August 16, 2017
In view of the project proposed by the Romanian Government according to which “from 1 September 2017 we will introduce an improved VAT collection mechanism (split payment) on the model used in Italy, which reduces almost total VAT evasions declared and not paid at present” we have analysed the following aspects related to the implementation of this system and we will bring to your attention our comments:
there are significant differences between the value added tax of the payment resulting as the difference between the value added tax collected and the deductible tax in a calendar month and entered in the VAT statement – form 300 and the receipts and payments that would be made in the VAT account opened separately, related to purchases and deliveries of goods/services.
Moreover, there is a possibility that in a month (or several months) the value added tax to be recovered (in the month or in the balance) can be recorded in the accounts and tax records, and this cannot be correlated with the actual receipts and payments that would be operated in the VAT account opened separately.
A summary analysis or lack of such a study could have a significant negative impact on the cash flow of a commercial company in the sense that it would produce either an immobilisation of monetary amounts (which the trading company cannot use for economic purposes) or a deficit of available money (which the company must insure by credit) not related to the financial-accounting and tax situation, respectively the balance of account 4423 and 4424 (PAYMENT VAT, respectively VAT to recover);
there are no real possibilities of correlation of value added tax to pay or recover resulting from commercial operations and recorded in the VAT statement and the conditions for making payments to suppliers (including VAT) and receipts from beneficiaries (including VAT) which are stipulated in the contracts for the purchase/delivery of goods and/or services.
Moreover, non-compliance with the contractual conditions entered in the contracts for the supply of goods/services may further affect the conduct of operations through a separate VAT account and generate significant differences from the financial-accounting and tax statements on value added tax.
the balance of the account of the value added tax of the payment is shown in the accounts of a commercial company at the end of each month, and the obligation of declaration and payment occurs on the 25th of the following month, according to the Tax Code, and during the period covered by this period are made significant payments and receipts related to other tax periods, to suppliers and beneficiaries of goods/services that include value added tax.
And in this context there could be either an immobilization of monetary amounts or a deficit of available money, with a significant impact on the good running of a commercial company, because in the period up to the date of actual payment of value added tax, there are other operations represented by payments and receipts to suppliers and beneficiaries respectively of goods/services that include value added tax.
In this way, there have been situations in which on the due date of payment of value added tax a surplus of available money was created, in excess of that resulting from the preliminary and made-off calculation. It can be used by companies to pay other budgetary obligations resulting from the declarative system: corporation tax, payroll tax, contributions to the social and health insurance system, etc.
In this respect and in the spirit of the efficiency of the money flow of commercial companies, we consider it appropriate to create the “VAT account” – split VAT system, provided that the remaining monetary amounts available after payment of value added tax at the due date can also be used for the payment of other budgetary obligations resulting and entered in the tax returns: corporation tax, payroll tax, contributions to the social and health insurance system, etc.
On the other hand, we consider it appropriate to create such a separate VAT account called “split VAT” only to companies with high tax risk and which generate important and concrete suspicions in not making value added tax payments resulting from the corresponding declarations made monthly and whose commercial operations can be easily identified, being singular and with a high share of possible tax evasion – trade in fruit-vegetables, trade in metal and non-metallic waste, wood and wood products, etc., as well as those in insolvency proceedings.