The emergence of digital banking alternatives represents the beginning of the fintech revolution in the banking system. The changes have commenced and will continue to accelerate, and during the last years new players entered the market welcoming customers with interesting and innovative solutions.
Revolut is an electronic money institution, incorporated in the UK, authorized by the UK authorities and passported in other European countries, including Romania. The declared purpose of Revolut is to offer an alternative technical solution for all interactions customers have with banks, i.e. opening bank accounts, loans, deposits, cashing salary or current income and even investment management. However, Revolut is not authorized as a credit institution (at least for the time being) in any of the European Union Member States and as a consequence it cannot open deposit accounts or bank accounts for its customers as opposed to credit institutions. According to Revolut’s official website description and to the terms and conditions applicable to customers, Revolut is based on collecting money from the clients in exchange to issuing e-money equivalent for payment purposes.
The money cashed-in by Revolut in the RON accounts opened with Revolut are transferred into bank accounts opened in the UK on Revolut’s behalf, in one or more unique collecting accounts and such collecting accounts are not individualized for every particular customer. Consequently, in case any state’s authority such as the Romanian National Fiscal Administration Agency (hereinafter “ANAF”) would want to enforce a debtor whose income or salary is cashed into Revolut’s accounts, the authority may encounter certain legal or administrative barriers when enforcing sums held abroad.
ANAF’s territorial jurisdiction
According to Directives 2010/24/UE and 2011/16/UE implemented in Romania in the fiscal procedure code, the Romanian fiscal authorities have the possibility to cooperate with other fiscal authorities of the EU Member States in order to recover claims relating to taxes owed by Romanian citizens. The authorities’ cooperation can be achieved through exchange of information, as well as through the participation of ANAF’s representatives in the administrative enquiries conducted by foreign authorities. Furthermore, at the request addressed by the fiscal authorities of one EU Member State to the fiscal authorities of another EU Member State, the former can recover the requesting Member State’s claims relating to taxes owed by debtors who have assets on the territory of the requested Member State on the basis of a title which allows enforcement in the requested Member State and which reflects the content of an enforceable title from the requesting Member State (e.g. the Romanian law considers that a due notice of assessment issued by ANAF is an writ of execution), using only the measures of enforcement available under the internal legislation of the state in which the debtor’s assets are located.
We consider worth mentioning that the Romanian authorities can request the enforcement of assets located in foreign jurisdictions (including foreign bank accounts) only if prior to this moment the fiscal authority proceeded, or attempted to, with the recovery of the claims in Romania, the rule being that the recovery by foreign authorities of claims relating to taxes is subsidiary. ANAF may request foreign authorities the recovery of claims relating to taxes owed by Romanian citizens only if certain conditions are met, such as: it is obvious that the debtor does not own assets in Romania or the enforcement in Romania would cause disproportional difficulties.
Furthermore, in the eventuality that the UK will no longer be part of the EU Member States starting with 2019 as a consequence of Brexit, in the relationship between the UK authorities and Romania, the Convention on Mutual Administrative Assistance in Tax Matters developed jointly by the OECD and the Council of Europe, which comprises provisions similar to the ones comprised by the European directives and which was ratified by Romania on 15 October 2012 (in force in 124 jurisdictions, including the UK) would be applicable.
Therefore, the Romanian fiscal authority has certain means for the garnishment of a foreign bank account, but certainly it is a difficult, long lasting and unusual procedure.
The possibility of garnishing Revolut accounts
As already mentioned, since Revolut is not a credit institution, it does not open bank accounts in RON on behalf of its clients for ANAF to garnish. Provided that ANAF meets the conditions required by the Romanian law for enforcing the assets located on foreign territory, it will come across certain difficulties in enforcing Revolut accounts and the money held there. Firstly, due to the fact that the money gets into a sole collector account opened with an UK bank on behalf of Revolut and not individualized for each particular client, ANAF could not garnish that account without a writ of execution title against Revolut.
Revolut clients have accounts opened at Revolut in which in fact they deposit electronic money, yet we do not believe that these accounts could be garnished by using the procedure provided by Romanian law - which refers to bank accounts. However, fiscal authorities (and generally any creditor) could consider that e-money represents a type of receivable which Revolut owes to its clients. Thus, ANAF could notice Revolut, as a third party debtor of the Romanian debtor, to pay the money equivalent of this receivable in certain indicated accounts for debt recovery. According to information found on Revolut website, Revolut will cooperate with the local authorities of the country where it activates. However, if, after being noticed accordingly, Revolut would not make the requested payment, ANAF would have the possibility, at least theoretically, to garnish the UK bank account.
Therefore, ANAF is not completely out of means for satisfying its receivables owed by Romanian debtors who transfer their income into Revolut accounts, but it will come across considerable administrative difficulties and will need the cooperation of the UK authorities. We expect that, in the context of increasingly frequent and intense use of these types of fintech solutions, fiscal norms and practice will develop, leading to a simplified and more flexible legislation about the enforcements of this type.