Romania: VAT

An Order of the President of the National Agency for Fiscal Administration has approved a new procedure introducing provisions regarding the VAT registration and deregistration by default of taxable persons required to register for VAT purposes, but which do not comply with this obligation.

The default VAT registration of taxable persons is valid starting from the first day of the month following the month when the taxable persons were notified about the default VAT registration. The default VAT deregistration of temporarily inactive taxpayers, according to the Trade Registry, is valid starting from the first day of the month following the month when the taxpayers were declared as temporarily inactive in the Trade Registry.

The default VAT deregistration of inactive taxpayers is valid starting from the first day of the month following the month when the Order of the National Agency for Fiscal Administration containing the list of inactive taxpayers was published.

Transfer pricing. At the beginning of May an amendment to the Romanian fiscal law was approved clarifying that transfer pricing legislation also applies to domestic intra group transactions, thus putting an end to the common interpretation that only cross-border transactions are subject to transfer pricing regulation. Consequently, it is likely that the Tax Authorities will conduct extensive transfer pricing audits of domestic intra-group transactions, which could result in fiscal adjustments.

In the past, the tax authorities have focused on intra group cross-border transactions, mainly due to inconsistencies in the Fiscal Code and its Application Norms. This latest development in legislation suggests that transfer pricing audits will increase. As a result, Romanian companies that trade domestically with group entities are also required to prepare transfer pricing documentation to prove that prices charged for intra group transactions reflect the market value. If they fail to demonstrate this, they may face fiscal adjustments.

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