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VAT Registration in Romania

by Vlad Cuc

Extensive information on the procedure for VAT registration in Romania can be presented by our Romanian law firm; new regulations were also introduced starting with the end of 2018, when new VAT rates were introduced, which are presented in this article. Our lawyers can assist those who have to obtain a VAT number in this country and can also provide legal advice on the VAT compliance applicable here. 

In Romania, the VAT number must be comprised of 10 characters. 

What are the obligations for VAT taxpayers in Romania in 2022?

In 2018, the procedure for VAT registration in Romania was modified again, after it was changed in 2015, when the most important modification was the fact that new companies registering at a national level for VAT were no longer required to go through a physical inspection of their headquarters, but rather meet the following criteria (starting from February 2015), which are presented below. 

The taxable persons must be able to perform their activity in the registered office or secondary locations. To assess this criterion one has to file an affidavit (criteria stipulated in the previous legislation has been maintained in the new provisions). None of the directors and/or shareholders of the taxable person seeking registration for VAT purposes, according to art. 153 paragraph (1) a) and c) and paragraph. (9 ^ 1) of the Tax Code and any taxable person requesting registration under art. 153 paragraph (1) c) and paragraph (9 ^ 1) of the Tax Code cannot have criminal records. 

If administrators and shareholders are not registered in Romania, they must submit an official declaration showing that they do not have criminal records. In order to register for VAT purposes an analysis conducted by the tax authorities will be completed,  showing the taxpayers intention and ability to undertake economic activities involving taxable operations and/or exempt from VAT deductibility, and operations for which the place of delivery/supply is considered to be abroad if the tax would be deductible if these operations would be placed in Romania

To assess this criterion taxpayers will have to file an affidavit. (This is a new criterion, which does not exist in the previous legislation). Our team of Romanian lawyers can present extensive information on the applicable legislation concerning the procedure for VAT registration in Romania

Note: This last paragraph basically describes an analysis which will be performed by the Romanian authorities before granting the VAT number, a procedure which is obviously left more or less at the discretion of the tax authorities. From our experience the authorities will verify the following: the location of directors and shareholders (EU or non-EU) and the ability to perform a specific activity from the registered office or secondary office. 

After 2018, the Romanian tax authorities introduced new regulations for VAT registration in 2020, but the latest modifications were introduced for 2021 as well, after the Order no. 239/2020 was approved. The Order was published in the Official Gazette no. 183/23 February 2021, which provides new requirements on the VAT registration in Romania. Thus, taxpayers may be required to register for VAT before developing their business operations, if they expect to reach a yearly revenue above EUR 88,500. The rule has been maintained for 2022 as well. 

What documents are necessary for VAT registration in Romania? 

For instance a company will not be granted with a VAT number if it is involved in the import-export of machinery as activity but has a rented apartment as registered office. Other criteria (employees etc.) can also apply. In order to register for VAT in Romania, the following documents will be required to be filed with the Fiscal Administration:

  • the special forms per the provisions of the law applicable in the field;
  • the Trade Register Extract showing that the respective taxpayer fulfills the conditions for activating;
  • the copy of the document related to the company’s seat or secondary headquarters of the Romanian company;
  • the legalized copies of the ID documents of the administrators/directors;
  • the long-term visa/certificate emitted by the Romanian Office for Immigration for non-EU directors and the copy of the Certificate of Registration.

The Romanian tax authorities granting the VAT number will firstly assess the level of risk for the respective business, depending in a series of factors, such as: the type of business, the type of location of headquarters, actual company “substance” referring to the possibility of the entity to conduct the respective business in the country from the rented location and the area of business (certain areas of activity are considered more risky than others). 

For instance, in some areas of import-export there are more registered cases of VAT fraud. The tax authorities have also recently requested a number of additional documents from both Romanian or foreign shareholders and directors such as the proof of income (in Romania or abroad) and general business experience.

 

What are the VAT rates in Romania? 

The VAT rates available in Romania were reduced, starting with 1st of November 2018. Under the new regulations of the VAT law, the standard VAT rate was maintained at its known value. However, the reduced VAT rate available in this country was further reduced for specific types of products and services, while the new legislation introduced a second reduced VAT rate. Currently, the following types of VAT rates are applicable in Romania

  • the standard VAT rate is of 19%, charged for a wide range of goods and services sold here;
  • a reduced VAT rate of 9% is applicable for goods such as: foodstuffs, pharmaceutical products, water supplies, medical equipment for persons with disabilities;
  • the second reduced VAT rate is charged at 5% for the following: newspapers, books, social housing, admission to sports events and amusement parks, restaurants and other catering facilities, hotel accommodation and others;
  • the VAT law in Romania stipulates that intra-community passenger transportation and international passenger transportation is charged with a 0% VAT rate;
  • starting with 1st of November 2018, the VAT rate for hotel accommodation was lowered from 9% to 5%. 

Specific types of goods and services that were charged with the reduced VAT rate of 9% are now imposed with the 5% VAT rate and this is applicable for the following: catering services and restaurant units and the rental of camping grounds. Our team of Romanian lawyers can offer an extensive presentation on other types of goods or services that can now be charged with the 5% VAT rate

A novelty of the new legislation is that specific types of economic activities that were traditionally charged with the standard VAT rate are now imposed with the reduced VAT rate of 5%; for example, this is the case of sports facilities used for the purpose of practicing sport activities. Amusement parks and recreational parks are also included in this new category. 

What are the obligations for VAT compliance in Romania? 

Once a company received a VAT number in Romania, its representatives will need to conclude a set of VAT compliance procedures. This also applies to foreign companies that develop business operations charged with the VAT on the Romanian territory. Throughout the financial year, a company should prepare invoices following the requirements of the Tax Code and maintain its books and records for a period of at least 10 years. 

Specific VAT documents must be submitted with the local tax institutions according to the tax period applicable for a local business, which is established on a monthly or quarterly basis. The VAT is payable in a period of 15 days since the respective reporting period ended. 

We invite you to watch a short presentation on VAT registration in Romania

What is the VAT registration procedure for foreign businesses? 

As mentioned earlier, all types of entities that are liable to the payment of the VAT must conduct the necessary steps for VAT registration in Romania. This also applies to foreign businesses, and the manner in which they will register for VAT purposes will depend based on their tax residency; our team of lawyers in Romania can provide in-depth tax consultancy services

With regards to this matter, it is necessary to know that the Romanian Tax Code stipulates that foreign businesses selling goods over the internet to Romanian customers must conduct the steps for VAT registration in Romania once they have reached a threshold of EUR 118,000 in a financial year. 

The Romanian tax legislation distinguishes between EU based companies and non-EU companies, which means that the issuance of the Romanian VAT number will differ for these entities. In the case of EU based companies, the list of documents is comprised of fewer documents compared to non-EU businesses registering for VAT, as per the requirements of the Romanian Tax Office

A EU company should prepare documents such as: the VAT certificate issued in the country where it is incorporated, the company’s statutory documents, an extract from the Trade Register in its country of origin and various documents that will show the fact that the business activities developed in Romania are to be considered taxable transactions. Our team of lawyers in Romania can provide legal assistance on the documents available in this case and can also offer information on the papers required for VAT registration for non-EU businesses.  

Taking into consideration all recent developments we would consider Romania one of the EU countries where it’s most difficult to obtain a VAT registration at a national level. Businessmen should consider that the VAT registration in Romania can last up to two months. For more information and for legal assistance during this process, we invite you to contact our team of Romanian lawyers