Romania’s fiscal changes bring new costs for companies

With VAT payment for collected invoices coming into force next year, companies with a turnover below EUR 500,000 need to invest in IT and staff training to implement it correctly. Meanwhile, the authorities are scrutinizing transfer pricing operations in a bid to attract fresh resources to the budget.

By Ovidiu Posirca

These were some of the pronouncements made during the Transfer Pricing & New VAT Cash Accounting System workshop, organized by Business Review last week.

The fiscal agency ANAF has stepped up its scrutiny of transfer pricing cases, collecting an additional RON 66.6 million (EUR 15 million) in tax last year. This was in the form of interest and penalty payments made by companies whose transfer prices were adjusted, said Otilia Bujor, tax manager at PKF Finconta, the fiscal consultancy.

Affiliated companies use transfer pricing for the transaction of goods, services or use of property within the group. The authorities need to make sure these operations are made at market prices, so that national budgets can get their fair share of taxes. However, filing the right prices remains a challenge.

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The tax manager added that multinational companies are trying to reduce some of the general fiscal burden of their groups, while the fiscal authorities want to collect the right amount of tax under their jurisdiction.

“There isn’t a formula for a transfer pricing file not to be adjusted in the event of an inspection,” said Bujor. Companies that fail to present this file can be fined up to RON 12,000 (close to EUR 3,000). Most of the time, authorities estimate the prices and tax the additional profit.

Companies with a reasonable profit margin don’t run a real risk in these operations, but they should make sure they have market level prices, said Alin Irimia, director in the transfer pricing – risk analysis general directorate at ANAF.

“The scrutiny of transfer pricing has increased and the performance indicators from these operations are very good,” said Irimia. He added that ANAF was able to generate 12 percent of the additional resources (collected taxes) by using 1 percent of its own resources. He said the fiscal agency may get additional funding in this area.

Changes in VAT chain for small firms

Companies that generated a turnover of less than RON 2.25 million (EUR 500,000) in the previous year and new ones need to implement the VAT chargeability when invoices are collected or within 90 days of the invoice having been submitted, according to Mariana Vizoli, director in the department for VAT legislation at the Ministry of Public Finance.

Non-residents who are registered as VAT payers in Romania and residents that are part of a VAT group are exempt from this system. Certain cash operations and reverse taxation operations are among the areas where it doesn’t work.

Companies need to make changes in their accounting tools, including the sales journal, advised Florentina Susnea, partner at PFK Finconta.

Training employees in the new regulation and the identification of the clients or suppliers that use the new system are the first steps that companies need to take, stated Mihai Popa, tax consultant at PKF Finconta. He also mentioned the revision of contracts and the payment terms of invoices along with updates in the IT system.

Companies are obliged to mention on their invoices that they use the new VAT system and should separate them based on the payment method used, be it cash or bank transfer.

Furthermore, firms should be informed when they go over the EUR 500,000 threshold mentioned in the law.

Popa added that companies need to use a tracking system that informs them if a certain supplier switches to the old VAT system.

In addition, suppliers need to be separated depending on the VAT regime they use. The same applies with invoices.