. “It is a measure which has been previously requested by the business environment as it allows an improved and more accurate forecast of a company’s liquidities.At present firms actually lend the state money until their invoices are paid as there is a gap between the VAT payment to the state, which is monthly, and cashing in the invoices which can sometimes take three to four months if not longer,” said Dragos Nicolae, tax manager at Accace Romania.

Overall, the measure could help economic growth, say businesspeople, but there are also concerns that in the short term it could reduce budget revenues. Others have complained that it is not yet clear whether the measure applies to companies with an annual turnover that doesn’t exceed EUR 500,000 or for invoices of up to EUR 500,000 regardless of the company’s turnover.

The measure could be introduced next month but it must be agreed with the IMF and the European Commission, said Ponta.

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