Scope and Rates
Supplies of goods or services with the place of supply in Romania are subject to Romanian value-added tax (VAT), where made by a taxable person in the course of a business carried on by said person. Supply includes all forms of supply. It is not restricted to the provision of goods and services by way of sale but can equally apply to other forms of transaction. A supply with the place of taxation in Romania is either a taxable or VAT exempt supply.
Supply does not include anything done otherwise than for a consideration. However, certain actions carried out for no consideration are deemed to be supplies; for example, certain free-of-charge supply of goods, private use of business assets.
The standard rate of VAT is 24 percent.
The following types of goods and services are subject to a reduced rate of VAT of 9 percent:
- entrance fee for visits at castles, museums, memorial houses, historical monuments, architectural and archeological monuments, zoos, botanical gardens, fairs, exhibitions, cultural events, and cinemas
- textbooks, books, newspapers, and magazines, except for those destined exclusively for advertising purposes
- any type of prosthesis(including contact lenses and eyeglass frames), except for dental prostheses
- orthopedic products
- medicines for human and veterinarian use
- accommodation in hotels or similar facilities, including the rental of lands for camping purposes.
In 15 December 2008, a reduced VAT rate of 5 percent was introduced for the sale of residential real estate which is either:
- designed for retirement homes for the elderly or pensioners, children’s homes, as well as for centers for children with special needs or
- has a usable surface area of up to 120 square meters (and the land on which it is constructed does not have a surface area exceeding 250 square meters), and a value of less than RON 380,000. The reduced VAT rate of 5 percent may be applied only once for each individual or family, meaning that an individual or couple may not benefit from a 5 percent VAT rate if they have previously purchased a residence which was subject to this 5 percent VAT rate or
- is supplied to city halls to be used for social housing purposes.
Exports and intra-EU supplies are VAT exempt with credit (the taxpayer is allowed to deduct the input VAT related to the export operation). Services ancillary to export operations (such as international transport of merchandise, loading and unloading of goods etc) are also VAT exempt with credit.
Romanian VAT legislation also provides for a range of operations that are VAT exempt without credit (with no right to deduct related input VAT).
VAT exempt without credit transactions mainly include:
- hospital care, medical treatment, including veterinary treatment, and closely-related operations carried out by duly authorized units
- services performed as part of their profession by dentists and dental technicians, as well as the delivery of dental prostheses by dentists and dental technicians
- transport of sick or injured persons in vehicles specially designed for this purpose
- deliveries of organs, blood, and milk of human origin
- educational activities carried out by authorized units, including activities of dormitories and canteens organized in connection therewith, vocational training of adults, as well as supplies of services and deliveries of goods closely related to such that are performed by public institutions or other recognized entities
- tuition given privately by teachers, covering school, pre-university or university education
- supplies of services and/or deliveries of goods closely related to social assistance and/or social protection, protection of children and youth performed by public institutions or other entities recognized as having a social character
- sports practicing related services performed by not-for-profit organizations for persons who practice sports or physical education
- supplies of cultural services and culture-related goods, carried out by public institutions or not-for-profit cultural institutions
- activities carried out by public national TV and radio stations, with the exception of the advertising or other similar commercial activities
- postal public services
- financial and banking services (subject to certain limitations related to the place where the customer is established)
- insurance and reinsurance services (subject to certain limitations)
- rental and leasing of immovable property, with some exceptions
- supply of buildings or land (if option to tax is not expressed); the supplies of new buildings and building land are not exempt
- supply of services by independent groups of persons, who are carrying on an activity which is exempt from VAT or in relation to which they are not taxable persons, for the purpose of rendering their members the services directly necessary for the exercise of that activity, where those groups merely claim from their members exact reimbursement of their share of the joint expenses, provided that such exemption is not likely to cause distortion of competition
- supply of services, and the supply of goods closely linked thereto, to their members in their common interest in return for a subscription fixed in accordance with their rules by non-profit-making organizations with aims of a political, trade-union, religious, patriotic, philosophical, philanthropic or civic nature, provided that this exemption is not likely to cause distortion of competition
- supply of services and goods, by organizations whose activities are exempt , in connection with fund-raising events organized exclusively for their own benefit, provided that exemption is not likely to cause distortion of competition
- betting, lotteries and other forms of gambling.
