Single Rulebook Q&A

Question ID: 2018_3726
Legal act : Regulation (EU) No 575/2013 (CRR) as amended
Topic : Liquidity risk
Article: 422
Paragraph: 3 and 4
Subparagraph: c; second sentence
COM Delegated or Implementing Acts/RTS/ITS/GLs: Delegated Regulation (EU) 2015/61 - DR with regard to liquidity coverage requirement
Article/Paragraph : 27(1)(c); 27(4) - second and last sentences; 27(6)
Name of institution / submitter: National Bank of Romania
Country of incorporation / residence: Romania
Type of submitter: Competent authority
Subject matter : Treatment of Value Added Tax (VAT) accounts opened for collection and payment of VAT
Question:

Should the Value Added Tax accounts be treated as operational deposits and should they receive the treatment mentioned at Article 27(1)(c) from Delegated Regulation (EU) 2015/61?

Background on the question:

The Romanian Government introduced a new mechanism for collecting VAT whereby, in some cases, the taxable persons registered for VAT purposes in Romania (i.e. companies, public institutions) have to open and use at least one dedicated account (held at credit institutions or at Romanian Treasury) for VAT collection and payment.

These accounts are strictly regulated by law and they must be separated from other bank accounts of the respective persons (Government Ordinance no. 23/2017).

According to the law, the VAT accounts opened with credit institutions  shall meet the following conditions:

  • the IBAN code contains a special character string: "VAT";
  • the VAT accounts have operational limitations in order not to allow cash withdrawals.

Taxable persons registered for VAT purposes will collect the amounts corresponding to the VAT on the supply of goods and services in dedicated VAT accounts.

In terms of VAT payments, each taxable person registered for VAT purposes will have the obligation to transfer the amount representing the VAT for the acquisition of goods and services from its own VAT account to that of the provider.

The transactions allowed to be perform from VAT accounts according to the law are presented below:

 

1. The VAT accounts can be credited with:

a) VAT collected on deliveries of goods/services;

b) the amounts representing VAT paid/submitted;

c) the amounts transferred from another VAT account of the holder;

d) the amounts transferred from the current account of the holder opened with the same credit institution;

e) the amounts received as a result of corrections due to material errors in the payment process;

f) the amounts received from correction of the invoices or as a result of adjusting the tax base of the VAT according to the Fiscal Code;

g) other amounts resulting from operations established by order of the National Agency for Fiscal Administration (NAFA) president;

h) the interest granted by the credit institution.

 

2. The VAT accounts can be debited with:

a) VAT paid to the supplier/provider, related to the purchases of goods/ services;

b) VAT paid to the state budget;_

c) the amounts transferred to another VAT account opened by the same holder;

d) the amounts resulting from corrections due to material errors in the payment process, for which the refund is made in another VAT account or a current account;

e) the amounts resulting from correction of the invoices or as a result of adjusting the tax base of the VAT according to the Fiscal Code, for which the refund is done in another VAT account or in current account;

f) the amounts transferred to the current account of the holder opened at the same credit institution, within the limits of the amounts stipulated at point 1 letter d);

g) the amounts transferred to current account, in the case of persons who are no longer obliged to have an VAT account due to the law and who no longer have VAT obligations;

h) the amounts representing VAT paid in cash or with the current account card;

i) other amounts resulting from operations established by order of the NAFA president;

j) fees related to the VAT account charged by the credit institution.

Only the transactions above mentioned are allowed to be performed from VAT accounts and the cash withdrawals from VAT account are forbidden.

The transactions mentioned at point 1 letter (d) and point (2) letter (f) could be considered “mirror transactions”. The law does not provide other explanations or details, but, as long the amounts transferred by the taxpayer from the current account (according to point 1 letter (d)) are the only ones (other than VAT related payments) that can be debited from VAT account (according to point 2 letter (f)), the amounts representing VAT are subject to limitation.

Also, in order to perform the transactions mentioned at point 2 letters (d), (e), (f), (g) and (h),  the taxable person registered for VAT purposes shall fill in the form “Request for approval of the transfer of amounts from the VAT account” and shall submit it on the National Agency for Fiscal Administration’s (NAFA) site, together with the supporting documents that proved the compliance with the law’s provisions. The NAFA may approve the transfers or may reject partial or total of the respective transfers. For example, the NAFA may reject the request if the taxpayer does not fall in the situations specified by the law, for example: the supporting documents were not submitted by taxpayer, the documents are incomplete or the documents and the information provided do not justify the compliance with the provisions of law.

The legal framework also provides specific sanctions for non-compliance with the obligations set out in the Government Ordinance no. 23/2017.

Delegated Regulation (EU) 2015/61 establishes, at Article 27, the treatment of outflows from operational deposits. Thereby, according to Article 27(1), “the credit institutions shall multiply by 25 % liabilities resulting from deposits that are maintained as follows: […] (c) by the depositor in the context of an established operational relationship other than that mentioned in point (a)”.

At the same time, at paragraph (4) of the same article is stipulated that “Deposits referred to in points (a), (c) and (d) of paragraph 1 shall have significant legal or operational limitations that make significant withdrawals within 30 calendar days unlikely. Funds in excess of those required for the provision of operational services shall be treated as non-operational deposits.

Also, paragraph (6) of the same article provides that, in order to identify the deposits referred to in point (c) of paragraph 1, a credit institution shall consider that there is an established operational relationship with a non-financial customer if all the criteria mentioned at this paragraph are met.

Taking into consideration that:

  1. VAT accounts have significant legal and operational limitations that make significant withdrawals within 30 calendar days unlikely (Article 27(4) - second sentence);
  2. VAT accounts must be used only for collection and payment of VAT and, as a consequence, these accounts do not have funds in excess (Article 27(4) - last sentence); and
  3. the features of VAT accounts (as were above mentioned);

In our opinion, the VAT accounts should be treated as operational deposits and they should receive the treatment mentioned at Article 27(1)(c) as long as these accounts meet the criteria mentioned at Article 27(6) of Delegated Regulation (EU) 2015/61.

Date of submission: 21/02/2018
Published as Final Q&A: 18/01/2019
EBA answer:

These VAT accounts can be treated as operational deposits and receive the treatment mentioned in Article 27(1)(a) of the Commission Delegated Regulation (EU) 2015/61, as long as these accounts provide operational services in the context of an established relationship as per Article 27(4). In the case of these VAT accounts, operational deposits in the context of an established relationship are characterised by the fact that the deposit account may only be credited and debited with amounts as part of a limited list of transactions, as set out in the background. In addition, cash withdrawals from the VAT account are forbidden unless exceptional circumstances are met. In particular, transfers from a VAT account to a current account must require specific approval from the tax authorities.

In case VAT accounts are treated as operational deposits in accordance with Article 27, funds in excess of those required for the provision of operational services shall be treated as non-operational deposits.

Status: Final Q&A
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