System of VAT Payable upon Receipt–Facility or Burden?

Lucia Paliu-Popa and Nicolae Ecobici
Authors registered in the RePEc Author Service: Lucia Popa Paliu

MPRA Paper from University Library of Munich, Germany

Abstract: Amid the growing discontent of the Romanian business environment regarding the collection and hence, payment to the state budget of the value added tax (VAT) related to the claims arising from the goods delivered, work performed or services provided to third parties, claims that, because of the economic and financial blockade mostly created by public institutions are not collected in good time for the payment of the related tax obligations, the State, by Government Ordinance no. 15 from the end of august 2012, "tried" to eliminate this drawback by introducing the system of VAT payable upon receipt. But, on the one hand, the system was applied in a discriminatory manner, since January 1, 2013, only by entities normally registered for VAT, which during October 1, 2011 - September 30, 2012, had a turnover of up to RON 2,250,000 inclusive, and on the other hand, the effect is not what the entities expected, since VAT is not always collected only upon receipt of claims, but also before that time, if the amounts are not received within 90 days. However, VAT deduction is not allowed in the same period from issue of the invoice, if the beneficiary failed to pay the debt, thus violating the principle of neutrality of VAT, circumstances that may adversely affect the taxpayers. In this context, using the theoretical approach and the empirical research, we will prove that the application of VAT system payable upon receipt does not benefit the entities, regardless of the category in which they fall; but the disadvantages outweigh the benefits and the positive effects can be reflected only in the state budget.

Keywords: VAT payable upon receipt; chargeability of VAT; VAT deduction; VAT payment; undue VAT; collection. (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2013-06
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Published in WSEAS Brasov Advances in Accounting, Auditing and Risk Management (2013): pp. 70-74

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