Some import operations are also VAT exempt, as follows:
- imported goods that would have been VAT exempt if supplied locally in Romania
- goods brought into Romania by travelers or other individuals, under the conditions and within the limits provided according to legal regulations in force regarding the customs regime applicable to individuals
- imported goods intended for sale under a duty-free regime, or in shops serving exclusively diplomatic representative offices and their personnel
- goods imported by diplomatic missions and consular offices as well as by foreign citizens with diplomatic or consular status in Romania, if reciprocity conditions exist
- goods imported by representative offices of international and intergovernmental organizations accredited in Romania, as well as by foreign citizens who are employees of such organizations, within the limits and in accordance with the conditions provided in the conventions establishing such organizations
- goods imported by the forces of NATO Member States, for the use of those forces or of the civilian staff accompanying them, or for supplying their messes or canteens, where such forces take part in the common defense effort
- imports of natural gas made through the natural gas distribution system and import of electric energy.
Special limitations of the deduction right
Starting from 1 January 2012, there is a 50 percent limitation on the right to deduct VAT related to the acquisition of certain types of vehicles (i.e. motor vehicles used for passenger transport with a maximum authorized weight of 3.5 tons and maximum nine seats, including the driver’s seat) and to fuel purchases for these types of vehicles. Moreover, as of 1 July 2012 this limitation has been extended to cover the tax related to leasing services and rental services, as well as to other related expenditure (e.g. repairs, car parking). However, in theory, the number of cases where this limitation is applicable has been actually reduced, as these provisions apply only where a vehicle is not exclusively used for business purposes.
The new provisions are applicable where invoices have been issued and/or advance payments have been performed for goods/services prior to 1 July 2012, if the supply takes place subsequent to this date.
Excises and customs duties.
Romanian entities carrying out economic activities in excess of the small undertakings threshold of EUR 65,000 (RON 220,000) 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. However, the taxable person may opt for the application of the normal tax regime.
If a Romanian entity carries out exclusively VAT exempt without credit operations, it cannot register for VAT purposes.
Also, if a taxable person (both Romanian as well as non-resident) performs intra-Community acquisitions /supplies of goods in Romania it is required to register for VAT purposes before performing such transactions.
On a related note, if a Romanian taxable person performs intra-Community acquisitions /supplies of services in Romania it is required to register for VAT purposes before performing such transactions.
Any foreign entity that is neither VAT established nor VAT registered in Romania, and performs taxable operations from a VAT perspective which give VAT deduction right, except for the operations for which the customer is liable to settle the VAT liability must register for VAT purposes in Romania before performing such operations. To deal with its VAT affairs a foreign entity may either appoint a VAT representative with joint and several liability to the tax authorities (compulsory for non-EU entities), or register directly with the Romanian authorities (option available only for entities from other EU countries).
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 a threshold of EUR 35,000 per year the non-Romanian entity is required to register and account for VAT in Romania.
If one business is established outside the European Union (EU) and supplies electronically supplied services to non-taxable customers established in the EU and the effective use and enjoyment of those services takes place in Romania, that entity will have to register for Romanian VAT.
The fine for not registering or late registration for VAT purposes ranges from RON 1,000 to RON 5,000 (that is approximately EUR 220 to EUR 1,100).
A taxable person, which is not established in Romania, may opt to register for VAT purposes only if it carries out one of the following operations in Romania:
- import of goods
- rent, lease, 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 land they are built on, and any other land, with certain exceptions, if they are taxable.
If a business as an intermediary purchases goods from a business in a EU Member State other than that of its own and the goods are delivered from the Member State to Romania, VAT due can be accounted for by the Romanian customer.
