Welcome to our in-depth look at in a significant development for businesses operating in Romania, the government has introduced mandatory electronic invoicing, a move that promises to modernize the fiscal landscape. Signed into law by President Klaus Iohannis, this regulation mandates the use of the RO E-Invoice system for all electronic invoices starting January 1, 2024. This initiative, part of a broader fiscal and budgetary reform, is aimed at increasing efficiency, reducing tax evasion, and streamlining VAT processes. With the transition period set to begin soon, this blog post delves into the key aspects of this mandate, its implications for businesses, and the steps needed for a smooth transition to this new digital invoicing era.
European Commission's Involvement:
Starting July 2024, in Romania, electronic invoices will become the only recognized format for invoice reception, with possible penalties for both issuers and recipients who do not comply. The European Commission has granted Romania a special permission, valid from January 2024 to December 2026, or until the adoption of the EU's ViDA proposal, to deviate from specific articles of the VAT Directive 2006/112/EC. This deviation is outlined in Government Ordinance 120/2021, which lays the groundwork for the national e-Invoicing system. Furthermore, Government Ordinance 130, issued on December 17, 2021, mandates electronic invoicing from July 2022 for businesses dealing in high-risk tax categories, as identified in ANAF 12/2022 ordinance published on January 6, 2022. This includes sectors like fruit and vegetables, alcohol, construction, mineral products, and clothing and footwear, which are considered more vulnerable to tax evasion.
💡 Country Specifications for E-Invoicing:
Tax Authority: ANAF (National Agency for Fiscal Administration)
- E-Invoicing/Continuous Transaction Controls (CTC) Model:
- Business-to-Government (B2G): Centralized
- Business-to-Business (B2B): Post-audit
- Required Infrastructure:
- B2G: Utilization of the RO e-factura system
- B2B: Not Applicable (N/A)
- Standardized Invoice Format:
- Format: RO_CIUS
- Mandatory Compliance:
- Invoice Issuance: Gradual implementation
- Invoice Reception:
- B2G: Mandatory for all contracting authorities
- B2B: Subject to buyer’s agreement
- Electronic Signature Requirements:
- Requirement: Not necessary
- Invoice Archiving:
- Duration: 10 years
- Archiving Abroad: Permitted, subject to specific conditions
Key Features of the New E-Invoicing System:
- Mandatory Use: All companies must issue and receive invoices electronically via the RO E-Invoice system starting January 1, 2024.
- Grace Period: A grace period extends from January 1, 2024, to March 31, 2024, during which companies can adapt to the new system without penalties.
- Penalties: Post grace period, non-compliance can attract fines from 500 to 10,000 RON, depending on the company's size.
- Phased Implementation:
- Phase 1: B2B e-reporting for all companies from January 1, 2024.
- Phase 2: Full B2B e-invoicing for established companies from July 1, 2024.
Romania will start requiring electronic invoices in two main phases:
Phase 1: E-Reporting (January 1, 2024, to June 30, 2024)
- What It Is: This initial phase is a preparation period.
- Who It Affects: All businesses, whether based in Romania or not, must report details of invoices for goods and services sold within Romania. This includes sales to other businesses and the government.
- What Needs to be Done: Businesses must report all these invoices electronically. For companies not based in Romania but registered for VAT there, this rule applies too.
- For example, if a Romanian businesswoman, Ioana Popescu, owns a small craft shop in Bucharest and is VAT-registered, she must report all her business transactions electronically. Similarly, if Andrei Ionescu, who owns a tech startup in Cluj-Napoca and is VAT-registered, must also comply with this e-reporting rule.
- Special Note: During this phase, there won't be any fines for late submission until March 31, 2024. This gives companies time to adjust.
Phase 2: E-Invoicing (Starting July 1, 2024)
- What It Is: The full e-invoicing system starts.
- Who It Affects: All Romanian businesses and foreign companies operating in Romania must start using electronic invoices for all domestic sales and transactions with the government.
- What Needs to be Done: These electronic invoices must be sent through Romania's official system, RO E-Factura, and follow a specific format (RO_CIUS).
- How It Works:
- Sending Invoices: Businesses send their invoices in a digital format to the RO E-Factura system.
- Checking Invoices: The tax authorities check and approve these invoices.
- Finalizing Invoices: Once approved, the system creates an official, digitally signed invoice.
- Receiving Invoices: Customers then download these approved invoices from the system.
- Take, for example, Maria Dobre, who runs a furniture manufacturing company in Timișoara. She will need to issue electronic invoices for all her sales to other businesses or government entities in Romania.
- Likewise, a foreign company, say a Hungarian IT firm with an office in Brasov, must also issue electronic invoices for its transactions within Romania.
- It's important to note that this requirement is not just limited to VAT-registered entities. For instance, Alexandru Voinea, a freelance photographer in Sibiu who is not VAT-registered, will still need to issue electronic invoices for his services to businesses and government agencies.
Scope of E-Invoicing and E-Reporting
- The rules cover all invoices within Romania, including those to businesses and the government. However, exports and transactions within the EU are not included.
Impact on Businesses
- From the start of 2024, businesses, whether Romanian or foreign with operations in Romania, must prepare for these changes. This includes both those registered and not registered for VAT.
Accessing the E-Invoice System
- To use the RO E-Factura system, businesses need to register in the Virtual Private Space (SPV).
Penalties for Not Following Rules
- Fines vary by the size of the business, ranging from 1,000 lei for small entities to 10,000 lei for large companies.
This new system aims to streamline tax reporting and reduce fraud, but it requires businesses to adapt to new digital processes.
- Romania is implementing a mandatory electronic invoicing system. This move aims to modernize financial transactions, improve VAT compliance, and reduce tax evasion.
Timeline for Phases:
- Phase 1 starts on January 1, 2024, introducing e-reporting for all businesses, both local and foreign.
- Phase 2 begins on July 1, 2024, where established companies switch to e-invoicing, while foreign companies continue e-reporting.
- A grace period until March 31, 2024, ensures no penalties for early non-compliance.
- Invoices must be submitted within 5 days of issuance during Phase 1. Failing to comply can result in fines ranging from 1,000 to 10,000 LEI (approximately 200 to 2,000 EUR).
This change is expected to bring more efficiency, transparency, and compliance in business transactions. Companies that adapt quickly can gain a competitive advantage in the new digital-first business environment.
Conclusion:
Romania's move towards mandatory e-invoicing is a significant step in its digital transformation journey. While it poses challenges, it also offers opportunities for businesses to enhance their efficiency and compliance.
