Romanian Value Added Tax
article provides an overview of value added tax rules in Romania.
According to the Romanian legislation,
before undertaking any economic activities involving VAT taxable
and/or exempt transactions, such as supply of goods or services, any
taxpayer whose economic activity is based in Romania, or has the
center of its activity outside Romania but has a fixed establishment
in Romania, must register with the competent tax authorities for VAT
purposes. However, the Fiscal Code approved by Law no. 227/2015
provides that companies which estimate that their annual turnover
will be lower than the threshold provided by law may opt not to
register for VAT purposes.
The annual turnover threshold for VAT
registration is 220,000 Romanian Lei, i.e. 65,000 euros. The said
threshold is derogatory from the provisions of the Council Directive
2006/112/EC of 28 November 2006 on the common system of value added
tax, which provides a smaller threshold of 35,000 euros. According to
the Decision of the Council of the European Union no. 2014/931/EU,
such derogatory threshold is
currently scheduled to apply until December 31, 2017. However, if
within the fiscal year the turnover of the taxpayer becomes higher
than the said amount, the taxable person will have to register for
VAT purposes with the competent tax authorities.
Depending on the resident status, taxpayers
may opt for:
standard VAT registration applicable to
companies registered in Romania;
special VAT registration of Romanian
companies for intra-Community (European Union) acquisitions;
nonresident EU registered entities, or
non-EU entities operating in Romania may appoint a fiscal
representative and register for VAT purposes;
direct VAT registration in case of EU
A Romanian company may be required to
register for VAT purposes in other EU Member States where it performs
operations such as intra-EU Community acquisition of goods, or
holding a stock of goods.
From the VAT perspective, the economic
activities of any entity carried out in an independent manner,
irrespective of the purpose or result of those activities, are
subject to VAT.
A taxpayer is considered to be a resident
of Romania if it registered its main place of business in Romania, or
it has a fixed establishment in Romania.
A taxpayer with its main place of business
outside Romania has a fixed establishment in Romania if it has
sufficient technical and human resources in order to perform taxable
deliveries of goods and/or services on a regular basis.
Transfer of Business
Any type of partial or total transfer of
assets such as the transfer of a going concern is not subject to VAT
if the beneficiary is a taxpayer. In order for a partial transfer of
assets to be exempt from VAT, the transferred assets must constitute
an autonomous business unit capable of autonomous economic activity.
The rules for establishing the place of
supply of goods and services, i.e. the place of VAT levy, are in line
with the EU VAT Directives.
The supply of natural gas, electricity, and
thermal energy is subject to VAT where the trader has its main place
of business or, in the case of supplies to an end customer, the place
where they are used and consumed.
Services Provided by Nonresident Entities
Services provided by nonresident entities
to Romanian companies with the place of supply in Romania are subject
to Romanian VAT.
For services provided by taxpayers to other
taxpayers, the place of taxation is the place where the beneficiary
established its place of business, or it has a fixed establishment,
domicile or habitual residence.
The Fiscal Code provides various exceptions
from the above rules regarding VAT applicability in case of
nonresidents regarding certain services such as (i) transport-related
auxiliary services, (ii) works involving movable tangible goods,
(iii) valuation of movable tangible goods, and (iv) local transport
of goods. If such services are rendered to a non-EU resident taxpayer
and the effective use of the services takes place in Romania, then
the place of taxation is considered to be Romania.
The VAT Rate
The standard VAT rate currently applied in
Romania is 20% of the taxable base. As of January 1, 2017, the VAT
rate will be 19%. The taxable base in respect of VAT is the value of
the delivery of a commodity, the value of the services rendered, the
value of a taxable import, or the value of an intra-EU Community
acquisition, as defined by the Fiscal Code.
A reduced VAT rate of 9% is levied on
medicines for human and veterinarian use, books, newspapers and
periodicals, accommodation in hotels or in establishments 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
orthopedic products, restaurant and catering services, excluding
alcoholic beverages, most food and beverage products (excluding
alcoholic beverages) intended for human and animal consumption, such
as live domestic animals and poultry, seeds, plants and ingredients
used in preparing food, certain food supplements or substitutes.
As of 1 August 2016, the reduced VAT rate
of 9% also applies to:
the sale of fertilizers and
pesticides used in agriculture, seeds and other agricultural
products for sowing or planting; and
the rendering of specific services
performed in agriculture.
The reduced VAT rate of 5% applies to
housing delivered as part of an approved welfare scheme, including
old people's homes, retirement homes, orphanages, rehabilitation
centers for children with disabilities, including buildings and parts
thereof supplied as housing, subject to certain conditions. Houses of
no more than 120 square meters and a value of maximum 380,000
Romanian Lei also qualify for the reduced 5% VAT rate.
Calculation of VAT
Any taxable person has the right to deduct
the VAT related to purchases, if these are intended to be used for
generating taxable revenues.
The difference between the VAT collected by
a Romanian VAT payer, and the deductible VAT paid by the same,
results in a VAT balance, which will be reflected in the VAT return.
If the VAT balance is positive, i.e. the
collected VAT is higher than the deductible paid VAT, the VAT balance
will have to be paid to the state budget.
