Why you have to pay VAT on an external service bill from your Accounting

When choosing to buy goods or services from abroad (whether it is a good laptop or advertising on social media) it is good to pay attention to some important elements. Alexandru Puiu, Chief Operating Officer at Keez, explains why VAT must be paid on the Facebook invoice, for example, and what to do with invoices from non-EU countries:

"In the case of goods, the situation is relatively simple because they have a customs duty. VAT on goods is calculated (in addition to the invoice from the supplier) and paid in customs. There may be situations where VAT is not paid (for individuals under certain Accounting conditions or for certain goods), but in general companies pay VAT on the import of goods. 

In the case of services, things are not as simple and special regulations are needed. Let's start from a concrete example: let's assume that there are two suppliers, F from France and R from Romania, that provide the same service, at the same cost and at the same price, 100 EUR. A Romanian company that wants to buy it would pay 119 EUR if it took it from company R (from Romania) and only 100 EUR if it buys it from company F (from France).

The services do not have a physical customs and therefore, the purchase of services is self-declared by the company. The service is considered consumed in Accounting Romania and the Romanian legislation and VAT rate apply. In other words, the VAT is calculated by the company with VAT rate in Romania, applied to the value without VAT in the invoice.

If there were no special regulations and VAT was not paid on purchases from abroad, the situation would disadvantage local companies compared to those in other countries. It would even generate countless attempts to avoid paying VAT.

Clarification is needed from the beginning. The name "VAT paying company" leaves room for an unfortunate interpretation: some entrepreneurs say to themselves "if they are not a VAT paying company, then they do not pay VAT". Not so, the name should be: "non-VAT deductible company". No one will bill that entrepreneur, Accounting only him, without VAT. For example, it will never happen that that entrepreneur goes to a Cash & Carry and tells them that he does not pay VAT and receive an invoice without VAT.

Once this is clarified, here is how the mechanism works:

- EU invoices come without VAT (if the data has been configured correctly in the partner portal, Facebook, for example). Accounting In this case you can create the impression that all you have to do is pay the bill to Facebook and everything is closed. Not so, the invoice comes with the obligation to pay VAT in Romania - if you are a non-VAT payer, you pay next month, if you are a VAT payer apply reverse charge and practically do not pay or deduct VAT, generating the same final effect.

- If the data was not configured correctly in the account in the partner portal (be careful: the VAT code valid in VIES must be entered in this portal, otherwise the invoices will contain the VAT from that country), the EU invoice may already contain VAT . Unfortunately, the situation here is extremely unpleasant - the VAT in Romania will have to be paid once again. 

There is also the special situation where invoices from some non-EU countries will not be able to be controlled. If they have VAT or a similar tax, they will put it on the invoice. For these, VAT will surely have to be paid in Romania. As a specialist in the field, I understand that it is the kind of cluttered information that can put you in trouble if you do not have serious knowledge in the field. As an entrepreneur, it is best to have an expert by your side to help you.

Keez's clients are accompanied by a whole team of CECCAR certified Accounting experts who prepare and submit the D301 declaration for non-VAT paying companies in which the value of the service and the related VAT are mentioned separately. From here, the value of VAT is highlighted in the report “Debts to the State” from the Online Platform (or in the application on the phone) from the month in which the services were purchased, so that you can always know what you have to pay to the state. Remember that this tax does not follow the standard rules: it is paid monthly, so it is important to check your State Debt report every month, so that you do not wake up indebted without permission. "