Romania asked by EU to end VAT split payments

The European Commission has sent a letter of formal notice to Romania requesting it to withdraw its new VAT split payment regime on the ground of burdening honest businesses with unreasonable compliance requirements.

Under the split payment requirements, introduced in January 2018, businesses in administration must open separate VAT bank accounts into which customers must split the VAT due on invoices directly into. These accounts are locked, and may only be used to settle the regular VAT return liabilities to the Treasury. The EC described the split payments regime as running against both EU VAT rules and the freedom to provide services. The Commission has rejected a Romanian application to derogate from the EU rules on the basis that the regime was disproportionate.

Romania now has two months to act before the Commission may send a reasoned opinion to Romania. If no action is taken following this, a referral to the European Court of Justice may be made.