Romania raises cash-based VAT reporting threshold

Romania’s threshold for small businesses to use the simplified cash-based VAT reporting threshold has been increased from RON 2.25m to RON 4.5m per annum.

Cash based reporting enables small businesses to assess their VAT liabilities based on actual revenues as opposed to accrued VAT. With the cash accounting scheme you pay VAT on your sales when your customers pay you; and reclaim VAT on purchases when you have paid your supplier.

The scheme allows you to account for VAT (output tax) on your sales on the basis of payments you receive, rather than on tax invoices you issue. This is different from the normal accruals rules that require you to account for VAT on your sales when you issue a VAT invoice, even if your customer has not paid you.

However, if you choose to use the scheme, you can only reclaim the VAT incurred on your purchases (input tax) once you pay your supplier. Under the normal method of accounting for VAT you can reclaim VAT on purchases you make as soon as you receive a VAT invoice even if you have not paid your supplier.