E-Invoice - the Next Step towards Fiscal Digitalization in Romania

How prepared are Romanian companies to implement the RO e-Invoice system starting from January 1, 2024? What are the uncertainties in the preliminary phase of transitioning to the new system? What are the implications for companies not currently enrolled in the RO e-Invoice system? What results do tax authorities expect following the implementation of e-Invoice? Furthermore, what is the practice in other EU member states regarding e-Invoice? These were the main topics discussed in the webinar organized on Tuesday, August 22, 2023.

At the end of July, the Council of the European Union granted Romania the derogation to adopt mandatory electronic invoicing, a decision applicable from January 1, 2024, to December 31, 2026. Consequently, the RO e-Invoice system could become mandatory on a widespread level, starting from January 1, 2024, for transactions between companies established in Romania.

“Nowhere have we seen a more accelerated transformation of fiscal reporting into a digital format than in Romania. SAF-T, RO-transport, e-Invoice for goods with high fiscal risk, and the B2G channel – and now we are waiting for the next steps toward widespread B2B electronic invoicing,” noted the webinar moderator, Georgiana Iancu, Partner, Coordinator of Indirect Taxes and Fiscal Digitalization Practice at EY Romania.

While awaiting national legislation, there are several aspects for which clarifications are expected from authorities. These include the date when e-Invoice will be adopted, whether the reporting of invoice data through the current RO e-Invoice platform for goods with high fiscal risk will be extended to a widespread level, or if the RO e-Invoice platform will be adopted as the sole invoicing channel from the outset. Consequences of non-compliance (VAT deduction, potential violations, or incentives for compliance) and whether phased implementation is considered are other significant aspects for which the business environment awaits clarification through upcoming legislation.

In line with the derogation received by Romania from the EU Council, the expected direction is that the only message qualifying as an invoice will be the one electronically transmitted through the RO e-Invoice system. On the other hand, given Romania’s limited three-year timeframe for the widespread implementation of e-Invoice, an alternative approach could be the implementation (possibly during a transition period) of a system where data from issued invoices are reported through the RO e-Invoice system (as currently done for goods with high fiscal risk), allowing suppliers to communicate their invoices to clients through the agreed commercial channel.

Iulian Ardeleanu, Director General of the General Directorate for Fiscal Legislation and Customs and Accounting Regulations at the Ministry of Finance, who participated in the EY webinar, reiterated that, starting from 2024, Romania will definitely apply one of the two variants.

The experience of e-Invoice implementation across the EU has shown various situations. Italy was the first country to implement e-Invoice, followed by Poland, France, and Germany. Italy accomplished this in less than a year, while other states took about two years. Germany obtained the same derogation from the EU Council as Romania did, with the proposed implementation timeline being 2026.

“Regarding the generalized implementation of B2B e-Invoice, it’s important to look at what other EU member states have done. Italy, Poland, and France have already begun the process of adopting e-Invoice on a widespread level, while Romania and Germany have just obtained the derogation from the EU Council. Analyzing the best practices regarding e-Invoice within the EU should contribute to establishing an efficient system as we transition to widespread e-Invoice. The main observed directions are the time taken by countries for e-Invoice implementation, ranging from 9 months to 2.5 years, and phased implementation based on taxpayer categories – France, Poland, Italy. Additionally, e-Invoice as the original document for domestic transactions,” commented Georgiana Constantin, Senior Manager of Indirect Taxes at EY Romania.

Concrete aspects of widespread e-Invoice implementation, detailed together with representatives of the authorities, relate to the objectives of e-Invoice, the implementation period and manner, implementation schedule, stages, and implications in case of non-compliance with e-Invoice deadlines.

“The main objective for authorities in transitioning to the e-Invoice system is to prevent and combat fraud, as it will enable us to identify all discrepancies in the data reported by taxpayers and intervene in real-time for remediation. Equally important is the objective of increasing tax transparency, particularly in public procurement. The implementation of the e-Invoice system is beneficial for both parties – authorities and the business environment, which will have a very effective tool at their disposal for interactions with the state and other business partners,” explained Iulian Ardeleanu, Director General of the General Directorate for Fiscal Legislation and Customs and Accounting Regulations, Ministry of Finance.

