Demystifying VAT in Romania: A Comprehensive Guide for Businesses

Navigating the intricate tax landscape is a vital aspect of running a successful business in Romania. Among the critical considerations lies the Value Added Tax (VAT) registration, a pivotal step for enterprises, both big and small, operating in the country. Mastering VAT registration is not only essential for complying with Romanian tax regulations but also for optimizing financial operations and fostering credibility in the market.

Whether you are a seasoned entrepreneur or just stepping into the Romanian market, this guide will equip you with the knowledge and insights needed to smoothly navigate the VAT registration process and stay on the right side of the tax authorities.

Let's delve into the world of Romanian VAT registration and unlock the potential advantages it brings for your business's growth and compliance.

Understanding VAT in Romania:

Value Added Tax (VAT) is a consumption tax levied on goods and services at each stage of the supply chain. It is borne by the final consumer and collected by businesses on behalf of the government. In Romania, VAT plays a vital role in generating revenue for public services and is governed by the Romanian Tax Code.

It is crucial for individuals and businesses operating in Romania to comprehend the different VAT rates and exemptions applicable to goods and services.

The Standard VAT Rate. As of January 1, 2017, the standard VAT rate in Romania is 19%. The standard rate applies to most taxable operations that are not eligible for reduced rates or exemptions. Businesses engaged in transactions subject to the standard rate must calculate and collect 19% VAT on their sales and remit it to the tax authorities.
The Reduced VAT Rates. In Romania, there are two reduced VAT rates: 9% and 5%. These reduced rates apply to specific goods and services.
The 9% Reduced VAT Rate: The reduced VAT rate of 9% is applicable to certain goods and services, such as medical and veterinary drugs, basic food items, agricultural products, water for irrigation, and specific agricultural services.
The 5% Reduced VAT Rate: The further reduced VAT rate of 5% applies to specific goods and services, including school textbooks, cultural and sports activities, social housing, energy supply during the cold season, and certain environmentally friendly heating systems.

Specific Exemptions. There are also some exemptions from VAT in Romania. For instance, certain goods and services, such as the delivery of specific medicines and medical products, certain educational materials, and cultural activities, may be exempt from VAT altogether.

Benefits of VAT Registration:

Input Tax Deductions: VAT-registered businesses are entitled to claim input tax deductions on business-related expenses. This means they can offset the VAT paid on purchases against the VAT collected from sales, reducing the net VAT payable to the tax authorities.
Credibility and Market Presence: VAT registration enhances a business's credibility and market presence. It signals that the company has attained a certain level of turnover and is compliant with tax regulations, which can be appealing to potential customers, partners, and investors.
Intra-EU Transactions: VAT registration enables businesses to engage in intra-EU trade with ease. By obtaining a VAT identification number, businesses can benefit from the simplified procedure for VAT transactions within the European Union.
Recoverability of VAT: VAT-registered businesses can recover VAT on eligible goods and services acquired from other VAT payers. This contributes to improved cash flow and reduces the overall cost of business operations.
Compliance with Tax Authorities: VAT registration ensures compliance with the tax authorities, avoiding penalties, fines, and other legal consequences that may arise from non-compliance.

When to register as a VAT payer?

a) Pre-Activity VAT Registration:

Declare a projected turnover exceeding or equal to 300,000 lei.
Declare a projected turnover lower than 300,000 lei but opt for the normal tax regime.

Submit the VAT registration request along with the company's registration file to the Trade Registry as Annex 1 through the legal representative, an associate, or an authorized person to the competent tax authority's registry or by registered mail.

b) Post-Activity VAT Registration:

Request VAT registration after starting economic activities if the annual turnover is below 300,000 lei but the normal tax regime is chosen.
If the turnover reaches or exceeds 300,000 lei, request VAT registration within 10 days from the end of the month in which the threshold was reached.

Submit the "Form 010" amendment declaration for legal entities, associations, and other entities without legal personality to the competent tax authorities. The declaration can be submitted directly by the legal representative or an authorized person at the competent tax authority's registry or by registered mail.

For self-employed individuals (sole traders/PFA), VAT registration is done through Form 700:

For post-activity VAT registration, you must submit the required form online to ANAF using www.e-guvernare.ro. Additionally, a digital signature is mandatory for the submission process.

What do you do when you become a VAT payer?

If you have exceeded the threshold and become a VAT payer, there are some very important aspects you need to know.

1. Invoicing with VAT:

Issue all receipts and invoices with VAT once registered as a VAT payer.
Collect the VAT amount from customers at the time of invoicing, which is not a cost to you.
Include the specific VAT rate calculated on the value of goods or services sold.
Deduct the VAT related to invoices received from suppliers during purchases.
Calculate the difference between VAT collected from customers and deductible VAT from purchase invoices at the end of the period (monthly/quarterly).

2. Invoicing to Customers in Romania:

Follow the provisions of the Fiscal Code and include VAT in invoices issued to customers in Romania.
The VAT rate will correspond to your service or product, irrespective of whether your customer is a VAT payer or non-VAT payer.

3. Invoicing to International Customers:

Consider the taxation and VAT status of the EU customer for correct invoicing.
If your customer is a VAT payer with a valid VAT number in VIES, issue the invoice without VAT.
If your customer is a non-VAT payer, issue the invoice with VAT.

4. Invoicing to Non-EU Customers:

For customers from non-EU countries, issue invoices without VAT, regardless of their VAT payer status.

