In Romania, a recent order has changed the VAT reimbursement procedure.[1]

The updated provisions are likely to speed up the processing of taxpayers’ requests and to make more efficient use of tax administration resources. They apply to VAT refunds requested for reimbursement after 1st May 2017.

Reimbursement Procedure

Any taxable person registered for VAT purposes may request the reimbursement of VAT refunds through the VAT return submitted for the relevant reporting period. If the taxpayer does not request such reimbursement during that tax period, the balance is carried forward to the next period.

Following the request, the tax authorities will make a tax risk assessment, and, depending on the risk category of the taxpayer, the VAT reimbursement will be made either with a subsequent control, with a prior documentary analysis or following a VAT audit.

Taxpayers claiming reimbursement of up to 45,000 RON will generally speaking be classified in the lowest risk category, provided that they do not have an entry in the fiscal record and they do not present a high tax risk.

Registration of taxpayers in special database

In order to streamline control activities and to reduce the reimbursement process, the tax administration wants to create a special database (bază de date specială) of taxable persons. It will include information obtained from taxable persons’ tax history about potential risks for VAT reimbursement.

The new Order creates the legal basis for this special database and the factors that determine whether a taxable person is noted as risky, or can be removed from the database. It establishes that a taxable person presents a tax risk for VAT refunds if there is at least one of the following four situations:

  • tax authorities hold official information from other institutions that may influence an unjustified VAT reimbursement;
  • facts discovered during fiscal controls indicate possible fiscal offences;
  • during subsequent tax audits, differences exceeding 10% of the refund amount, but not less than 50,000 RON per VAT return, have been detected;
  • the tax authority identifies significant inconsistencies between the information included in the informative returns (form 394) submitted by the taxable person and those submitted by their business partners and / or through the recapitulative statement (form 390).

Deletion of a taxpayer from the special database

If the reasons for keeping the taxable person on the database no longer apply, removal will be proposed in any of the following situations:

  • according to information received from other competent authorities, the taxable person is no longer subject to fiscal criminal investigations;
  • the tax audit teams identified only insignificant VAT differences during the tax inspections or the taxpayer no longer owes additional VAT amounts;
  • the taxable person has ceased its operational activity and has been removed from the tax records;
  • the institutions which proposed the inclusion of the taxable person in the special database submit a substantiated report along with a proposal for the deletion of that person; such proposal is subject to the approval of a commission.
  • the tax bodies have found that the discrepancies between VAT forms 394 submitted by the taxable person and its business partners and the recapitulative statements forms 390 which were the basis of the database entry, ceased or have become insignificant.

Conclusions

The new clarifications provided for VAT reimbursement aim at increasing the predictability of fiscal risk and may raise the tax authorities’ efficiency. They give rise to hope for an acceleration of request processing.

In principle, the creation of the special database could be an appropriate approach for improving the VAT reimbursement process. It is essential, however, that this database is administered and managed responsibly. In this context, concrete provisions informing taxpayers about their inclusion in the database, any claim for deletion, and a legal remedy would have been desirable. Practice will show if it actually works and will accomplish its purpose.