VAT Rates in Romania
VAT Deduction Limits in Romania
Input VAT is generally deductible as long as the goods or services are used for business purposes.
Unlike most EU countries, Romania only restricts VAT deduction on a few items. In general, input VAT incurred in the course of a business in hotel and other travel expenses, advertising, attendance to conferences, purchase of vans and trucks (vehicles with a maximum authorized mass exceeding 3,500 kg or more than 9 seats, including the driver's seat), are 100% deductible.
The following supplies are subject to special rules concerning input VAT deduction:
- Input VAT from business gifts when the individual value is higher than RON 100 are not deductible.
- Alcohol and tobacco, unless they are used as part of the business’ taxable transactions are not deductible.
- The purchase of vehicles is limited to a deduction of 50%. However, for certain activities the 100% of input VAT deduction is allowed provided that the conditions can be certified, e.g., vehicles used exclusively for emergency services, security and protection services and courier services; vehicles used by sales and purchasing agents; or vehicles used for the transport of persons, including taxi services; etc.
A valid and fully compliant VAT invoice must be issued for each expense on which VAT is deducted.
The VAT deduction limits in Romania are regulated in Art. 297 and following of the Romanian Fiscal Code.
Statute of Limitations in Romania
The statute of limitations in Romania is five years.
The statute of limitations period determines the periods on which the tax authority can go back to review the information declared, and apply additional VAT assessments, penalties or interests. However, please consider that in case of fraud or fiscal evasion, the re-assessment from tax authorities may go back up to 10 years.
Also, the statute of limitations determines the period a taxpayer can voluntarily correct any errors on past submissions, and deduct input VAT.
Tax Point Rules in Romania
The tax point is the time by when VAT becomes due. VAT due should be distinguished from VAT payable. VAT is due when the tax point occurs. VAT is payable between the day after the end of the reporting period and the due date to submit and pay the VAT return.
- General rule: VAT becomes due when the goods are put at the customer’s disposal, or when the services are completed.
- Prepayments or advanced payments: the tax point is at the moment of receiving the prepayment or deposit.
- Intra-Community transaction: Tax point occurs on the invoice date or the 15th day of the month following the month in which the invoice was issued, whichever occurs earlier.
Use and enjoyment rules in Romania
When it comes to establishing the place of supply of a transaction, Member states may introduce another exception to the B2B and B2C rules according to the place where the services have been actually used and enjoyed. This exception may be introduced to avoid double taxation (positive use and enjoyment rules), to avoid non-taxation (negative use and enjoyment rules), or both.
Romania introduced both the negative and positive use and enjoyment rule. A negative use and enjoyment rule applies in the following scenarios:
- Ancillary transport services, such as loading, unloading, handling, etc.
- Works on tangible movable property and valuations.
- Transport of goods performed in Romania.
The place of supply for above services B2B is Romania where the customers are based in a non-EU country and such services are used and enjoyed in Romania.
Also, a positive use and enjoyment rule is introduced for the transport of goods service that takes place outside the EU. Where the client is a Romanian taxable person, the service is taxable where used and enjoyed outside the EU.
Bad Debt Relief in Romania
Bad debt regime applies to scenarios where an invoice has been issued with VAT, reported in the VAT return and the VAT amount has been paid to the tax authorities but the whole price has not been collected from the customer.
This is often due to the client´s bankruptcy, insolvency, or simple missed payments to suppliers. In the EU, most countries allow to recover the VAT initially paid to the authorities, however, the conditions change from one country to another.
Romania allows for bad debt relief only in the case of bankruptcy of the client or upon the implementation of a restructuring plan approved by a court whereby the creditor's claim is modified or cancelled.
Find here further information, and under Art. 287.d) Romanian Fiscal Code.
