On 31 August 2017, Ordinance no. 23/2017 – which introduces a new split payment mechanism for VAT – was published in the Official Gazette. The VAT split payment mechanism will become mandatory on 1 January 2017, but taxpayers may elect to participate on 1 October 2017 in exchange for certain tax benefits.
The split payment mechanism works like this: Taxable persons registered for VAT purposes in Romania will be required to open a bank account, separate from the bank accounts used for regular transactions, to receive the VAT amounts. Suppliers must open these VAT accounts with the State Treasury or credit institutions capable of meeting special conditions (such as allocating a distinct IBAN structure for these VAT accounts). At the time of payment, the taxable base listed on the invoice will be transferred into the supplier’s regular bank account and the amount owed as VAT will be paid directly into the supplier’s VAT account. For payments made in cash, with cards, or cash substitutes, the recipient is obligated to transfer the VAT amount to the VAT account within seven working days.
Amounts in the VAT account can be used to pay the VAT invoiced by suppliers and to pay the VAT owed to the State Budget. All transfers from the VAT account to the holder’s current account require approval by the tax authorities – approval is estimated to take three days.
Failure to make VAT payments into VAT accounts within seven business days will trigger a daily penalty of 0.06% of the VAT amount. VAT payments that are not corrected within 30 days, may trigger in a fine of 10% or 50% of the VAT amount, depending on the type of error.
Entities that implement the system on 1 October 2017 may benefit from tax incentives, such as: cancelation of VAT related late penalties that are outstanding as of 30 September 2017; and a 5% tax credit for payment of corporate income tax/income tax due by micro-entities.
Ordinance no. 25/2017, also published in the Official Gazette on 31 August 2017, introduces several fiscal law changes that will become effective on 1 January 2018 (with the exception of excise duties). Notable changes include:
- Corporate income tax deductions for expenses with transferred receivables will be capped at 30% of the value of the transferred receivable. Currently, these expenses are fully deductible.
- For purposes of personal income tax, income obtained from independent activities carried out in Romania is deemed to be Romanian sourced, irrespective of whether it is received in Romania or abroad. Likewise, income from intellectual property rights is deemed to be Romanian sourced if received from a Romania payer or from a Romanian PE of a non-resident.
- Representative offices in Romania will be subject to an annual tax of RON 18,000 due by the end of February. Previously, the tax for representative offices was the RON equivalent of EUR 4,000 per year and was payable in two instalments, by 25 June and by 25 December.
- Starting with 1 September 2017, excise duties for petrol and gasoline (leaded and unleaded) will increase by RON 189.35/tonne and RON 207.79/tonne respectively. The same amount of RON/tonne increase will be replicated starting with 1 October 2017.