Since January 1, 2018, Romania applies an alternative VAT collection mechanism where VAT is paid to a separate blocked account, causing a major administrative burden for honest companies doing business there, the EC said.
This arrangement is mandatory for certain businesses which are required to open a separate blocked VAT bank account. Their customers must split the payment of the invoice by paying the VAT separately to the VAT account of the supplier. The taxpayer may only use the amount collected on the dedicated VAT account to pay VAT to the Treasury and to its suppliers.
The Commission said the measures run against both EU VAT rules and the freedom to provide services.
The letter of formal notice follows a communication also adopted Thursday from the Commission rejecting a request from Romania to derogate from EU rules in this area due to concerns arising from the proportionality principle and compatibility with the Treaty.
If Romania does not act within the next two months, the Commission may send a reasoned opinion to the Romanian authorities.