SPLIT VAT PAYMENT-Operational aspects-

Please find below a presentation of the Split VAT Payment (In Romanian: “Plata defalcată a TVA”). Split
VAT Payment is mandatory starting 1 January 2018 for invoices issued / advances received from 1 January
2018. Split VAT Payment is optional in the period 1 October 2017 – 31 December 2017.

1. For what operations split VAT payment apply?

Split VAT payment apply for all taxable supplies of goods and services, for which the place of supply is
deemed in Romania, performed by taxable personals normally registered for VAT purposes.
Split VAT payment do not apply for the following operations:
✓ Operations for which the client is obliged VAT (reverse charge);
✓ Operations subject to special VAT regimes.

2. Who must open VAT account?

Taxable persons registered normally for VAR purposes must open separate VAT account for receipt and
payment of VAT. Practically, a company who has many suppliers, for optimization of payment process,
shall customize each supplier with two accounts.
For each invoice issued to a supplier, the supplier will make two payments:
✓ One payment in the current account representing value of goods/services.
✓ One payment in the VAT account representing VAT related to those goods/services.

This payment is realized from the VAT account of the client. We recommend mentioning the VAT account
on the invoices issued to the client’s companies. From VAT account of the company may be realized, in
general, only two types of payments:
✓ Payment of VAT to the company suppliers.
✓ Payment of VAT to the state budget (the amount due computed as the difference between output
VAT and deductible VAT from VAT return).

3. Where shall be opened VAT accounts

VAT account are opened with:

✓ Treasury units – by taxable persons registered for VAT purposes for supplies of goods and services
performed to public institutions.
✓ Treasury units or banks – by taxable persons registered for VAT purposes for supplies of goods
and services performed to other beneficiaries than public institutions.

4. VAT accounts opened with banks

✓ Taxable persons registered for VAT purposes may open VAT accounts with one or several banks.
✓ VAT accounts may be opened with the banks that meet cumulatively the following conditions:
✓ Structure of IBAN account includes in unique way the string of characters "TVA" and country
✓ code of Romania: RO.
✓ Do not allow cash withdrawal from this account.

VAT accounts may be automatically opened by banks for their clients who are normally registered for

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VAT purposes without the need for a request from them. The banks shall immediately communicate to
the clients the account, the utilization conditions and the related costs.
Clients are entitled to opt for keeping the account or renounce within 90 days from the communication.

5. VAT accounts opened at the treasury units

Treasury units open automatically and free of charge VAT accounts for taxable persons normally
registered for VAT purposes. To use the amounts from the VAT accounts automatically opened by
treasury units, taxable person shall submit to the treasury unit the documents related to opening the
account, at the latest when they perform operations from that account.

VAT accounts opened with the treasury units are published on the internet page of the Ministry of Finance
and National Agency for Fiscal Administration (ANAF) and are updated periodically.

Minimum information published are: name of the account holder, fiscal registration number, IBAN VAT
number and the treasury unit with which the VAT account is opened.

The account statement will be made available free of charged to the account holders and in electronic
format.

From accounts opened at the treasury units may be performed payment in electronic system.

Therefore, the company will identify its own VAT account and the VAT account of its suppliers on the
internet page of Ministry of Finance and ANAF.

Accounts opened with treasury units may be used only for settlements in lei.

6. Who must pay VAT in the VAT accounts of the suppliers?

✓ Legal taxable persons, irrespective of whether these are registered or not for VAT purposes.

7. What changes from the perspective of individuals?

Nothing changes for individuals.

Individuals will make cash payments and/or with cards as in the case today, without being necessary
another operation.

8. Crediting the VAT account

VAT accounts are credited with:

✓ VAT cashed related supplies of goods and services, including tax related to down-payments:
➢ amounts from other VAT accounts of clients who are VAT payers;
➢ amounts from the current account of the clients who are not VAT payers.

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 ✓ Transfers of amounts from the current account of the holder, representing:
➢ VAT related to receipts by using credit/debit cards or of cash substitutes.
➢ VAT which was paid in the VAT account by beneficiaries who did not have this obligation (for
example, VAT paid in the current account by a client individual not registered for VAT
purposes).