Electronic invoicing should significantly contribute, not just in Romania but at the international level of fiscal administrations, to reducing the VAT gap and improving risk management capabilities.

“Regarding early detection of fraud schemes, discussions on e-Invoice with Romanian fiscal administration representatives and EU-level discussions for the adoption of the ViDA package – VAT in the digital era, show a concern to create a link between goods/services, invoices, and payment,” concluded Georgiana Iancu.

“ANAF ensures public expenditure through efficient collection, for which we need a digitized fiscal administration. The electronic invoice is just one part of the entire fiscal digitalization effort. Within the content of the invoice, we find valuable data about taxpayers, amounts to be collected, goods to be delivered – crucial information for our collection activities. We aim to become the most efficient tax agency in the EU. We’re striving to create a taxpayer profile, with assets on the left and tax obligations on the right, ensuring a perfect balance between them,” mentioned Antoine Avram, Director General of the Information Management Unit at the National Agency for Fiscal Administration (ANAF).

During the EY webinar, the survey conducted at the end of June 2023 was relaunched to gauge the readiness of Romanian companies to adopt e-Invoice. Thus, 83% of respondents stated they are not ready to apply generalized electronic invoicing by January 1, 2024.

“The e-Invoice project conceptually began in 2020, with various activities conducted in early 2021. It gained momentum in November 2021, when the RO e-Invoice platform became available to economic agents. The details supporting electronic invoicing can be found on both the ANAF and Ministry of Public Finance websites, where there is also a link to asro.ro, allowing free downloading of the European e-Invoicing standard that underlies the RO e-Invoice,” pointed out Albert Fruth, Head of the Strategy and IT Office at the Information Management Unit, ANAF.

When asked about a reasonable timeframe for compliance with electronic invoicing rules through the RO e-Invoice platform from the date of legislation publication, companies indicated the following: 25% of respondents could comply within 6 months. However, the majority need more time, with 45% of companies needing 6 months to 1 year, and 25% needing 1 to 2 years.

“New companies that need to comply will require investments in new IT systems and staff training. Similarly, the authorities will need resources to effectively prepare for the enrollment of companies. We are considering whether this process should be done in stages to efficiently integrate e-Invoice into Romania’s fiscal system. Currently, there are no penalties for those who don’t achieve perfect compliance because our interest is to have as many companies in the system as possible,” added Iulian Ardeleanu, Director General of the General Directorate for Fiscal Legislation and Customs and Accounting Regulations, Ministry of Finance.

Regarding a grace period, the fact that e-Invoice implementation will begin next year has been announced by the authorities for two years now.

“The business environment was informed that we requested derogation from the European Commission and obtained it, for the period from January 1, 2024, for three years. Thus, the issue of a grace period in transitioning to this system no longer arises. In the meantime, to facilitate reporting for companies, we are exploring options like pre-filled declarations, such as VAT returns, among others,” further explained the MF representative.

Few companies would require more than 2 years, only 5%, down from 20% as indicated in the survey conducted by EY at the end of June 2023.

“This might mean that once the EU Council favorably advised Romania’s derogation, companies already started analyzing and making efforts to comply with the new invoicing requirements. In conclusion, the main insight from the webinar, with the participation of our guests from the Ministry of Finance and ANAF, is that as we move towards widespread e-Invoice in line with the derogation granted by the EU Council, e-Invoice becomes the sole exemplar supporting VAT deduction. This is of major importance for companies. Therefore, I recommend that companies treat e-Invoice implementation not only from an IT solution perspective but consider all fiscal implications, as well as commercial aspects, and conduct a detailed business analysis starting from the electronic invoicing standard,” concluded Georgiana Iancu at the end of the webinar.

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