The legislative changes, introduced at the beginning of this year, brought an unprecedented blockage for the new investments.
“From the findings of the fiscal body results that the taxable person – company established according to Law 31/1990 – does not justify the intention and ability to carry out an economic activity.”
This is the response, with no further explanation, that is received by a lot of companies who have applied for VAT registration in the last two months.
How we got here and what is to be done?
Contexpert has anticipated at the time of the approval of this new procedure – as we presented in a newsletter sent in February – the new procedure is likely to put obstacles to the honest businesses, although the initiators intend to fight tax evasion.
We recommend to fill in the request very thoroughly, anticipating the requirements of NAFA, in order to avoid, if possible, a refusal. Rejecting the request can create blockage in the activity for a significant time since you will have to redo the entire procedure.
Registration procedure for VAT has been changed from 1 February, by the order 112/2015, and has five steps, the last two are not mandatory (depending on the decision):
The analysis of the request establishes if the applicant has or has not fiscal risk and if the fiscal risc is small/ medium / high. In case the fiscal risk is high, NAFA decides an anti-fraud control.
The application for registration is checked with a computer application, but the procedure is completely opaque. It does not have criteria and a score attached. Therefore, the companies have to presume or to anticipate the reasons or the requirements. Our advice for the companies is to turn to experienced professionals who can manage in the “bureaucratic puzzle”.
Moreover, in case of refusal, NAFA forwards that “after remedying the situation that led to the rejection of the application (…) the taxpayer may apply for VAT registration by submitting a new application.” Obviously, without stating reasons that led to the rejection of the request, the companies do not know what they should remedy.
Examples of reasons for rejection: the administrator does not have income in Romania (in fact it is normal, since the request is to open a business in Romania) or the company does not have employees (also normal, since it has been recently established).
What happens at the interview?
If the risk is small / medium, NAFA sends an invitation to interview and requests new documents. Following the discussion, NAFA may decide approval / rejection of the application or triggering an anti-fraud control.
If an interview is decided, NAFA requests new documents. The list can be very long and may include: diploma of the manager, declaration of income of the administrator from the previous year, the original business plan, contracts with customers / suppliers, labor contracts and extracts from REVISAL, if any, an explanatory note on the intention and ability to undertake economic activities.
It should be noted that there are situations where, although there is good faith, some items can not be effectively available for objective reasons.
The intention and ability to perform activities: Statement 088
The main issue of the new registration procedure is the Statement 088 “Statement on own responsibility to assess the intention and ability to undertake economic activities involving operations from the scope of VAT” approved by order. 112/2015.
The Declaration 088 contains 18 questions, some of which are at least questionable.
For example, they concern:
Attention! The declaration 088 must be submitted also if the company changes its registered office and / or the associates / administrators. Basically NAFA checks once again the criteria for registration for VAT purposes and can void the VAT code. All details of this procedure are in the order 19/2015.
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