Indirect taxes

08.02.2013 ZF English

Value Added Tax

Romanian VAT legislation is generally in line with the principles of EC VAT Directive 2006/112 (the recast of the Sixth VAT Directive).

Romanian VAT legislation uses three different VAT rates.

The standard VAT rate which is applicable for supplies of goods or services is 24%. The other two reduced rate are 9% for sale of certain goods (i.e. school books, magazines, orthopedic products, medicine suitable to both human and animal use) and 5% for sale of real estate, as part of social policy, under certain conditions.

Operations subject to VAT

Local supplies and purchases of goods/services, intra-Community acquisitions/supplies of goods/services and imports/exports of goods performed by taxpayers (i.e. entities that independently carry out business activities) fall within the scope of VAT.

Supplies of goods or services with the place of supply in Romania are subject to Romanian VAT, where performed by a taxable person in the course of a business carried out by that person.

VAT registration requirements

Romanian entities

The VAT registration process has become more complicated for taxpayers established in Romania. They must submit to the relevant tax office additional documents (i.e. appendix to the amendments registration form under which the taxpayer’s intention and ability to perform economic activities is assessed, notarized copies of the identity documents of the taxpayer’s directors, as well as the contract covering the existence/location of their office. Moreover, since 1 August 2010, Romanian VAT payers performing intra-Community transactions have also been required to register into the registry of intra-Community Operators (RIO) before performing the respective operations.

Romanian entities carrying out economic activities including taxable operations or VAT exempt operations with deduction right in excess of the EUR 65,000 threshold are required to register and account for Romanian VAT.

If the annual turnover is below EUR 65,000, the entity is not required to register for VAT purposes. However, the taxable person may opt for the application of the general VAT regime.

If a Romanian entity carries out exclusively operations which are VAT exempt without credit, it is not allowed to register for VAT purposes.

Non-Romanian entities

Any foreign entity that is neither VAT established, nor VAT registered in Romania, that performs taxable operations from a VAT perspective, which give rise to a VAT deduction right (except for operations for which the customer is liable to account for VAT) must register for VAT purposes in Romania before performing such operations.

If a non-Romanian entity is not registered for VAT in Romania, but sells and delivers goods from another EU Member State to customers in Romania who are not VAT registered (distance sales), where the value of those sales exceeds the threshold of EUR 35,000 per year, the non-Romanian entity is required to register and account for VAT in Romania.

Since 1 January 2012, a non-resident taxable person has been able to opt to request a VAT registration if it carries out one of the following operations in Romania:

Import of goods.
Rental and leasing of immovable property, with certain exceptions, if the taxpayer has chosen to tax these operations.
Supplies of buildings/parts of buildings and the land they are built on, if the taxpayer has chosen to tax these operations.

International supplies of goods and services

Goods

In general, if goods are sold to a customer who is registered for VAT purposes in another EU Member State (i.e. intra-Community supplies of goods) and the sale involves the dispatch of those goods from Romania (either by the supplier or the customer or by a third party on their behalf) to that other Member State, then the supply is VAT exempt with credit in Romania.

If goods are sold to a customer in another EU Member State who is not registered for VAT purposes, the supplier would generally have to charge Romanian VAT.

The acquisition of goods, arriving in Romania from another EU country, represents an intra-Community acquisition of goods, when the goods are supplied by a taxable person identified for VAT purposes in another EU member state. Intra-Community acquisitions of goods are subject to VAT in Romania under the reverse charge mechanism.

Under the reverse charge mechanism, the taxpayer is required to account for the relevant VAT as output tax via a certain VAT return, recovering this VAT as input tax on the same return.

If goods are exported to a customer (business or private) outside the EU then no VAT is charged. Goods exported from Romania are VAT exempt with credit. For intra-Community supplies of goods, as well as for exports, the seller should make sure that in all cases proof of dispatch/delivery is available to support the exemption.

When goods are imported into Romania from outside the EU by a Romanian VAT registered entity or individual, payment of import VAT is actually made to the customs authorities, except for those taxpayers who applied for and obtained certificates for the suspension of payment of VAT in customs.

Starting 1 January 2017, all taxpayers registered for VAT purposes in Romania will no longer actually pay VAT to the customs authorities, but only register the related tax as both output and as input VAT (using the reverse charge mechanism).

Services

The general rule is that the place of supply of services is the place where the beneficiary has established its business. However, there are some exceptions to this rule (e.g. services connected with immovable property, restaurants and catering, as well as passenger transport).

Moreover, the place of supply of services to a non-taxable person is where the supplier has established its business, except if the customer is established outside the EU, in which case, the services are taxable where the customer is located.

