One of the most important changes in the new Fiscal Code is a reduced value added tax rate from 24% to 20%. Business owners will need to prepare for this change and comply with the new requirements in order to avoid any risks that might become associated with failing to perform the transition in time. Our Romanian accountants can help you understand the implications of this new measure on your business activities.
What are the necessary measures?
The new Fiscal Code will become effective as of January 1 2016. One of the most notable change concerns the percentage of the value added tax
which has been reduced from 24% to 20%. This tax will eventually reach 19% starting with January 1 2017.
This measure will have a great impact both on the consumer and on the economic agents operating in Romania who will have to adjust their economic operations or transactions. Staring with 2016 a set of transitional legal requirements will be implemented. These will be similar to those implemented when the VAT was raised in July 2010. Business owners will need to observe the provisions of these legislative guidelines in order to determine the correct VAT rate for the transactions which will be ongoing when the change is made in January 2016.
What are the risks for noncompliance?
Economic agents in Romania will have approximately three months to update their accountancy software and/or cash register software. Sellers will also have to update their price list to comply with the new rates.
Economic agents that fain to make the necessary changes until January 1 2016 will face certain risks, including:
- inability to make any fiscal deductions;
- penalties and interest payments for failure to apply the right VAT rate;
- extra maintenance costs for updating the used software;
- the possibility of losing clients if still using the old prices;
- litigation risks with third parties because on unclear VAT provisions.
Depending on their business activities, companies in Romania can face different or additional risks if they fail to comply with the new VAT rate next year.