A company ABC SRL, from Romania, buys online various materials necessary for its activity. On the invoices received by email from the UK supplier, a German VAT code appears. The ordered materials arrive at ABC by courier. The invoices show a VAT rate of 19%.
What is the fiscal and tax treatment of these purchases?
As the invoices received by ABC company show a German VAT code and a 19% VAT rate, ABC SRL was treated by the German supplier as a non-taxable person for VAT purposes.
Thus, if the goods in question were dispatched/transported from within Germany, the UK supplier, identified by a VAT code assigned by the German tax authority, deemed to be making a taxable supply in Germany to a non-taxable person for VAT purposes, in which case he collected VAT for the German tax authority by applying the standard VAT rate of 19%.
It is important to mention that in Germany the standard VAT rate is 19%, which is identical to the rate applied in Romania for similar products.
Therefore, the UK supplier applied the normal taxation regime in Germany, without applying the exemption regime for intra-Community supply of goods, similar to the provisions of article 294 paragraph (2) letter a) of the Fiscal Code applicable in Romania, harmonised with the provisions of article 138 of the EEC Directive no.112/2006 on the value added tax system.
“(1) Member States shall exempt the supply of goods dispatched or transported to a destination outside their respective territory, but within the Community, by the vendor or the person acquiring the goods, or on their behalf, for another taxable person or for a non-taxable legal person acting as such in a Member State other than that in which dispatch or transport of the goods begins.”
In addition, it is provided that the obligation to pay for an intra-Community supply of goods is incumbent on the purchaser under Article 197, if that purchaser is identified for VAT purposes in the Member State where the supply takes place:
“(1) VAT is payable by the person to whom the goods are supplied if the following conditions are met:
- the taxable transaction is a supply of goods carried out in accordance with the conditions laid down in Article 141;
- the person to whom the goods are supplied is another taxable person or a non-taxable legal person identified for VAT purposes in the Member State in which the supply takes place;
- the invoice issued by the taxable person not established in the Member State in which the person to whom the goods are supplied is established is drawn up in accordance with Chapter 3, Sections 3 to 5. “
Therefore, as the goods are shipped from Germany to Romania, the operation represents:
-for the UK supplier identified with a valid VAT code in Germany: an intra-Community supply of goods exempt from VAT in Germany;
-for the purchaser ABC SRL identified with a valid VAT code in Romania: an intra-Community acquisition of goods taxable in Romania according to the definition regulated by Article 273 “An intra-Community acquisition of goods is considered to be the acquisition of the right to dispose, as owner, of tangible movable goods dispatched or transported to the destination indicated by the purchaser, by the supplier, by the purchaser or by another person, on behalf of the supplier or the purchaser, to a Member State other than that of departure of the transport or dispatch of the goods.”
According to Article 276(1), “The place of intra-Community acquisition of goods shall be deemed to be the place where the goods are located at the time when dispatch or transport of the goods is completed”. These provisions are supplemented by those in paragraph 13(1) of the implementing rules for this Article:
“13.(1) Under Article 276(1) of the Tax Code, the place of an intra-Community acquisition of goods is always in the Member State in which the dispatch or transport of the goods is completed. (…)”.
In the case of acquisitions made, the Romanian purchaser is liable for VAT in Romania according to the provisions of Article 308 “Person liable to pay tax for intra-Community acquisitions” paragraph (1) “The person who makes an intra-Community acquisition of goods which is taxable under this title is liable to pay the tax.”
Thus, if ABC SRL has a valid VAT code in the VIES system at the date of delivery of the goods by the UK supplier, it (through its representatives) must apply to the supplier for correction/reversal of the invoice initially issued by applying the German taxation scheme and issue a correct invoice by applying the exemption scheme specific to intra-Community supplies of goods.
If the UK supplier does not identify a valid VAT code of the Romanian purchaser, the purchaser must apply the reverse charge scheme to the total invoice amount, including VAT, thus re-increasing the purchase cost of the goods by the amount of VAT collected by the UK supplier, which cannot be recovered by exercising the right of deduction in Romania through the VAT return code 300.
Thus, taking into account the fact that the UK supplier acts as a taxable person registered for VAT purposes in Germany for the application of the normal supply scheme, having a valid VAT code in the VIES system (DE), without acting as a taxable person registered for VAT purposes for the application of the special scheme for intra-Community distance supplies, the transaction represents for the Romanian purchaser an intra-Community acquisition of goods, taxable in Romania through the application of the reverse charge scheme by the accounting formula 4426 = 4427.
In order to apply a correct tax treatment in terms of VAT in Romania, the buyer registered for VAT under the normal regime according to the provisions of Article 316 is obliged to comply with the following rules:
- to apply the reverse charge regime by the accounting formula 4426 = 4427 applying the VAT rate on the VAT tax base determined in lei by using the exchange rate in force at the date of the invoice issued by the supplier as the date of the VAT chargeability. By applying the reverse charge regime, the provisions of article 326 “Payment of the tax to the budget” paragraph (2) of the Fiscal Code shall be respected.
“(2) By way of exception to the provisions of paragraph (1), the taxable person registered in accordance with Article 316 shall enter in the statement provided for in Article 323, both as tax collected and as deductible tax, within the limits and under the conditions laid down in Articles 297 – 301, the tax relating to intra-Community acquisitions, goods and services purchased for his benefit, for which that person is liable to pay tax, under the conditions laid down in Article 307 paragraphs (2) – (6)”;
- to report the value of the purchase by:
- VAT return code 300 on line 5 and line 20 with carryover to line 5.1 and line 20.1 “Intra-Community acquisitions for which the purchaser is liable for VAT (reverse charge) and the supplier is registered for VAT in the Member State from which the intra-Community supply took place”,
- by means of the recapitulative statement code 390 VIES with symbol A, based on the form regulated by the O.M.F.P no.705 of 11 March 2020 for the approval of the model and content of the form (390 VIES) “recapitulative statement on intra-Community supplies/purchases/provisions”.
-Tax Code (approved by Law no.227/2015, published in the Official Gazette no.688 of 10.09.2015), with subsequent amendments and additions;
-EEC Directive No.112/2006 on the value added tax system, as amended and supplemented;
-Methodological Norms for the application of the Tax Code (approved by GOVERNMENT DECISION no.1/2016).