VAT

Concepts

Operations which fulfil the following conditions fall within the scope of VAT:

- They represent a supply of goods / services in return for a consideration or an operation treated as such:
- The deemed place of supply is in Romania
- They are performed by taxable persons
- They result from economic activities.

The import of goods, intra-community acquisitions of goods and operations deemed as intra-community acquisitions of goods are also within the scope of VAT.

A taxable person is any person conducting economic activities anywhere in an independent manner, irrespective of the purpose or result of those activities, as well as any non-taxable legal person registered for VAT purposes.

A taxable person is considered to be established from a VAT point of view where its centre of economic activity lies, meaning where essential managerial decisions are taken and where central administration functions are performed. In addition, for non-residents the main criteria is the existence of a fixed establishment, meaning it has sufficient technical and human resources in Romania to perform taxable supplies of goods and services.

In addition, any private individual who performs an intra-community supply of a new means of transport (i.e. no longer than six months after the date of first entry into service or has not travelled more than 6,000 kilometres) or a person who sells real-estate property (as a continuous economic activity) is also deemed a taxable person.

Intra-community trade

Romanian companies performing transactions involving goods with other companies within the EU deal with such operations as intra-community supplies and intra-community acquisitions respectivelly.

Intra-community supplies from Romania are VAT-exempt with deduction right, provided that certain conditions are fulfilled, whereas intra-community acquisitions in Romania are subject to VAT under the reverse charge mechanism.

Special regimes apply for transactions with new means of transport, excisable products and for distance sales.

Taxable persons not registered for VAT purposes in Romania (e.g. private individuals, public institutions) and which perform an intra-community purchase of new transportation vehicles have to submit a special VAT return and pay the VAT before registering these vehicles in Romania.

Distance sales imply the transportation of goods by / or in the name of the supplier to beneficiaries not registered for VAT purposes. These will be subject to VAT taxation in the destination Member State if the total value of the distance sales made by the supplier exceeds a threshold established by the destination Member State (in Romania this threshold is EUR 35.000) during the year in which a particular distance transaction takes place, including the value of that particular transaction or during the previous calendar year.

Import of goods

VAT on imported goods continues to be paid in customs until 31 December 2012, except for taxable persons registered for VAT purposes that obtain an import VAT deferment certificate from the customs authorities. For these, the VAT is not paid in customs, but shown in the VAT return as both input and output VAT.The ceiling regarding the minimum value of imports, for obtaining the VAT deferment certificate is RON 100 million in the last 12 consecutive months or in the previous calendar year.

VAT exemptions for imported goods can be applied to any goods which are VAT-exempt in the case of intra-community deliveries to Romania.

Importers holding a single customs authorisation for simplified customs procedures issued in another Member State or importing goods into Romania for which they do not have the obligation to submit custom declarations, pay the VAT due on imports of goods into Romania based on an import declaration for VAT and excise duties.

The taxable amount for VAT purposes for imported goods is the customs value, to which is added customs duties, excise duties (if any) and ancillary expenses, such as commissions, packing, transport and insurance costs occurring subsequent to the entry of goods into Romania until their first destination.

Transfer of business

Any type of partial or total transfer of assets (i.e. transfer of a going concern, irrespective of its form) forming an independent autonomous business unit capable of carrying out an economic activity independently is not considered supply of goods if the beneficiary is a taxable person. In addition, the beneficiary is regarded as the assignor's successor for purposes of adjustment of the VAT deduction right.

The rules for establishing the place of supply for goods and services (and therefore the place of VAT taxation) are fully aligned with the EU 112/2006/CEE and 2008/8/CEE VAT Directives.

The supply of natural gas / electricity / thermal energy / refrigeration is subject to VAT where the trader has its main business place or, in the case supplies to an end customer, the place where they are used and consumed.

Services provided by offshore entities to Romanian companies with deemed place of supply in Romania are subject to Romanian VAT.

For services provided by taxable persons to other taxable persons, the place of taxation is the place where the beneficiary has established its business place, has a fixed establishment, domicile or habitual residence.

For services provided by taxable persons to non-taxable persons, the place of taxation will be the place where the provider has established its business place, has a fixed establishment, domicile or habitual residence.

There are also some exceptions from the basic rules. For these services, the place of taxation will be determined according to specific rules.

