The legislation that concerns widespread electronic invoicing was developed by authorities and stipulates that, starting from January 1, 2024, entities conducting taxable operations in Romania will be obliged to report all invoices through the RO e-Invoice system.

The paper version will still be able to be used in parallel only until June 30, 2024, and only in cases where the supplier or recipient is not yet registered in the RO e-Invoice Registry. Afterward, the refund of VAT will only be possible for entities established in Romania based on electronic invoices. What are the implementation stages and what are the risks for entities that do not comply?

Romania implemented a mandatory electronic invoicing system last year for goods with fiscal risk, in dealings with government entities (business-to-government - B2G), and for tourism operators that accept holiday vouchers. To extend the obligation to all categories of transactions carried out in Romania, the authorities requested a derogation from EU VAT legislation, which was approved by EU institutions in the summer of 2023.

Six months of transition

The implementation process of the generalized system has two important stages. In the first stage, between January 1 and June 30, 2024, Romanian suppliers, whether registered for VAT purposes or not, will be required to report in the RO e-Invoice system all B2B (business-to-business) invoices issued for taxable operations (delivery of goods or provision of services) in Romania.

This rule also applies to non-resident taxpayers registered for VAT purposes in Romania, as well as to invoices issued by Romanian suppliers for transactions involving government entities (B2G), other than those covered by the previous B2G electronic invoicing legislation in force from last year.

Exempt from these provisions are invoices related to the export of goods made by the supplier or another person on their behalf and those for intra-community supplies of goods leaving Romania.

In the first implementation stage, the mentioned taxpayers must issue invoices in XML format, in addition to traditional paper invoices, and submit them in the RO e-Invoice system through the Private Virtual Space (SPV).

During this period, suppliers will transmit the invoices issued to business partners according to existing procedures (on paper or through other electronic invoicing methods), except in cases where both the supplier/provider and the recipient are registered in the RO e-Invoice Registry, in which case the invoice is considered communicated to the recipient when it is successfully transmitted electronically.

The deadline for transmitting invoices in the RO e-Invoice system is five working days from the date of issuance, with certain conditions, and a violation of this provision constitutes a violation and is subject to fines ranging from 1,000 to 10,000 lei, depending on the taxpayer's size. No penalties will be applied for such violations during the period from January 1 to March 31, 2024.

In the second stage, after July 1, 2024, paper invoices or the old electronic formats will no longer be accepted for tax purposes. The only invoices accepted for the purpose of VAT deduction will be those issued electronically in XML format and transmitted to recipients through the RO e-Invoice system.

Significant Penalties

Taxpayers must prepare in advance to meet these obligations since the penalties are significant. B2B invoice recipients who, after July 1, 2024, receive and record in their accounting records invoices that are not issued electronically and not sent through the RO e-Invoice system will be fined an amount equal to the VAT stated on the invoice.

Such a provision seems to be in contradiction with EU law principles (for example, the CJEU decision in case 564/15 Farkas). Moreover, recipients who record traditional format invoices in their records will also face the rejection of VAT deduction because these types of invoices will no longer be accepted for VAT deduction.

In conclusion, all taxpayers conducting taxable operations in Romania must be ready from January 1, 2024, to issue electronic invoices and report them in the system, even though they can still use the current invoice format for six more months.

To achieve this, it is necessary to identify solutions compatible with internal accounting systems that will allow taxpayers to comply with the new reporting requirements. On the other hand, the tax authority (ANAF) needs to improve its infrastructure to ensure that this obligation produces the expected results.

Opinion piece by Alexandru Stancu, Senior Manager, Indirect Taxation, Deloitte Romania.