Situation:
A company ABC SRL, registered for VAT purposes in normal regime, purchased discount services for a video conferencing platform. The invoice was issued by a supplier in Ireland, excluding VAT. The provider provides a VAT code, but on verification it appears invalid for cross-border transactions within the EU.
What is the tax treatment of VAT in this situation?
Solution:
For the beneficiary from Romania, the respective operation represents the acquisition of an electronic service for which the reverse charge regime is applied by the accounting formula 4426 = 4427 because the service is taxable to the beneficiary from Romania, according to the provisions of article 278 paragraph (2).
Therefore, the beneficiary in Romania is obliged to pay VAT because the place of provision of the service is considered in Romania according to the provisions of article 278 paragraph (2) applicable in the B2B relationship.
We mention that in this situation, the obligation to pay VAT is regulated by 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 the services that take place in Romania according to article 278 paragraph (2) and who are provided by a taxable person who is not established in Romania (…) “.
We specify that, according to article 326, any person must pay the tax to the tax authorities until the date on which he has the obligation to submit one of the returns or declarations provided in articles 323 and 324. By exception, the taxable person registered according to article 316 will record in the return provided for in Article 323, both as a tax collected and as a deductible tax, within the limits and under the conditions set out in Articles 297 to 301, the tax on intra-Community acquisitions, goods and services purchased for his benefit, for which , under the conditions laid down in Article 307 (2) to (6).
The application of the reverse charge regime is performed on a tax base whose equivalent in lei is determined by using the exchange rate of the B.N.R. in force on the date of issuance of the invoice by the external provider.
The operation must be highlighted from a fiscal point of view, both in the purchase journal corresponding to the debit turnover of account 4426 and in the sales journal corresponding to the credit turnover of account 4427.
The amounts thus highlighted in the VAT journals corresponding to the performed accounting registration are reported by the beneficiary.
- in line 7 called “Acquisitions of goods, other than those from lines 5 and 6 and acquisitions of services for which the beneficiary in Romania is obliged to pay VAT (reverse charge)”, without report in line 7.1 allocated only for “Acquisitionsof intra-community services for which the beneficiary is obliged to pay VAT (reverse charge) “- the amount of VAT is taken from the credit turnover of account 4427;
– in line 22, without carrying over the amount in line 22.1 – the amount of VAT is taken from the debit turnover of account 4426.
– by the declaration code 394, in the cartridge F allocated to the transactions carried out with taxable persons from the third state. The reporting by this statement is made in the event that the supplier company has its registered office in Northern Ireland.
If the supplier has its registered office in Ireland, the report is made by declaring code 390 VIES, even if it appears with an invalid VAT code in the VIES system.
In this case, the operation represents an intra-community acquisition of services. Receipt of the service is an indication that the taxable person is carrying out operations within the scope of VAT.
The way of reporting the acquisition of services made in the absence of a valid VAT code of the provider is regulated by OpANAF 705/2020 for the approval of the model and content of the form (390 VIES) for completing the recapitulative statement “for” Column “Intra-Community Operator Code”…. “in the case of intra-Community acquisitions of services (S) – the identification code for VAT purposes in another Member State assigned to the provider or, as the case may be, only the code of the Member State where the service provider is established, if the provider is not identified for but there is sufficient evidence to suggest that he is a taxable person.
” Thus, in the absence of a valid VAT code, the reporting is performed by entering in the declaration code 390 the name / name of the provider and his country code where he has a permanent residence.
Some details about Northern Ireland:
- The United Kingdom of Great Britain and Northern Ireland withdrew from the European Union on 31 January 2020, and the transitional period provided for in the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community has expired. on December 31, 2020;
- as of January 1, 2021, European Union VAT legislation is no longer applicable in the United Kingdom;
- on the basis of the Protocol on Ireland / Northern Ireland, which is part of the Withdrawal Agreement, for a specified period, all European VAT rules on transactions in goods will continue to apply in relation to Northern Ireland, as well as when it would be considered a Member State of the European Union from the point of view of taxation;
- certain transactions carried out between taxable persons in Romania and taxable persons in the United Kingdom of Great Britain and Northern Ireland are still considered for VAT purposes as intra-Community transactions, falling within the scope of all VAT obligations under Title VII. of the Fiscal Code, including regarding their reporting in the recapitulative statements;
- however, the VIES system no longer provides information on the registration for VAT purposes of taxable persons in the United Kingdom of Great Britain and Northern Ireland.
Unlike Ireland, which is an independent sovereignty, Northern Ireland is part of the United Kingdom.
- Thus, in the relationship with Northern Ireland, only the operations with goods are reported by the code 390 declaration, using the prefix XL (OUG 226 / 30.12.2020).
Also, by OUG (Emergency Ordinance) 19/2021 at point 5 it was regulated that in article 325, after paragraph (1^1) a new paragraph is introduced, paragraph (1^2), with the following content:
(1^2) By exception from the provisions of paragraph (1), the recapitulative statement does not mention the intra-community operations carried out by taxable persons from Romania with taxable persons from the United Kingdom of Great Britain and Northern Ireland, except for intra-community operations involving transports of goods to / from North Ireland.”
Legal basis:
– OUG 226/2020 regarding some fiscal-budgetary measures and for the modification and completion of some normative acts and the extension of some terms
– OUG 19/2021 regarding some fiscal measures, as well as for the modification and completion of some normative acts in the fiscal field
– 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.