For certain services such as: ancillary transport services, work / valuations of movable tangible goods, local transport of goods, when provided to a beneficiary taxable person outside the EU, the place of effective use and enjoyment of services will be taken into account in determining the place where the VAT is due.

VAT chargeability occurs on the date of the supply of goods / services.

The chargeability for ICS occurs on the date when the supply of goods is made or when the invoice is issued, but no later than the fi fteenth of the month following that when the ICS is performed.

For services rendered on a continuous basis for a period which exceeds one year and which do not trigger any payments or settlements throughout this period, the VAT is due at the end of each calendar year.

Standard rate

As from 1 July 2010 the standard VAT rate is 24%. The rate is levied for all supplies of goods and services, including imports, which do not qualify for an exemption (with or without credit) or for VAT reduced rate. At the same time, the reduced VAT rates (5% and 9%) remain unchanged and apply for the same delivery of goods or services, as provisioned before.

Reduced rates

The reduced VAT rate of 9% and is levied on medicines for human and veterinarian use, books, newspapers and periodicals, accommodation in hotels or in areas with a similar function, cinema tickets, admission fees at museums, historical monuments, zoos and botanical gardens, fairs and exhibitions, supply of school manuals, supply of prostheses and orthopaedic products.

The reduced VAT rate of 5% applies to housing delivered as part of welfare policy, including: old people’s homes, retirement homes, orphanages, rehabilitation centres for children with disabilities, including buildings and parts thereof supplied as housing, subject to certain conditions. Homes with no more than 120 square metres and a value of maximum RON 380,000 also qualify for the reduced 5% VAT rate, therefore.

Exemption with credit

There are also operations that are exempt with credit (i.e. deduction right) for input VAT:

- export of goods, transport and related services
- intra-community supply of goods
- international transport of passengers
- goods placed in free trade zones and free warehouses
- supply of goods to a bonded warehouse, a VAT warehouse and related services
- supply of goods, which are placed under suspensive customs regimes
- supply of services in connection with goods placed under customs suspensive regimes
- supply of goods and services to diplomatic missions, international organisations and NATO forces.

Exemption without credit

VAT exemption without credit applies to a range of activities including banking, fi nance and insurance. However, some financial services are also subject to 24% VAT (e.g. factoring, debt collection, managing and depositing certain equity papers).

The VAT exemption without credit also applies for medical, welfare and educational activities, if performed by licensed entities.

The ulterior delivery of vehicles for which VAT deduction has not been permitted at the moment of the purchase, is also VAT exempt.

Rental and leasing operations involving immovable goods, as well as the supply of old buildings are VAT exempt without credit.

An old building is any building which has not been so transformed that its structure, nature and even its destination have been modifi ed, or in the absence of such criteria, when the cost, exclusive of tax, of the transformations is less than 50% of the building's open market value, minus the land value, after such a transformation.

The delivery of non-constructible land plots are also VAT exempt without credit.

However, the option to tax these operations is available. The option is exercised by submitting a written notification to the relevant tax office.

Any taxable person has the right to deduct the VAT related to acquisitions, if these are destined to be used for generating taxable revenues.

Input VAT related to expenses incurred from set-up transactions can be retroactively deducted when all requirements for VAT deductibility are fulfilled, within a maximum period of five years.

The VAT deduction right can also be based on electronically issued invoices.

Companies with a single customs authorisation for simplified customs procedures issued in another Member State or that import goods into Romania for which they do not have the obligation to submit custom declarations, can deduct the VAT due on imports of goods based on an import declaration for VAT and excise duties.

The VAT wrongly stated on an invoice cannot be deducted by the beneficiary if the transaction for which the invoice was issued is exempt from VAT without credit.

If a taxable person registered for VAT purposes performs both taxable and exempt operations without deduction right, the 'input VAT' can be recovered according to the following criteria:

- directly attributable to VAT-able transactions - fully deductible directly
- attributable to exempt transactions - fully non-deductible related to both
- VAT-able and exempt transactions - subject to pro-rata.

The pro-rata is determined as a ratio between:
a) the total amount, exclusive of VAT, of the goods and services supplied which qualify for the right to deduct, including subventions directly related to price, as numerator; and

b)the total amount, exclusive of VAT, of the operations included under point a) and supplies of goods and services which do not qualify for the right to deduct, as denominator. Included are also amounts received from the state or local budgets, granted for the financing of exempt operations without deductibility rights or operations outside the scope of VAT.

