Tax Relief Opportunity
Romania’s EU Accession has brought a major tax relief opportunity for foreign companies which incur costs with Romanian VAT on their acquisitions in Romania.
From 1 January 2007, based on the relevant EU Directives, foreign companies established in or outside the EU which incur VAT in Romania are entitled to claim back the VAT on all eligible business expenses, such as conferences, events, training, hotel accommodation, meals, fuel and transportation services. Similarly, Romanian established companies may request the refund of input VAT incurred on their expenditure made abroad (e.g. hotel accommodation, fuel costs, training) through a claim form submitted in the respective country.
Promotional events, conferences, seminars and training are usually organized through tour operators which provide comprehensive service packages (i.e. accommodation, transport, organization, meals). In this context it is important to plan ahead and communicate with the tour operator in order to ensure that foreign VAT can be recovered (e.g. Romanian companies organizing corporate events abroad cannot recover the related VAT if the event is organized through a tour operator applying the special margin scheme).
What VAT can be claimed back?
Foreign businesses not registered, nor liable to register for VAT purposes in Romania are entitled to claim back only the VAT related to expenses incurred in their normal course of business.
VAT on the following is not available for refund:
- Supplies of goods and services which would normally be VAT exempt under the VAT law;
- Tobacco and alcoholic beverages;
- Amounts paid on behalf of a third parties;
- Amounts not claimed in due time.
Conditions for a VAT refund
According to the Romanian legislation in force, the following aspects are important in the case of VAT refunds:
- The taxable person not established in Romania, who is established in another Member State, not registered and who is not obliged to register for VAT purposes in Romania, may benefit from the refund of VAT related to imports and purchases of goods / services performed in Romania;
- the unregistered taxable person who is not obliged to register for VAT purposes in Romania, not established in the European Union, may request a refund of the tax related to imports and purchases of goods / services performed in Romania, if, according to the laws of the country where the business is established, a taxable person established in Romania would have the same right of refund in respect of VAT or other similar taxes / duties applied in that country;
- the unregistered taxable person who is not obliged to register for VAT purposes in Romania, but who makes an exempt intra-community delivery of new means of transport in Romania may request a refund of the tax paid for its purchase in Romania of the respective means of transport. The refund shall not exceed the tax which would apply if the delivery by that person of the new means of transport in question were taxable delivery. The right of deduction arises and may be exercised only at the time of the intra-Community supply of the new means of transport;
- the taxable person established in Romania, not registered and who is not obliged to register for VAT purposes in Romania, may request the reimbursement of the tax paid related to the operations provided in art. 297 para. (4) lit. d) or in other situations provided by the methodological norms.
According to the art. 169, par. (3) from the Romanian Tax Procedure Code, in case of returns with a negative amount of VAT with reimbursement option, submitted in the legal term of deposit, the negative amount of the returns is taken over in the statement of the following period. The central fiscal body decides under the conditions provided by the law if it carries out the tax inspection before or after the approval of the reimbursement, based on a risk analysis.
By exception from the provisions of par. (3), in the case of the statement with negative amount VAT with reimbursement option for which the amount requested for reimbursement is up to RON 45,000, as well as in the case of the statement with negative amount of VAT with reimbursement option submitted by the taxpayer who benefits from a payment rescheduling, the central fiscal body reimburses the fee with the subsequent performance of the fiscal inspection.
EU companies do not require a fiscal representative for refund purposes in Romania as the refunded VAT could be paid directly into the company’s bank account in the country of origin. Non-EU companies require a fiscal representative for refund purposes and a bank account in Romania. However, a non-EU company may recover the VAT incurred in Romania only in case it is established in a country with which Romania has signed a reciprocity agreement.
How can Tax Representation help its clients?
Tax Representation assists its clients in all stages of the VAT refund process, from filing-in the claim form to following-up the refund request with the tax authorities.
Tax Representation will assist in:
- Detailed analysis whether all the necessary documentation (e.g. claim form in Romanian; the original invoices on which Romanian VAT was charged; certificate attesting that the company is registered for VAT purposes in a Member State or that it has a similar status in a non-EU country, etc.) has been prepared;
- Ensuring that the deadline for submitting the VAT refund claim is not missed;
- Ensuring your business complies with local rules on invoicing, VAT treatment, accounting procedures and VAT filing and payments;
- Acting as a buffer for clients and dealing with the potential questions raised by the Romanian tax authorities;
- Handling enquiries and tax inspections from the local VAT office;
- Acting as representative for refund purposes for non-EU companies;
- Advising its clients in identifying tax efficient structures to ensure that foreign VAT incurred on acquisitions of certain goods and services can be recovered;
- Handling any issues that may arise from the submission of the refund claim and following-up the status of the refund with the tax authorities;