Michaela Merz

Romania – It’s very difficult to get registered for VAT purposes

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Romania has a very high fraud in the VAT field and this is why the authorities had put in place a VAT registration process for resident entities, which is far more demanding compared to similar processes in other EU countries. After the VAT registration file is submitted at the level of the Romanian tax authorities, the tax authority performs an ​​evaluation of the fiscal risk of the taxpayer.

This evaluation is based on a high number of criteria, as detailed below:

 

  1. Criteria regarding the premises of the company: the premises of the company must not be set-up at the lawyer’s office, the agreement for the space rental needs to be signed for a time-frame higher than one year, it is a plus for a company to have any working points/secondary offices;
  2. Criteria regarding the insolvency/bankruptcy – the Romanian tax authorities analyse if the shareholders and/ or administrators of the company hold or held the capacity of a shareholder/ administrator/ holder/ member in at least one company in Romania to which insolvency / bankruptcy proceedings have been initiated in the last 5 fiscal years;
  3. Criteria regarding the fiscal inactivity – the Romanian tax authorities analyse if the shareholders and / or administrators of the company hold (in at least one company) or held (in at least 3 companies) the capacity of a shareholder/ administrator/ holder/ member in a company declared inactive (from a fiscal perspective) during the last 5 fiscal years;
  4. Criteria regarding temporary inactivity at the level of the Trade Registry – the Romanian tax authorities analyse if the shareholders and/ or administrators of the company has the status of a shareholder/ administrator/ holder/ member in at least two companies to which the legal term of temporary inactivity registered with the Trade Register office without being reactivated already expired;
  5. Criteria regarding refusal/cancellation of a VAT registration –the Romanian tax authorities analyse if the shareholders and/ or administrators of the company hold or held the capacity of shareholder/ administrator/ holder/ member in at least one company whose VAT registration was cancelled in the last 5 fiscal years due to the facts included in the fiscal record or for which the VAT registration application has been rejected starting with February 2015 or the registration for VAT purposes has been cancelled by the tax authorities due to the high fiscal risk identified;
  6. Criteria regarding outstanding fiscal liabilities – the Romanian tax authorities will analyse if the total amount of the outstanding tax liabilities registered by the companies in which the shareholders and / or the administrators of the company hold or held in the last 5 fiscal years the capacity of a shareholder/ administrator/ holder/ member, is more than or equal to RON 50,000;
  7. Criteria regarding potential contraventions/ crimes – the Romanian tax authorities will analyse if any criminal offenses and / or contraventions, which are included in the tax records of the company’s shareholders or in the tax records of the companies in which the shareholders/ administrators hold or held the capacity of a shareholder/ administrator/holder;
  8. Criteria regarding revenues: the Romanian tax authorities will analyse the level of the administrators’ revenues obtained in the past 12 months prior to the month in which the VAT registration application is submitted, respectively in the previous fiscal year, if the case may be. Moreover, they will check if the administrators of the company have obtained in the past 12 months prior to the VAT registration application submission, only salary revenues from the provision of services as an unskilled worker;
  9. Criteria regarding fiscal residency – the Romanian tax authorities will analyse if at least one of the company’s administrators (i.e. individual) is a foreign citizen, who does not have a tax residence in Romania and the shared capital of the company is below RON 45,000;
  10. Criteria regarding bank account: the company does not have a bank account opened in Romania or at least one of the persons empowered by the company to perform operations on its bank account does not have the capacity of a legal representative, shareholder or employee;
  11. Criteria regarding the effective carrying out of business activities at main premises or third parties – the Romanian tax authorities will check if the company does not carry out economic activities in the premises of the registered office and / or the secondary offices, nor outside them;
  12. Criteria regarding how the accounting activities are organisedthe Romanian tax authorities will check if the company has not designated a person to lead the accounting department or has designated a person but who does not have higher education as required by the law or has concluded service contracts with third parties (accredited companies) for the provision of accounting services;
  13. Criteria regarding the employees: the Romanian tax authorities will check if the company has concluded individual employment contracts (i.e. except for the contracts concluded with the persons employed as CEO and chief accountant).

Very important: the company will need to have employees (either its own or hired through an agreement from another entity), in order to be able to carry out economic activities in Romania and the VAT registration to be approved.

A company must meet as many criteria as possible in order to have chances to a positive outcome, namely the VAT registration application to be successful. Moreover, each criteria will need to be backed up with relevant justifying documents, if the case may be.

For a Romanian established entity to receive the VAT registration, the company should be already operational in terms of business activities: to have a premises where activities are carried out, to have employees, to have opened a bank account for current operations, to have in place an accounting department/agreement with a third party for accounting purposes, etc. Therefore, the company does not need to prove only the intention to carry out activities in Romania, but it needs to have the business activities already started.

In case you plan to register for VAT purposes in Romania, please keep the above in mind and act accordingly.

For further details, please contact:

Daniel Anghel
Office: +40 21 225 3688 | Mobile: +40 742 394 208 |  Email: daniel.anghel@pwc.com

or

Adriana Costea
Office: +40 21 225 3257 | Mobile: +40 723 847 874 |  Email: adriana.costea@pwc.com

 

Bildquelle: Thommy Weiss / pixelio.de

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