The pro-rata does not include the value of sales of capital goods, or the value of other operations performed on an occasional basis (e.g. leasing, rental of immovable goods).

The pro-rata is rounded up to the next unit in favour of the tax able person (e.g. from 4.1% to 5%).

VAT related to goods and services that are not purchased for business purposes is non-deductible, as is VAT related to the purchase of alcoholic beverages and cigarettes.

For the period 1 May 2009 – 31 December 2011, VAT is not deductible (with some exceptions) for expenses incurred in the purchase of fuel and vehicles exclusevly used for passenger transport, weighing under 3,500 kg and with fewer than 9 passenger seats (including the driver’s seat).

Excepted are some categories of vehicles, as well as the purchased fuel: vehicles used for rendering paid services, including renting activities, financial or operational leasing, and vehicles used for commercial purposes or meant to be re-sold.

Changing the original destination of capital goods (e.g. a fixed asset or movable goods), by using this asset for operations entitled to deduction in a different proportion than that originally established entails the adjustment of the deductible right during the fiscal period in which it ocurrs. The adjustments will be carried out on a continuous basis during the adjustment period, for the same capital goods, each time such events take place.

From 1 January 2010, assets whose normal useful life is less than five years will no longer be considered capital goods and, therefore, input VAT incurred on their acquisition will no longer need to be adjusted.

Adjusting of the deductible VAT for services and goods (other than capital goods)

Inactive or temporary inactive taxpayers whose registration for VAT purposes has been cancelled will adjust the VAT related to tangible fixed assets for the value which remained un-depreciated, or if the case, in proportion to the remaining period of the depreciation.

The annual turnover threshold for VAT registration is the RON equivalent of EUR 35,000.

When calculating the turnover, revenues derived from VAT exempt without deductions right operations are also taken into consideration.

A taxable person registered for VAT purposes which during the course of 2011 calendar year does not exeed the EUR 35,000 threshold can request to be removed from the VAT registered persons record for applying the special exemption regime, until the 20 of January 2012.

Taxable persons wanting to register for VAT purposes can opt for one of the following:

- Standard VAT registration of companies established in Romania

- Special VAT registration of Romanian companies for intra-community acquisitions (e.g. public institutions, insurance companies)

- VAT registration of taxable persons established / non-established in the EU through appointment of a VAT Fiscal Representative

- Direct VAT registration of taxable persons resident in the EU.

A Romanian company may be required to register for VAT purposes in a number of other EU Member States where it performs certain operations (e.g. intra-community acquisition of goods, holding a stock of goods).

Taxable persons established in Romania which receive / send tangible goods to be processed from / to another Member State do not have the obligation to report the transactions, and the owner from the other Member State will not have the obligation to register for VAT purposes in Romania, if after the processing:

-    waste is generated (recoverable or not) which does not leave the territory of Romania / the other Member State;
-    the goods are destroyed or if the resulted products are qualitatively degraded or do not meet quality standards imposed by the beneficiary are destroyed on the territory of Romania / the other Member State by the owner’s request.

For sale-purchase transactions between taxable persons registered for VAT purposes in Romania that involve waste materials, wood or secondary raw materials, VAT is not actually paid, but only shown by the purchaser in the VAT return as both output and input tax.

The list of products for which simplification measures can be applied has been extended and enters into force starting with the tenth day following that on which the approval from the European Council regarding the implementation of these measures is communicated, and up to 31 December 2011.The categories of goods are the following:
-    grain crops
-    fruits and vegetables
-    meat
-    sugar
-    flower, bread and bakery products.

Simplificatiom measures also apply for the transfer of greenhouse gas emission certificates. Consequently, for transactions with such certificates between taxable persons registered for VAT in Romania, the beneficiaries will have the obligation to pay the VAT by applying the reverse-charge mechanism.

Fiscal period

As a general rule, the fiscal period is the calendar month. For taxable persons registered for VAT purposes whose previous year-end turnover did not exceed EUR 100,000 the fi scal period is the calendar quarter.
For those taxpayers whose fiscal period is the calendar quarter, the fiscal period becomes the calendar month if they perform during the previous calendar year a taxable intra-community acquisition in Romania.

