Situation: A micro-enterprise, ABC SRL, registered for VAT purposes, provides parquet/tile installation services to clients from the European Union. A work lasts a few weeks and does not exceed 6 months. What are the tax obligations in terms of VAT? Where does the company owe VAT?
Solution:
The ABC provider company, for the services provided on the territory of another member state in connection with a real estate, does not owe VAT to the Romanian tax authority because the place of service is not considered in Romania on whose territory the provider has its economic activity.
In the case of services directly related to a real estate, the provisions of articol 278 paragraph (4) letter a) are applicable, according to which the place of supply is considered to be the place where the real estate on which the services are provided is located.
Therefore, the services are non-taxable in Romania, being taxable in the EU member country, where the real estate is located, regardless of the fact that the beneficiary of these works is from the point of view of VAT:
- the taxable person with the registered office of the economic activity in that Member State or in any other Member State, but not in Romania;
- non-taxable person domiciled in that Member State.
We specify the fact that the provisions of article 278 paragraph (4) letter a) represent an exception to the general rule regulated in the Fiscal Code by:
– Article 278 (2) according to which the place of supply is considered to be the place where the beneficiary is the taxable person;
– Article 278 (3), according to which the place of supply is considered to be the place where the provider is established.
Thus, the application of the exception to the general rule takes precedence over the application of the general rule, which is expressly governed by the rules for the application of Article 278, point 15 “15. 1. The rules provided for in Article 278 (2) or (3) ) of the Fiscal Code shall apply only if the services cannot fall under any of the exceptions provided for in Article 278 (4) to (7) of the Fiscal Code. (4) – (7) of the Fiscal Code, the exception always prevails, no longer being applicable the general rules established in article 278 paragraphs (2) and (3) of the Fiscal Code.
- Details of services related to immovable property can be found in point (a) to point (q) of paragraph 3 of point 16 of the implementing rules of Article 278 (4) (a), for example, in the situation presented by you, in letter k): maintenance, renovation and repair of a building or parts of a building, including cleaning works, installation of tiles, wallpaper and parquet; “
Provided that the provider is not obliged to register for VAT purposes with a fixed office in the EU, the service is non-taxable in Romania, in which case the invoice is issued in the name of the beneficiary by registering:
- the mention “non-taxable in Romania”;
– the legal basis related to the tax treatment applied in Romania “article 278 paragraph (4) letter a) of Law no. 227/2015” according to the obligation from article 319 “Invoicing”, paragraph 20, letter l) “l) if a tax exemption is applicable, a reference to the applicable provisions of this Title or of Directive 112 or any other statement to the effect that the supply of goods or services is subject to an exemption;”
– the concluded contract (number and date), in order to identify the operation and the duration of the works execution.
The value of the invoice issued without VAT is reported only by the VAT return code 300, in line 3, without being reported in line 3.1 because the operation is not of the nature of an intra-community provision of services, even if the beneficiary is a taxable person registered for VAT purposes.
The EU shall communicate to it a valid VAT code assigned by that Member State. Also, the value of the service is not reported by D390 VIES because it is not of the nature of an intra-community provision of services.
Intra-Community supply is the service for which the general rule of Article 278 (2) is applicable, according to which the place of supply is considered to be the place where their beneficiary is established.
The value of the invoices issued according to the Romanian fiscal legislation, if the Romanian provider is not obliged to register for VAT purposes in the EU through a fixed / permanent establishment, the from the point of view of an accountant by formula 411 = 704.
In this case, the beneficiary of the taxable person from the EU, the beneficiary of the assembly services, is obliged to pay the VAT for the service provided.
The fiscal treatment, regulated by article 278 paragraph (4) letter a), is applied in the situation in which the Romanian company is not obliged to register for VAT purposes in the EU:
– by a permanent establishment from the point of view of VAT if it has sufficient material and human resources to provide, on a regular basis, such services in Italy or
– by permanent establishment from the point of view of the profit tax in case the duration of a construction site is longer than 12 months according to the double taxation avoidance agreement concluded between Romania and Italy. Implicitly, the registration is made from the point of view of VAT because the permanent establishment is of the nature of a fixed establishment from the point of view of VAT;
– directly to the tax authority in Germany / Italy in case of services provided for beneficiaries by non-taxable persons (individuals, non-profit entities).
In the conditions in which the company would be obliged to register for VAT purposes in the EU, the value of the services that take place in the EU member country:
– would be invoiced according to the tax legislation applicable in the EU member country;
– it would be reported only to the fiscal authority from the EU member country, without also reporting to the Romanian tax authority through the VAT return code 300.
With regard to services directly related to immovable property, provided to a non-taxable person in a Member State, the provisions of the tax legislation of the Member State in whose territory the immovable property on which the works are carried out are located and are applicable.
Therefore, ABC should, before the commencement of the works contract, apply to the tax authority of the EU Member State to determine whether it is required to register for VAT purposes in that Member State in order to collect VAT on the services provided. on immovable property in that country for the benefit of a non-taxable person domiciled in that Member State.
In this context, taking into account that each Member State had the obligation to harmonize the national legislation in 2021 with the provisions of the EEC Directive no. 2455 of December 5, 2017 amending Directive 2006/112 / EC and Directive 2009/132 / EC regarding certain obligations regarding value added tax for the provision of services and distance sales of goods.
If the mentioned provisions were also transposed in the tax legislation of the EU member country, the Romanian provider would have the possibility to register in the O.S.S. regime, in order to apply the special VAT regime in case of services provided for an EU real estate for non-taxable persons. physical).
Thus, the Romanian provider would collect VAT for the tax authority from the EU member country and would transmit through O.S.S. a single special VAT return due from each Member State. We emphasize the fact that in Romania, the harmonization with the two mentioned directives was carried out by Emergency Ordinance no. 59/2021, the regulations of which entered into force on July 1, 2021.
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;
– OUG 59/2021 for the amendment and completion of Law no. 227/2015 regarding the Fiscal Code;
– Methodological Norms for the application of the Fiscal Code (approved by HG no. 1/2016).