Romania considers general VAT reverse charge

Goal to close VAT Gap pushes debate on removing VAT cash payments

Romania is considering more extensive adoption of the anti-VAT fraud reverse charge mechanism.  This eliminates the VAT cash payment from a B2B customer to their supplier – so no further factional payments of VAT through the VAT chain until the final consumer.

Romania has one of the most stubborn VAT Gap’s: it still loses approximately one-third of the VAT that should be collected, and in 2022 (latest EU VAT Gap estimate), the nominal value of these losses exceeded €8 billion.  Romania introduced e-invoicing at the start of this year, and may chose to see what revenue improvements this produces before opting for full reverse charge.

Whilst Romania already uses the reverse charge in certain circumstances, see below, it is now reviewing deploying it generally across all B2B domestic supplies. This option, a fundamental deviation from the EU VAT Directive, has been on offer to member states since November 2019 for transactions exceeding €17,500. However, the one country that most supported this option, the Czech Republic, has not adopted it due to potential complexity.

Current Romanian reverse charge adoption

Beyond the general reverse charge on cross-border B2B services, Romania has opted to adopt the reverse charge in accordance with the provisions of the EU VAT Directive:

• General Reverse Charge (Art 194 VAT Directive) when a supplier is not established in Romania and their customer is.  Even if a non-resident customer has a Romanian VAT number, the reverse charge applies.
• Specific Reverse Charge (art 199 VAT Directive) for a range of high-risk suppliers: energy certificates; construction; laptops, mobile phones, tablets, PC parts etc; precious metals; greenhouse gas trading; and more.

See more in our Romanian VAT guide.

Optional general reverse charge

The reverse charge mechanism is a measure that aims to reduce the risk of VAT fraud, and particularly Missing Trader Intra-Community fraud, by shifting liability for VAT payment from the vendor to the customer. This type of fraud occurs when a trader acquires goods, transported or dispatched from another Member State, and exempt from VAT, and sells them on including VAT on the invoice to the customer. After having received the VAT amount from the customer, the trader disappears before paying the VAT due to the tax authorities.

EU VAT General and Domestic Reverse Charge rule by country