Proposed tax rate changes
The busy fiscal trajectory continues this year in Romania.
The Romanian Tax Administration, ANAF (Agentia Nationala de Administrare Fiscala), is proposing a VAT rate increase in line with the following:
VAT/G(S)ST rate information
Tungsten Network continually reviews its solution in Romania and supports all current valid VAT rates in Romania.
- Soft drinks: an increase from 9 to 19%
- In the hotel industry: the delivery of food and non-alcoholic beverages would increase from 5% to 9%
Tungsten Network has recently published an overview of the key characteristics of the e-Transport system in Romania. The system was developed to monitor the transport of goods specifically with high fiscal risk, with the underlying aim of preventing tax fraud. On 1st October 2022, importers and experts will need to oblige with the e-Transport system requirements, should they wish to avoid incurring any financial penalties.
The obligation to declare the goods commenced earlier, on 1st July 2022, although sanctions and fines because of non-compliance will only come into effect from 1 October 2022.
Extension of reverse charge on specific supplies
In addition to e-invoicing mandates, countries deploy a range of complementary measures which serve to reduce tax evasion and by extension reduce the VAT gap. VAT gaps are defined as the projected amount of revenue a government is expected to receive against the actual amount of VAT-related revenue collected by the government. This has been, and continues to be, a perennial problem across Europe which the introduction of e-invoicing mandates seeks to address.
The reverse charge is one such complementary mechanism designed to circumvent the difficulties posed by VAT gaps. The reverse charge shifts the onus of paying the VAT to the customer rather than the supplier. This in turn means that suppliers cannot charge VAT on an invoice and knowingly avoid paying VAT after having received payment from a customer.
Romania has extended the reverse charge mechanism on the following products:
- A variety of foodstuffs
- The exchange of certificates for greenhouse gas emissions
- The issuance of green certificates
- The delivery of integrated circuit devices
Romania has one of the highest VAT gaps in Europe, with an astonishing 34.9% of VAT unaccounted for in 2019. It is no surprise that governments continue to advance supplementary measures in addition to e-invoicing mandates to thwart substantial VAT gaps.
Potential upcoming VAT changes
VAT/G(S)ST rate information
The fiscal trajectory in 2022 has been a busy one for Romania as it grapples with a partial e-invoicing mandate
and multiple tax rates changes.
The Ministry of Finance has opened a consultation which proposes an increase in tax rates from 1st
January 2023, in line with the following:
- Fizzy drinks reclassified from 9% reduced VAT rate to standard 19% rate
- Hotel and similar short-term accommodation raised from 5% to 9% reduced rate
- Catering services, cafés and restaurants reclassified from 5% reduced rate to 9% for food and non-alcoholic drinks
- 5% reduced rate on a range of small dwellings.
Romania is a compliant territory in Tungsten Network and we will continue to monitor and support any new tax rates in the country. The Tungsten Network Web Form portal currently supports all valid VAT rates in Romania.
Extension of reverse charge mechanism
Romania has one of the largest tax gaps Europe. In 2019, it saw 34.9% of its VAT revenues disappear. To counter this, Romania is deploying several fiscal measures to drastically reduce the VAT gap.
The B2G mandate and upcoming B2B e-invoicing mandate on 1st
July 2022 relating to high-risk fiscal product is viewed as a significant measure to achieve this aim.
In addition to the e-invoicing mandate, the operation of the reverse charge mechanism also serves to reduce the VAT gap. This is where the responsibility to pay tax shifts from the supplier to the buyer.
To this effect, the domestic reverse charge in Romania has been extended until 2026 on the following products:
- 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
Both the seller and buyer must be Romanian taxpayers for the reverse charge to apply.
Potential for mandatory e-invoicing for all B2B transactions
We have recently communicated about the upcoming partial e-invoicing mandate in Romania
, where high-risk fiscal B2B transactions will need to be cleared through the Romania e-invoicing platform, the RO e-Factura.
However, Romania wants to advance its e-invoice mandate yet further- it has requested approval from the European Council for a derogation from the VAT Directive articles 178, 218 and 232 for mandatory transmission of all B2B invoices through the RO e-Factura system.
Tungsten is already assisting its suppliers and buyers with the upcoming partial mandate in Romania, and we will continue to monitor developments in the country regarding the derogation.
Extension of VAT-exemption for imports of goods to combat Covid-19
VAT/G(S)ST rate information
Romania had previously exempted all imports of goods required to combat Covid-19 from the obligation to charge VAT. This was due to expire last year.
However, Romania has sought permission from the European Commission to extend this facility, which has now been granted.
As such, the draft order prepared by the Ministry of Finance extends the VAT exemption of imports for goods required to combat Covid-19 until 30 June 2022.
Donations of goods and services to Ukrainian people free of VAT
VAT/G(S)ST rate information
Globally, we have seen how the Covid-19 pandemic has overhauled the way countries have assessed and deployed fiscal measures considering growing inflation and hardship. We can expect to see a direct impact on fiscal measures countries deploy considering recent events in Ukraine.
Donations of goods and services to persons affected by the armed conflict in Ukraine are to be free of VAT in Romania. We can expect to see bordering countries deploy similar measures.
Proposal of e-transport
Romania is further extending the scope of taxpayers subject to fiscal obligations as we approach the deadline of 1st July 2022 for mandatory reporting of ‘high risk fiscal products’ through the national e-invoicing system. In line with other government mandates, a primary objective of this is for tax authorities to have greater visibility over transactions and thus reduce the VAT gap.
Romania has now honed in on tax owed to the state budget for the transport of goods specifically with a high fiscal risk; this has been identified as an area of potential exploitation, and the Romanian government is keen to reduce the tax gap in relation to this. To this effect, the Romanian government has published a draft Emergency Ordinance for the establishment of the National Transport Monitoring System of goods with high fiscal risk.
