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Article written by Florin Gherghel, Tax Manager Ensight Finance

Romania has implemented the EU provisions regardingelectronically supplied services, namely services delivered over the internetor via an electronic network and rendered in an essentially automated fashion involvingminimal human intervention.

As a general rule, in the case of electronicallysupplied services by EU companies to Romanian non-taxable persons (e.g.individuals), the place of supply is the place where the customer isestablished and the supplier could be required to register for VAT inRomania.

Nevertheless, the services will be considered renderedfrom the country where the supplier is established (no VAT registrationis required in Romania), if the following conditions are fulfilled cumulatively:

• the supplier isestablished in a single EU member state;
• the services arerendered to non-taxable persons established in any other EU member state,except the state of the supplier;
• the total value of therendered services, without VAT, does not exceed EUR 10,000 (RON 46,337) in thecalendar year and did not exceed EUR 10,000 in the previous calendar year either.

If the value of the supplied services exceeds the EUR10,000 threshold, the place of supply of these services will become thecountry where the customer is established from the moment the threshold is exceeded,and the supplier could be required to register for VAT in Romania.

Irrespective of the above, if the EU supplier is registeredas a supplier of electronically supplied services in its country, the EUsupplier is no longer required to register for VAT purposes in Romania for thesupply of such services to Romanian non-taxable persons.

Supplyof e-books – VAT implications

The supply of the digitalised content of books isconsidered an electronically supplied service and, consequently, such supplyrepresents a service and not a delivery of goods from a Romanian point of view.

Consequently, the reduced VAT rate of 5%(applicable in general to the supply of books) is not applicable and,therefore, the regular 19% VAT rate is applicable to the supply of e-books byRomanian suppliers to Romanian entities.

Onlinecommunication with tax authorities

Almost all tax returns (submitted monthly / quarterly/ yearly) must be submitted online, and an electronic signature must beobtained for this.

A company can also have access to its private virtualspace in order to check the status of submitted tax returns and paid taxes.Thus a company can obtain online certificates attesting that it does nothave outstanding tax liabilities (such certificates are useful, for example,when a company takes part in a bidding process).

Financial statements can also be submitted online usingthe same electronic signature.

Besides the online submission of tax returns, officialcommunication with the tax authorities can only be performed by submittingvarious requests directly to the registration office of the tax authorities or bypost.

The tax authorities do not have access to the accounting systems of the companies or to the invoices issued by the companies.

The article is part of the WTS CEE Tax Bridge #2/2019 edition, which can be read here: https://wtsklient.hu/wp-content/uploads/2019/10/wts-cee-tax-bridge-201902.pdf

by Mihaela Danalache, Managing Partner Ensight Finance

I have been working in business consulting for many years and I was involved in countless optimization projects of the finance function in larger or smaller companies. I am familiar with the problems encountered by professionals in the field, one of the most common being the incorrect positioning of the Finance Department within the company.

Often perceived as “a necessary evil”, Finance Department can be an essential business partner for all other departments within the company. All processes of a company (Procurement, Production, Sales, or support processes) involves at their end the Finance Department. Therefore, all decisions made in the “upstream” departments could be positively influenced if the financial impact of such decisions is known in advance. This is where the role of the Finance Department intervenes as a business partner – in preventing the waste of resources, in anticipating possible risks and preventing their occurrence, in communicating the incentives the company can benefit from.

Unfortunately, in general, the effort is concentrated on the proper and timely data processing and less or at all on prevention. It is about reconciliations, verification, recording each transaction, tax computation, declaration and payment. It is not an easy job, as all these activities are done in parallel with the permanent monitoring of legislative changes (frequent in Romania). However, accounting can be creative, being based on professional interpretations and judgments. Thus, the most suitable accounting policies for the business can be selected, and there is the possibility of complete separation of the accounting area from the fiscal one.

How can Finance Department become a business partner in the company? The management of the Finance Department has a defining role in this regard. In general, people with special professional results are promoted in management positions, very “technical” people who feel comfortable in dealing permanently with data. Having reached the management position, these people have major difficulties in understanding their new role and for being recognized as such by their colleagues. The classical notions of management are less known, they do not know what their actions as managers should be, and what they should focus on first and how. For a period, they continue to focus strictly on the technical area (comfort zone), perhaps with more dedication than before. But they soon become aware about the need to change.

Support is needed to determine them to act, to make them setting personal goals, to make them to prioritize and achieving them. Experience has shown that the most appropriate guidance comes from a “coach” with experience and expertise in the finance field. Common technical language and understanding of financial processes and technical details often helps.

I discovered with great satisfaction how much and how quickly people can change if they really want this. The change of the individual (manager) triggers changes in the organization: team motivation, a relaxed working atmosphere, less frustration and conflicts. That is why I encourage those who face the problems described above to try a coaching program dedicated to this field.

Ensight Finance can help you through coaching services dedicated to the financial function of the company.

Here is a glimpse at Taxation and Investment in Romania – 2019.

1. Ways of Doing Business /Legal Forms of Companies

Romanian legislation defines 5 forms of legal entities: (1) Joint Stock Company (SA); (2) Limited Liability Company (SRL); (3) General Partnership (SNC); (4) Limited Partnership (SCS) and (5) Limited Partnership by Shares (SCA). Foreign companies can also register branches, permanent establishments or representative offices in Romania.

2. Corporate Taxation       

Corporate income tax is payable by the following taxpayers: Romanian companies; legal persons set up according to European law and who are registered in Romania; foreign companies with permanent establishments/branches in Romania; foreign companies with their place of effective management in Romania; foreign companies obtaining revenues from real estate located in Romania, from transactions with shares of Romanian companies or from the exploration of natural resources in Romania. 

3. Double TaxationAgreements

Ifa taxpayer is resident in a country with which Romania has concluded a double taxtreaty (DTT), the tax rate applicable to the income obtained by the respectivetaxpayer from Romania will be the most favourable rate between the ratestipulated by local legislation and the rate stipulated by the DTT, providedthat a certificate of fiscal residency is provided.

If the taxpayer is also an EU resident, the provisions of EU directives are applicable, provided that the required conditions are fulfilled and proper documentation is available.

4. Transfer Pricing

The arm’s length principle isapplicable to all transactions with related parties, including those between aforeign legal entity and its Romanian permanent establishment. Also, related-partytransactions carried out between two Romanian companies are subject to a transferpricing analysis.

Romanian taxpayers are required to prepare transfer pricing documentation as follows to document the observance of the arm’s length principle for transactions performed with affiliates.

5. Anti-avoidance Measures

In Romania, anti-avoidance controls are performed by the National Agency of Fiscal Administration.

6. Taxation of Individuals /Social Security Contributions

Individuals who are Romanian tax residents are subject to income tax on their worldwide income. Individuals who are non-residents of Romania for tax purposes are subject to tax in Romania only on their income earned in Romania.

7. Indirect Taxes

Indirect taxes include VAT, excise duties and custom duties.

8. Property Taxes

Propertytaxes are payable by the owners of buildings, land and vehicles and are paid tolocal authorities. Local taxes are assessed yearly and are payable in two equalinstalments during the year, by 31 March and 30 September. 

Other local taxes are payable for outdoor advertising, and tax for obtaining different authorisations.

For the complete brochure, please access

Ensight Finance SRL provides tax, accounting and financial business advisory services to resident and non-resident
companies doing business in Romania.

Ensight Finance SRL is a member of WTS Global for Romania.