SAF-T in Romania in two phases

From 1 January 2022 SAF-T is also rolled out in Romania. First, only large taxpayers had to declare SAF-T in Romania through mandatory monthly filings, but from 1 January 2023 also medium sized taxpayers have to submit SAF-T on monthly basis. The rest of taxpayers, including small taxpayers and non-resident companies registered only for VAT purposes in Romania, will submit SAF-T from 1 January 2025. The obligation applies to all Romanian and foreign companies with a presence in the country registered for tax purposes in Romania.

Content of SAF-T reports 

Generally, among others, data reports submitted to the National Tax Administration Agency (ANAF) within the system of SAF-T in Romania must contain the following:

1. The master files section contains subsections for more information, such as:

• accounting accounts / journal register
• customers (identification data, analytical account, initial and final balance debtor / creditor)
• suppliers (identification data, analytical account, initial and final balance debtor / creditor)
• tax table (specific tax information)
• table of units of measurement
• table of types of analysis (information on the structure of the taxpayer’s cost centers)
• table of types of movements
• products
• stocks
• owners (details regarding stock owners)
• assets

2. Accounting records / Journal Register: information on accounting records, at transaction level, including analytical accounting accounts.

3. Source documents: information about source documents such as:

• sales invoices
• purchase invoices
• payments
• movements of goods
• asset transactions

Reporting periods for SAF-T in Romania

The submission terms for SAF-T in Romania are monthly or quarterly, depending on the VAT fiscal period. Companies submitting SAF-T on monthly basis have a grace period of six months for the first return, five months for the second return, etc.

Information regarding section “Assets” will be submitted annually, at the date when the financial statements are submitted, whilst information of section “Stocks” are submitted upon the request of the tax authorities.

If you would like to know more about the SAF-T in Romania or if you have any tax related question in the country, please visit the homepage of Ensight, the exclusive representative of WTS Global in Romania.

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Withholding tax

According to the above-mentioned amendments to the Romanian Fiscal Code, the tax on dividends paid to non-residents becomes 8% applied to the gross dividend (instead of 5%), starting with dividends distributed after 1 January 2023. Nevertheless, the exemption / reductions based on European directives or double tax treaties can be applied (if the required conditions are fulfilled).

Corporate income tax 

The CIT-related changes of the Romanian Fiscal Code affect from one hand the exemption of reinvested profits. Starting from 1 January 2023, other assets are eligible for the exemption from corporate income tax regarding the reinvested profit. Investments in assets used in the production and processing activity, the assets representing refurbishment will be exempted from corporate income tax (these assets will be established by order of the Minister of Finance).

Another CIT-related change of the Romanian Fiscal Code affects the dividend tax which is computed by applying an 8% tax rate on the gross dividend paid to a Romanian legal entity (instead of the current 5%).

Both of these provisions apply to dividends distributed after 1 January 2023.

Micro-enterprise tax

The amendments to the Romanian Fiscal Code significantly modify the regime of the income tax of micro-enterprises as well.

The conditions that must be met cumulatively by a company in order to be a taxpayer on the tax of micro-enterprises (these must be met on 31 December of the previous fiscal year) are amended as follows:

• revenues must not exceed the RON equivalent of EUR 500,000 (instead of the current EUR 1,000,000);
• its share capital is held by persons other than the state and the administrative-territorial units (condition currently in force);
• it is not in dissolution, followed by liquidation, registered in the trade register or in the courts, according to the law (condition currently in force);
• the company generates revenues, other than those from consulting and / or management, in proportion of over 80% of the total revenues (new condition);
• the company has at least one employee (new condition – respectively, the differentiated tax rate is no longer applied in relation to the existence or not of the employee);
• the company has associates / shareholders who hold over 25% of the value / number of participation titles or voting rights to at most three Romanian legal entities that apply to apply the income tax regime of micro-enterprises, including the analyzed company (if they are more than three Romanian companies, the three legal entities paying the micro-enterprise tax will be established, and the rest of the legal entities will become corporate income tax payers) – new condition.

Given the above conditions, from 2023 the tax rate becomes 1% in all cases. The tax regime becomes optional upon the registration of the company. The option can be exercised after registration if certain conditions are observed.

Micro-enterprises cannot opt ​​for the payment of the corporate income tax during the fiscal year, the option being able to be exercised starting with the following fiscal year, with certain exceptions.

Special rules for leaving the income tax system of micro-enterprises during the year were also established.

