Romania. Recent VAT changes and action items. February 2016

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1 Romania Recent VAT changes and action items February 2016

2 VAT Changes in Romania VAT changes most significant The standard rate of VAT in Romania was reduced from 24% to 20% with effect from 1 January It is expected to be further reduced to 19% with effect from 1 January Extension of the domestic reverse charge mechanism to supplies of electronic devices if the goods supplied excluding VAT entered into an invoice is greater than or equal to 22,500 lei (approximately EUR 4,980). Application of the reverse charge mechanism to the supply of buildings, parts of buildings and land. Reporting changes on Form 394 All taxable persons registered for VAT purposes in Romania should submit an informative statement regarding the supplies and acquisitions performed on the national territory (Form 394). Previous version of Form 394 included domestic transactions between taxable persons registered for VAT purposes in Romania. Recent changes to Form 394 are applicable starting with the operations performed in the first quarter of 2016 and are expected to enter into force on 1 April For monthly tax payers January and February forms will be submitted using old version but need to be re-drafted and submitted using the new template once in place. The main impacting changes refer to: Form should be submitted even if no reportable operations were performed during the reporting period Requirement to indicate VAT system applied (normal VAT system or VAT cash-in system) Supplies and acquisitions subject to simplification measures (domestic reverse charge) are reported separately considering the categories of goods (e.g. electronic devices) / services. Taxpayer should identify the code and name of the product. All domestic supplies should be reported, not only the transactions between two taxable persons registered for VAT purposes in Romania. New sections have been added to Form 394 to report transactions carried out with e.g.: Persons not registered for VAT purposes Taxable persons established outside Romania Requirement to report the total number of invoices issued in the reporting period and to split into credit notes, cancelled invoices and self-invoices Please note that this information is based on the released legislation, but the Form 394 has not been provided by the tax authorities yet. EY is actively working together with the tax authorities to clarify some interpretations and obtain answers relevant to our clients. Page 2

3 Form 394 High level overview of the information to be reported AP Acquisitions from VAT registered taxable persons (20%; 9%; 5%); Standard acquisition of goods and services From taxable persons applying cash-in system Subject to reverse charge (e.g. agricultural items; electronic devices; real estate) Acquisitions from Romanian persons not registered for VAT purposes in Romania Acquisitions from taxable persons established outside Romania and not registered for VAT purposes in Romania and that do not have the liability to register for VAT purposes in Romania reverse charge at the beneficiary (20%; 9%;5%) Acquisitions for which a simplified invoice mentioning the VAT ID of the beneficiary was received from: A taxable person applying the standard VAT regime; A taxable person applying the cash in system Acquisitions for which a fiscal receipt that observes the requirements of a simplified invoice and mentions the VAT ID of the beneficiary was received AR Deliveries to VAT registered taxable persons, except simplified invoices (20%; 9%; 5%): Standard VAT regime; Cash in system; Subject to reverse charge (e.g. agricultural items; electronic devices; real estate) Deliveries to Romanian persons not registered for VAT purposes in Romania Deliveries to taxable persons established outside Romania and not registered for VAT purposes in Romania and that do not have the liability to register for VAT purposes in Romania (20%; 9%;5%) Monthly cashing through cash registers and cashing for transactions for which the use of cash register is not mandatory (20%; 9%;5%) Deliveries for which a simplified invoice is issued Mentioning the VAT ID of the beneficiary Not mentioning VAT ID of the beneficiary and for which no fiscal receipt was issued Other info Overall batch of invoices used during the fiscal period at hand, including reversed, cancelled and self-billed invoices In case of VAT refund option exercised through form 300 during the fiscal period the company will have to details the nature of transactions that triggered such refund Different requirements for taxable persons applying the standard VAT regime or the cash in system Other information regarding the specific activities included in a list published by the Romanian tax authorities Sworn statement from the legal representative that the form is correct, complete and in line with the VAT return This is an indicative list of the most relevant types of transaction to be reported and not a comprehensive relation of all the information required. Page 3

