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Split VAT at the Chamber of Deputies: Dilemmas of all kinds. Thresholds for outstanding payments have increased 10 times, Budget Committee to resume debates on Monday

de Adrian N Ionescu , 4.12.2017

The Budget Committee of the Chamber of Deputies has increased ten times the threshold of the outstanding VAT obligations from which companies will automatically be added to the split payment system after the opposition has argued against the too low level.

At the same time, the Committee postponed its debates for next Monday, because it did not go through all the amendments proposed and especially because of the issues in approaching the difficulties of companies having trade relations with firms that are required to apply the split VAT system.

The Committee increased the maximum threshold of VAT arrears for large taxpayers up to 15,000 lei, instead of 1,500 lei, and for the mid-sized taxpayers to 10,000 lei instead of 1,000 lei. For other taxpayers, including individuals, the threshold will be over 5,000 lei.

The members of the Chamber of Deputies also extended by 30 days the deadlines for the payment of the outstanding VAT obligations.

On the other hand, the Chamber of Deputies members from the opposition proposed to amend the law so that only those who are required to apply the VAT split mechanism will have to pay VAT on the purchases of goods and services into a separate VAT account of the supplier or service provider that applies the split VAT payment mechanism.

The Romanian Chamber of Fiscal Consultants and the Coalition for Romania’s Development raised the problem of the difficulties for the companies having relations with the firms obliged to apply the split payment, which should work with the two different accounts of these firms, one of which is the VAT account.

It has been argued that the law could disadvantage Romanian producers and service providers because of the difficulties mentioned. Local administrations, as well as companies, may prefer purchases from the countries that use the reverse charge mechanism – stated members of the Committee for cursdeguvernare.ro.

As a result, the Chairman of the Committee, the social democrat Viorel Stefan, former Minister of Finance, postponed the further debates until Monday, to give the Government the opportunity to answer the objections.

Viorel Sefan argued that the adoption of the amendment would make even the split VAT payment system useless.

The Committee is to debate numerous amendments and has not covered but a few dozen. USR announced that it has filed 5,000 amendments against the VAT split and will support all of them in the committee and the plenary, to draw attention to the importance of this law.

Parliament is waiting for clarifications from Government

The Committee stopped its debates after 7 hours, in which it reached only Article 3 of the ordinance referring to the very situation of taxpayers that will not be part of the split VAT system but have contractual relations with companies that are in this system.

“Only those that are insolvent or have arrears will be required to open a special VAT account for others to transfer the VAT amount to this account. Question is: can third parties be some entities that have the same VAT split system or some that do not have the VAT split system? The form existing at the Senate includes everyone. Both those who are under the split VAT system and those who are not under the split VAT system but are in the situation to make invoice payments to those who are under the split VAT system and they must make split payments. So, each invoice will generate two payment orders: one to the VAT account, the other to the main account of the invoice issuer,” explained the Committee Chairman Viorel Stefan, quoted by Agerpres.

Viorel Stefan also said that the proposal of the Chamber of Fiscal Consultants and the Coalition for Romania’s Development would mean that the companies not included in the system would make the payments to the main account of the supplier and the supplier would make the payment to the VAT account voluntarily, from the amount received.

That “seems easy at the first glance, but at a closer analysis, we can see that, in fact, these suppliers, if they are registered in this split VAT system, it means they have financial problems. If they have financial problems, it is no longer a guarantee that the money collected in the current account, in the taxpayer’s main account, is still there and may be transferred to the special VAT account. In other words, the purpose this ordinance (…) could be mostly compromised,” added Viorel Stefan.

Debates will continue next Monday, and until then the Finance Ministry, the committee experts and business representatives will be analysing the solutions for this case.

“We took Monday as a deadline when we are planning to have a special meeting to finalize this report, to think about the solution. (…) If we shall not be able to come up with a formula for adopting the ordinance by law, then the ordinance remains in effect in the form issued, and as of January 1, it is to take effect as such. It is not the most desirable solution to intervene with an emergency ordinance to amend another emergency ordinance. I believe that we can also find solutions by the law of approval, to make these matters operational,” Viorel Stefan also said.

Viorel Stefan pointed out that a position assumed by the Government on these amendments is needed. “There is a need for an opinion assumed on these amendments that have been raised within the committee today,” the chairman of the committee said.

The Budget-Finance Committee of the Chamber of Deputies decided on Tuesday to keep the Senate’s amendments to the Emergency Ordinance 23/2017 on the split VAT, in the sense that this measure is mandatory only for companies that register outstanding debts in the payment of this tax or are in the insolvency process, but has increased the debt thresholds from which companies apply this system.

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