Invoicing

Invoices for the internal supply of goods and services must be issued no later that the fifteenth of the month following that in which the supply of goods or services occurs. The supply-related VAT must be reported in the month in which the delivery takes place.
The invoice must contain the minimum amount of information required by the law and EU Directive 112/2006.
Taxable persons are also allowed to issue summary invoices or invoices on behalf of the supplier, and to issue and store invoices electronically. From a VAT perspective, the signing and stamping of invoices is no longer mandatory.

Operations record

Taxable persons must keep complete and detailed records for calculation of VAT liabilities.

VAT returns should be submitted to the tax authorities by the twenty-fifth of the month following the end of the fiscal period; the VAT is due by the same date. The VAT return should be submitted using an electronic carrier (floppy disk).

Taxable persons not registered for VAT purposes are required to pay VAT and to submit a special VAT return on services rendered by non-residents, which have a deemed place of supply in Romania. These obligations must be fulfilled by the twenty-fifth of the month following that when the services are supplied.

The recapitulative statement is submitted monthly, not later than the fifteenth day of the month following that in which the intra-community supply / acquisition of goods or services has occurred, for all intra-community taxable operations made with taxable persons establishd in other Member States, with some exceptions.

Large and medium size taxpayers, as well as their secondary headquarters, have the obligation to electronically submit the VAT statement and recapitulative  statement. The signing is realised by using a qualified certificate issued by a certification service provider.

Taxable persons are required to file twice yearly statements for taxable acquisitions / supplies of goods and services performed on Romanian territory, based on the existence of invoices.

For the intra-community trade of goods, taxable persons also submit the Intrastat form.

Correcting documents

If a taxable person erroneously issued an invoice, for the supply of goods or services, without mentioning the VAT amount, and subsequent to a fiscal inspection the authorities have set additional VAT payment obligations, the taxable person can recover the VAT from the beneficiaries by issuing a corrective invoice, while the beneficiaries may exercise their right to deduct in accordance with legal provisions.

Other obligations

Starting with 1 August 2010, taxable persons and legal non-taxable persons, who undertake intra-community goods and services trading activities, must register in the „Registry of Intra-Community Operators”, otherwise their VAT registration number will not be considered valid for intra-community operations.

If a company is in a VAT refundable position, it must tick the VAT refund box on the VAT return to claim the refund. Alternatively, the balance can be carried forward against VAT liabilities reported in future returns. The refund claims must be processed by the tax offi ce within 45 days of being submitted.

Refundable VAT returns with negative amounts will be settled only after the tax authorities clasify the taxpayer in one of the fiscal risk categories (low, medium, high). Thus, VAT returns with a small fiscal risk will be settled by issuing a refund decision, medium risk situations by a document analysis and high-risk situations by an anticipated fiscal inspection.

Large and medium taxpayers (as classified by law) as well as exporters are entitled to refund on request, with a subsequent inspection (i.e. a "fast refund") except for the cases where a high fiscal risk is present.

If the VAT is not reimbursed within the legal term (i.e. 45 days), taxable persons are entitled to claim interest currently set at 0.04% per day of delay.

The new VAT refund procedure for VAT paid in other Member States by taxable persons established in Romania for imports and acquisitions of goods or services, allows for the electronic submission of the forms. The forms will be submitted via the electronic portal set up by the National Agency for Fiscal Administration and will be signed using a certified digital certificate issued by an accredited certification service provider.

VAT Refund to taxable persons established in the EU / outside the EU

Taxable persons not registered and which do not have the obligation to register for VAT purposes in Romania may request a VAT refund from Romania based on the refund request transmitted electronically to the authorities from the Member State where they are registered.

The requests will be transmitted to the Member State in which the solicitor is registered, no later than 30 September of the year following the reimbursement period. By exception, for VAT paid during 2009 the refund requests can be submitted by 31 March 2011 the latest.

The authorities from the Member State where the taxable persons are established will forward the request to the competent authority in Romania which in turn will inform the solicitor about the request’s arrival date. The settlement period is four months starting from the date when the request is received by the Romanian authorities, with an option to be extended up to eight months if the fiscal authorities request further information.

Taxable persons established outside the EU also have the right to claim a VAT refund from Romania, based on the reciprocity agreements signed by Romania; this is currently the case for Switzerland and Turkey.