The split VAT payment will become mandatory next year only for state-owned companies and firms that are in contractual relations with the state.

For the other companies, the system will be optional next year and will become mandatory in 2019, according to a bill the Senate’s budget committee passed on Tuesday, reports local Profit.ro.

However, the Senate and the Chamber of Deputies will have the final say on the bill.

In its current form, the split VAT is expected to enter into force from October 1 as optional and from January 1, next year, as mandatory. Local firms have criticized the measure, saying that it will block the economy.

There are still many uncertainties related to how this system would work. The VAT split payment means that the VAT is no longer paid by the buyer to the seller, but directly to the state budget in a separate account. The companies will have a free VAT account in Romanian currency lei at the treasury from January 1, 2018, based on the new "Split VAT" measure.

The changes to the split VAT system were proposed by MPs of the Social Democratic Party (PSD). The amendments also remove the fine for companies that fail to comply with the new system and replace it with a warning, at the first offence, given the system’s complexity and the short time to implement it.

Survey: Smooth transition to split VAT system in Romania would take 2 – 4 years

editor@romania-insider.com