The ability to carry out economic activity and VAT: in-depth study
The past year has seen a small revolution in Romanian tax legislation. We are referring to the tightening in the VAT code activation procedure introduced byOPANAF 17/2015 , which requires, effective February 1, 2015, on the part of the taxpayer the preparation and filing of the D088 declaration (and annexes) required in order to prove the company’s ability to carry out economic activity. The filing of the declaration and the subsequent, discretionary assessment by the relevant office are the necessary steps to be able to operate in the VAT field for each taxpayer (issue invoices with VAT and deduct tax from purchases).
The new procedure was then revised and further specified through subsequent ANAF Decrees nr. 1964/2015 and r. 1966/2015 effective August 3, 2015.
As we have pointed out elsewhere, the procedure tends to verify the taxpayer’s fulfillment of certain conditions. From this verification, a risk of evasion scaffold is determined to be assigned to the applicant. If the score is particularly severe, the office notifies the VAT code activation denial.
What are the criteria to be met? There are 20 criteria among which the most important are:
1- Does the company hold a space designated as its registered office?
2- Have the partners/directors held this position in other companies? Have there been cases of liquidation, bankruptcy in these companies?
3- What are the educational qualifications of the members/administrators?
4- Indicate the income earned by the partners/directors in the past 12 months.
The examples given make it possible to identify a common thread that connects all the requests: to identify a priori those individuals who have carried out economic activity in Romania creating tax problems or to avoid critical issues related to individuals who do not have the characteristics to carry out the reported economic activity (because they lack competence or financial soundness).
Having described and commented on the procedure, we aim to provide two other important clarifications:
1° Article 316 of the new Tax Code (Law 227/2015) stipulates in paragraph 11(h) that taxpayers already active in the VAT field are also subject to the subsequent assessment of the ability to carry out economic activity based on the criteria identified by the President of the ANAF (National Agency of Financial Administration). These criteria, are contained in ANAF President’s Decree 3330/2013 as amended. Specifically in Section 5 (1) A, it is clarified that the ex officio cancellation of the VAT code is a consequence of failure or inadequate demonstration of the above capacity, for taxpayers who have changed their registered office, directors or corporate structure.
2° While pointing out the lack of transparency in the procedure, which in fact does not provide some justification for the denial of the activation of the VAT Number, and the critical nature of the short deadline for the integration of the documents to be attached to the D088 (15 days!), we also want to point out that the procedure itself is neither meaningless nor complete in its demands. It is unthinkable in 2016 to open a business in an EU country without being able to prove that you have the means, resources and have planned at least a first year of activity.
Conclusion: the procedure envisaged for activating (and retaining) the VAT ID through the filing of D088 and attachments has introduced a strong filter to the entry of new entities capable of carrying out VAT-relevant transactions; even pre-existing taxpayers will have to take the necessary countermeasures to retain their VAT ID. The new system has an obvious anti-fraud purpose and requires greater awareness for domestic and international entrepreneurs to structure their business from the outset.
Other references:
http://www.zf.ro/opinii/formularul-088-ruleta-ruseasca-a-inregistrarii-in-scopuri-de-tva-13999646
We are available for further clarification.
