Tax alert No. 23

Tax alert No. 23

The ordinance for the VAT split payment mechanism published in the Official Gazette of Romania

Government Ordinance 23 on the VAT split payment mechanism was published in the Official Gazette of Romania no. 706/31 August 2017. Compared with the initial draft whose content was presented to you in our tax alert no.18 as of 07.08.2017 and tax alert no.22 as of 24.08.2017, some changes occured.


The latest news is that now the distinct VAT account can be debited by a writ of execution not only for the payment of VAT, but also for the payment of other outstanding debts toward the state budget, existing in the records of the central tax authorities.


Compared to the initial draft of the ordinance, there have been:


- Introduced provisions regarding various facilities for the taxable persons registered for VAT purposes that decided to apply the optional VAT split payment mechanism starting 1 October 2017 (e.g. a 5% bonus from the corporate income tax or tax on micro- companies income due for the 4th quarter of the year 2017)


- Introduced penalties if erroneous payments are not corrected within a grace period of 7 working days


- Introduced the provisions for differentiating penalties, which amount from 0.06% per day, since the date of making the incorrect payment and up to 50% of the incorrectly paid amount


- Introduced other additional provisions for clarifying the obligations for a taxable person for VAT purposes to have at least one distinct VAT account


The mechanism of VAT split payment is also applicable in Italy, but only as a temporary measure and will be implemented as an option in Poland starting 2018.


In this context, we recommend you to consider adjusting in due time the ERPs in order to comply with the new legal provision as well as to benefit by the tax incentives available.