Example: If during a fiscal year a micro-enterprise generates revenues higher than EUR 500,000 or the share of revenues from consulting and / or management in total revenues is over 20% inclusive, it owes corporate income tax starting with the quarter in which any of these limits are exceeded, without the possibility to opt to apply the micro-enterprise tax afterwards.

VAT

According to the amendments to the Romanian Fiscal Code, amongst the goods subject to 9% VAT rate, the list of food products / other similar goods, as well as of the products used in agriculture was modified.

The VAT rate increases to 9% (from 5%) for hotel accommodation, restaurant and catering services (with certain exceptions).

The delivery of homes with a VAT rate of 5% to individuals applies to homes with a usable area of up to 120 square metres, excluding household annexes, whose value, including the land on which they are built, does not exceed the amount of RON 600,000, excluding VAT. Any natural person can purchase, starting with 1 January 2023, individually or jointly with another natural person / other natural persons, a single home whose value does not exceed the amount of RON 600,000, excluding VAT, with a reduced rate of 5% (there are transitional measures for 2022).

If you would like to know more about the latest amendments to the Romanian Fiscal Code or if you have any tax related question in Romania, please visit the homepage of Ensight, the exclusive representative of WTS Global in the country.

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The system already existed in the Romanian Fiscal Code under the name “Mini One Stop Shop” (MOSS) before 1 July, but only for electronic services. On 1 July 2021, it was expanded to include several categories of transaction, becoming the “One Stop Shop” (OSS).

These provisions aim to extend the simplification measures applicable to certain transactions with non-taxable persons (mainly natural persons) and applying VAT from the Member State of the buyer (thus avoiding registration for VAT purposes in multiple EU states).

Three special OSS regimes in Romania

Since 1 July 2021, three special OSS regimes are in force in Romania:

• The first of the special OSS regimes can be applied for certain services provided by taxable persons not established in the European Union towards non-taxable persons.

• The second of the special OSS regimes can be applied for transactions with non-taxable persons for distance sales of goods between Member States, for deliveries of domestic goods made by electronic interfaces facilitating such deliveries and for certain services provided by taxable persons established in the EU towards non-taxable persons, but not in the Member State of consumption.

• The third of the special OSS regimes can be used for the distance sale of goods imported from outside the EU.

A single ceiling of EUR 10,000 (roughly RON 46,337 in Romania) has been set in all Member States for intra-community deliveries of distance goods or, inter alia, for services provided electronically. So if this threshold is exceeded, the special regime is applied. However, it is possible to apply the special regime for at least two calendar years even if the ceiling is not exceeded.

Basically, in the case of sales to individuals from other EU countries, a Romanian company will apply:

• the Romanian VAT rate for sales under the ceiling,
• the VAT rate in the buyer’s state for sales above the ceiling.

Special regime for services provided by taxable persons not established in the European Union

Any taxable person not established in the European Union may use a special regime for all services provided to non-taxable persons who are established in the EU. The special regime allows, inter alia, the registration in a single Member State of a taxable person not established in the EU for all services provided to non-taxable persons established in the EU.

The entity will receive a special registration code for VAT purposes, and it is not necessary to appoint a tax representative.

By the end of the following month after the end of each calendar quarter, this entity must submit a special VAT return (in EUR) – regardless of whether services were provided under the special regime – which will contain:

• the special registration code for VAT purposes;
• total value, excluding VAT, of the services under the special regime, the applicable VAT rates and the corresponding amount of VAT subdivided into quotas, due to each Member State of consumption,
• the total amount of VAT due in the EU.

The taxable person not established in the EU must pay the total amount of VAT due in the EU, to a special account, in EUR, by the date on which the special declaration must be submitted. It cannot deduct VAT through the special tax return, but it can request a VAT refund under certain conditions (amongst others, if there is a reciprocity agreement regarding the VAT refund between Romania and the respective country).

Click here if you want to read the full article about the new special OSS regimes in Romania on the homepage of Ensight, the exclusive representative of WTS Global in the country.

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Reinvested profit

One of the most important amendment of the Fiscal Code of Romania affects the reinvested profit exempt from CIT. It represents the cumulated gross accounting profit from the beginning of the year obtained until the quarter / year of commissioning of the eligible assets. The CIT exemption related to the performed investments is granted within the limit of the cumulated CIT computed from the beginning of the year until the quarter / year of putting the assets into operation.

