When the business environment is facing the challenges of the SAF-T reporting, for which the first deadlines are fast approaching (until 31 July 2022, a number of 3,280 companies will have the obligation to file the 406 statement), two other projects undertaken by the tax authorities in the reforms included in the National Plan for Recovery and Resilience become a priority for all companies, earlier than anticipated.
Besides the SAF-T reporting, all categories of taxpayers (large, medium and small) have to comply with two new reporting requirements starting 1 July 2022 – RO e-Invoice and RO e-Transport. These are two projects dedicated to the digitalisation of the tax administration, through which the authorities aim to improve the level of VAT collection and prevent and combat tax evasion in sectors prone to fiscal risk.
„In the case of SAF-T, we appreciate a visibility showed by the tax authorities, which have published a Guideline to help companies in the preparation of the new statement, as well as a list of specific questions and answers. They have also introduced a grace period of 6 months for the first reporting deadline, given the complexity of this new requirement. On the other hand, in relation to the other two new regulations, RO e-Invoice and RO e-Transport, which should be implemented on a mandatory basis in about one month (starting with 1 July 2022), the tax authorities are late in providing clarifications and answers to questions that may arise in practice. Hence, for the moment, there is a long list of questions, but few answers.“, Bianca Vlad, Tax Partner, Mazars Romania.
When looking at the implementation process of the RO e-Invoice system, although the project has been announced in the public space for more than two years, we rather notice a lack of predictability from the tax authorities’ side, who made several amendments to this project. Initially, the system was intended to be applied on a mandatory basis for business-to-government relationship transactions (B2G). Then, it has been decided to be mandatory also for business-to-business transactions (B2B) starting with 1 July 2022 , but for certain high fiscal risk products, while two weeks ago, the legislator surprised us again with other changes that raise additional questions. In this respect, e-invoicing becomes mandatory for B2G transactions as of 1 July, regardless of the type of supply. Furthermore, it has been announced that within 30 days of the date on which Romania obtains approval from the European Commission for the implementation of e-invoicing,The National Agency for Tax Administration (NAFA) will publish an order that will provide the date from which e-invoicing will be applied for all B2B transactions. On the other hand, the emergency ordinance that introduced the obligation of e-invoicing for high fiscal risk products as of 1 July has not yet been approved by law, so companies are not yet sure if or how these provisions will be applied.
Such a project requires implementations at the level of the ERP systems, automated integrations, reshaping of the internal procedures for issuing and receiving the invoices and new validation processes. All of these are difficult and expensive to be implemented in a short term, at a time when businesses have to allocate significant technical, human and financial resources for the SAF-T implementation. Thereby, we noticed that to meet the tax reporting requirements, it becomes imminent for every company to allocate a specialized IT human resource to work closely with the financial and accounting team.
Although such requirements should be observed by the supplier (issuing and sending the invoice using the e-Invoice system), the legislation does not provide any fine for failure to comply with these new provisions. Should there be a risk at the level of the beneficiary if the supplier does not fulfil his obligations and therefore does not issue and send the invoice via the system provided by the Ministry of Finance? May the VAT deduction for the related acquisition be challenged?
At the moment, there is a lot of uncertainty, especially in relation to the flow of invoice communication via this new system, which requires granting access to the Virtual Private Space (SPV) – according to the current functionality of the SPV, this cannot be provided in a restrictive way. Basically, the employee who will have access to the company’s SPV will be able to view all the information existing in the system (e.g. statements submitted, submission proofs, replies to certain requests, etc.). The same challenge arises also in the case of the RO e-Transport system, which can also only be accessed via the SPV. In practice, it is difficult to manage such reporting, for which the data is generally administrated by people in the logistics department. In addition, for this new system, whereby the tax authorities will monitor the transport of goods with high fiscal risk, we do not yet have the application procedure published in the Official Journal, even though significant fines are applicable starting with 1 July.
If we review the list of products for which the e-Invoicing becomes mandatory (vegetables and fruit, alcoholic beverages, clothing and footwear, mineral products and new constructions), we notice a significant impact for retailers. We are talking about transactions carried out in real time, for which customers pay for the goods at the time of purchase, while the invoice represents the document relevant for accounting purposes and VAT deduction. Provided the invoice is compliant only after it is available in the RO e-Invoice system and is subject to several checks, it will be almost impossible to make the invoice available to the customer at the time of purchase. It is clear, that the client has no guarantee that the supplier will subsequently send him a compliant invoice. On the other hand, it is difficult to challenge a reduced degree of taxation in the case of transactions for which the suppliers are obliged to issue tax receipts which, moreover, are sent in real time to the NAFA. However, the legislation does not provide for exemptions for such cases. There is also the dilemma of fiscal receipts on which are mentioned the VAT numbers of the beneficiaries and are, according to the legislation, regarded as simplified invoices. How can these be technically transmitted in the e-Invoice system?
Another issue not yet clarified by the authorities is related to the case when a supplier decides to issue only e-Invoices starting with 1 July, respectively what happens when the supplier sends in the system invoices which contain products not included in the list published by the NAFA. In practice, it is difficult to set up and manage an invoicing system which can issue and send the invoices depending on the tariff codes of the products invoiced.
Beyond the long list of questions for which the business community expects answers from the authorities in the upcoming period, the most important challenge remains to decrease the VAT gap. Will the e-Invoice really restart the Romanian tax system and will the authorities succeed in improving the VAT collection by 5% until 2026 through an instrument as it is currently defined?
Author: Bianca Vlad, Tax Partner, Mazars Romania