If this proposal is adopted, it will become optional from 1 April 2022 and mandatory as of 1st July 2022- therefore following the same timeframes as the reporting of high risk fiscal products to the national e-invoicing system.
The following groups that trade goods with high risk are anticipated to be in scope:
· the consignee named on the import customs declaration or the consignor named on the export customs declaration, for import/export cases;
· the beneficiary from Romania in cases of local transactions or intra-Community supplies of high tax risk goods;
· the supplier from Romania in cases of local transactions or intra-Community supplies of high tax risk goods;
· the warehouse administrator in case of the high tax risk goods which are subject to intra-Community transactions in transit, both for the goods unloaded in Romania for storage purposes or for the purposes of forming a new transport of one or many batches of goods, or for the goods loaded after storage or after a new local transport of goods was formed for one or many batches of the goods.
Tungsten Network will monitor developments regarding when this draft emergency Ordinance will be approved.
Virtual Private Space (VPS) – mandatory for taxpayers
Virtual Private Space (VPS) becomes mandatory for Romanian taxpayers to enrol as of 1st March 2022.
VPS is the electronic system which allows the exchange of documents between taxpayers and government administrations.
Obligation for retail stores to use e-invoicing for high-risk fiscal products
At the start of the year, we communicated that Romania would mandate e-invoicing for B2B transactions which related to ‘high risk fiscal products’. This obligation now extends to retail stores in Romania.
This means that if customers request invoices, these will now have to be issued through the RO e-Factura system, if the transaction involves a high-risk fiscal product.
The extension of taxpayers now subject to the mandatory e-invoicing requirement relating to high-risk fiscal products demonstrate Romania’s motivation to oversee more tax transactions and reduce tax fraud further in the country.
Mandatory usage of RO e-Factura for high fiscal risk products for B2B transactions
The Romanian government published Emergency Ordinance number 130/2021 on 18 December 2021, which states that ‘high fiscal risk products’ must soon be issued through the RO e-Factura. The Emergency Ordinance provides a few key dates:
• A voluntary phase from 1st April 2022 to 30 June 2022;
• This then becomes mandatory from 1st July 2022.
The requirement to issue B2B invoices through the RO e-Factura is currently optional- and both the supplier and the buyer must be registered through the RO e-Factura to do so. However, requirements will be much more demanding from 1st July 2022 for transactions involving high risk fiscal products – these must be issued through the RO e-Factura, regardless of whether the buyer is registered in the RO e-invoice registry or not.
Affected taxpayers must ensure that they have the technical infrastructure to issue invoices in XML format, in accordance with the technical and usage specifications of the RO_CIUS electronic invoice in Romania.
The National Agency for Fiscal Administration (ANAF) have provided 5 categories that come under the definition of a high-risk fiscal product- these are fairly wide in scope:
• Certain foods (including fruit and vegetables, amongst others)
• Alcoholic beverages
• New constructions
• Mineral products
• Clothing and footwear
ANAF plans to update this list regularly.
Tungsten is monitoring developments in Romania and what this means for our solution.
Procedure for registering with RO e-invoice Register & Core invoice usage specifications for the Romanian e-invoicing system
The Romanian government has introduced Government Emergency Ordinance no. 120/2021 which regulates B2G e-invoicing. Taxpayers in the B2B sphere can also now choose to issue and send invoices through the RO e-invoicing system, but it is not yet mandatory to do so.
Tungsten is monitoring developments in the Romania B2B landscape and will keep you updated.
The Minister of Finance Order no. 1366/2021 has also approved the core invoice usage specifications (RO_CIUS) for e-invoicing. These specific operational rules are compliant with the SR EN 16931-1 European standard for e-invoicing. This Order contains the core invoice usage specifications for e-invoices and how to use them.
New legal provisions for e-invoicing published
Recently, Government Emergency Ordinance (“GEO”) no. 120/2021, regulating the structure of the electronic invoice and creating the framework for achieving the basic technical specifications of the electronic invoice in Romania, was published in the Official Gazette. This includes detailed instructions regarding the Electronic Invoice RO e-factura.
The RO e-factura will become operational within 30 days of the GEO (so by 6 November 2021).
Economic operators can opt to use the national e-invoicing system and issue RO e-factura in both a B2G and B2B context.
The Ministry of Finance plans to issue a further order in the future to approve details around the use and operation of the RO e-factura system for B2B or B2G transactions and technical specifications.
Status update on B2G & B2B e-invoicing
Romania is making some strides with e-invoicing. The Romanian Ministry of Public Finance announced on 14 September 2021 that the pilot-programme “E-factura” will become operational starting September 2021.
For now, this programme will address only the uploading, storing and downloading of invoices for B2G transactions.
The Romanian Ministry of Public Finance mentioned that such a pilot program will lead to further developments and also provide some further insight into how B2B e-invoicing can be developed.
Implementation SAF-T as from 1 January 2022
The National Agency for Fiscal Administration (“NAFA”) has started the implementation of SAF-T in Romania.
The preliminary SAF-T structure was published in April 2021, while the related guidance and legislation is expected to be published this summer. The SAF-T related software at NAFA’s level is expected to be finalised by the end of July 2021, allowing voluntary testing together with large taxpayers to be performed during August – December 2021. January 2022 will be the first reporting month for large Romanian taxpayers, and SAF-T reporting periods will follow the VAT reporting period (e.g. monthly or quarterly).
The technical specifications have been released and can be found on the ANAF portal.
Jumping on the bandwagon?
The Romanian Finance Minister has announced that the Romanian government intends to introduce an e-invoicing system. Currently, there is no more information available. We will monitor the announcements and report on further progress in the upcoming compliance updates.