Romania’s Senate approved yesterday the law on split VAT, which provides that the split VAT payment system will only apply to insolvent companies and bad payers.

This law modifies a government ordinance adopted earlier this year, which provided that the split VAT system would become mandatory for all companies in Romania starting January 1, 2018. Companies can still opt for this measure and will receive a 5% exemption on the tax on profit for this.

The bad payers for which the system is mandatory include large companies with debts of over RON 1,500 (EUR 326) at the end of December this year, medium companies with debts of over RON 1,000 (EUR 217), small companies with debts of over RON 500 (EUR 108.7) and individuals with debts of over RON 100 (EUR 22).

Companies that opt for the split VAT system can give up the mechanism at the end of the fiscal year, but no sooner than one year after the start of the measure. Insolvent companies or the bad payers, which are obliged to apply the split VAT system, can give up the system within six months after they get out of insolvency or pay all their debts to the state budget.

The draft law on split VAT will be sent to the Chamber of Deputies, which has the final say.

Study: Romania’s split VAT payment system needs to remain optional

editor@romania-insider.com