If the VAT balance is negative, and the
amount of such balance is higher than 5,000 Romanian Lei, the VAT
payer may request the reimbursement by the state of the respective
VAT balance. The reimbursement of VAT is usually done after the
conduct of a tax audit by the relevant tax authorities.
As of March 1, 2014, VAT returns requesting
the reimbursement of an amount less than 45,000 Romanian Lei will be
granted prior to the conduct of the tax audit. For VAT returns
requesting the reimbursement of an amount higher than 45,000 Romanian
Lei, the tax authority, after a risk analysis, will decide if the tax
audit has to be conducted prior, or after, the VAT reimbursement.
Within the investment period of a company
which is starting a new business, the VAT may be reimbursed prior to
the conduct of a tax audit by the relevant tax authorities. In this
case, a bank guarantee is necessary; the cost of such letter may be
lower than the cost that may be caused by the late reimbursement of
VAT is usually chargeable on the date of
the sale of goods, or of the rendering of services.
The Fiscal Code provides certain exemptions
to this rule, i.e. the tax becomes chargeable:
on the date of the issuance of an invoice,
if the invoice is issued before the date when the generating fact
on the date of the receipt of the advance
payment, for the payments in advance made before the date of the
supply of goods/services;
on the date of cash withdrawal, for the
delivery or supply of goods or services performed by automatic sale
machines, game machines, or other similar machines.
Moreover, the following categories of
taxpayers registered for VAT purposes in
Romania having their registered place of economic activity located
in Romania, which registered an annual turnover in the previous
fiscal year below 2.25 million Romanian Lei; or
taxpayers having their registered offices
of their economic activity located in Romania, which registered for
VAT purposes in Romania during the current calendar year;
may opt to charge VAT on the date of
receipt of the full, or partial, price for the goods or services
If during the current calendar year the
turnover of the above-mentioned taxpayers exceeds the ceiling of 2.25
million Romanian Lei, the option to pay VAT upon receipt of payment
for goods or services rendered shall be applicable until the end of
the tax period following the period in which the ceiling was
The VAT payable upon receipt of the price
for the goods or services rendered is mandatory for the
above-mentioned taxpayers. However, this procedure is not applicable
to taxpayers which are members of a tax group as defined by the
Fiscal Code. Furthermore, the VAT payable upon receipt is applicable
only for operations for which the location of delivery or performance
is considered to be in Romania.
Taxpayers must issue an invoice no later
than the 15th day of the month following the one in which the tax
Taxpayers must also issue an invoice for
the amount of the advance payments received in connection with the
supply of goods/services no later than the 15th day of the month
following the one in which the advance payments were received.
If the annual turnover of a taxable person
is lower than the equivalent of 100,000 euros, VAT returns must be
filed, and the VAT balance must be paid on a quarterly basis.
If the annual turnover of the respective
taxpayer is higher than the equivalent of 100,000 euros, VAT returns
must be filed on a monthly basis, and the VAT balance must be paid on
a monthly basis.
For taxpayers which perform intra-EU
Community acquisitions which are subject to taxation for VAT purposes
in Romania, the tax period for VAT purposes will be the month, i.e.
the VAT returns must be filed, and the VAT balance must be paid on a
Tax Exemption for Import of Goods Followed by Intra-EU
Community Deliveries of Goods
According to the provisions of the Fiscal
Code, if the import into Romania of goods from a third country is
followed by intra-Community deliveries of the respective goods, the
said import is VAT exempt. This exemption is granted only if the
importer provides the customs authorities with the following
code of registration for VAT purposes;
code of registration for VAT purposes of
the counterparty to which the goods are delivered in another EU
proof of the fact that the imported goods
are to be delivered from Romania to another EU Member State, in the
same condition they were at the time of the import.
In practice, if the import is not
immediately followed by an intra-Community delivery, the importer may
request approval of temporary storage of the goods until an EU
counterparty is found, or until the logistics required for the
delivery are finalized.
This exemption may be also applicable if
the imported goods are subject to more or less complex processing in
Romania prior to intra-Community delivery.
It is possible for certain companies to
form a fiscal group for VAT purposes. For example, a foreign company
which establishes two branches in Romania will appoint only one of
the branches to register as a Romanian VAT taxpayer.
VAT Simplification Measures
For sale–purchase transactions between
taxable persons registered for VAT purposes in Romania that involve
waste materials, wood or secondary raw materials and certain grains,
VAT is not actually paid, but only evidenced by the purchaser in the
VAT return as both output and input tax.
Simplification 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 VAT by applying the reverse-charge
VAT Refund to Taxable Persons Established in the EU or Outside the EU
Taxable persons not registered for VAT
purposes 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.
Such requests have to be transmitted to the
Member State in which the applicant is registered, until September 30
of the year following the reimbursement period.
The competent authorities from the Member
State where the taxable persons are established will forward the
request to the competent authority in Romania which will inform the
applicant with regard to the request's arrival date.
The settlement period is four months
starting from the date when the application is received by the
Romanian authorities. The said period will be extended up to eight
months if the tax 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.
The content of this article is intended
to provide a general guide to the subject matter. Specialist advice
should be sought about your specific circumstances.