The VAT Split payment mechanism, repealed as of 1 February 2020

In brief

The VAT split payment mechanism, the so-called “VAT Split”, will be abolished as of 1 February 2020, as established by the Government last year. The European Commission issued a formal letter to Romania in 2018 demanding that the VAT Split be withdrawn, stating it breached European Union legislation.

In detail

The Government specifies in Emergency Ordinance no. 78/2019 (“the Ordinance”) what will happen to those registered in the VAT Split mechanism. The Romanian tax authorities ceased on 23 December 2019 keeping records in the Register of persons applying this mechanism.

Note that, until 1 February 2020, i.e. the Ordinance’s date of entry into force, the VAT account of persons enrolled in the mechanism can be executed by any creditor, including ANAF, regardless of the nature of the claim.

For persons who have applied the VAT Split mechanism and opened accounts at the State Treasury Units, the Treasury will transfer, within 10 days as of the Ordinance’s date of entry into force and without any prior formalities, the amounts available in those persons’ VAT accounts to their current accounts.

Persons that have applied the VAT Split mechanism and do not have available a current account at the State Treasury will need to notify the State Treasury Unit of a current account opened with a credit institution.

Persons that have applied the VAT Split mechanism can no longer perform operations as of 1 February 2020, except, of course, for transfers from VAT accounts to current accounts.

Source: Emergency Ordinance no. 78/2019 regarding the changes of some normative acts and the establishment of some measures in the field of agriculture, as well as for the approval of fiscal-budgetary measures, published on the Official Gazette no. 1031 of 23 December 2019

The takeaway

The VAT Split mechanism – known as “VAT Split” – has been abolished as of 1 February 2020. Until that date, the VAT account can be executed by any creditor, regardless of the nature of the claim. As of that date, account holders will not be able to perform transactions. The affected persons will automatically recover the available amount from the VAT Split account if they have an account opened at the Treasury. Persons that have a current account at a credit institution can recover the corresponding amounts by communicating this account information to the Treasury.