The VAT Registration Regime in Romania

Romania/September 2015

The Romanian Government has recently imposed new procedures for VAT registration, in an attempt to prevent VAT fraud and limit the registration of companies that are set-up exclusively as VAT vehicle purposes.

Starting with February 1, 2015, companies incorporated under the Companies Law no. 31/1990 must meet new criteria for VAT registration, according to article 153 paragraph (1) letters a) and c) and article 153 paragraph (91) of the Tax Code.

The taxpayers should comply with the following procedures for VAT registration:

•The taxpayers applying for VAT registration and which will achieve a turnover of 220.000 Lei, will submit to the Trade Registry, within the same day, the application for registration in the Trade Registry, to submit to the competent tax authorities the application for VAT registration (Form 098).

•Taxpayers applying for VAT registration, with turnover during a calendar year lower than the threshold, but opt to apply the normal tax regime must submit to the competent tax authorities the declaration of mentions (Form 010).

•Taxpayers applying for VAT purposes, after they had been deregistered, must submit to the competent tax authorities the application for VAT registration (Form 099).

For the VAT registration, the taxpayer must meet the following 3 criteria:

1.the taxpayer should not be in a position in which it does not undertake economic activities at its headquarters and/or secondary locations or outside its premises. In order to evaluate this criterion an affidavit must be filed that proves whether the taxpayer carries out economic activities at its headquarters, secondary locations or outside its premises or not.

2.none of the directors and/or shareholders of the taxpayer that requires the VAT registration, who are fiscally registered in Romania, and also the taxpayer itself does not have registered in their tax record the offenses and/or deeds  stipulated in art. 2 para. (2) letter a) of the Government Ordinance no. 75/2001 on the organization and functioning of the fiscal record. If the administrators and/or the shareholders of the taxpayer are not fiscally registered in Romania, they must submit an affidavit that proves they have not committed the offenses and/or deeds stipulated in art. 2 para. (2) letter a) of the Government Ordinance no. 75/2001.

3.for the VAT registration the taxpayers intention and ability to carry out economic activities will be evaluated involving taxable operations and/or exempted from VAT with right of deduction, and also operations for which the place of delivery/supply is considered to be abroad if the tax would be deductible in case these operations would take place in Romania. In order to evaluate this criterion the taxpayers will have to file an affidavit (Form 088), accompanied by supporting documents of the information given, such as: study documents of the administrators, documents stating the nature and amount of the gross incomes achieved by the directors or shareholders in the past year, copies of labour contracts concluded by the company, if any, copies of bank statements attesting the existence of bank accounts and so on.

The requests for VAT registration are subject to an analysis made by the competent tax authority, which aims to assess the intention and capacity of the taxpayer to undertake economic activities. If the taxpayer does not demonstrate the ability to undertake economic activities, the application for VAT registration is rejected.

If the data and information provided are incorrect and incomplete, while the intention and ability of the taxpayer to conduct economic activities is not clarified, the authorities will send the request for registration to the competent regional antifraud directorate which will further analyze the situation and decide on approving or rejecting the application.

It is important to mention that the on-the spot review of the headquarters performed by the tax authority in order to obtain the VAT registration is eliminated with the new changes, but the competent tax authority can request the presence of the company’s administrator at the tax authority’s premises for providing further clarifications for the VAT registration. From our past experiences, this matter is required especially when the company is newly established, the shareholders or administrators do not hold such qualities in other companies and practically the tax authority has no fiscal evidence on them.

There are situations in which the tax authorities cancel the registration for VAT purposes ex officio, if either the administrators or the taxpayer itself has registered in their fiscal record offenses relating to the regulations of economic, financial – accounting and tax legislation.

Whereas the VAT registration procedure has become increasingly more difficult for local entities, it is very important to evaluate with maximum responsibility the information that have to be filled in the Form 088 when requesting for the VAT registration and to identify the areas that could pose a potential risk for VAT registration refusal.

If companies intend to perform EU transactions before acceptance of VAT registration in Romania, they could apply for obtaining VAT registration exclusively for EU transactions and VIES registration. In this case, it should be taken into consideration the impact on cash–flow, as VAT must be paid to Romanian state at the acquisition date for goods acquired. After VAT registration in Romania, VAT paid priory for existing stock or assets can be adjusted.

Cozmina Avasaloaei
Senior Legal Advisor