Romania withdraws mandatory VAT split payments

Romania has dropped the requirement for mandatory VAT split payments following a November order from the European Commission (EC). The EC held the measure, which required permission to waiver from the EU VAT Directive, was disproportionate to honest businesses.

The measure requires customers to pay the VAT element of suppliers’ invoices into a special, restricted account of the supplier. It was mandated from 1 March 2018 for all insolvent or VAT indebted suppliers. It was also run on a voluntary basis for other businesses, with the incentive of a 5% discount off corporate income taxes.

The anti-fraud measure will remain on a voluntary basis. 18,700 businesses are currently using the mandatory regime.

Romania has one of the EU’s largest VAT GAP’s, an estimate of missing VAT collections, at over 37% of VAT due.