The VAT legislation provides for this simplification measure, avoiding a registration in the Member State of arrival of the goods, provided that certain conditions are met.
The call-off and consignment stock simplifications are available in Romania.
Supply and Installation and Work on Movable Goods
Reverse charge will apply if the non-Romanian supplier has no fixed establishment and is not registered for VAT purposes in Romania and the beneficiary is a taxable person or a non-taxable legal person, established in Romania or not established in Romania but registered for VAT purposes in Romania.
Reverse charge mechanism
Romanian VAT law provides for a derogation with respect to the VAT registration of a non-resident taxpayer (an overseas company) by which, if a supply of goods taxable in Romania is carried out by a taxable person which is not established, nor VAT registered in Romania, than VAT shall be payable by the person to whom the goods are supplied if this is a taxable person or a non-taxable legal person established in Romania or not established in Romania, but registered for VAT purposes in Romania.
Yes, if the company is not established in the EU.
The current Romanian VAT grouping system does not exclude from the scope of VAT (or exempt) the transactions between the members of the group. Instead, the system simply allows the consolidation of the VAT returns of each member.
Such group may be formed by at least two taxable persons established in Romania and more than 50 percent of their shares are held directly or indirectly by the same shareholders.
Therefore, in order to be treated as a fiscal group, the following conditions have to be met:
- a taxable person may be part of only one fiscal group
- the option must refer to a period of at least two years
- all the taxable persons from the group must apply the same fiscal period
- the fiscal group can be established only by taxable persons managed by the same fiscal body.
The tax authorities have the discretionary right to refuse a group registration or to terminate a person’s membership of a group registration for revenue protection reasons.
As a general rule, VAT returns must be filed on a monthly basis, by 25th of the month following the month to which the return relates.
However, companies having an annual turnover not exceeding EUR 100,000 (in RON equivalent) file VAT returns on a quarterly basis, by 25th of the first month of each quarter in respect of the previous quarter. Also, under certain conditions Romanian VAT taxpayers may ask for other VAT period (such as, annual).
As from 14 April 2009, taxpayers whose fiscal period is the quarter are obliged to file monthly VAT returns if they perform an intra-Community acquisition in Romania.
EC Sales and Purchases List (Recapitulative Statements)
As at 1 January 2010 the EC Sales and Purchases Lists are to be filed on a monthly basis.
Local Sales and Purchases List
As at 1 January 2012 the Local Sales and Purchases Lists are to be filed on a monthly basis.
- VAT registered businesses whose annual arrivals total is equal to or more than RON 300,000 are required to declare for the arrivals
- VAT registered businesses whose annual dispatches are equal or exceed RON 900,000 are required to declare for the dispatches
- VAT registered businesses required to declare are selected on the basis of their VAT returns for the previous year and the current year
- The type of declarations depends (that is standard or extended declarations) on the actual value of the flows of goods.
The exchange rate applied when declaring the transaction for VAT purposes is the one communicated by the National Bank of Romania or by the European Central Bank and valid at the date when the VAT chargeability occurs (i.e. the exchange rate published in the day previous to the day on which the VAT chargeability of the transaction occurred), or the exchange rate of the commercial banks through which the payments are carried out, if specific provisions are included in the contract.
If the exchange rate communicated by the European Central Bank is used, the conversion between currencies other than the euro is made using the exchange rate of the euro for each of the currencies. It must be mentioned in the contracts between parties whether the exchange rate for payments is that of a commercial bank, otherwise the exchange rate communicated by the National Bank of Romania or by the European Central Bank will be used.
If established in another EU Member State a company may submit VAT refund claims under Directive 2008/9/CE. A non-EU business may recover the VAT based on the provisions of the 13th Directive, if reciprocity exists only.
As of 1 January 2010, the claim period covers the calendar year and claims must be submitted by 30 September of the following year.