5. Reporting Obligations:

As a VAT taxpayer, submit periodic VAT declarations depending on the tax period (monthly or quarterly).
Submit Form 300 - VAT return and Form 390 for intra-community supplies, services, and acquisitions (if applicable) by the 25th of the current month for the previous month.
Companies registered as VAT payers must also submit Form 394 for domestic supplies of goods, services, and national acquisitions, by the 30th of the following month after the reporting period.

Remember to adhere to these steps and obligations to ensure smooth compliance with VAT regulations in Romania.

6. Submit the TVA declarations

The procedure to submit the TVA (Value Added Tax) declarations in Romania can be done online through one of the ANAF platform: www.e-guvernare.ro and you must have your digital signature registered to ANAF prior the submission. Here are the main steps to submit TVA declarations:

Download declaration: You have to download the declaration from the ANAF site here.
Complete the TVA declaration: Fill out the TVA declarations with accurate information regarding your sales, purchases, and other relevant operations.
Verify the data and sign it with your digital signature: Ensure that all the information provided is accurate and that no important details have been omitted. Save the signed PDF on your computer.
Access the ANAF platform: Visit https://www.e-guvernare.ro and go to declaration submission tab (Depunere declaratii ANAF). You will need to authenticate with your digital signature here.
Submit the declaration: Once you have completed the TVA declaration and logged in the platform, click the "Upload" button to choose the declaration you want to submit then click the "Submit" button to send the declaration to ANAF. In case the declaration contains errors or omissions, you will receive an error message and will be asked to correct the information.
Confirmation of submission: After successful submission, you will receive a confirmation of submission on the platform and a number associated with this submission. Then go here and save the proof of submission by entering the submission number and your VAT registration number.

It is important to ensure that TVA declarations are submitted on time and that all the information is accurate to avoid potential penalties and issues with the tax authorities. Additionally, it is recommended to keep all supporting documents and financial reports in case they are required for future checks by ANAF.

Special VAT Registration for Intra-Community Acquisitions or Services

But... what happens if you are not registered for VAT purposes but you carry out intra-community acquisitions or provide intra-community services?

In this situation, if you are not registered for VAT purposes, you are not allowed to make intra-community acquisitions or provide intra-community services. These activities require a valid VAT registration number. If you engage in such transactions without proper VAT registration, you may face penalties and other legal consequences.

Article 317 from Fiscal Code outlines the requirements for special VAT registration in Romania for various scenarios involving intra-Community acquisitions or services. The following entities are obliged to apply for this registration:

Romanian taxable individuals and non-taxable legal entities established in Romania, who are not registered under Article 316 and do not fall under lit. b) - d) or paragraphs (2) or (21), if they make taxable intra-Community acquisitions exceeding the threshold in the respective calendar year.
Romanian taxable individuals and non-taxable legal entities established in Romania, who are not registered under Article 316 and do not fall under lit. a), c) or d) or paragraphs (2) or (21), if they provide services in another EU member state, where the service recipient is liable for VAT payment according to that member state's legislation.
Romanian taxable individuals, who are not registered under Article 316 and do not fall under lit. a), b) or d) or paragraphs (2) or (21), if they receive services from a non-resident taxable person for which they are liable for VAT payment in Romania.
Taxable individuals applying the special agricultural regime under Article 3151, who are not registered under lit. a) - c) or paragraphs (2) or (21), if they make intra-Community supplies of goods specified in Article 3151 paragraph (8) lit. c) or d).

The competent tax authorities will register any entity that applies for special VAT registration under the mentioned provisions. Failure to apply for registration can result in automatic registration by the tax authorities. Registered entities have specific obligations and may request cancellation under certain conditions. The special VAT registration is solely for transactions specified in Article 317, paragraphs (1) - (21), and does not grant regular VAT registration status.

The Intra-Community Special VAT Number is a code used by companies (sole traders or limited liability companies) that are not registered for VAT purposes in Romania. In other words, this number is mandatory for non-VAT paying companies that will collaborate with firms within the European Union.

Obtaining an Intra-Community VAT Number is not equivalent to VAT registration in Romania. The company will continue to be a non-VAT payer. This means that it will not issue invoices with VAT and will not deduct VAT from purchases. The Intra-Community Special VAT Number will be used only in relation to other companies within the intra-community space.

The Certificate of Registration for Intra-Community VAT Purposes and the Intra-Community Special VAT Number are obtained from ANAF (National Agency for Fiscal Administration), you only need to submit Form 700 and a copy of the registration certificate.

If your business activities involve intra-community trade, it's advisable to consult with a tax professional or authority to ensure compliance with all relevant VAT obligations.

As a VAT special taxpayer, you have certain reporting obligations that you must adhere to. This means that you must periodically submit VAT declarations:

Form 301 – Special VAT return
Form 390 for intra-community supplies, services, and acquisitions.

In the intricate landscape of Romanian taxation, one pivotal step for enterprises, both big and small, is the Value Added Tax (VAT) registration. Mastery of VAT registration is not only essential for ensuring compliance with Romanian tax regulations but also for optimizing financial operations and bolstering business standing in the market.

As a business owner in Romania, comprehending VAT is crucial for both financial efficiency and compliance. By adhering to VAT regulations, businesses can pave the way for growth and success in the competitive Romanian market, establishing a strong foundation for credibility and long-term prosperity.