✓ Deposits of cash/transfer representing the difference between VAT related to cash receipts and
VAT related to cash payments performed in one day.
➢ Amounts transferred from another VAT account of the holder.
➢ Amounts transferred temporarily from the current account of the holder opened with the
same bank.
➢ Amounts received further to a correction as result of material error in the payment process.
➢ Amounts received further to the correction of invoices or to adjustment of taxable base of
VAT from
➢ the VAT accounts of the suppliers and clients.
➢ Refund of negative VAT from VAT return if the holder opts to receive the amounts in the VAT
➢ account.
➢ Interest related to VAT account granted by the bank.

9. Debiting the VAT account

VAT accounts are debited with:

➢ VAT paid related to acquisitions of goods and services, including VAT related to down-payments:
amounts transferred to the VAT accounts of the suppliers.
➢ VAT paid to the state budget.
➢ Amounts transferred in another VAT account of the account holder.
➢ Amounts paid further to a correction as result of material error in the payment process.
➢ Amounts paid further to the correction of invoices or to adjustment of taxable base of VAT from
the VAT accounts of the suppliers and clients – with the approval of tax authority.
➢ Amounts transferred in the current account of the holder opened with the same bank, in the limit
of amounts which were transferred temporarily from this account – with the approval of tax
authority.
➢ Other amounts with the approval of tax authority, in accordance with the Order of ANAF.
➢ Fees levied by the banks related to VAT accounts.

There is forbidden to perform cash withdrawal from the VAT account.

10. Transfer of the amounts from the VAT account

Transfer from VAT account in an account of other nature (of the holder or of another person) is performed
only with the approval of tax authority.

For transfer between the VAT accounts of the holder or between the VAT account of the holder and the
VAT accounts of other persons will be implemented by the banks and treasury units a verifying mechanism
(IBAN code with “TVA” in its structure).

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Transfer of the amounts from the VAT account in the current account may be performed only with the
approval of tax authority.

Transfer may be performed only for the amounts with which the VAT account was previously injected
from the current account.

11. Partial payments

In case of partial payment of the value of the supply of goods/services and of a down-payment, each
payment shall be deemed to include the related VAT, which is determined by the applying the
grossing-up method, as follows:

✓ 19 x 100/119, for the standard rate,

✓ 9 x 100/109 or 5 x 100/105 in the case of reduced quotas.

Beneficiaries, who partially pay an invoice, in which transactions are subject to multiple VAT rates and /
or multiple tax regimes, must allocate the amounts paid with priority to operations subject to the normal
VAT regime, in descending order of rates.

12. Obligation to communicate the VAT account

Taxable persons normally registered for VAT purposes must communicate the VAT account to suppliers
and beneficiaries.

If the supplier does not communicate the VAT account to its client, the client is obliged to pay VAT related
to the purchases into the supplier's VAT account opened with the treasury unit.

13. Transfers/deposits into the VAT Account

Taxable persons normally registered for VAT purposes must transfer/deposit into their own VAT account
the following:

✓ Transfer the VAT related to receipts through credit / debit cards or cash substitutes within
maximum 7 working days from the receipt of the value of the supplies of goods / services.

✓ Deposit in cash / transfer the difference between VAT related to cash receipts and VAT related to
cash payments realised in one day in their own VAT account, within maximum 7 working days
from the receipt of the value of the supplies of goods / services.

✓ Transfer the VAT on invoices issued before 1 January 2018 or before the date on which they
optionally apply the Split VAT Payment, which was paid after this date, within 7 working days from
the receipt.

✓ Transfer the VAT which was not paid in the VAT account by the clients which did not opt to apply
the

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 ✓ Split VAT system, within 7 working days from the cash of the value of the supplies of goods
services.

14. Enforcement

The VAT account may be enforced only for:

✓ VAT due to the state budget;

✓ payment of other outstanding tax obligations in the records of the tax authorities;
✓ VAT on purchases of goods/services, based on enforceable titles.