The minimum amounts to be reclaimed under Directive 2008/9/CE and 13th Directives are:
- if the application relates to a period of less than one calendar year but not less than three months, the amount for which the application is made may not be less than EUR 400
- if the application relates to a period of a calendar year or the remainder of a calendar year, the amount may not be less than EUR 50
- invoices that have not been paid by the date of the VAT refund claim according to Directive 2008/9/CE will be included in the VAT refund claims for the periods in which they are paid (this provision applies only for non-resident taxpayers that submit VAT refund claims in Romania).
The Romanian VAT law allows refunds to taxable persons established outside the European Community, based on the provisions of the 13th Directive, which have been transposed in the VAT legislation in force, with the condition that a reciprocity agreement has been signed with the other country (that is where the business is established). Romania has signed a reciprocity agreement with Switzerland, allowing VAT refund to Swiss taxable persons for acquisitions of goods and/or services for business purposes, mentioning that the same rules as for any Romanian company are applicable. Another agreement has been signed with Turkey also, allowing the VAT refund for acquisitions of goods and/or services connected with the participation at a fair or exposition or acquisitions of goods and/or services connected with transport activities (that is fuel, spare parts, repairs, etc.).
Also, in December 2012, Romania has signed a reciprocity agreement with Norway, allowing VAT refund to Norwegian taxable persons for acquisitions of goods and/or services for business purposes, mentioning that the same rules as for any Romanian company are applicable.
Input VAT related to the following goods and services cannot be recovered, in circumstances such as:
- alcohol and cigarettes (unless these goods are further used for being resold or for supplying taxable services)
- goods or services purchased for VAT-exempt without credit purposes
- goods found missing on stocktaking, the value of which cannot be recovered from employees and that are not covered by insurance
- 50 percent of the fuel and motor vehicles acquired or leased/hired, as well as other related expenditure (e.g. repair, car parking) unless the vehicles are mainly intended for resale or mainly used for rental purposes or as taxis or can be proven that are used 100 percent for business purposes
- any input VAT for which proper supporting documents are not available.
International Supplies of Goods and Services
In general, if goods are sold to a customer who is registered for VAT in another EU Member State and the sale involves the dispatch of those goods from Romania (either by the supplier or the customer) to that other Member State, then the supply is Romanian VAT exempt with credit. The seller must mention the customer’s VAT number on the invoice, and obtain evidence of that the goods left Romania.
If goods are sold to a customer in another EU Member State who is not registered for VAT, the supplier would normally have to charge Romanian VAT.
If goods are exported to a customer (business or private) outside EU then no VAT is charged. Goods exported from Romania are VAT exempt with credit, therefore, the taxpayer may deduct the input tax incurred with respect to goods exported. As for intra-Community supplies, the seller should make sure that in all cases it obtains proof of dispatch/delivery to support the exemption.
If a Romanian established business supplies services to a foreign business customer (B2B), in general the supply of services is taxable in the country of the recipient under the reverse charge mechanism. If the company, however, supplies services to a private consumer (B2C), the services are in general taxable in the country of the supplier and therefore subject to Romanian VAT.
The following exceptions apply to the B2B and B2C main rules as described above:
- services involving real estate (taxable in the country where the real estate is located)
- restaurant and catering services (taxable in the country where these services are performed). Other rules apply if these services are performed on board a ship, aircraft, or train
- passenger transport (taxable in the country where the transport services are actually performed, proportionate to the distances covered)
- services with regard to admission to cultural, artistic, sporting, scientific, educational, entertainment, and similar activities, such as fairs and exhibitions, along with the ancillary services (taxable in the country where those activities are physically carried out)
- short-term hiring of transportation vehicles (for ships maximum 90 days / for other means of transport maximum 30 days; taxable in the country where the vehicle is actually put at the disposal of the customer).
The following exceptions apply to the B2C main rule:
- intermediary services (taxable in the country where the underlying transaction is taxable)
- intra-Community transport of goods (taxable in the country of departure)
- transportation-related services (taxable in the country where the services are physically carried out)
- services involving movable tangible goods (taxable in the country where the activities are actually carried out)
- long-term hiring out of means of transport (taxable in the country where the beneficiary is resident). Nevertheless, long term hiring of leisure boats is taxable where the leisure boat is effectively put at the disposal of the client, as long as the respective service is actually rendered by the supplier from its place of business / private establishment.
