In Romania, for foreign companies registered for VAT purposes but without a permanent establishment or fixed establishment, the process of recovering value-added tax (VAT) can take more than 2 years from the time of application. On the other hand, for Romanian companies, the period for resolving tax inspections aimed at recovering VAT averages 180 days from the submission of the request and the commencement of the tax inspection, even though the maximum resolution period is 90 days, according to the Fiscal Procedure Code. Accace Romania has analyzed the entire procedure that Romanian and foreign companies go through to recover VAT from the authorities.
Duration of VAT recovery for foreign companies vs. Romanian companies
For non-resident companies registered for VAT purposes in our country but without a fiscal presence here (e.g., a permanent establishment / fixed establishment), the waiting period can be quite lengthy. For instance, according to information from Accace in August 2023, VAT refund applications filed in May 2021 with option for reimbursement were processed, with a gap of over two years from the time of application submission to the initiation of the tax inspection.
The situation becomes even more complex for non-resident companies that are not registered for VAT purposes in Romania but wish to recover the VAT paid in Romania in the state where they are established. To facilitate the resolution, Romanian tax authorities often request additional information at long intervals, sometimes even up to a year after the date the request was submitted.
In the case of Romanian companies, according to the analysis conducted by Accace, VAT refunds are processed within an approximate period of 180 days, from the time of VAT refund request submission to the commencement of the tax inspection. However, in accordance with the provisions of the Fiscal Procedure Code, the legal resolution period is a maximum of 90 days.
Conditions for VAT recovery and related procedures
Any taxable person registered for VAT purposes can request a VAT refund, regardless of the amount, while adhering to the eligibility conditions specified by tax law. There is only one exception regarding the minimum refundable amount, which applies to taxable persons who are not established and registered for VAT purposes in Romania. For these, the minimum amount for which a refund request can be submitted is 400 euros.
Regarding companies with offices in other European Union states, the documents they need to present to tax authorities are similar to those required for companies registered in Romania to obtain VAT refunds. These may include invoices, contracts, customs documents, transport documents, payment or insurance documents, depending on the type of transaction in question. Thus, for taxpayers established outside the EU, VAT refund is possible, but only for countries that have concluded reciprocity agreements with Romania: Turkey, Switzerland, Serbia, and Norway. In this case, there is a specific resolution procedure regulated by law, and it is necessary to appoint a tax representative established in Romania to facilitate the VAT refund process.
Causes of delays in VAT payment resolution
A lack of personnel within the National Agency for Fiscal Administration (ANAF) is one of the primary reasons for delays in the VAT refund process, a problem acknowledged by tax authorities. Furthermore, once tax inspections are initiated, companies often face significant pressure to meet all bureaucratic requirements.
“When it comes to VAT recovery, both foreign and Romanian companies face significant challenges and obstacles. Firstly, there are delays in initiating tax inspections. Additionally, authorities often adopt extremely rigid approaches in their control actions, emphasizing form over economic substance. For an honest taxpayer, whose aim is to consistently ensure tax compliance in a correct manner, VAT reimbursement should be a formality. However, practice shows, including to us as consultants, that the tax inspection process for VAT reimbursement is often tiresome, putting the tax authority and the taxpayer in an adversarial position when, in essence, they should collaborate as partners,” stated Elena Sighinaș, Tax Director at Accace Romania.
Accace representatives also emphasize that the partnership assumed by taxpayers with tax authorities, at the declarative level, should be reflected in all activities of the control and assistance process, and inspections should be conducted in a constructive and collaborative manner. Ultimately, regarding VAT reimbursement, specialists emphasize the importance of understanding that it is not about requesting sums of money as a favor. Therefore, VAT reimbursement is not a favor granted by the tax authority to the taxpayer but rather a fundamental right provided for in European legislation.