Generally, if a taxable person buys certain services from outside Romania and the services are deemed to be supplied in Romania according to the general rule, it will be required to apply the reverse charge mechanism.

Returns

VAT returns

A VAT return must be filed with the tax authorities as follows:

On a monthly basis for businesses whose annual taxable income exceeds EUR 100,000, by the 25th of the month following that when the VAT became chargeable.
Quarterly, for businesses under this threshold, by the 25th of the first month following each quarter.
Bi-annually/annually, under certain conditions (approval of relevant tax authorities is required).

Taxpayers which perform intra-Community acquisitions of goods, in Romania must file monthly VAT returns, regardless of their turnover.

EC Sales and Purchases Lists (so called “Recapitulative Statements”)

EC Sales and Purchases Lists must be filed on a monthly basis, no later than the 25th of the month following that when the VAT became chargeable and should comprise all intra-Community acquisitions / supplies of goods, as well as all acquisitions / supplies of intra-Community services.

Local Sales and Purchases Lists (so called “Informative Statements”)

Local Sales and Purchases Lists must be filed on a monthly/quarterly basis, no later than the 25^th of the month following that when the VAT became chargeable and should comprise all the acquisitions / supplies of goods and services carried out in Romania to / from VAT registered persons in Romania.

Intrastat returns

Intrastat returns must be filed on a monthly basis no later than 15th of the month in which goods are dispatched from one EU Member State to another and must include all intra-Community dispatches / arrivals of goods from/in Romania.

Deduction of VAT

VAT was designed as a tax on consumer expenditure, rather than on businesses. Registered VAT taxpayers are entitled to deduct the input VAT incurred on purchases (“input VAT”) from the VAT which they charged with respect to their customers (”output VAT”).

In order to deduct VAT, the taxpayer must provide the following documentation:

An invoice drawn up in accordance with art. 155 (19) of the Fiscal Code or
An import customs declaration (in the case of imports).

Whenever business outputs are VAT exempt without credit, input VAT paid cannot be deducted.

VAT cash accounting system

The VAT cash accounting system entered into force starting from 1 January 2013. Romanian businesses which during the calendar year obtained a turnover lower than RON 2,250,000 qualify as eligible for applying the VAT cash accounting system (i.e. deduction/collection of input/output VAT at the time of payment/cashing of consideration to/from suppliers/customers and not at the date of receipt/issuance of an invoice).

Invoicing

With effect from 1 January 2013, the provisions of Council Directive 2010/45/EC on invoicing rules have been transposed into Romanian VAT law, according to which, any documents or messages on paper or in electronic format, if in compliance with art. 155 of the Fiscal Code, are to be considered invoices.

VAT simplification measures

Current Romanian VAT legislation, allows the consolidation of the VAT returns of a group of companies. Such groups may be formed by at least two taxable persons which directly or indirectly hold at least 50 percent of the shares and which are registered with the same tax office.

VAT warehouses

A location situated in Romania which complies with certain conditions mentioned under the law. In the case of excisable products, a tax warehouse is automatically also considered to be a VAT warehouse. For other cases, only certain goods qualify for being placed in a VAT warehouse (e.g. various foodstuffs, metals, products of the chemical industry).

Excise Duties

Harmonized excisable goods:

Alcohol and alcoholic beverages;
Processed tobacco;
Energy products (e.g. leaded and unleaded gasoline, diesel, kerosene, liquefied petroleum gas, natural gas, etc) and electricity.

In addition to harmonized excisable goods mentioned above, Romania also applies excise duties on coffee (green, roasted or soluble coffee) whether imported or from intra-Community acquisitions.

Payment procedures

Excise duties are payable by all companies, legal entities, family associations and authorized individuals, which hold, produce or import products subject to excise duties. Also, excise duties are due by authorized warehouse keepers, registered consignees or any other legal entity or individual releasing the excise goods from the duty suspension arrangement. If an irregularity is noticed during the movement of excise goods under a duty suspension arrangement, the legal entity or individual liable to pay the excise duties is the authorized warehouse keeper, the registered consignor or any other legal entity or individual which has guaranteed the payment of the excise duties.

The guarantee is 6% of the excise duties related to the goods to be produced within a year, based on the production capacity of a newly-established warehouse. For existing registered warehouse keepers, the value of the guarantee is calculated by applying the 6% to the value of the excise duties related to the excisable output amounts from the last year, but will not be less than 6% of the value of the excisable goods which should result based on the production capacity. The guarantee can be reduced to a lower amount depending on the length of time the company has been running as an authorized warehouse keeper.

