Romania: Extension of reverse-charge mechanism for specific transactions until 30 June 2022

The VAT reverse-charge mechanism (also known as “simplified procedures”) is applicable in Romania for specific transactions between two Romanian VAT payers. The main condition is that both the seller and the buyer are registered for VAT purposes in Romania and that the supply takes place within Romania.

The reverse-charge mechanism is mandatory for applicable transactions as Romania has one of the highest VAT gaps as regards uncollected VAT. In this respect, the seller issues the invoice without VAT and the buyer records the VAT both as input and output VAT, offsetting one another.

Provided that both the seller and the buyer are Romanian VAT payers, the main local goods and services subject to this reverse charge mechanism are as follows:

• Sale of ferrous and non-ferrous wastes
• Sale of wood
• Sale of cereals
• Sale of electrical energy
• Sale of construction, partial construction, land (subject to the VAT regime by option or by law)
• Sale of mobile phones
• Sale of devices with integrated circuits
• Sale of PC tablets or laptops

As most of the above transactions could have been invoiced without VAT until 31 December 2018, Romania requested the extension of this mechanism to combat VAT fraud in these specific areas.

In this respect, EU Directive 2018/1695 was published in the Official Journal of the European Union as of 12 November 2018, allowing member states to regard the buyer as the person liable for VAT for specific local transactions until 30 June 2022. 30 June 2022 represents the date on which the new EU VAT Directive is envisaged to enter into force.

Having considered the above EU Directive and the current approach of the Romanian Ministry of Finance, the Romanian authorities will most probably modify the Romanian Fiscal Code so that the reverse-charge mechanism may continue to operate after 1 January 2019.