The law providing for the extension of the RO e-Invoice reporting system to all taxable transactions conducted in Romania, starting from January 1, 2024, has been promulgated by the President of Romania and is set to be published in the Official Gazette (Law No. 296/2023 on certain fiscal budgetary measures for ensuring the long-term financial sustainability of Romania).

As a result, companies established in Romania or non-residents registered for VAT purposes in our country will be required to report all invoices issued for taxable transactions in Romania in the RO e-Invoice system, and they must consider three important deadlines: January 1, April 1, and July 1, 2024. After this final deadline, for companies established in Romania, electronic invoicing remains the only legal method for issuing invoices.

The intermediate deadline, April 1, 2024, is extremely important because, from that point, sanctions can be applied for non-compliance with reporting in the RO e-Invoice system, and these sanctions are significant. On one hand, failure to transmit the invoice to the RO e-Invoice system within five working days from the date of issuance (reporting valid until June 30, 2024 for Romanian companies and indefinitely for non-residents with a VAT code in Romania) is sanctioned with fines ranging from 5,000 to 10,000 lei for large taxpayers, 2,500 to 5,000 lei for medium-sized taxpayers, and 1,000 to 2,500 lei for small taxpayers and non-residents.

On the other hand, starting from July 1, 2024, a taxable person established in Romania who receives and records a traditional paper or electronically issued invoice by economic operators established in Romania, meaning it was not issued electronically (in XML format with the seal of the Ministry of Finance), is fined an amount equal to the VAT amount stated on the invoice. For non-resident taxpayers registered for VAT purposes, the penalty for non-compliance with reporting in the RO e-Invoice system remains in effect even after July 1, 2024.

Unclear Aspects Regarding the Amount of Fines

The fines stipulated in the legal act raise several questions, both regarding their applicability and certain principles.

Firstly, the law expressly states that, in the case of a breach of the obligation to transmit (report) the invoice in the RO e-Invoice system, Article 2 of Government Ordinance No. 2/2001 on the legal regime of contraventions does not apply. This article allows for the payment of half of the minimum fine within 15 days of receiving/being served with the penalty notice. In practice, the fine imposed by the tax authority (up to 10,000 lei) will have to be paid in full by the taxpayer.

However, although the new legislation expressly stipulates that the fine coming into effect on July 1, 2024, applied in relation to the VAT amount stated on the invoice, departs from the maximum contravention fine provided for in Government Ordinance No. 2/2001 (up to 100,000 lei), it does not prohibit the possibility of paying half of the minimum fine set by law. Therefore, the text is ambiguous and will create difficulties in implementation.

In a strict interpretation, a taxpayer fined an amount equal to the VAT from the invoice they recorded without ensuring it was issued electronically should be able to pay only half of the fine within 15 days from the moment of receiving the penalty notice. In the absence of an explicit clarification in this regard and without a practice in the field, it is debatable whether the tax authority will accept only 50% of the amount specified.

Another question that arises concerns the accumulation of fines for non-reporting of invoices in the RO e-Invoice system. Specifically, it is uncertain whether the fine applies for each unreported invoice in the RO e-Invoice system or for a block of invoices loaded into the system.

Moreover, it is not clear what the maximum amount would be. In this case too, the wording of the law is ambiguous – on one hand, it provides that the penalty is applied for the non-transmission of the invoice "within five working days from the date of issuance," and on the other hand, the general text requires the loading of invoices (in plural) into the RO e-Invoice system. However, beyond the ambiguity of the text, the fine should not exceed twice the maximum fine.

This aspect results from Government Ordinance No. 2/2001, according to which, if the contraventions are established in the same penalty notice, the penalties accumulate, but the final sum cannot exceed twice the maximum fine (the highest of them). Additionally, if a person commits multiple contraventions and they are established by the same establishing officer, a single penalty notice is drawn up.

The practice of tax authorities should confirm this approach because, during an inspection, the tax authority checks a longer period, not a single transaction or the activity of a single day. In theory, multiple inspections could be carried out daily, and a penalty notice could be issued for each day. However, such an approach would be at least unique in the practice of inspections in recent years.

Furthermore, the number of invoices recorded in the RO e-Invoice system should be treated as an indicator of the taxpayer's compliance with legal provisions. Therefore, a simple omission to report one or several invoices by a taxpayer who complies with this obligation for most invoices should not be subject to a contravention fine but a simple warning.

Risk of Double Taxation

The deficient drafting of the law and all the deficiencies mentioned above also raise issues of legality. Any law must be clear and predictable. However, the numerous problems that may arise as a result of the application of the above-mentioned penalties indicate that the regulation of these fines contradicts these principles. In practice, it will be difficult for a taxpayer to comply and anticipate the reaction of the tax authorities.

In addition, a fine determined in relation to the VAT amount on the invoice is clearly disproportionate to the seriousness of the offense. This aspect is particularly criticized by the Court of Justice of the European Union (CJEU), which has highlighted in several judgments the arbitrary manner in which a Member State applies sanctions (Ecotrade, C95/07 and C96/07, Farkas C564/15).

At the same time, the sanction is not applied uniformly, given that certain operations can be exempt from VAT (even if the issuance of the invoice is optional), and it would lead to double taxation since companies that accept non-compliant invoices (not issued electronically) will also lose the right to deduct VAT for those purchases.

Most likely, numerous legal disputes will arise regarding this aspect, in which either a constitutional challenge will be invoked, or a preliminary reference will be made to the CJEU.

In conclusion, taxpayers subject to the requirement of RO e-Invoice must begin preparing as soon as possible to meet the deadlines specified by law. Opinion piece by Ana Săbiescu, Director, Indirect Taxation, Deloitte Romania, and Emanuel Bondalici, Senior Managing Associate, Reff & Associates | Deloitte Legal.