Quality of justifying document in the context of RO e-Invoice
July 1, 2024 brought the generalized application of the transmission of invoices in RO e-Invoice for supplies of goods and services with the place of taxation in Romania, between persons established for VAT purposes in Romania (“B2B”), without the obligation to communicate invoices by other means to the beneficiary. What are the accounting and tax challenges of this new paradigm (referred to by specialists as “real-time invoicing”) is the topic of this edition of the Tax & Training newsletter.
Let’s remember what has changed since July 1, 2024 and what are the accounting and tax challenges resulting from this impact change
GEO 120/2021 defines the electronic invoice as “the invoice issued, transmitted and received in a structured XML electronic format, which allows its electronic and automatic processing”. Art. 4 of GEO 120/2021 mentions that the original copy of the electronic invoice is considered the XML file accompanied by the electronic seal of the Ministry of Finance. The date of communication of the electronic invoice to the recipient is considered the date on which the electronic invoice is available for download from the national electronic invoice system RO e-Invoice. The date of communication is also accessible in the system to the issuer of the electronic invoice.
According to art. 10 of GEO 120/2021, as amended by Law 296/2023, starting with July 1, 2024, in the B2B commercial relationship, between taxable persons established in Romania according to art. 266 para. (2) of the Fiscal Code, the issuer of the electronic invoice has the obligation to transmit it to the recipient using the national system regarding the electronic invoice RO e-Invoice. As of July 1, 2024, the legislation no longer mentions the obligation to send in parallel the invoice to customers through other channels, e.g. email, mail, etc.
In practice, as we have already shown in a post on Linkedin in July 2024, this provision has been interpreted by economic agents in ways that have ranged from:
- The only document that some suppliers have decided to send to customers, on the B2B relationship, is the electronic invoice sent through RO e-Invoice, i.e. the invoice issued, transmitted and received in a structured XML electronic format, which allows its electronic and automatic processing, and which bears the seal of the Ministry of Finance. This situation mainly included those suppliers who received either in advance or on the date of delivery the value of the goods or services delivered/rendered.
- The electronic invoice is sent in RO e-Invoice, but the customer still has access to the electronic invoice, in the format used up until 30.06.2024 (i.e., pdf format) communicated by email, or uploaded to the supplier’s platform, or both. In addition, most of the suppliers have opted to notify their customers by email about the invoice upload index in RO e-Invoice, so that customers know that they are not exposed to a fine of 15% of the invoice value, which can be imposed for invoices recorded in the books without being communicated in RO e-Invoice. This method of communicating invoices is common to suppliers who collect the receivable within a certain term from the date of issuance of the invoice, and who have every interest in letting the customer know that an invoice has been issued in which the commercial receivable is formalized.
MFP Order 2634/2015 on financial accounting documents provides that “the circuit of financial-accounting documents and the number of copies thereof are established by their own procedures regarding the bookkeeping, approved by the entity’s administrator, the authorizing officer or another person who has the obligation to manage the respective entity”, so it was expected that we would have differences from one taxpayer to another.
However, the new legal provision gives rise to non-unitary approaches caused also by the fact that the legislative provisions are evasive, which raises very important questions, to which companies have answered, as I said, differently, because the perception of the tax risks and the need to have an efficient tool for collecting customer receivables differ from one business model to another:
- A first question that arises is whether it is correct to coexist both the electronic invoice in XML format mentioned by GEO 120/2021, and which is transmitted through RO e-Invoice, being able to be converted into humanly readable format at the recipient – e.g. pdf (for ease, we generically call it “RO e-Invoice”), and the invoice as we knew it until 30.06.2024 (and which until July 1, 2024 we only sent through RO e-Invoice, in parallel with its transmission on the usual channels to the beneficiary – email, mail, etc.).
- A second question would be: what document could be considered a justifying document, for reflecting in the books the acquisition and sales operations, what is the date of the operation and what is the date of the document that the accounting software should record, given that, in the B2B commercial relationship, between taxable persons established in Romania for VAT purposes, the issuer of the electronic invoice (i.e. the invoice in XML format – see above) has the obligation to transmit it to the recipient using the national electronic invoice system RO e-Invoice, within 5 calendar days from the date of issuance of the invoice, but no later than 5 calendar days from the deadline provided for the issuance of the invoice in art. 319 para. (16) of the Fiscal Code. This means that there may be differences between the date of the transaction, the date of the invoice issued from the supplier’s IT system and the date of the RO e-invoice (e.g. supply of goods on the 25th of the month, invoice issued on the last day of the month, RO e-Invoice sent on the first day of the following month).
- A third question refers to the tax implications: can we deduct the expense or VAT if we have not received the electronic invoice in XML format for the operation carried out through RO e-Invoice? Is the supplier obliged to highlight the income and collect VAT if it has not submitted the electronic invoice in XML format for the operation carried out through RO e-Invoice for various reasons (e.g., the law allows for 5 days for RO e-invoice to be transmitted, or the system did not work on the last day of the month, in which it should have issued and transmitted RO e-Invoice)?
We remind you that the amendments on electronic invoicing are a reflection of Council Implementing Decision (EU) 2023/1553 of 25 July 2023 authorising Romania to introduce a special measure derogating from Articles 218 and 232 of Directive 2006/112/EC on the common system of value added tax. According to this Decision, by which Romania is authorized to accept only invoices issued by taxable persons established on the territory of Romania in the form of documents or messages in electronic format, and to provide in the national legislation that the use of electronic invoices issued by taxable persons established on the territory of Romania is not subject to acceptance by the recipient established on the territory of Romania.
