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Changes to VAT Rules in 2010

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Government Emergency Ordinance No.109/2009, amending and supplementing Law No.571/2003, regarding the Tax Code, has been published in Monitorul Oficial al Romaniei on 13 October 2009.
This legislative act contains new amendments to the national VAT legislation, aiming at harmonizing it with the Community legislation on the value added tax (i.e. Council Directive 2008/8/EC, Council Directive 2008/9/EC and Regulation (EC) No.143/2008). Such amendments will become effective as of 1 January 2010.  

The first implementation stage starts on 1 January 2010, being materialized in the Romanian legislation through the application of the following measures:  

a.       Change in the place of supply of services  

In compliance with the new legislative provisions, in order to establish the place of supply of services it is important to identify the capacity of the beneficiary of services (i.e. whether the beneficiary is a taxable entity or a non-taxable entity). Therefore:  

·         the general rule is that the place where services are subject to taxation is the place of consumption;  

·         services rendered to beneficiaries that are taxable entities shall be taxable at the place where such beneficiaries are established;  

·         services supplied to beneficiaries that are non-taxable entities shall continue to be subject to taxation at the place where the supplier is established.  

Nevertheless, the legislation applicable in 2010 contains several exceptions from the general rule regarding the place of supply of services covering, inter alia, services related to immovable property and intra-Community transportation of goods, as well as electronic services.  

b.      New obligations of reporting on intra-Community services  

As an outcome of the change to the rule referring to the place of supply of services, a new obligation occurs with regard to the insertion of further data in recapitulative statements. Consequently:  

·         any taxable entity registered for VAT purposes shall have the obligation to submit monthly the recapitulative statement by the 15th of the month, following the month in which the tax becomes due and payable, instead of submitting it quarterly as is currently required;  

·         recapitulative statements shall also be submitted to the relevant authority with regard to the supply/acquisition of services to or from taxable entities established in other EU Member States for which the place of supply is determined in accordance with the general rule and for which VAT becomes due and payable in the respective calendar month;  

·         it is only the services which are subject to taxation in the beneficiary’s Member State that shall be included in the recapitulative statements.  

c.       New system of VAT refund to taxable entities acquiring goods and services in a Member State other than that in which such entities are established  

Taxable entities may electronically submit their application for VAT refund directly in the Member State in which they are established.  

Such application shall be submitted within nine (9) months of the end of the calendar year in which the VAT has become due and payable, instead of the currently provided six (6) month term. In addition, tax authorities shall handle the applications for VAT refund within four (4) months of the application date, instead of six (6) months. Should tax authorities fail to observe the aforesaid term, they shall pay penalties.  

Since companies have a rather short time to react to all contemplated changes to the VAT rules, they must duly assess the impact of these changes on their transactions. Such assessment will help them avoid the risk of failing to apply the VAT to some of their operations. To this end, tax advisory firms can be an effective support for companies to comply with the new rules.  

Adrian Teampău
Senior Consultant  

Tax Advisory Services  

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