Romanian president Klaus Iohannis promulgated on December 27 the law that introduces the split VAT payment system, the Presidential Administration announced on Wednesday.

Starting January 2018, the split VAT payment will be mandatory for insolvent firms and companies that register VAT debts over a certain limit at the end of 2017 and. Companies that are not registered for VAT purposes and public institutions are exempt.

The law has recorded several amendments compared to the Government’s initial form.

The Government decided in August that the split VAT system would become optional from October 1, 2017, and mandatory from January 1, 2018, for all VAT paying companies in Romania. However, the Senate came up with the amendment that the split VAT system would become mandatory only for insolvent companies and those that record VAT debts.

The Chamber of Deputies later brought a new amendment to the bill, which increased tenfold the debt thresholds for which companies automatically enter the VAT split system. Large taxpayers enter the split VAT system if they have VAT debts of over RON 15,000 (EUR 3,200) whereas medium taxpayers automatically enter the split VAT payment if they have VAT debts of over RON 10,000 (EUR 2,100). The threshold will be RON 5,000 (EUR 1,074) for small taxpayers.

Although it only applies to a relatively low number of taxpayers, the split VAT system will also impact the companies that have business relations with these taxpayers. A company that does not apply the split VAT payment system will have to make two payments to a company that applies this system instead of one as the VAT will be paid separately.

A new app launched by PwC helps companies check if their suppliers apply the split VAT system, and avoid penalties related to incorrect payments. The app is called ANAFcheck. Companies can also check if their suppliers apply the split VAT system directly on ANAF’s website.

editor@romania-insider.com

(Photo source: sxc.hu)