The Commission for the authorization of economic operators for harmonized excisable goods may approve, on request, the reduction of the guarantee for a warehouse keeper or registered consignee, as follows:

By 50%, if they have not had outstanding fiscal obligations for 2 consecutive years.

By 75%, if they have not had outstanding fiscal obligations for 3 consecutive years.

In both the above cases the level of the reduced guarantee is no longer subject to the minimum guarantee required by fiscal law.

Excise duties are generally payable by the 25th of the month following that when they become chargeable. However, the supply of energy products like diesel gas, petrol, kerosene and liquefied petroleum gas can only be made if the suppliers hold a document confirming the payment of the excise duties related to the goods that will be invoiced.

Excise duty is generally chargeable at the moment of release for consumption (i.e. removal from a suspensive regime, production outside a suspensive regime, or use of excisable products other than raw materials inside a fiscal warehouse).

Chargeability of excise duty on imports is the moment of registration of the customs declaration, except for cases when the excisable products are placed under a suspensive regime (i.e. in a fiscal warehouse).

Excisable products are not subject to excise duties upon export if they are delivered from a fiscal warehouse directly to a non EU country, based on adequate supporting documentation.

Fiscal warehouses

A fiscal warehouse system is in operation in Romania. The fiscal warehouse regime is applied to alcohol (including alcoholic beverages), tobacco products, and energy products.

A fiscal warehouse is a place under the control of the relevant tax authorities where “excisable products” are produced, transformed, held, received or dispatched under a suspension regime, by the authorized warehouse keeper, in carrying out its activity, under conditions provided by the Fiscal Code and its Application Norms.

It is illegal to produce excisable products outside fiscal warehouses, or to hold such goods outside fiscal warehouses if excise duty has not been paid, except for certain specific cases.

A fiscal warehouse may operate only on the basis of a valid authorization issued by the appropriate tax authority and may be used only for production and/or storage of excisable products.

Production and/or storage of excisable products for which excise duty has not been paid, is possible only in a fiscal warehouse.

A fiscal warehouse cannot be used for retailed selling of excisable products, except for delivery of energy products (e.g. fuel) to airplanes, supplies of excise goods which take place in tanks, supplies of energy products to be used for certain purposes, (e.g. energy products used as fuel for vessels intended for sailing in EU waters or inland waterways, including vessels used for fishing) and sales from duty-free shops.

Customs Duties

Inside the EU there are no customs controls and no customs charges, so goods may be moved freely between Romania and other EU Member States. Romania, like any other Member State, applies the Community Customs Legislation, as well as the Common Customs Tariff and EU commercial measures on imports and exports. With the exception of certain agricultural products, for which specific taxation duties apply, customs duties are established as a percentage, generally ranging between 0 and 14%.

The customs regimes under which goods may be placed are the following:

Export
Release for free circulation
Inward processing
Processing under customs control
Temporary admission
Outward processing
Customs warehousing
Transit

Release for free circulation and export are so-called “definitive” regimes, for which import/export duties must be paid. The other customs regimes mentioned under points 3) - 8) above are considered to be temporary customs arrangements. Under the temporary customs arrangements no import duties are payable for the period while the regime lasts. However, the customs authority requires a guarantee (in local currency) to ensure that it collects import duties which become due if the goods are released for free circulation.

The temporary customs arrangement comes to an end when the goods are given a “definitive” customs status (i.e. release for free circulation or export) or when they are replaced with another temporary arrangement, for another purpose accepted by customs.

Other taxes

Environmental taxes

The most common environmental taxes due in Romania are in relation to:

Packaging materials, mineral oils and tires placed on the Romanian market (i.e. produced, imported or acquired from another EU Member State), for the difference between the quantities collected/recycled and the collection/recycling targets set by law.
Emissions of pollutants from fixed sources (e.g. factories, energy plants), which depend on the type of pollutant.
Carrier bags made of non-biodegradable materials, supplied to customers (0.1 RON per bag).
The first registration of a motor car or motor vehicle in Romania, calculated based on the vehicle's emission standard, cylinder capacity and age.

Companies placing EEE (electrical and electronic equipment), batteries and accumulators) on the Romanian market are required to finance collection and recovery of the related EEE waste.

Special taxes are imposed on companies in certain lines of business:

Insurance and reinsurance.
Energy (Electricity, Oil & Gas).
Natural Resources.
Pharmaceuticals.
Media & Telecommunications
Gambling.

Source: KPMG - Investment in Romania report (May 2013)

Keywords:: romania; , business; , taxation