| Background |
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| Romania 's EU accession will entail the alignment of our domestic legislation to the EU VAT law (the 6th Directive). Accordingly, substantial changes to current national VAT law will be introduced in Romania , as well as to the interpretation of, prima facie, the compliant law with respect to more than 50 years of case law of the European Court of Justice. |
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| The impact of the EU accession over the Romanian business cannot be neglected anymore. Businesses will have to analyse their operations, identify potential risks and opportunities arising from the complex EU rules and prepare for the challenges of EU accession. |
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| Intra-community transactions |
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| By eliminating customs barriers, current “import” and “export” regimes will no longer exist with regard to transactions with goods between Romania and EU member states and will be replaced by the EU VAT system, comprising intra-community supplies and acquisitions. |
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| Thus, for intra-community supplies no Romanian VAT will be applicable, provided that the supplier has a suitable proof of transportation and a valid VAT number of the beneficiary. For intra-community acquisitions the Romanian VAT will be applied through reverse-charge mechanism, by registering the VAT as both input and output VAT. |
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| In addition, EU VAT system will bring complex regulations with regard to, among others, VAT registration, movement of stocks between different EU countries, triangular and chain transactions, distance sales, intra-community acquisitions by non VAT payers, etc. |
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| New administrative requirements |
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| Although having positive consequences, the management of Romanian companies should be aware that these new rules, (such as improved transportation of goods, new logistic planning and cash flow savings), create a series of administrative burden that should be estimated and budgeted as accurately as possible. These costs arise first of all from the obligation of filling the documentation required by the VAT European legislation (Intra-stat declarations, EU Sales lists and other supplementary documentation for justifying the zero VAT rate applicable to intra-community supplies, as well as supplementary information for completing the VAT return). |
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| In order to fulfil these obligations Romanian companies must be able to collect and extract relevant data, which means important changes in the accounting and IT systems of the companies. Also, companies should train staff in logistics and finance departments to quickly adapt to the requirements of European legislation and to avoid unforeseen costs related to the obstruction of logistics flows and fines for not fulfilling VAT obligations. |
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| In addition to the new EU VAT system regulating the flow of goods between the Member States, the implementation of the VAT EU legislation will bring other major changes, such as: |
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| VAT adjustment for capital goods |
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| The new legislation will stipulate complex rules for the adjustment of the VAT deduction right in case of capital goods, which can impact the companies in a favourable way or not. |
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| Real estate transactions |
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| The increase in real estate transactions noticed in recent years will be supported by the introduction of VAT exemption for sales and purchases of old buildings (affecting mostly the private market segment not corporate), as well as for real estate leasing operations. VAT exemption for these operations is not compulsory, companies being able to exercise the option for taxing such transactions. |
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| Simplified invoicing measures |
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| The EU accession will bring positive changes in respect of procedure of issuing and archiving of invoices. The good news is that standard fiscal invoices will disappear as companies will be allowed to issue invoices in their own format by respecting a minimum of requirements. Also, the Romanian companies will have the possibility to issue electronic invoices and also to archive them in an electronic format. |
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| Business transfer |
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| Starting 1 Ian 2007 a significant improvement is expected in the level of cash flows for companies selling their businesses or part of them since such transactions may no longer be subject to VAT regardless of the form of transfer. Currently, this provision exists only in respect of transfers resulting from mergers and acquisitions. |
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| VAT planning opportunities |
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| Beyond the compulsory VAT changes imposed by the EU legislation, other important opportunities will arise for the Romanian business environment in the VAT field, such as: VAT Grouping, VAT warehouses, simplification measures . |
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| How we can help you? |
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| In order to prepare companies operating in accession countries for changes relating to integration with the EU, our VAT team offers comprehensive advisory services covering interpretation of the 6th Directive, instructions and rules for harmonising national VAT law with the 6th Directive, and how it affects specific companies and industries. |
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| Our VAT professional services include: |
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Review and analysis of structures relating to VAT and analysis of individual transactions for their |
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compliance with EU regulations, taking into account the specific issues for your business (t ypes of transactions subject to VAT, t he place where the VAT obligation arises, t he basis for the VAT assessment, VAT rates, exemptions from VAT, t he right to deduct input VAT, r efund of VAT, o bligations of entities liable to pay VAT, s pecial schemes, simplification measures, EU case law). |
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Identifying the tax risks and tax savings opportunities under the EU legislation |
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Developing tax-effective solutions for optimising VAT transactions in compliance with EU |
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legislation (ex. VAT grouping, VAT warehouse). |
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VAT Compliance - a service that consists of the periodical review of tax records, review and/ or |
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preparation of tax returns and supporting documents in order to ensure compliance with formal national and EU requirements. |
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Supporting companies in their discussions with representatives of national and EU |
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Administrations. |
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| For further information please contact one of our experts in the enclosed listing or your usual PricewaterhouseCoopers representative. |
