Situation: A company paying profit tax and registered for VAT purposes in Romania concludes a contract for the acquisition of advertising services with a legal person from the USA. The provision of services is done both in the USA and in Romania.
What is the VAT treatment for this purchase? What is the tax treatment regarding the non-resident tax?
Solution:
For the beginning, we mention that according to article 268 paragraph (1) of the Fiscal Code, from the VAT point of view, there are taxable operations in Romania that cumulatively meet the following conditions:
- a) the operations which, within the meaning of article 270-272, constitute or are assimilated with a delivery of goods or a provision of services, within the scope of the tax, carried out with payment;
- b) the place of delivery of goods or provision of services is considered to be in Romania, in accordance with the provisions of articles 275 and 278;
- c) the supply of goods or services is carried out by a taxable person, as defined in Article 269 (1), acting as such;
- d) the supply of goods or the provision of services results from one of the economic activities referred to in Article 269 (2).
In the case of advertising / marketing services provided to taxable persons, the place of supply, from the VAT point of view, is determined on the basis of the general rule from article 278 paragraph (2) of the Fiscal Code:
“(2) The place of provision of services to a taxable person acting as such is the place where the respective person receiving the services has established the headquarters of his economic activity. If the services are provided to a fixed headquarters of the taxable person, located in a place other than the one where the person has his headquarters of his economic activity, the place of provision of services is the place where the fixed headquarters of the person receiving the services is located. In the absence of such a place or fixed establishment, the place of supply of services is the place where the taxable person who receives these services has his permanent domicile or habitual residence. “
Since the beneficiary is a taxable person with the headquarters of the activity in Romania, it results that the place of providing these services is in Romania.
Being cumulatively fulfilled the conditions from article 268 paragraph (1) of the Fiscal Code, it results that these services are taxable in Romania from the point of view of VAT.
According to article 307 paragraph (2) of the Fiscal Code, VAT is due by any taxable person, including the non-taxable legal person registered for VAT purposes according to article 316 or 317, who is the beneficiary of services provided in Romania according to article 278 paragraph (2) and which are provided by a taxable person who is not established on the territory of Romania or is not considered to be established for the respective services on the territory of Romania according to the provisions of article 266 paragraph (2), even if he is registered in Romania according to Article 316 (4) or (6).
Therefore, for the services purchased from the US company, the Romanian company is obliged to pay VAT in Romania according to article 307 paragraph (2) of the Fiscal Code.
Given that the company in RO is normally registered for VAT purposes (article 316) it will make reverse charge. The company will declare this acquisition in the VAT return (form 300) in lines 7 and 22 and in declaration 394.
Non-resident tax – implications:
According to article 223 paragraph (1) letter k) of the Fiscal Code, the services provided on the Romanian territory are taxable in Romania.
Provided that the beneficiary presents the certificate of fiscal residence valid at the time of income, the company will not withhold tax because the provisions of Article 7 of the agreement between Romania and the USA apply to avoid double taxation on income taxes. If the beneficiary does not present the fiscal residence certificate or if the tax is borne by the income payer, the Romanian company will withhold the non-resident income tax by applying the rate of 16%. The tax is withheld on the date of payment of income.
The tax is declared in form 100 until the 25th of the month following the one in which it is withheld and in the declaration 207 until the last day of February of the following year.
Considering that the services are provided in Romania as well, the company must register the contract through form 017 according to article 8 paragraph (8) of the Fiscal Code:
(8) Romanian legal entities, resident individuals, as well as foreign legal entities operating in Romania through a permanent establishment / designated permanent establishment, beneficiaries of services related to the activities of construction works, assembly, supervision, consulting, technical assistance and any other activities, executed by foreign legal entities or natural persons not resident on the Romanian territory, have the obligation to register the contracts concluded with these partners at the competent fiscal bodies, according to the procedure established by order of the ANAF president Contracts concluded for activities carried out outside the territory of Romania are not subject to registration according to these provisions. For the classification as a permanent headquarters of a construction site or of a construction project, assembly or assembly or of the supervision activities related to them and other similar activities, the starting date of the activity from the concluded contracts or any other information will be taken into account. which proves the beginning of the activity. The periods consumed for the realization of some related contracts that are directly related to the first contract that was executed are added to the period that was consumed when the basic contract was realized.
Legal basis:
– Fiscal Code (approved by Law no. 227/2015, published in the Official Gazette no. 688 of 10.09.2015), with subsequent amendments and completions;
– Fiscal Procedure Code (approved by Law no. 207/2015, published in the Official Gazette no. 547 of 23.07.2015), with subsequent amendments and completions;
– Methodological Norms for the application of the Fiscal Code (approved by HG no. 1/2016).
– Convention for the avoidance of double taxation between Romania and the USA.