EC tells Romania to end VAT split payment mechanism | KPMG | RO
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European Commission tells Romania to end VAT split payment mechanism

EC tells Romania to end VAT split payment mechanism

According to the European Commission, the VAT split payment mechanism infringes both EU VAT rules (Council Directive 2006/112 / EC) and the freedom to provide services (Article 56 TFEU). Romania has requested a derogation for the application of this mechanism, but this has been rejected by the Commission.

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KPMG Comment

It is expected that the Romanian authorities will have to eliminate the VAT split payment mechanism.

ECJ decision on VAT exemption related to transport operations for export of goods

Cartrans Spedition SRL (hereinafter referred to as "Cartrans" or "the Company"), a taxable person established in Romania, acted as road transport services broker. For certain transactions, the tax authorities refused to apply the VAT exemption because the company could not provide the customs export declarations (hereinafter referred to as "DVEs") to show that the goods were actually exported.

In Case no. C-495/17 Cartrans, the Court of Justice of the European Union ('the ECJ') ruled that the exemption applicable to transport services directly linked to the export of goods cannot be made conditional solely on the presentation of the DVE. As long as the supply of services contributes directly to the actual carrying out of the export operation, the ECJ has ruled that the application of the exemption can also be supported by a TIR carnet addressed by the customs authorities of the third country of destination of the goods as long as its authenticity or reliability cannot be challenged.

KPMG Comment

The ECJ, by means of this decision, clarified that the DVE is not the only document which may be used to justify VAT rexemption for services related to the export of goods. However, the ECJ's ruling in Case C-288/16 LC should also be taken into account. This states that the exemption may be applied only to those services provided directly to the consignor or consignee of those goods.

Thus, we recommend that carriers should carry out a rigorous analysis of these transactions to determine the extent to which the VAT exemption can be justified.

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