Financial and tax reporting are becoming increasingly complex and sophisticated. In the context of continuous digitization and the growing shift towards technology, Romania has also taken measures in recent years to modernize the systems of the National Tax Administration Agency (ANAF), focusing on real-time information exchange between ANAF and taxpayers.
By Camelia Malahov, Director; Andreea Vlad, Manager; and Crinu Pavelescu, Senior Consultant, Direct Taxation, Deloitte Romania.
However, are the management accounting systems used by companies prepared for this technological advancement? Or are additional investments necessary from both technology companies and taxpayers to keep up with these new changes and legislative requirements?
The introduction of the obligation to report through the Standard Audit File for Tax (SAF-T) is one such measure adopted by Romanian authorities in early 2022, initially for large taxpayers. SAF-T was designed to standardize the transfer of information between tax authorities and taxpayers and, beyond the monthly declaration of tax obligations, also involves detailed annual reporting of fixed assets.
From the experience of a year and a half since SAF-T implementation, it has emerged that the information requested by authorities is often not easily extracted from current accounting systems, and adjustments or additional modules are typically needed, requiring financial resources and time.
Through this reporting on assets, taxpayers must provide a complete and accurate picture of the fixed assets they own, enabling tax authorities to efficiently verify tax compliance. This involves detailing the value, categories, and movements of assets, including processes such as acquisition, depreciation, or sale.
Reporting of fixed assets is done annually, by the date of submitting financial statements.
Legal Requirements vs. Practical Aspects
The SAF-T reporting module includes two subsections. The asset subsection is essentially a transcription of the fixed asset register existing within a company during the reporting period. Information requested for reporting includes the asset’s name, initial value, annual depreciation, or depreciation period, for each individual asset. It is important to note that through declaration 406, these accounting information related to assets is required, and from a tax perspective, there is an obligation to report the asset classification code from the “Catalog of Classification and Normal Operating Durations of Fixed Assets,” according to Government Decision 2139/2004.
Furthermore, this subsection also includes specific details such as the inventory number of the asset (representing a unique identification key), additions, modernizations, as well as transfers from one management to another or from one accounting account to another.
However, while some information can be found in the accounting systems of companies and can be easily extracted, for others, various manual adjustments of source files or manual preparation of complementary files are required. For example, information regarding the tax classification code of the asset is found in national legislation and cannot be automatically extracted from the accounting system, thus this element needs to be added later in the report. The fact that these files require manual adjustment consumes time and can lead to errors in SAF-T reporting if information is incomplete or missing.
In the transactions with assets subsection, information related to the unique identification of the transaction, the number of the accounting note generated by the reported movement, the unique identification number of the asset, as well as value information regarding the assets (e.g., net book value), must be reported.
Information in this subsection is usually reported based on the journal register. However, there are cases where this accounting file only partially includes the requested information or it is highlighted only at the asset class level. An example of this is depreciation, which is usually presented in the journal register at the asset class level, not individually per asset, as required by ANAF.
Additionally, in the case of net book values or gains/losses resulting from sale or revaluation, after consulting internal sources, in addition to the journal register, other methods may be needed to obtain information, such as additional calculations or extracting information from various other sources – sales registers or revaluation reports, which complicates the reporting process.
Thus, taxpayers need to be aware of the importance of correctly and completely reporting the information requested through SAF-T, especially in the case of asset reporting, as this information is collected from multiple sources, some of which are the result of manual operations.
In conclusion, implementing SAF-T for assets can be a complex and demanding task, requiring significant efforts from taxpayers to ensure compliance. Accounting systems must also provide the capability to extract information requested by authorities without involving manual operations, which can lead to errors and, consequently, incorrect reporting.