Romania changes obligatory VAT cash accounting scheme to voluntary

The Romanian tax office is drawing up plans to change its controversial compulsory VAT cash accounting regime to a purely voluntary scheme.

The current compulsory scheme was introduced at the start of 2013.  This enabled small traders – with a turnover below €500k per annum – to pay VAT only when they had collected the output on their sales.  And to only recover VAT on any inputs when they had paid it.  This system, increasingly common in other EU countries, provides some cash flow relief to small entrepreneurs, and simplifies their reporting requirements.

The design of the scheme has created a number of problems:

1. Customers of the businesses within the scheme must accept and agree to the cash-basis.  The created difficulties for large enterprises not within the scheme
2. Many traders are in a regular Romanian VAT credit (surplus) position, e.g. exporters or those paid on time but buy their purchases through credit
3. The scheme requires payment of the sales VAT within 90 days, but many businesses did not operate to these terms which left entrepreneurs with serious cash problems