European Commission urges Romania to abolish the split VAT payment mechanism

30 November 2018
Roamnia News

Romania has been asked by the European Commission to stop using the split VAT payment mechanism.

From 1 January 2018, the split payment mechanism has been mandatory for Romanian taxpayers that have VAT debts and those that are undergoing insolvency procedures.

VAT-registered customers of taxpayers that have VAT debts or who are undergoing insolvency procedures must split the payment of invoices issued by paying part of the VAT due to the supplier and the other part into a special account of the supplier. The amount paid into the special account may only be used to satisfy the supplier’s VAT liabilities with the Romanian government or to pay its own suppliers.

According to the European Commission, this payment system has been placing a major administrative burden on honest companies doing business in Romania. It was said that these measures run against both EU VAT rules and the freedom to provide services and if Romania does not act within the next two months, the European Commission may send a reasoned opinion to the Romanian authorities.

The European Commission has rejected a request from Romania to derogate from EU rules in this area.

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