Sanctions applicable for non-compliance with the RO e-Invoice reporting system

The law that extends the RO e-Invoice reporting system to all taxable operations conducted in Romania, starting from January 1, 2024, has been promulgated by the President of Romania and will be published in the Official Gazette (Law no. 296/2023 on certain fiscal-budgetary measures to ensure Romania’s long-term financial sustainability).

By Ana Săbiescu, Director, Indirect Taxation, Deloitte Romania, and Emanuel Bondalici, Senior Managing Associate, Reff & Associates | Deloitte Legal

Thus, companies established in Romania or non-residents registered for VAT purposes in our country will be required to report all invoices issued for taxable operations in Romania in the RO e-Invoice system by three important deadlines: January 1, April 1, and July 1, 2024. After this last deadline, for companies based in Romania, electronic invoicing remains the only legal method of issuing invoices.

The intermediate deadline, April 1, 2024, is crucial because from that date sanctions for non-compliance with the RO e-Invoice reporting system can be applied, and they are significant. On one hand, failing to transmit the invoice to the RO e-Invoice system within five working days from the date of issuance (a report valid until June 30, 2024, for Romanian companies and indefinitely for non-residents with a VAT code in Romania) is punishable by a fine ranging from 5,000 to 10,000 lei for large taxpayers, 2,500 to 5,000 lei for medium taxpayers, and 1,000 to 2,500 lei for small taxpayers and non-residents.

On the other hand, starting July 1, 2024, a taxable person established in Romania, who receives and records a traditional invoice, issued on paper or through other electronic variants by economic operators established in Romania, that was not electronically issued (in XML format with the seal of the Ministry of Finance), is fined an amount equal to the VAT recorded on the invoice. For non-resident taxpayers registered for VAT purposes, only the penalty for non-compliance with the RO e-Invoice reporting remains valid even after July 1, 2024.

Unclear aspects related to the amount of fines

The fines stipulated by the normative act raise several questions, both regarding their applicability and certain principles. First, the law expressly states that in case of breaching the obligation to transmit (report) the invoice in the RO e-Invoice system, the article from OG no. 2/2001 on the legal regime of contraventions, which allows payment of half of the minimum fine within 15 days from receiving the contravention report, does not apply. Practically, the fine imposed by the fiscal body (up to 10,000 lei) must be fully paid by the taxpayer.

However, although the new legislation expressly states that the fine imposed from July 1, 2024, calculated in relation to the VAT on the invoice, deviates from the maximum contravention fine provided by OG no. 2/2001 (i.e., 100,000 lei), it does not prohibit the possibility of paying half of the minimum fine set by law. Therefore, the text is ambiguous and will create difficulties in application. In a strict interpretation, a taxpayer fined an amount equal to the VAT of the invoice they recorded without ensuring it was electronically issued should be able to pay only half of the fine within 15 days from receiving the sanctioning report. In the absence of an express specification in this regard and without a practice in the field, it is debatable whether the tax authority will accept only 50% of the established amount.

Another question concerns the accumulation of fines for not reporting invoices in the RO e-Invoice system. Specifically, it is uncertain whether the fine applies to each unrecorded invoice in the RO e-Invoice system or to a batch of invoices loaded into the system. Also, the maximum amount is unclear. In this case, the legal text is ambiguous – on one hand, it provides that the penalty applies for not transmitting the invoice “within five working days from the date of issuance”, and on the other hand, the general text provides for the obligation to upload invoices (in plural) in the RO e-Invoice system. However, beyond the ambiguity of the text, the fine should not exceed twice the maximum fine. This aspect results from OG 2/2001, according to which, if the contraventions were ascertained by the same report, the sanctions accumulate, but the final sum cannot exceed twice the maximum fine (the highest of them). In addition, if a person commits several contraventions, and these are ascertained by the same agent, only one report is drawn up. The tax authority’s practice should confirm this approach, as the tax authority, during an inspection, checks a longer period, not just one operation or the activity of one day. Theoretically, multiple daily inspections could be carried out, and for each day, a sanctioning report could be issued. But such an approach would be at least unique in the practice of inspections in recent years.

Furthermore, the number of invoices recorded in the RO e-Invoice system should also be treated as an indication of the taxpayer’s compliance with legal provisions. Thus, a simple omission to report an invoice or a few invoices by a taxpayer who complies with this obligation for most invoices should not be punishable by a fine but by a simple warning.

Risk of double taxation

The deficient manner in which the law is drafted and all the deficiencies highlighted above raise issues of legality. Any law must be clear and predictable. However, the numerous problems that may arise from applying the above sanctions indicate that the regulation of these fines contradicts these principles. In practice, a taxpayer will find it difficult to comply and anticipate the tax authorities’ reaction.

Moreover, a fine established concerning the VAT on the invoice is certainly disproportionate to the gravity of the act. This aspect is especially criticized by the Court of Justice of the European Union (CJEU), which emphasized in several decisions the arbitrary manner of a member state applying sanctions (Ecotrade, C-95/07 and C-96/07, Farkas C-564/15). Also, the sanction is not uniformly applicable, considering that certain operations may be exempt from VAT (even if issuing the invoice is optional), and would lead to double taxation since companies that accept non-compliant invoices (not electronically issued) will also lose the right to deduct VAT for those purchases.

Most likely, numerous litigations will arise on this aspect, either invoking an exception of unconstitutionality or making a preliminary referral to the CJEU.

In conclusion, taxpayers targeted by the RO e-Invoice obligation should start preparing as soon as possible to meet the deadlines set by law.

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