Legislative summary – April 2018

In this issue:

  • Amendments to the Tax Code
  • EU case-law
  • Amendments to the Day laborers law

 

  • Amendments to the Tax Code

Order for the approval of the Procedure of processing of the forms 230 „Application for the destination of the amount representing up to 2% of the annual tax on income from salaries and pensions”, published in the Official Gazette no. 316 / 11 April 2018.

The Order approves the Procedure regarding the processing method of the Forms 230 „Application for the destination of the amount representing up to 2% of the annual tax on income from salaries and pensions”.

The Order approves the model and the content of the form „Notification regarding the destination of the amount representing up to 2% of the annual tax on income from salaries and pensions to support non-profit entities/worship units”.

Please refer to the Official Gazette no. 316 / 11 April 2018 for more details.

  • EU case-law

Decision of the Court of Justice of the European Union (“CJEU”) in the case C-81/17 Zabrus Siret

The Romanian case analyses whether a taxable person is entitled to a refund of VAT relating to a period which was already subject to a tax audit, when such refund is requested within the statute of limitation period provided by the law for exercising the input VAT deduction right.

For the purpose of issuing its opinion, the CJEU analysed the application of the principles of effectiveness, fiscal neutrality and proportionality in the case at hand.

The CJEU noted that the Romanian tax legislative provisions which do not allow a taxable person to correct the VAT returns for periods which were subject to a tax audit and, thus, do not allow the exercise of the input VAT deduction for amounts related to those periods, are contrary to the principle of effectiveness. This is due to the fact that such provisions have the result of shortening the time available to the taxable person for correcting its VAT returns and, consequently, making it impossible in practice, or, at the very least, excessively difficult for the taxable person to exercise its VAT deduction right, despite the fact that the five year limitation period has not elapsed.

In the view of the CJEU, the above mentioned law provisions lead to a definitive VAT burden at the level of the taxable person, even where the substantive conditions for input VAT deduction were met, which is against the principle of fiscal neutrality.

The CJEU also states in its decision that, where the substantive requirements are met and theire is no evasion or prejudice to the state budget, the national tax authorities cannot fully deny the deduction of input VAT due to non-compliance with formal requirements (e.g. not performing a correction of the VAT returns before the tax audit was closed). Such a measure would be disproportionate as compared to the deed of the taxable person and would thus be contrary to the EU VAT principle of proportionality.

In addition, the CJEU held that the measures of the national tax authorities, allowing the correction of VAT returns, after a tax audit is performed for a respective period, only at the request of the tax authorities, are not taken to ensure the application of the principle of legal certainty, but to ensure the effectiveness of tax inspection and the functioning of the national administration.

Thus, the legislative provisions enforcing the above measures cannot be used as valid arguments for the refusal of the input VAT deduction right.

The decision of the CJEU could be used by taxpayers to sustain their right to correct VAT returns and to deduct input VAT even for periods which were already the subject of a tax audit if they can prove that the substantive conditions for exercising such a right are met.

The arguments of the CJEU in issuing this decision can be used also in other litigations with the tax authorities where the rights of taxpayers, regulated by the EU VAT law were denied due to non-compliance with formal requirements imposed under the Romanian law.

Decision of the CJEU in the case C-580/16 Firma Hans Bühler

The case analyses the application of the VAT simplification measures in case of triangular operations, where the middle man is established and registered for VAT purposes in the Member State of dispatch of the goods and where certain obligations regarding the reporting of the operations concerned in the Recapitulative statements were fulfilled with delay.

According to the CJEU, in order for the VAT simplification to apply, the middle man should be identified for VAT purposes in a Member State different from the Member State of dispatch of the goods only in the context of the specific acquisition he is making. Thus, the fact that he has a VAT identification number issued in the Member State of dispatch is irrelevant where he does not use this VAT number for the purpose of the discussed operations.

Also, a refusal to grant the benefit of the simplification scheme for the sole reason that the middle man is registered for VAT purposes in the Member State of dispatch of the goods would lead to a difference in the VAT treatment of taxable persons and might restrict the pursuit of economic activities by taxable persons on the basis of their VAT identification numbers, which would be against the objectives of the VAT Directive.

Additionally, in the view of the CJEU, the requirement to report the triungular operations in the Recapitulative statements has only a formal nature and non-compliance or late compliance with such a requirement cannot lead to a refusal of the VAT simplification when the related substantive conditions are met.

A different approach taken by the Member States could lead to a double taxation of the intra-Community acquisitions of goods, both at the level of the middle man in the country which issued the VAT identification number and at the level of the final customer in the Member State of arrival of the goods.

The Court re-stated the cases when failure to comply with formal requirements could lead to a disallowance of the VAT simplification measures being applied, namely:

  • the taxable person has intentionally participated in tax evasion which has jeopardised the operation of the common system of VAT;
  • non-compliance prevents the production of conclusive evidence that the substantive requirements have been satisfied.

Moreover, the CJEU noted that the EU VAT law provisions require that a VAT identification number is valid at the time transactions are performed and not at the time the Recapitulative statements reporting such transactions are submitted.

The above mentioned decision clarifies the application of the VAT simplification rules in case of triangular operations. Taxable persons can rely on the judgment to justify the application of the VAT simplification provided by the Romanian VAT law for triangular operations even in situations when they have a VAT registration number in the Member State of dispatch, provided that a different VAT identification number is used for those specific transactions.

Also, the decision can help taxpayers sustain their case against the Romanian tax authorities when certain rights / simplifications under the EU VAT law were restricted / denied based on arguments of a formal nature.

  • Amendments to the Day laborers law

Law no. 52/2011 regarding the exercise of some occasional activities carried out by day laborers, published on the Official Gazette no. 313 / 10 April 2018

The law makes several amendments, but inter alia, it introduces to Article 13 the following new occasional activities that can be carried out by day laborers:

  • hotels and other accommodation facilities;
  • hotels and other similar accommodation facilities;
  • accommodation facilities for holidays and short-term periods;
  • children’s camps, organized by the Ministry of Youth and Sport, directly or through the units under its subordination;
  • restaurants;
  • other food activities;
  • bars and other beverage service activities.

Please refer to the Official Gazette no. 316 / 11 April 2018 for more details.

 

Authors:

  • Inga Tigai – Senior Manager, People Advisory Services
  • Catalina Cambei – Manager, Indirect Tax

 

For additional information, please contact:

Alex Milcev, Partner – Head of Tax & Legal

Email: office@ro.ey.com

 

 



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