Situation:
A VAT-liable company has its VAT code cancelled ex officio. The company also provides services during this period and invoices them with VAT. In the meantime, the company applies for reactivation of its VAT code.
For the period during which the company was no longer a VAT payer, can the VAT on the services be deducted?
Solution:
After the supplier’s re-registration for VAT purposes, the procedure leading to the reactivation of the VAT code previously cancelled ex officio indicates that the beneficiary can exercise the right of deduction only after the supplier has issued an invoice correcting the invoice initially issued during the period when the VAT code was cancelled ex officio.
Thus, the supplier must comply with the provisions of point 5^1, paragraph 2(b) of section 2^1 “Special rules for the application of VAT”:
“(2) After registration for tax purposes according to Article 316, paragraph (12) of the Tax Code, the taxable person must issue invoices in which the value added tax collected on taxable supplies of goods/services made during the period in which they had their VAT registration code cancelled, which is not recorded in the tax return submitted according to Article 323 of the Tax Code, in the section “Value added tax collected”. Depending on how they acted during the period in which they had their VAT registration code cancelled, the following situations are distinguished:
(…).
- b) the taxable person has collected VAT on taxable transactions, i.e. has submitted the declaration of collected value added tax payable under Article 11, paragraphs 6 and 8 of the Tax Code, and has issued invoices. In this situation, after re-registration for VAT purposes, the taxable person must issue correction invoices in accordance with Article 330, paragraph (1)(b) of the Tax Code. If there is no difference between the tax collected during the period in which the taxable person’s VAT registration code was cancelled and the tax entered in the invoices issued after the taxable person’s re-registration for VAT purposes, the invoices issued after the re-registration are not included in the tax statement submitted in accordance with Article 323 of the Tax Code, in the section “Value added tax collected”;
Thus, the correction of the invoice according to the provisions of point 5^1, paragraph (2), letter b) is made by the supplier/supplier only to be used by the buyer in order to exercise the right to deduct the amount of VAT 34,000 lei through the VAT return for February 2022 (due 25.03.2022). In this case, the buyer considers that the condition of article 299 “Conditions for exercising the right to deduct” paragraph (1) letter a) is fulfilled:
“(1) To exercise the right to deduct the tax, the taxable person must meet the following conditions:
- a) for tax due or paid in respect of goods supplied or to be supplied to him or services supplied or to be supplied to him by a taxable person for his benefit, to hold an invoice issued in accordance with the provisions of Article 319, as well as proof of payment in the case of purchases made by taxable persons applying the VAT on collection system or by taxable persons acquiring goods/services from taxable persons during the period in which they apply the VAT on collection system;”
Article 330 “Correction of invoices” paragraph 1letter (b) referred to in point 5 1 paragraph 2 letter (b) regulates:
“(1) The correction of information entered on invoices or other documents in lieu of an invoice shall be made as follows:
(…)
- b) if the invoice has been sent to the beneficiary, either a new invoice is issued which must include, on the one hand, the information from the original invoice, the number and date of the corrected invoice, the values with a minus sign or, if applicable, a mention that these values are negative, and, on the other hand, the correct information and values, either a new invoice is issued containing the correct information and values and at the same time an invoice is issued with the values with a minus sign or, as the case may be, with a statement that the values are negative, in which the number and date of the corrected invoice are entered.”
Therefore, in view of the above provisions, invoices issued by the supplier during the period in which he had his VAT code cancelled ex officio must be corrected by the supplier after re-registration, in which case:
- the supplier/provider does not have to report the value of correction invoices (invoices issued with a minus/reversed sign and invoices issued with a plus sign) on the VAT return code 300 if their value was reported on form code 311;
- the purchaser must report the value of the correction invoices received from the supplier on line 34 of the VAT return code 300, for the purpose of exercising the right to deduct the amount of deductible VAT. If the customer/beneficiary is registered for VAT on collection, the report on line 34 is made only if the value of the invoices has been paid, otherwise their value is reported on line B “Purchases of goods and services for which the right to deduct the related VAT has not been exercised, existing in the balance at the end of the reporting period as a result of the application of Article 297(2) and (3) of the Fiscal Code”, with a transfer to row B1 “Purchases of goods and services made in the last 6 months/2 calendar quarters”.
By this reporting, the beneficiary complies with the provisions of point 5 ^ paragraph (6) of the implementing rules of Article 11 paragraph (7) or paragraph (9) of the Tax Code
” (6) In application of the provisions of Article 11 paragraph (7) and (9) of the Tax Code, taxable persons who have made purchases from suppliers/suppliers during the period in which they had their VAT registration code cancelled shall exercise their right to deduct VAT on those purchases, within the limits and under the conditions laid down in Articles 297 to 302 of the Tax Code, on the basis of the invoices issued by the supplier in accordance with paragraph 2, by entering the tax in the first tax return provided for in Article 323 submitted after the supplier’s re-registration or, where applicable, in a subsequent return. “
In conclusion, we underline the fact that the right of deduction is exercised on the basis of a correction invoice issued by the supplier after re-registration for VAT purposes, without the right of deduction being exercised on the basis of the invoice issued during the period in which the VAT code was cancelled ex officio, even if the supplier has highlighted VAT on the taxable transaction carried out on the invoice.
Legal basis:
– Tax Code (approved by Law no. 227/2015, published in the Official Gazette no. 688 of 10.09.2015), as amended and supplemented;
– Methodological Norms for the application of the Tax Code (approved by GOVERNMENT DECISION no. 1/2016).