As I said, the legal provisions are not precise, because, although Romania did not request (therefore did not obtain) a derogation from Article 178 of the VAT Directive, so that VAT deductions are possible only on the basis of the original electronic invoices, GEO 120/2021 refers to the XML transmitted through RO e-Invoice, with the MF seal, as being considered the original copy of the invoice, and art. 319 para. (1^1) of the Fiscal Code recognizes only these invoices on the B2B relationship between persons established in Romania. And, from an accounting perspective, OMFP 2634/2015 on financial-accounting documents tells us that, for economic operations subject to the obligation to issue an invoice, according to the Fiscal Code, the justifying document is the invoice. The Directorate of Accounting Regulations has not modified the general rules for the use of financial-accounting documents; hence we have to apply the already known principles to the new regulations on invoicing, which are not precise. And the taxpayer is left to interpret and conclude, with the help of tax consultants and professionals in accounting, the 2 legislative sources (in the tax field and in the accounting field).
We have tried to provide answers to these questions, by applying the professional judgment, and the accounting and tax principles to which no changes have been made after June 30, 2024, although some correlations, as we will show, are imperative to be made as soon as possible.
As a first conclusion of the analysis, we consider that paragraphs 4 and 25 of Annex 1 on the General Rules for the Use of Financial and Accounting Documents to OMFP 2634/2015 should be reformulated. Point 4 of these norms specifies that the documents that are the basis of the accounting entries can acquire the quality of justifying document only if they contain all the information provided by the legal norms in force. Can this provision be interpreted as allowing the taxpayer to use documents other than those expressly mentioned in Annex 1, respectively Annex 2 to OMFP 2634/2015, provided that the documents comply with the requirements mentioned at point 2 of the Rules? Personally, I do not understand this way provision of point 4, and I consider it necessary to adjust both points 4 and 25 of the general rules for using the justifying documents, so that it is understood very clearly that, when I am not in the possession of the invoice, the justifying document on the basis of which I make the registration at the time when the operation takes place is not the invoice (or RO e-Invoice), but one of the documents provided for in Annex 2, provided that, upon issuance/receipt of the invoice, specific registrations are made again. Of course, this interpretation problem did not arise in the context of the implementation of RO e-Invoice, but it is more evident in this new context.
From a tax perspective, our analysis concluded that the invoice issued electronically by the supplier’s invoicing, accounting or ERP IT systems and its form converted into XML should be considered 2 different electronic formats of the same document that both can circulate between the supplier and the buyer, depending on the internal rules specific to each individual taxpayer (subject to the fact that we do not know if the VAT Directorate of the MF has the same opinion). A clarification from the legislator would, however, be welcome, because, if it is considered that only the XML invoice with the ANAF seal is the one that is legally circulated, the implications can go as far as Law 241/2005, and it is not fair to leave the taxpayer in this uncertainty.
Also, as a conclusion of the analysis, a problem left to the taxpayer’s interpretation (i.e. not settled by the legislation) is that with which number and on what date should be accounted for in the accounting systems (of the issuer / beneficiary) the economic operation reflected in the invoice and what should be the date of the document: the number given by the issuer’s IT system and the date of issuance in electronic format from the IT system or the number of the transmission index in RO e-Invoice and the date of this communication? Here we consider that there are pros and cons to both options, which is why the Ministry of Finance (through the General Directorate of Tax Legislation, either through the specialists who develop the regulations in the field of VAT, or through those from the Directorate of Accounting Legislation and Regulations) should come up with clarifications:
- The option “date and number of the document from the taxpayer’s IT system”: the date of issuance of the invoice from the beneficiary’s IT system is the first, in chronological order, compared to the date of transmission in RO e-Invoice; RO e-Invoice includes, as a mandatory element, this date. RO e-Invoice system is just a channel to send invoice through, and it does not change the invoice.
- The “date of transmission in RO e-Invoice and the related index” option: as we have shown above, the RO e-Invoice is the one that meets the conditions of justifying document, and the original copy of the electronic invoice is considered the XML file accompanied by the electronic seal of the Ministry of Finance, according to art. 4 para. (6) of GEO 120/2021.
We hope that the Ministry of Finance (through the General Directorate on Fiscal Legislation, either through the specialists who develop the VAT regulations, or through those from the Directorate of Accounting Legislation and Regulations, or through the cooperation of both teams) will realize as soon as possible the need for clarification on this subject.
Depending on these clarifications, we will know whether an invoice issued on July 31, 2024 and sent in RO e-Invoice on August 1, 2024 will have to be reflected in the account 401 “Suppliers” / 4111 “Customers” on July 31 or only on August 1, until then it will have to be reflected in account 408 “Suppliers – invoices to be received” / 418 “Customers – Invoices to be issued”. And, to elaborate, we should go back to accounting principles.
You can read the accounting reasoning in detail in the most recent article published on the @Tax&Training blog: The quality of supporting document in the context of RO e-Invoice – Tax and Training.
We wish you good luck reading and, to the extent that you resonate or not with what is written, we invite you to discussions and exchange of professional opinions.
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This information does not constitute tax or accounting advice. Nadia Oanea or Tax & Training SRL does not assume responsibility for the application of the tax provisions for the particular cases of each taxpayer. This information is not provided with the intention of helping to avoid or illegally reduce taxes, duties or accessories that may be imposed by the authorities.
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