Romania To Introduce Mandatory VAT Split Payment Mechanism

By way of a recent measure that has resulted in numerous debates and raised significant criticism, the Romanian Government has decided to change the country's VAT payment system. The new VAT split payment mechanism's implementation is unique in the European Union, and affects all taxpayers registered for VAT purposes in Romania.

Under this new mechanism, VAT will be collected in a bank account, distinct from the current bank account, specifically where only the VAT-free amounts will continue to be cashed. Also, the input VAT incurred for acquisitions of goods or services will also need to be paid from the said VAT account.

The new VAT split payment mechanism:

• will be optional starting from 1 October 2017 and mandatory as of 1 January 2018 for Romanian and non-resident taxpayers registered for VAT purposes in Romania;