Place of effective management

The definition “place of effective management” (POEM) has also been changed in the Fiscal Code of Romania. According to the new definition, a foreign legal entity is considered to have the POEM in Romania if it performs operations that correspond to economic, real and substantial purposes. It also has to meet at least one of the following conditions:

• the economic-strategic decisions necessary for the management of the activity of the foreign legal entity as a whole are taken in Romania by the executive directors / members of the board of directors; or
• at least 50% of the executive directors / members of the board of directors of the foreign legal entity are Romanian residents.

If a foreign legal entity is considered to have the POEM in Romania and is considered Romanian resident, it will have, amongst others, to have accounting records in Romania, to register as a CIT payer and to maintain its residence in Romania for a period of at least one fiscal year.

Non-deductible expenses with entities from non-cooperating states

Expenses incurred as a result of transactions with a person located in a state included in the EU List of non-cooperating jurisdictions for tax purposes (American Samoa, Anguilla, Barbados, Fiji, Guam, Palau, Panama, Samoa, the Seychelles, Trinidad and Tobago, the American Virgin Islands and Vanuatu) are non-deductible in the computation of the CIT.

Fiscal consolidation for CIT purposes

The amendment to the Fiscal Code of Romania introduces the concept and rules for CIT fiscal consolidation. The fiscal group for CIT purposes consists of at least two of the following entities:

• a Romanian legal person / legal person with its registered office in Romania established according to European legislation and one or more Romanian legal persons / legal persons with registered office in Romania established under European legislation in which it holds, directly or indirectly, at least 75% of the value / number of participation titles or their voting rights;
• at least two Romanian legal entities in which a Romanian natural person holds, directly or indirectly, at least 75% of the value / number of participation titles or voting rights;
• at least two Romanian legal persons held, directly or indirectly, in proportion of at least 75% of the value / number of participation titles or voting rights, by a legal / natural person, resident in a state with which Romania has concluded a double tax treaty or in a state with which an agreement on the exchange of information has been concluded;
• at least one Romanian legal person held, directly or indirectly, in proportion of at least 75% of the value / number of participation titles or voting rights, by a legal person resident in a state with which Romania has concluded a double tax treaty or in a state with which an agreement was concluded regarding the exchange of information and the permanent establishment / designated permanent establishment in Romania of this foreign legal entity.

The period of application of the fiscal consolidation system is five fiscal years and starts with the next fiscal year following the submission of the application (hence, it can be applied starting with 2022). The system is optional and is required to be communicated at least 60 days before the start of the period for which the fiscal consolidation is requested.

Certain cumulative conditions must be met, such as the fulfilment of the holding condition for an uninterrupted period of one year, prior to the beginning of the fiscal consolidation period. A legal person will be appointed for computing the consolidated fiscal result of the fiscal group, submitting the CIT return and paying the CIT on behalf of the group.

Each member of the fiscal group determines the fiscal result individually, and the consolidated fiscal result of the fiscal group is determined quarterly / annually by summing the fiscal results determined individually by each member of the fiscal group. The CIT is calculated by applying the rate of 16% on the positive consolidated fiscal result of the group. Each member of the fiscal group has the obligation to prepare the TP documentation which will include both the transactions carried out with the members of the fiscal group, as well as with the affiliated entities outside the fiscal group.

Special rules are provided both for entering / leaving the fiscal group and for cases in which the group no longer meets the mandatory conditions during the five years. 

Changes to VAT in the Fiscal Code of Romania 

The most relevant VAT-related amendments to the Fiscal Code of Romania include the increase of ceiling for VAT-cash accounting system and the VAT exemptions for certain imports.

The ceiling for entities wishing to apply the VAT cash accounting system has increased from RON 2,250,000 (roughly EUR 460,000) to RON 4,500,000 (roughly EUR 920,000).

According to the new rules in the Fiscal Code of Romania amongst others, the VAT is not actually paid to the customs authorities for certain imports of goods subject to simplification measures (for example, imports of cereals), made by entities registered for VAT purposes (if certain conditions are met). The VAT will be paid through the reverse charge mechanism.

If you would like to know more about the latest amendments to the Fiscal Code of Romania or if you have any tax related question in Romania, please visit the homepage of Ensight, the exclusive representative of WTS Global in the country.

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No interest and penalties / non-enforcement of unpaid taxes

One of the main reliefs of the recent additional fiscal measures in Romania is the non-computation of interest and penalties for late payment. More precisely, interest and penalties on taxes due from 21 March 2020 and not paid until 25 December 2020 will not be computed (the previous deadline was 25 October 2020).

