Situation: A company in Romania, ABC SRL, not paying VAT, without a special VAT code, receives a commission invoice (services) for sales made on a platform owned by Alfa Hungary. What is the tax treatment of this invoice?
Solution:
First of all, it is important to point out that, for the service contract concluded with Alfa Hungary, ABC SRL was obliged to register for VAT purposes under the special regime according to Article 317 because it knew that it was going to benefit from the services provided by Alfa.
Thus, the acquisition of commission services carried out by a supplier with a place of business or a fixed establishment in a Member State, represents for the beneficiary in Romania intra-Community acquisitions of services taxable in Romania for VAT purposes as defined by the implementing rules of Article 278 paragraph (2), point 15 and paragraph (13):
“Services to which the provisions of Article 278 paragraph (2) of the Tax Code apply, benefiting taxable persons established in Romania and which are provided by a taxable person supplier who is not established in Romania, have the place of supply in Romania, being applicable the VAT rates provided for in Article 291 of the Tax Code or, as the case may be, the VAT exemptions provided for in Article 292, 294, 295 or 296 of the Tax Code. Where the supplier is a taxable person established in another Member State, the recipient taxable person established in Romania makes an intra-Community acquisition of services which shall be declared in the recapitulative statement provided for in Article 325 of the Tax Code, if the service is not tax exempt.”
For these services, the beneficiary in Romania who is not registered for VAT purposes under the normal VAT regime as provided for in Article 316, actually owes VAT in Romania by applying the standard VAT rate of 19% on the VAT taxable base determined in lei by using the BNR lei/euro exchange rate in force on the date of the invoice issued by the intra-Community supplier.
It is important to note that the services are taxable in Romania because the place of supply is considered to be in Romania according to the provisions of Article 278 paragraph (2), which specifies that the place of supply of the service is considered to be the place where the beneficiary, the taxable person, is established.
For the services purchased, VAT is due in Romania according to the provisions of article 307 paragraph (2) of the Fiscal Code “(2) The tax is due by any taxable person, including by the non-taxable legal person registered for VAT purposes according to article 316 or 317, who is the beneficiary of services which are supplied in Romania according to Article 278 paragraph (2) and which are supplied by a taxable person who is not established in Romania or is not considered to be established for the supply of those services in Romania according to Article 266 paragraph (2), even if he is registered in Romania according to Article 316 paragraph (4) or (6). “
The company in Romania must report intra-Community purchases of services in the VIES system through the summary declaration code 390 VIES.
In order for the reporting to be possible, the beneficiary in Romania, under the special exemption scheme governed by Article 310 “Special exemption scheme for small enterprises” is obliged to register for VAT under the special scheme according to the provisions of Article 317 “Registration for VAT purposes of other persons making intra-Community acquisitions or for services” paragraph (1)(c), before making the first intra-Community acquisition of services, regardless of its value.
“(1) He shall be required to apply for registration for VAT purposes in accordance with this Article:
(c) a taxable person who has established his business in Romania, who is not registered and is not obliged to register under Article 316 and who is not already registered under point (a), (b) or (d) or paragraph (2), if he receives from a supplier, a taxable person established in another Member State, services for which he is obliged to pay tax in Romania under Article 307 paragraph (2), before receiving those services”
In view of the above, VAT registration is carried out because the intra-Community supplier considers the service not taxable in his Member State, but taxable with the beneficiary in Romania who has communicated a valid VAT code in the VIES system.
By communicating a valid VAT code assigned by the Romanian tax authority, the beneficiary in Romania assumes responsibility for paying VAT in Romania for the service received.
Thus, the beneficiary in Romania is obliged to actually pay the VAT to the Romanian state budget, the tax base and the VAT amount due being reported through the special VAT declaration code 301.
VAT registration is also required for access to the VIES system for reporting the intra-Community acquisition of services from an intra-Community supplier registered for VAT purposes in his Member State. The report is made through the recapitulative statement code 390 with the symbol S.
It is important to note that the VAT registration code assigned under Article 317 of the Fiscal Code does not confer on the taxable person the status of a person normally registered for VAT purposes, but is used only for intra-Community acquisitions of services and only for the purpose of reporting their value in the VIES system by means of the recapitulative statement code 390 VIES with symbol S.
According to Article 318, paragraph 4, letter b), the VAT code thus obtained from the Romanian tax authority in accordance with Article 317 of the Fiscal Code must be communicated to the supplier before the contract begins.
Upon receipt of the monthly invoices for the services rendered by Alfa, the beneficiary in Romania has the following obligations:
- tax: to submit form code 301 “Special VAT declaration” completed in section 4 entitled “Transactions referred to in Article 307(2), (3), (5) and (6) of the Tax Code”, with reference to subsection 4.1 “Intra-Community purchases of services for which the beneficiary is liable for VAT under Article 307(2) of the Tax Code”;
- for information: to submit form code 390 VIES, with symbol S, using the VAT code of the supplier in Ireland entered on the invoice received.
In each of the two declarations, the beneficiary shall enter the VAT code obtained under the special scheme in accordance with Article 317, preceded by the RO prefix.
The actual payment of the VAT due shall be made on or before the 25th day of the month following the month in which the intra-Community acquisition of services took place.
The amount of VAT due is determined by applying the standard VAT rate of 19% to a tax base determined in RON using the exchange rate of the National Bank of Romania in force on the date of the invoice issued by each supplier, the invoice date being considered the VAT due date (the date on which VAT is due to the Romanian tax authority).Given that the beneficiary under the special exemption scheme governed by Article 310 cannot exercise the right to deduct the amount of VAT due and actually paid, he reincludes the purchase cost of the services by the amount of VAT paid.
Basically, Alfa Hungary did the right thing by issuing the invoice with VAT collected for Hungary because it treated the recipient in Romania as a non-taxable person for VAT purposes, but this does not mean that the recipient in Romania is exempt from paying VAT in Romania.
The recipient in Romania owes VAT in Romania by applying the standard VAT rate on the VAT taxable amount to the amount of VAT collected by the supplier in Hungary.
It should be emphasized that if the taxable person in Romania continues to perform the contract with Alfa Hungary, this company is obliged to register for VAT purposes under the special regime according to the provisions of Article 317 because for the service received it owes VAT to the Romanian tax authority.
Legal basis:
– Fiscal Code (approved by Law no. 227/2015, published in the Official Gazette no. 688 of 10.09.2015), as amended and supplemented;
– Tax Procedure Code (approved by Law no. 207/2015, published in the Official Gazette no. 547 of 23.07.2015), as amended and supplemented;
– Methodological Norms for the application of the Tax Code (approved by Government Decision no.1/2016).