The following services performed to non-taxable customers that are established or resident outside the EU are taxable in the country where the customer is established:
- the transfer of licenses and similar rights
- advertising services
- services performed by consultants, as well as data-processing and information-provision services
- the obligation to refrain, in whole or in part, from pursuing a business activity
- banking and insurance service
- supply of staff
- hiring out of movable property, with the exception of means of transport
- operating natural gas and electricity-distribution systems
- telecommunications services
- radio and television broadcast services and
- services performed electronically.
When goods are imported into Romania from outside EU by a Romanian VAT registered person, payment of import VAT is actually made to the customs authorities, except for those taxpayers who applied and obtained certificates for suspension of payment of VAT in customs (special procedure provided under law for companies fulfilling certain criteria).
Also, companies benefiting from VAT exemption on imports of products destined to be onward-dispatched to other EU Member States will be required to guarantee the VAT-related amount for the goods, at customs, until they prove to the fiscal authorities that the goods have actually been dispatched to the other EU Member State.
As mentioned above, for services rendered to taxable persons the general rule is that services are taxable at the place where the taxable person acting as such has established its business or at the place where a fixed establishment is located, if the services are provided to a fixed establishment.
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.
Under the reverse charge mechanism it is required to account for a notional amount of VAT as output tax on the VAT return covering the period in which payments are made and recovering this VAT as input tax on the same return.
If one taxable person can recover all of the VAT the reverse charge mechanism has no cost effect and would only trigger VAT compliance obligations. However, if the taxable person is partly exempt there is likely to be a VAT cost depending on the level of recovery allowed under the partial exemption method.
Reverse charge applies to a range of services, for which the taxable place is Romania when supplied by a taxable person not established in Romania (even though VAT registered for some types of operations) to a taxable person established in Romania:
The following services are treated as supplied where physically performed and are subject to reverse charge where the supplier is not established for VAT purposes in Romania:
- admission to cultural, artistic, sporting, scientific, educational, entertainment, or similar activities, such as fairs and exhibitions, and where appropriate, supply of ancillary services
- catering and restaurant services, excepting the services performed on board of ships, airships and trains
- work on immovable property.
The VAT package implemented on 1 January 2010 extended the area of applicability of the "use and enjoyment" override rules. Romania opted to apply the use and enjoyment rules to the following types of services:
- ancillary transport services, such as loading, unloading, handling and similar services
- valuation and work on movable tangible property
- transport of goods services performed in Romania.
According to the new provisions, the three types of services mentioned above will be considered to have their place of supply in Romania, as long as these services are used and enjoyed in Romania and supplied to taxable persons established outside the European Union.
Yes, every taxable person must issue an invoice to each beneficiary for the goods/services supplied or for the amount of every advance payment with respect to a supply performed, at the latest on the 15th day of the month following the month during which the supplies are performed/the taxable person receives such an advance payment (except for supplies of goods in retail stores, as well as transport services by taxi). However, as a result of the new VAT invoicing rules provided by Council Directive 2010/45/EU,(implemented in Romania starting with 1 January 2013), taxable persons will no longer be required to issue invoices with respect to advance payments received for intra-Community supplies of goods performed.
Romanian VAT regulations require the following elements to appear on the VAT invoice:
- sequential number uniquely identifying the invoice
- date of issue
- supplier's VAT identification number, names, and addresses (as well as information with respect to the Romanian fiscal representative, if any)
- purchaser's VAT identification number, names, and addresses (plus the data of the Romanian fiscal representative, if any)
- quantity and nature of goods supplied or nature of services rendered
- date of supply or date of service completion or date when an advance payment is received, but only when this date is earlier than the date when the invoice is issued
- taxable amount of goods and services or of the advance payments invoiced, for each rate, exemption or non-taxable operation, unit price exclusive of tax and any rebates, discounts, or other price reductions
- the indication, at each rate, of the tax due and the total amount of the tax due expressed in RON
- a reference to the other invoices or documents previously delivered when several documents or invoices have been delivered for the same operation.