The above due and unpaid taxes will not be considered outstanding and their enforcement will be suspended / will not start until 25 December 2020 (with certain exceptions, such as in criminal cases).

No interest and penalties will be computed for the late payment of instalments from the rescheduling of taxes until 25 December 2020, the validity of this rescheduling is also maintained until 25 December 2020.

The prescription terms of the Romanian tax authorities to compute additional taxes and prescribe enforcement are suspended until 25 December 2020.

Extension of VAT refunds without a VAT audit

Another important element of the additional fiscal measures in Romania is that VAT can be refunded until 25 January 2021, with VAT inspections carried out afterwards (with certain exceptions, such as the submission of the first VAT refund request after registering for VAT purposes, or the reimbursable VAT is older than one year). Subsequent fiscal inspections are ordered based on a risk analysis by the fiscal authorities.

Payment rescheduling of taxes

A payment rescheduling of taxes may be approved for a maximum period of 12 months for the main and ancillary fiscal obligations whose maturity / payment term expired after the declaration date for the state of emergency (16 March 2020) and they are not paid before the issue date of the fiscal attestation certificate.

Payment rescheduling is not permitted for fiscal obligations totalling less than RON 500 (roughly EUR 100) for individuals and RON 5,000 (roughly EUR 1,000) for legal entities. To benefit from the payment rescheduling, the debtor must cumulatively meet the following conditions:

• submit an application to the tax authorities by 15 December 2020;
• not be subject to bankruptcy / dissolution proceedings;
• not have outstanding fiscal obligations on the date the state of emergency was declared, which are not paid before the issue date of the fiscal attestation certificate;
• not be liable according to the legislation regarding insolvency and / or joint liability;
• has submitted all tax returns, according to fiscal evidence, by the issue date of the fiscal attestation certificate.

After receiving the request, the fiscal body issues the fiscal attestation certificate ex officio, and communicates it to the debtor. Apart from this, there are several conditions for maintaining the validity of the payment rescheduling.

During the payment rescheduling period, from 26 December 2020 interest is due and calculated (0.01% for each day of delay) for the tax obligations scheduled for payment, namely, for each rate of the payment schedule, computed between the issue date of the payment rescheduling decision, and payment date of the instalment. The delay penalty of 0.01% will also be due for each day of delay.

Additionally, a penalty of 5% will be due for any late payment rescheduling rate until the next payment term in the rescheduling schedule, as well as for the differences of any unpaid fiscal obligations after settling VAT returns with a reimbursement option. The penalty of 5% is calculated based on:

• the amount remaining unpaid from the rescheduling rate, representing the main fiscal obligations and / or ancillary fiscal obligations rescheduled for payment;
• the differences of fiscal obligations remaining unpaid after the settlement of the returns with the negative amount of VAT with a reimbursement option.

Reduction of specific tax for HoReCa

According to the additional fiscal measures in Romania, HoReCa entities (hotels, restaurants, cafés) liable for the specific tax due for HoReCA activities in 2020, do not owe specific tax for the period between 26 October 2020 (the date these provisions enter into force) and 31 December 2020.

Thus, the specific tax established for 2020 will be recalculated accordingly.

Reduction of local taxes

Local authorities may reduce building tax for 2020 until 2 December 2020, the main measure being the reduction of the annual building tax by 50% for non-residential buildings, if, during the period for which the state of emergency / alert was established, the owners or users of the buildings were obliged, by law, to completely suspend their economic activity, or they hold a certificate for emergency situations issued by the Romanian Ministry of Economy certifying the partial interruption of the economic activity.

If such measures are adopted, the owners of the buildings are obliged to submit to the local fiscal authority a request for granting the reduction until 21 December 2020, together with a declaration on their own responsibility, which must contain specific information.

Extended restructuring of unpaid taxes

The additional fiscal measures in Romania also extend the possibility to restructure taxes (GO 6/2019). The obligation to notify the fiscal authorities of this restructuring intention can be submitted between 1 November 2020 and 31 March 2021. The restructuring request can be submitted until 30 June 2021.

No tax on employees for COVID-19 tests supported by the employer

No salary tax and social contributions are computed for the value of medical tests to diagnose COVID-19 infection, as supported by employers on their own initiative, for their employees, during the state of emergency or alert.