4 Form 394 High level file structure Structured Data Non-Structured Data Header (i.e., Type of taxpayer (monthly, quarterly, biannually, annually), tax period) Invoice Data (i.e., Simplified invoices With fiscal receipt Without fiscal receipt) Transaction Data (i.e., VAT registration number Name Tax domicile Contact information) Summary (i.e., Check in boxes indicating the nature of transactions causing the VAT refund position) Page 4

How the changes will impact your business Provide adequate

updates Create awareness of the new procedures People

allow proper reporting for each VAT rate Tax logic

configuration to correctly report the number of invoices and

type of documents Impact ed areas Clearness of master data

system or VAT cash-in system) Verify costumer VAT

services Review tax codes due to a tax rate change Data

In case of external vendor reporting: revisit configuration

5 How the changes will impact your business Provide adequate training to resources about the changes and processes updates Create awareness of the new procedures People Technolo gy ERP system customisation Review tax coding to allow proper reporting for each VAT rate Tax logic adjustments to comply with new requirements Revisit configuration to correctly report the number of invoices and distinguish them from credit notes, cancelled invoices and self-invoices. Explore ERP system functionality to distinguish different type of documents Impact ed areas Clearness of master data to: Identify the system applied by the supplier (normal VAT system or VAT cash-in system) Verify costumer VAT registration number Identify categories of goods and services Review tax codes due to a tax rate change Data Processe s In case of in-house reporting: processes changes In case of external vendor reporting: revisit configuration Process to create new data in the system (e.g. new products, new vendors, new customers) Processes to perform daily activities related to the simplified regimes Page 5

Action items Compliance readiness EY can help Technology Data Customise IT systems used for reporting in Form 394 Verify the correct setup and configuration of tax logic in company's ERP to issue

solutions and compare them considering your company s specific requirements Processes What EY TPA can do Validate Customers, Product and Vendors Master Data inside of ERP Verify data flow through to

6 Action items Compliance readiness EY can help Technology Data Customise IT systems used for reporting in Form 394 Verify the correct setup and configuration of tax logic in company's ERP to issue compliant reports and addressing potential issues Verify accuracy of tax code allocation to VAT transactions within ERP If needed, identify different external vendors for indirect tax reporting solutions and compare them considering your company s specific requirements Processes What EY TPA can do Validate Customers, Product and Vendors Master Data inside of ERP Verify data flow through to reporting database Review tax codes Provide a list of key information needed to correctly populate Form 394 People Define adequate processes for reporting in Form 394 and also high level roles and responsibilities in the tax compliance process Prepare training materials Deliver people training Communicate with the tax authorities when necessary to understand the new requirements Prepare informative materials about changes in Form 394 Page 6

7 Implementation Approach UNDERSTAND THE CHANGES - Translate tax requirements into IT requirements GATHER THE RIGHT DATA - Support with data extraction IMPACT ANALYSIS - Assessment of what types of transactions need to be reported - Data analysis (source and quality of the data) - Determine level of effort CREATE THE REPORT Page 7

8 EY s approach for different types of clients Clients with highly customised ERP systems Clients using local software and willing to make the changes themselves Clients outsourcing their compliance to EY IT firms providing local ERP solutions to Romanian businesses EY can assist clients with the customisation of their own ERP system SAP solution to be released in February EY can assist clients providing a list of key information they need to have the form correctly populated and translate tax requirements into IT requirements EY can provide clients with a list of data they need in their system so they can provide EY with the required information to populate the report EY can assist IT clients to update their software to provide solutions to their customers Page 8

For more information, contact: Jean-Marc Cambien

9 For more information, contact: Jean-Marc Cambien Partner Indirect Tax Romania Frank Cambie Partner Tax Performance Advisory frank.cambie@be.ey.com Robin Maxwell Executive Director Global Compliance & Reporting Indirect Tax Robin.Maxwell@ie.ey.com Page 9

10 EY Assurance Tax Transactions Advisory Ernst & Young LLP 2015 Ernst & Young LLP. Published in the UK. All Rights Reserved. The UK firm Ernst & Young LLP is a limited liability partnership registered in England and Wales with registered number OC and is a member firm of Ernst & Young Global Limited. Ernst & Young LLP, 1 More London Place, London, SE1 2AF. ey.com

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