Government Emergency Ordinance no. 79 / 8 November 2017 concerning the modification and completion of Law no. 227/2015 regarding the Fiscal Code was published, clarifying the VAT deduction right of taxable persons involved in fraud.
According to the Ordinance, the Romanian tax authorities are allowed to deny the VAT deduction right of taxpayers only if, after checking all available evidence under the law, they can prove beyond any doubt that the taxable person knew or should have known that a transaction involved VAT fraud which occurred upstream or downstream in the supply chain.
In this way, taxpayers are encouraged to adhere to the voluntary compliance and good faith principles and to take preventive steps to identify the extent to which their suppliers / customers are involved in fraudulent chains. This newly-adopted measure is welcome, as its stated purpose is fighting abuses in tax authority practice, as the VAT deduction right has often been rejected based purely on suspicion of fraud.
In this context, PwC recently launched at CEE level two unique VAT fraud detection tools. The two solutions, the VAT Fraud Tracker and FAIT, allow the monitoring of current and historical data in order to keep track of intra-Community trade with goods and to identify suppliers / customers susceptible to being involved in fraud.
VAT Fraud Tracker monitors the movement of goods within the EU, by using statistical information and by automatically indicating inbounds and outbounds showing signs of potential cross-border fraud. FAIT is an automated instrument used for the extensive checking of business partners as far as tax, reputational and operational risks are concerned.
In order to avoid being denied their VAT deduction right, a legislative clarification encourages taxpayers to be proactive and monitor whether their suppliers / customers are involved in fraudulent chains. Our new tools, VAT Fraud Tracker and FAIT, can be the first steps. To test the demo version for free, you can arrange a meeting with the PwC team right now!