If you would like to know more about the additional fiscal measures in Romania in force from 26 October 2020, please visit the homepage of Ensight, the exclusive representative of WTS Global in Romania.

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VAT simplification measures or simplified procedures (reverse charge mechanism) are applicable in Romania for specific transactions between two Romanian VAT payers. The main condition for applying the reverse charge mechanism in Romania is that both the seller and the buyer are registered for VAT purposes in Romania and that the supply takes place within the country.

Goods and services subject to reverse charge mechanism in Romania

The reverse charge mechanism in Romania is mandatory for applicable transactions as the country has one of the highest VAT gaps in Europe (35.88% in 2016) as regards uncollected VAT. In this respect, the seller issues the invoice without VAT and the buyer records the VAT both as input and output VAT, offsetting one another.

Provided that both the seller and the buyer are Romanian VAT payers, the main local goods and services subject to this reverse charge mechanism in Romania are as follows:

• Sale of ferrous and non-ferrous waste
• Sale of wood
• Sale of cereals
• Sale of electrical energy
• Sale of construction, partial construction, land (subject to the VAT regime by option or by law)
• Sale of mobile phones
• Sale of devices with integrated circuits
• Sale of PCs, tablets or laptops

Since it was possible to invoice most of the above transactions without VAT until 31 December 2018, Romania requested an extension of this mechanism to combat VAT fraud in these specific areas.

EU Directive on reverse charge mechanism

In this respect, EU Directive 2018/1695 was published in the Official Journal of the European Union on 12 November 2018, allowing Member States to regard the buyer as the person liable for VAT for specific local transactions until 30 June 2022. This is the envisaged date that the new EU VAT Directive will enter into force.

Having considered the above EU Directive and the current approach of the Romanian Ministry of Finance, the Romanian authorities modified the Romanian Fiscal Code. As we wrote in an earlier article, Government Emergency Ordinance no. 114/2018 enables the continued application of the reverse charge mechanism in Romania after 1 January 2019.

If you would like to know more about the application of the reverse charge mechanism in Romania or any other taxation issues of the country, please visit the website of Ensight, WTS Global’s exclusive representative in Romania.

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Starting from January 2019, Government Emergency Ordinance no. 114/2018 introduces several amendments to the Romanian Fiscal Code. The most important ones concern construction companies and the treatment of value tickets.

Changes regarding taxation of construction companies

According to the new law, the following fiscal incentives are valid for the period 2019-2028 for employees of construction companies:

• salary tax exemption;
• reduced social contribution from 25% to 21.25% (the published legislation does not explicitly mention the reduction, so a correction can be expected);
• exemption from health contribution – employees are insured for health services without payment of the contribution;
• employers are exempt from paying the social contribution for particular or special working conditions;
• work insurance contribution reduced from 2.25% to 0.3375%.

The conditions to be fulfilled by these employees / employers to apply the incentives are:

• the employers carry out activities in the construction sector which include the construction activity defined by NACE code 41.42.43, section F, Construction and/or production of building materials, defined by the following NACE codes: 2312 – Shaping and processing of flat glass; 2331 – Manufacture of ceramic tiles and flags; 2332 – Manufacture of bricks, tiles and construction products, in baked clay; 2361 – Manufacture of concrete products for construction purposes; 2362 – Manufacture of plaster products for construction purposes; 2363 – Manufacture of ready-mixed concrete; 2364 – Manufacture of mortars; 2369 – Manufacture of other articles of concrete, plaster and cement; 2370 – Cutting, shaping and finishing of stone; 2223 – Manufacture of builders’ ware of plastics; 1623 – Manufacture of other builders’ carpentry; 2512 – Manufacture of doors and windows of metal; 2511 – Manufacture of metal structures and parts of structures; 0811 – Quarrying of ornamental and building stone, limestone, gypsum, chalk and slate; 0812 – Operation of gravel and sand pits; 711 – Architectural and engineering activities and related technical consultancy;
• the employers generate the turnover from the above activities exceeding the limit of at least 80% of total turnover, calculated cumulatively from the beginning of the year, including the month in which the exemption applies;
• the monthly gross salaries are between RON 3,000 (roughly EUR 630) and RON 30,000 (roughly EUR 6,300) per month inclusive, and are obtained based on the individual labour agreement;
• the exemption is applicable on the basis of further instructions and Declaration 112 represents a declaration on one’s own responsibility to fulfil the above conditions.

