Banks will no longer have to pay the Value Added Tax (VAT) when selling non-performing loans to other entities, such as foreign subsidiaries, other banks or factoring entities, according to a recent decision taken by the European Court of Justice (ECJ). The VAT will be paid only when there is a factoring service agreed between the parties.

“The ECJ’s decision gives the Romanian VAT practice clarity and confirms our previous approach: only if you agree to buy a service for a specific consideration, there is a service to be supplied. The Romanian practice which charges VAT on the difference between economic value and final price paid has to come to an end, at least in transactions between non-related parties,” says Pieter Wessel, Deloitte Tax Partner.

There are also some opportunities to recover some of the VAT costs from the past. Other entities which paid VAT on transfers of non-performing loans can ask it back retroactively.

Irina Popescu, irina.popescu@romania-insider.com

(photo source: Sxc.hu)