VAT Deduction in Romania for Transactions Performed before VAT Registration

A company making acquisitions (meaning any type of purchase for the taxpayer’s business activity) before being registered for VAT purposes or during a period in which the VAT ID no. is canceled may deduct the input tax shown on the incoming invoices in Romania if certain conditions are met.

General Provisions

Every taxpayer has the right to deduct input tax beginning with the commencement of its economic activity if it can prove that the requirements for such deduction are fulfilled. In case the acquisition was performed before the VAT registration, the deductions can be exercited at a later stage taking into account the statute of limitation of 5 years.

Hence,

• a taxable person/ permanent establishment having cancelled the VAT ID no. at the time of the acquisition shall deduct VAT when the VAT ID No. is valid again;
• a non-resident person not being yet registered for VAT purposes may deduct input tax after its registration.

Non-resident businesses, not registered for VAT purposes, and which do not have the obligation for such registration, do not have the right to deduct the input tax, but can apply for a refund of the paid input tax.

The rules relating to the deduction of input VAT apply in principle to all taxable persons with the exception of small entrepreneurs, who are exempted from collecting VAT.

Deduction Procedure

In order to deduct the input tax, the VAT received is offset against the input tax. Hence either a payment obligation or a credit balance arises.

When the tax payer requests a refund, a tax audit may be carried out by the competent authority.

A clear evidence of the acquisitions for the taxpayer’s business activity shall be kept, including the related documents such as invoices, statements of work, etc. as well as the proof regarding their scope in the interest of the business activity.

Special Situations

Input tax can also be claimed under certain conditions for purchases of goods and services that for objective reasons are subsequently no longer used. In this respect, extensive EU case law exists.

Please find more detailed information at: https://stalfort.ro/en/publications