Separately, for the period between 1 January and 31 December 2019, the minimum gross monthly salary for construction workers (for the above-mentioned areas of activity) is RON 3,000 (roughly EUR 630), regardless of the positions held by the respective employees (e.g. accountant or secretary), the new legislation making no restrictions in this regard.

Taxation of value tickets

The fiscal treatment of value tickets granted to employees has been unified, so gift tickets, meal tickets, holiday vouchers, nursery vouchers and cultural vouchers are subject to 10% income tax, but they are not included in the calculation of social contributions.

Extended validity for VAT simplification measures

VAT simplification measures can now be applied until 30 June 2022 for certain operations (such as cereal supplies), as the supplier issues the invoice without VAT and the buyer registers the VAT through the reverse charge mechanism.

Contribution of 2% from turnover

Separately from the above amendments to the Romanian Fiscal Code, electrical energy license holders must pay a contribution of 2% from their turnover.

Tax on financial assets

In addition to the fiscal modifications, the banking institutions must pay a tax on their financial assets if the quarterly ROBOR (Romanian inter-banking interest rate) exceeds 2%. The tax on the financial assets will be computed quarterly by applying a rate to the financial assets of the banking institution as follows: a rate of 0.1% if the quarterly ROBOR is between 2% and 2.5%; a rate of 0.2% if the quarterly ROBOR is between 2.5% and 3%; a rate of 0.3% if the quarterly ROBOR is between 3% and 3.5%; a rate of 0.4% if the quarterly ROBOR is between 3.5% and 4%; and a rate of 0.5% if the quarterly ROBOR is above 4%.

Other changes to the Romanian Fiscal Code: Law no. 30/2019

Apart from Government Emergency Ordinance no. 114/2018, Law no. 30/2019 for the approval of Government Emergency Ordinance no. 25/2018 introduced significant amendments to the Romanian Fiscal Code.

Interest deductibility limits

From 1 January 2019, the interest deductibility limits have been increased for corporate income tax purposes. Thus the excess costs of indebtedness (the difference between borrowing costs and interest revenues) are deductible if they are less than the RON equivalent of EUR 1,000,000 (instead of EUR 200,000, the old limit).

The amount exceeding the EUR 1,000,000 ceiling may be deducted up to 30% (instead of 10%) of the following calculation formula: revenues minus expenses minus non-taxable revenues plus profit tax, plus the excess costs of indebtedness, plus tax depreciation.

The non-deductible interest expenses can also be carried forward by companies involved in merger or spin-off processes, or the successors of these companies.

Sponsorship tax credit

From 1 April 2019, corporate income taxpayers or microenterprise taxpayers can only use the sponsorship tax credit for sponsorships of non-profit entities listed in a register of entities for which tax deductions are granted, a register maintained by ANAF (the national tax authority).

This register can only contain non-profit entities who operate in the area for which they have been set up, who have fulfilled their tax declaration obligations, who have no tax obligations past due by more than 90 days, who have filed their annual financial statements and who have not been declared inactive.

New tax on income from virtual currency transfers

From 20 January 2019, the taxation of income earned by individuals from transfers of virtual currencies was regulated by subjecting the profits from these transactions to a 10% income tax rate.

Changes to VAT

From 1 January 2019, where deliveries performed cannot be cashed due to the bankruptcy of the beneficiary or as a result of a reorganisation plan, the VAT base may be adjusted from the date of the court ruling or of the closing judgement regarding the beginning of the bankruptcy procedure.

As of the same date, the VAT rate of 5% can be applied for the delivery of dwellings if several dwellings are acquired by the same individual (so far, the 5% VAT rate was only possible for the first delivery to an individual).

If you would like to know more about the Romanian Fiscal Code or other taxation issues in Romania, please visit the homepage of Ensight, the exclusive representative of WTS Global in Romania.

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Romanian VAT payers include local, Romanian companies, as well as non-resident companies registered for VAT purposes in Romania, either directly, in the case of EU companies, or through a fiscal representative, in the case of non-EU companies (non-EU companies are obliged to register for VAT purposes through a fiscal representative).

Registration procedure & submission obligations for Romanian VAT payers

A Romanian VAT payer will submit to the tax authorities the following VAT returns:

• VAT return code 300 including all transactions performed during the month / quarter, submitted by the 25th of the following month / quarter;
• VAT return code 390 including EU Intra-Community acquisitions and sales, submitted by the 25th of the following month;
• VAT return code 394 including the Romanian domestic transactions, submitted by the 25th of the following month / quarter.

