The cash accounting system implies that VAT will become chargeable at the date when the full or partial payment of invoices is received for the goods or services supplied. Only taxable persons with their economic headquarters in Romania and a turnover under RO N2,250,000 (i.e. EUR500,000) will use the cash accounting system, which will be mandatory for eligible taxable persons.
If the taxable person applying the cash accounting system does not receive full or partial payment for the supply of goods or services within 90 days of the invoice being issued, a VAT charge related to the amount unpaid will occur either on the 90th day from the date the invoice was issued, or on the 90th day from the deadline for the invoice’s issue (if the invoice was not issued by the deadline required by the law).
For 2013, the turnover for the period October 2011 – September 2012 will be taken into consideration to establish if the business is eligible to apply the cash accounting scheme. From 2014, the scheme will be applicable from the first day of the second VAT period of the first year they are eligible to apply the cash accounting system (i.e. February for monthly taxpayers or April for quarterly taxpayers).
Of note is that the cash accounting system only applies to businesses with their place of taxation in Romania, except for: taxable operations for which the client is the person liable for paying VAT, VAT exempt without credit operations, operations subject to special taxation regimes, operations where the beneficiary of the goods/services is a affiliated to the supplier and operations for which the payment is entirely or partially received in cash by the eligible supplier from beneficiaries other than individuals. This category includes associations with no legal status.
Another important aspect refers to the VAT deduction right for acquisitions of goods/services by a taxable person using the cash accounting system, where the reduction right is postponed until the tax related to the goods and services supplied has been paid to the supplier.
These provisions do not apply to intra and community supplies of goods, imports and acquisitions of goods/services subject to the reverse charge mechanism.
To apply for a VAT deduction on the acquisition of goods or services from a taxable person eligible to apply the cash accounting system, a taxable person (i.e. other than a taxable person eligible for the cash accounting system) must hold an invoice which complies with the provisions of the Romanian Fiscal Code, as well as proof of invoice payment.
In addition, a taxable person not applying the cash accounting system will need to account for the VAT on an invoice issued to a taxable person applying the system, when the tax point occurs, not when the invoice is paid.
In principle, the new provisions follow the rules set by the EU Directive 45/2010 and should bring a cash flow advantage to small companies. However, they will also generate significant changes in returns and IT systems – and the timeframe for addressing these is short.