(P) Tax Flash: Methodological Norms for the application of the Fiscal Code – Part 1

Value added tax

• Taxable persons and the economic activity

The Norms introduce criteria in respect of the dependency relationships in case of persons who do not work under a labor contract but through other legal instruments. In this context, it is mentioned that persons do not act in an independent manner if they do not have a proper organizational freedom in terms of human and material resources, such as the freedom to choose its collaborators the working hours or the material basis needed for performing their activity, and the inherent economic risk is not supported by them.

• VAT cash-in system

Clarifications are provided in respect of the VAT cash-in system in case of taxable persons having the turnover lower than RON 2,250,000 during the previous year or for the year to date.

The taxable person applying the VAT cash-in system starting 1 January 2014 may continue applying the system or may deregister from the Registry of taxable persons applying the VAT cash-in system upon request.

• Taxable base

It is mentioned that in case of the leasing agreements, when the lessor insures the good subject to the leasing agreement and further invoices the exact cost of the insurance to the lessee, such cost is not ancillary to the leasing services, but a VAT exempt insurance transaction.

• Adjustment of the taxable base

Clarifications are provided in respect of contracts terminated based on a mutual agreement either further to a Court decision or arbitration. Therefore, in case of goods, if the termination of the contracts implies the return of goods already supplied, it is not deemed that a new supply is performed by the buyer to the initial supplier. In case of services, only services after the termination of the contract are considered for the adjustment of the taxable base.

• Exemptions related to public postal services

Clarifications are provided in respect of the public postal services for which the VAT exemption is applicable.

• Conditions for exercising the deduction right

New provisions are introduced mentioning that in case of acquisitions performed from taxable persons not established in Romania and exempt from the obligation to register for VAT purposes in Romania with respect to occasional supplies, the deduction right may be justified based on the original invoice and a copy of the decision regarding the way of payment of VAT for occasional supplies of goods and/or services.

• VAT refund to taxable persons not established and not registered for VAT purposes in Romania

In case of VAT refund to taxable persons not established and not registered for VAT purposes in Romania, the proof of payment of the VAT payment to the supplier for the acquisition of goods or services performed in Romania is no longer necessary.

In addition, it is mentioned that this provision is also applicable in case of invoices issued during the period 1 January 2009 – 31 December 2013 which have not been paid in full or partially prior to the submission of the VAT refund claim. Such invoices can be included in a VAT refund claim to be submitted by 30 September 2014 without having to prove the payment of the invoice.

• Adjustment of input VAT in case of acquisitions of services and goods, other than capital goods

According to the new provisions, no adjustment of input VAT should be made in case of goods destroyed or lost provided that such situations are proven or confirmed by the taxable person. Also, no adjustment of input VAT should be made in case of stolen goods for which the taxable person possesses the proving documents issued by the judicial bodies, as well as in case of goods granted which do not qualify as a supply of goods.

If the taxable person could not demonstrate or confirm during a tax audit, that the goods were destroyed, lost or stolen, the taxable person may be obliged to adjust the VAT.

• Adjustment of input VAT in case of capital goods

According to the new provisions, no adjustment of input VAT should be made in case of goods destroyed, lost or stolen provided that such situations are proven or confirmed properly by the taxable person.

If the taxable person could not demonstrate or confirm during a tax audit, that the goods were destroyed, lost or stolen, the taxable person may be obliged to adjust the VAT.

• Registration of taxable persons for VAT purposes

The Norms bring clarifications regarding the date when it is deemed that the situations which led to the cancellation of VAT registration for taxable persons declared inactive and taxable persons who entered into temporary inactivity registered in the Trade Registry ceased.

The definition of the “majority shareholder” as stated by the Law no. 31/1990 was introduced, for the purpose of applying the provisions regarding the cancellation of the VAT registration and re-registration for VAT purposes of the taxable persons by the tax authorities.

• General VAT registration provisions

New provisions are introduced regarding the taxable persons not established in Romania, performing in Romania occasional transactions for which they are liable to pay the VAT but are not required to register for VAT purposes. They have the obligation to provide to the beneficiaries the invoices issued for such transactions, as well as a copy of the decision regarding the method of payment of the VAT for the supplies of goods and/or services performed occasionally.

The invoices issued for such transactions should not contain the information regarding the Romanian VAT number of the supplier/service provider.

• Records of transactions

New provisions are introduced for the taxable persons registered for VAT purposes who apply the VAT cash-in system regarding the obligation to include the tax receipts issued in accordance with the daily closing tax reports into the sales ledgers.

Excise duties

• Harmonised excise duties

Excise duties for mixtures of beer with non-alcoholic drinks

The computation method of the excise duties in case of mixtures of beer with non-alcoholic drinks has changed. As per the new provisions, the excise duty is computed based on the beer base from the mixtures of beer with non-alcoholic drinks.

Internal consumption of electricity

Clarifications were introduced regarding the chargeability of excise duty in case of internal consumption of electricity.

Reception of energy products

The preservation term of keeping energy products, for any possible checks performed by territorial customs authorities, is reduced from 48 hours to 24 hours in case of.

Suspension regime

There were introduced provisions that allow receiving and storage of raw materials in a warehouse under suspension of excise tax resulting from production activities for which the tax warehouse was authorized.

The concept of "new product"

Clarifications were brought regarding the concept of "new product" in terms of excise goods for which it is necessary to obtain the tariff classification and the classification in the nomenclature code for excisable goods.

The warranty level for certain energy products

Clarifications were introduced according to which the level of the warranty for certain energy products is determined based on the excise duties for diesel fuel in case of the registered sender.

Direct exemptions from excise duty on natural gas or electricity

In order to monitor the cases of granting a direct exemption from excise duty on natural gas or electricity used for the purposes exempted from excise duties, the users will notify the territorial customs authority and send to their suppliers a copy of the respective notification.

• Non-harmonised excise duties

Chargeability in case of products subject to non-harmonised excise duties

Clarifications were brought as regards the chargeability of excise duties on the products subject to non-harmonized excise duties, which are delivered under a consignment agreement.

• The conversion in lei of excise duties

For the conversion in lei of the excise duties expressed in EUR, the Ministry of Finance is required to communicate on its website how the value of the excise duties and the tax on crude oil from domestic production is determined in lei no later than 20th October of each year.

For additional information, please contact:

Venkatesh Srinivasan, Partner – Head of Tax and Legal

Ernst & Young SRL and E. Platis, C. Bazilescu LLLP

15-17 Ion Mihalache Blvd.

Bucharest Tower Center Building, 22nd Floor

Sector 1, 011171, Bucharest, Romania

Tel: (40-21) 402 4000, Fax: (40-21) 310 7124

Email: office@ro.ey.com

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