Where an invoice is issued by the beneficiary in the name of and on behalf of the supplier, the invoice must indicate that it is a “self-invoice,”, and where the chargeability of the VAT occurs at the date of receiving the total or partial payment for the supply of goods or services performed, the invoice must indicate that it is a “cash accounting” invoice.
Additionally, in some specific cases (e.g. tax exemption, intra-Community acquisition under the reverse charge mechanism, and supply of new means of transportation, special VAT regime) some additional elements may be required.
Yes, but only if specific conditions are fulfilled.
Yes, but specific requirements exist.
Invoices can be issued in any foreign currency as long as the VAT amount, if any, is mentioned distinctly in Romanian currency, namely RON.
Transfers of Business
Yes. The transfer of all the assets or of a part therein, as a result of sale, or as per operations such as a de-merger or merger, whether made with payment or not, or as a contribution in-kind to the share capital of a company, is not deemed to be a supply of goods if the recipient is a taxable person.
Options to Tax
Concessions, lease rental of immovable property, as well as transactions involving granting rights over immovable property such as usufruct and right of superficies, against payment, are normally VAT exempt without credit, but taxpayers may opt to tax these transactions (and consequently benefit from the deduction right of related input VAT), except for:
- accommodation within the hotel industry or similar industries, including rental of land suited for camping purposes
- vehicle parking services
- rental of machines which are incorporated into immovable goods
- rental of safes.
Also, supplies of buildings (except for new buildings) and land on which it stands (except for building land) are treated as VAT exempt, but however, taxpayers may opt to tax such operations.
Taxpayers must notify the tax authorities of their intention to tax the operations mentioned above.
Head Office and Branch transactions
Supplies of services between Romanian head offices and Romanian branches are seen as falling outside the scope of Romanian VAT, however no specific guidance exists in the Romanian Fiscal Code in this respect.
Intra-Community movement of goods between a head office and a branch established in different Member States (i.e. one in Romania, one in another Member State) is treated as a deemed intra-Community acquisition or a deemed intra-Community supply, respectively depending on whether Romania qualifies as the country of dispatch or arrival.
Relief for bad debts is available only if the client has gone bankrupt. The relief is granted at the moment the bankruptcy of the client is made official by a court decision.
No relief is granted for bad debts other than arising from bankruptcy.
The Romanian Fiscal Code specifically allows the tax authorities to apply the substance over form principle during tax audits. Accordingly, tax authorities are entitled to assess a transaction according to its economic substance rather than its legal form.
Penalties and interest apply for late payment or underpayment of VAT liabilities. Fines apply in case of failure to register for VAT purposes and for failure to file VAT returns within the legal deadline.
How often do tax audits take place?
There are no general provisions in this respect, however, given that the general statute of limitation period for taxes, including VAT, is 5 years, the Romanian tax authorities tend to perform one audit at least once every 5 years.
An audit will also take place upon each VAT refund claim.
Are there audits done electronically in your country (e-audit)? If so, what system is in use?
Is it possible to apply for formal or informal advance rulings from the (indirect) tax authority?
Yes, it is possible to apply for a formal advance ruling, however the taxable person requesting such a ruling would need to pay EUR 1,000 and some specific conditions must be met. In addition, taxpayers may also submit letters to the Romanian tax authorities in order to obtain informal rulings, which are non-binding.
Are rulings and decisions issued by the tax authorities publicly available in your country?
No. Moreover, these rulings generally cannot be used by taxpayers other than the one mentioned in the ruling.
No, other than the 9 percent and 5 percent reduced VAT rates, together with all simplification measures which result in a foreign company not being obliged to register for VAT purposes in Romania.