Depending on the volume of the transactions, Intrastat statistical reports can be submitted in respect of the goods exchanged with other EU Member States by the 15th of the following month.

The VAT registration procedure is simplified for non-resident companies which intend to register for VAT purposes in Romania, compared with local Romanian companies. Although both procedures require the provision to the tax authorities of documents justifying the intention to perform an economic activity in Romania, we consider it of interest to present the VAT registration procedure for local companies, as such procedure is burdensome or even arbitrary.

VAT risk analysis

The Romanian tax authorities want to fight against VAT fraud through a rigid VAT registration procedure applicable to Romanian companies. Thus, the tax authorities analyze various topics, allocate negative points for each topic (the exact scoring is not public) and compute the overall scoring by adding 100 points to the sum of the allocated points. If the overall scoring is below 51 points (hence, the negative aspects prevail), the fiscal risk is high and the VAT registration is rejected.

Having considered the above, we present below some aspects which should be avoided by Romanian companies registering for VAT purposes (the below examples are not exhaustive).

Romanian companies should not have their headquarters within a lawyer’s office and the period of use of the headquarters should be more than one year. The companies should perform their activity in their headquarters and / or working units.

The administrators / shareholders (with more than 25% of the shares) should not have committed fiscal offenses / crimes and they should not have been administrators / shareholders in other Romanian companies in the following cases: insolvent / bankrupt / fiscally inactive / trade registry inactive / with annulled VAT registration / with overdue taxes. The company should have employees other than the economic director / head accountant.

It is also interesting that the Romanian tax authorities consider it a negative aspect if at least one of the administrators is a non-Romanian tax resident individual and the company applying for the VAT registration has a share capital below RON 45,000 (roughly EUR 9,600).

Conclusion

Consequently, if a Romanian company does not have employees, has a foreign individual as administrator, has a minimum share capital and headquarters in the premises of a service provider, its VAT registration process is not straightforward, even if the new company has a serious business plan.

Fortunately, Romanian branches of foreign companies / EU companies registering directly for VAT purposes in Romania are not subject to the above VAT risk analysis.

If you would like to know more about the VAT compliance obligations for Romanian companies or for Romanian branches of foreign companies, please visit the homepage of Ensight, the exclusive representative of WTS Global in Romania.

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RELATED PUBLICATIONS:

WTS Global VAT Newsletter #2/2018

WTS CEE Tax Bridge #3/2018 – Major differences in the VAT system of the CEE countries to the EU regulations

Tax and Investment Facts in Romania 2017

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Romanian Fiscal Code was amended starting 1 January 2018 for transposing the provisions of Directive 2016/1164/EU of 12 July 2016. The new rules concerning also Romanian corporate income tax are intended to address tax evasion.

The most significant revisions to the Romanian corporate income tax

With few exceptions, the exceeding borrowing costs (calculated as the difference between any debt-related costs, including foreign exchange losses, debt-related costs about loans granted by financial institutions, capitalized interest – and the interest income and other equivalent income) incurred in a fiscal period, which exceed the deductible threshold of EUR 200,000 will be deductible for corporate income tax (CIT) up to the limit of 10% of a fiscal EBIDTA. In case of a negative fiscal EBITDA, only the costs up to the threshold of EUR 200,000 are deductible. Non-deductible exceeding borrowing costs are fiscally carried forward for an unlimited period.

A possible increase of the threshold from EUR 200,000 to EUR 3,000,000 is currently under discussion at the Romanian authorities level.

Exit taxation was introduced in Romania in cases of transfer of assets, tax residence and/or economic activity carried out through a permanent establishment for which Romania loses the right to tax. The tax base for 16% CIT is computed as a difference between the market value of the assets transferred and their fiscal value.

Existing General anti-abuse rule stipulated by the art 11 of the Fiscal Code was strengthened. According to this rule tax authorities can ignore a series of arrangements which have been put into place with the sole aim of obtaining a tax advantage, but such decisions should be justified.

Controlled Foreign Companies (CFC) Rules

Under these rules, a Romanian taxpayer should include in its taxable base, in proportion with its holding in the controlled foreign company, the latter’s non-distributed income derived from: interests, royalties, dividends, income from disposal of shares, income from financial leasing, from insurance and financial activities, income from certain transactions performed with associated companies. CFC is an entity held, directly or indirectly, more than 50% by the Romanian taxpayer, entity paying a lower CIT than the difference between CIT that would have been charged for the entity under the applicable Romanian law provisions, and the actual CIT paid.

