News › Taxand’s Take Article

VAT Changes Planned for 2012 will Impact Taxpayers

24 Jan 2012

The Government Ordinance amending the Romanian Fiscal Code will enter into force from the beginning of 2012. These changes could have a significant impact on businesses operating in Romania. The following will be of interest for non-residents:

  • limited VAT deduction allowed for acquisition of vehicles and fuel
  • implementation of severe rules regarding "ex-officio" VAT deregistration and subsequent VAT registration
  • option to register for VAT purposes in Romania upon importation

Taxand Romania highlights the key VAT changes planned for 2012 and how these will impact both residents and non-residents.

Limitation of VAT deduction rights for vehicles and fuel
Following a ban three years ago, companies in Romania were denied a deduction for certain car expenses and fuel costs. With the recent amendments, 50% of input VAT for the acquisition of cars with nine or fewer seats, used exclusively for passenger transport, and related fuel expenses, is now deductible. The same vehicles used exclusively by sales agents, HR recruiters or for activities such as leasing and rental, transportation services, intervention, repair, security and protection continue to benefit from the right to a 100% deduction, as long as exclusive use can be proved.

"Ex-officio" VAT de-registration and subsequent VAT registration
Taxpayers submitting nil VAT returns during a 6-month period or not submitting any VAT returns could be automatically de-registered by the tax authorities. Approval of the new VAT registration by the Romanian tax authorities would be subject to conditions requiring the submission of specific responsibility statements within a specific deadline (i.e. six months in case of the "ex-officio" deregistration triggered by submission of nil VAT returns).

Taxpayers which are de-registered "ex-officio" by the tax authorities will not be allowed to deduct any input VAT incurred during the period of registration. At the same time they will be held liable to pay any VAT in connection with taxable activities performed during this period. Such output tax should be declared through a special statement and paid to the State Budget. Customers will not be allowed to deduct any VAT charged by a taxpayer during the de-registration period.

Option to register for VAT purposes upon importation
Non-residents are entitled to register for VAT purposes when accounting for imports in Romania. As per the current VAT legislation, non-residents are not entitled to request for a VAT registration if they are merely importing goods into Romania.


Taxand's Take


Specific limitation of the VAT deduction rights for vehicles and fuel
This legislative change should have a positive impact on businesses operating in Romania as this relieves companies from the burden of proving the usage quota for those vehicles that are not exclusively used for business purposes, while the related VAT is deductible by default within a 50% limit. In addition, non-residents which do not create fixed establishments for VAT purposes are able to claim a refund of the input VAT incurred upon acquisition based on the procedures set out through the 9th and 13th EU VAT Directives.

"Ex-officio" VAT de-registration and subsequent VAT registration
These changes will definitely have a negative impact on businesses operating in Romania as this basically creates liabilities and cancels rights, leading to an infringement of the neutrality of the VAT system.

Option to register for VAT purposes upon importation
This change should have a positive impact for traders importing goods into Romania which are subsequently sold / re-sold locally. In practice, it is generally easier for entities registered for VAT purposes in Romania to obtain VAT refunds based on the normal VAT refund procedures, as compared to the case of non-residents applying for refunds based on the 9th and 13th EU VAT Directives.

Your Taxand contacts for further queries are:
Angela Rosca
T. +40 21 316 06 45
E. angela.rosca@taxhouse.ro

Cristian Radulescu
T. +40 21 316 06 46
E. cristian.radulescu@taxhouse.ro

Georgiana Trusca
T. +40 21 316 06 47
E. georgiana.trusca@taxhouse.ro

We are interested to hear your opinion on this key piece of tax news. Join our LinkedIn Group and share your ideas. With tax professionals in nearly 50 countries you can understand the impact of tax issues affecting multinationals today.

Taxand's Take Author