15. Contraventions and fines

VAT payment by the taxable person in another account than VAT account of the supplier is not sanctioned
if the erroneous payment is corrected in 7 working days from the erroneous payment date.

If the correction is realized after 7 working days, but within 30 days from the erroneous payment date,
this contravention is sanctioned with a penalty of 0.06% per day from the amount erroneously paid,
starting with erroneous payment date until the correction date, but no more than 30 days from the
erroneous payment date.

If the erroneous payment is not corrected within 30 days from the erroneous payment date, the
contravention is sanctioned with an additional fine equal with 50% from the VAT amount erroneously
paid.
Failure by the taxable person to comply with the obligation to pay the VAT related to acquisitions of
goods and services from VAT account is not sanctioned if the correction is realized within 7 working days.

If the correction is realized after 7 working days but before 30 days from erroneous payment date, this
contravention is sanctioned with a penalty of 0.06% per day from the amount erroneously paid, starting
with payment date until the payment from VAT account, but no more than 30 days from the erroneous
payment date.

If the correction is not realized in maximum 30 days from erroneous payment date, the contravention
is sanctioned with an additional fine equal with 10% from the VAT amount erroneously paid from other
account than own VAT account.

Failure to communicate the VAT account to the suppliers and clients is deemed as an offence
and is sanctioned with a fine ranging from 2.000 lei to 4.000 lei.

Failure by the taxable persons to:

✓ To transfer into own VAT account the VAT related to cash receipts through cards into the VAT
account;
✓ To deposit into own VAT account the cash / transfer the difference between VAT related cash
receipts and VAT related to cash payments made in one day into the VAT account;
✓ To transfer into own VAT account the VAT on invoices issued before 1 January 2018 or before the
date on which they optionally apply the Split VAT Payment into the VAT account;

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 ✓ To transfer into own VAT account the VAT that was paid in the VAT account by the clients who
did not opt for the Split VAT system;

is not sanctioned if this is corrected in 7 working days.

If the correction is realized after 7 working days, but before 30 days from the date when the obligation to
pay/transfer the amounts occurred, the contravention is sanctioned with a penalty of 0.06% per day
starting the day in which the amount must be transferred/deposited until its transfer/deposit in the VAT
account, but no more than 30 days from the date when the obligation to transfer/deposit the amounts
occurred.

If the correction is not realized in 30 days from the date when the obligation to transfer/deposit the
amounts occurred, this contravention is sanctioned with an additional fine equal with 10% from the VAT
not-transferred/not-deposited in the VAT account.

16. Application

Split VAT Payment is mandatory starting 1 January 2018 for invoices issued / advances received from 1
January 2018.

Split VAT Payment is optional in the period 1 October 2017 – 31 December 2017.

Taxable persons who opt to apply Split VAT Payment in the period 1 October – 31 December 2017 shall
notify the tax authority and apply the system starting the day following that in which they are published
in the Registry of the persons that apply the Split VAT Payment, for the invoices issued and advances
cashed starting with this date.

The Registry of the persons applying Split VAT Payment will be public on the ANAF’s site.

The registration in the Registry of the persons applying the Split VAT Payment is realized by tax authority
within maximum 3 days from the date submission of the Notification.

17. Facilities for taxable persons that apply optionally The Split VAT Payment during
the period 1 October 2017 – 31 December 2017

Taxable persons that opt for Split VAT Payment during the period 1 October 2017 – 31 December 2017
may benefit from the following facilities:
✓ A 5% reduction in profit tax for the fourth quarter of the fiscal year 2017.
✓ Cancellation of late payment penalties related to the principal VAT liabilities, outstanding at 30
September 30 September 2017. This facility is granted subject to certain conditions provided by
law.

18. Legal base

This document is based on the Government Ordinance no. 23/2017 regarding split VAT payment.

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19. Other aspects

Split payment does not influence functioning VAT rules provided by the Romanian Fiscal Code.

In this context, we recommend considering adjusting in due time the accounting and financial systems to
comply with legal provisions.