Tax on micro-company revenues

Starting 1 January 2018, all companies which obtained in the previous year revenues up to RON equivalent of EUR 1,000,000 at the exchange rate valid at the year end, which are not owned by the state and are not in dissolution/ liquidation procedure have been obliged to apply micro-companies tax instead of Romanian corporate income tax.

Micro-companies tax is computed based on total revenues obtained, to which a percentage of 1% in case of companies with 1 employee, or 3% in case of companies with no employees is applied. The level of expenses recorded does not influence the taxable base in this fiscal regime, affecting businesses with low mark-up. Moreover, fiscal losses cannot be carried forward during the period in which the company applies micro-company tax regime, affecting businesses in set-up / investment phase.

In order to limit the disadvantages of micro-company tax, the Ordinance 25 published on 30 March 2018 introduces an exception to the rule above, allowing companies with a share capital of at least RON 45,000 (roughly EUR 9,600) and at least 2 employees to opt for becoming a Romanian corporate income tax payer starting 1 April 2018.

If you would like to know more about the regulation of Romanian corporate income tax, please visit the homepage of Ensight, the exclusive representative of WTS Global in Romania.

If you are interested in more news about taxation and legislative amendments in the Central and Eastern European Region, please feel free to sign up for our newsletter!

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On 28 December 2017 law no. 275/2017 has been published in the Official Gazette in Romania. The law approves Governmental Ordinance 23/2017 regarding the Romanian VAT split payment mechanism, but brought significant amendments to that.

The VAT split payment system was introduced in Romania in August 2017 through Governmental Ordinance 23 and the text was applicable to all taxpayers registered for VAT in Romania as of January 2018 / optional as of 1 October 2017, with few exceptions.

Who has to apply the Romanian VAT split payment?

The Romanian VAT split payment mechanism requires companies applying this system to pay or cash-in invoice amounts split in two parts: the taxable base – in/from the normal bank account, the VAT amount – in/from a newly created VAT bank account, dedicated exclusively to VAT payments.

The law approving Governmental Ordinance 23 was published on 28 December 2017 and brought significant changes to the initial form of the norms.

Thus, the category of entities that have to apply the VAT split mechanism was significantly reduced, the taxpayers required to apply the VAT split payment system now being the following:

• taxpayers who, as of 31 December 2017, have outstanding VAT liabilities exceeding RON 15,000 (approx. EUR 3,200) for large taxpayers, RON 10,000 (approx. EUR 2,100) for medium taxpayers and RON 5,000 (approx. EUR 1,000) for other taxpayers and these outstanding amounts will not be paid until 31 January 2018;

• taxpayers who, as of 2018, will register outstanding VAT exceeding the above limits, if such amounts are not paid within 60 working days after the payment deadline;

• taxpayers in insolvency prevention or insolvency procedure;

• taxpayers who voluntarily opt to apply the VAT split system (for at least 1 year).

So, unlike according to the previous approach, which would have made VAT split mechanism compulsory to all VAT payers starting 1 January 2018, the VAT split became applicable compulsory only for the categories mentioned above.

Aspects that should be considered

The Romanian VAT split payment system applies to all taxable supplies of goods/services for which the place of supply is considered to be in Romania from a VAT perspective. Transactions subject to special regimes, or transactions for which the beneficiary is liable to pay the tax (reverse charge), are exempted.

The facilities for the optional application of the VAT split system are maintained, i.e. 5% decrease in corporate income tax/microenterprise income tax.

The Romanian VAT split payment system also affects entities that do not have to apply such system, as the beneficiaries are required to check their suppliers and split the payments made to suppliers that apply such system (with a few exceptions).

Considering that a taxpayer may opt voluntarily at any time to apply the Romanian VAT split payment system, for each payment to be made, a special ledger on the website of the tax authority ANAF should be checked. This electronic ledger discloses the companies applying the VAT split payment mechanism.

If you would like to know more about the Romanian VAT split payment system, please visit the homepage of Ensight, the exclusive representative of WTS Global in Romania.

If you are interested in more news about taxation and legislative amendments in the Central and Eastern European Region, please feel free to sign up for our newsletter!

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A Significant changes in the Romanian VAT split payment system bejegyzés először WTS Klient Ungarn | Steuerberatung | Buchhaltung | Lohnverrechnung | Advisory | HR Services | Digitale Lösung-én jelent meg.