According to Deloitte, the process of digitalizing the tax administration in Romania, accelerated in 2022 with the aim of combating tax fraud, is beginning to yield results, according to the latest report from the National Agency for Fiscal Administration (ANAF) on this matter.

Approximately one year after implementing SAF-T and initiating similar projects of importance, such as the RO e-Invoice and RO e-Transport systems, tax authorities have issued a report on the main deficiencies identified through control actions and the most important tax aspects addressed by taxpayers in the first part of 2023.

As a result of control actions carried out by ANAF inspectors in the first half of this year, a series of inconsistencies were identified in the records and declarations of taxpayers, which subsequently affected state budget revenues.

Among the irregularities found as a result of inspections by ANAF inspectors are the reporting of fictitious intra-community deliveries, which were actually local deliveries of goods with taxation in Romania, and for which the supplier was supposed to collect VAT.

Another irregularity concerns the deduction of VAT for local acquisitions of goods and services for which the invoice issuer did not fulfill reporting or payment obligations.

Failure to report or incomplete reporting in the RO e-Transport system of goods classified by authorities as high fiscal risk items is also among the inconsistencies identified by tax inspectors during inspections.

Additionally, the ANAF report mentions, under irregularities, the reporting of purchases from suppliers declared as inactive during the reporting period for VAT deduction purposes, as well as the failure to register for VAT purposes of certain taxpayers who were obligated to register due to exceeding the registration threshold (300,000 lei turnover).

Digitalization Objectives of ANAF

Romanian authorities have introduced electronic reporting systems in the context of Romania having the largest VAT collection deficit in the European Union (approximately 35%, according to the latest data from the European Commission, valid for 2020, equivalent to over seven billion euros annually).

Furthermore, Romania has committed, through its National Recovery and Resilience Plan, to modernize the tax administration to reduce the VAT deficit by five percentage points and increase revenues by 2.5 percentage points of GDP by the end of 2025.

The process is not yet complete; the implementation of SAF-T needs to be extended from large and medium-sized taxpayers (for whom it is currently mandatory) to small taxpayers, and the RO e-Invoice system is scheduled to be applied universally from 2024 (with a grace period) after being introduced for high fiscal risk goods, invoices issued in relation to state entities, and other categories.

As a result, even though the process presents challenges for both taxpayers and the tax administration, the completion of digitalization programs should result in simplifying inspections conducted by tax inspectors, who will have easier access to taxpayer data, and reducing administrative burdens for taxpayers.

In this context, taxpayers need to pay increased attention to new reporting requirements, and concurrently, the tax administration must continue to invest in the necessary infrastructure for online verification of taxpayer documents and records, allowing potential inconsistencies to be identified much more quickly.