Reverse Value-Added Tax (VAT) for additional product categories is being planned by Romanian authorities.
In an effort to tackle the issue of VAT evasion, the Romanian Ministry of Finance has announced plans to introduce a reverse charge on VAT in the fruit and vegetable sector. This move comes in response to Romania having the widest VAT gap in the European Union, according to Minister Alexandru Nazare.
The European Commission estimates a VAT gap of 30.6% for Romania in 2022, a decrease from 34.8% in 2021. The estimated VAT gap for 2022 is RON 41.8 billion or EUR 8 billion.
The reverse VAT charge mechanism is currently used in several high-risk areas for VAT evasion in Romania, including cereals, electronics, energy delivered to energy traders, timber and wood, and green certificates. The Ministry plans to expand this mechanism to the fruit and vegetable sector, with discussions with the European Commission about this topic set to take place in September.
However, the new reverse VAT charge regime cannot be enforced before the new VAT regulations in the European Union in 2030. A special VAT charging regime in certain sectors can be enforced as early as next year. Romania may receive an EC derogation to use the reverse VAT charge mechanism for vegetables and fruits next year.
The International Labour Organization (ILO) will also discuss with the Romanian Ministry of Finance in September the introduction of a reverse VAT rate in the fruit and vegetable sector. Other sectors may also follow the fruit and vegetable sector in implementing the reverse VAT charge.
Discussions with the European Commission about the reverse VAT charge in the fruit and vegetable sector will take place in September. The European Commission's permit for a generalized reverse VAT charge takes years to obtain, making the early enforcement in specific sectors a more feasible solution.
The reverse VAT charge mechanism places the responsibility for VAT on the customer rather than the supplier. This is expected to help combat VAT fraud and increase revenue for the Romanian government. The move is a significant step towards improving the country's VAT gap and bringing it in line with the rest of the European Union.
%20for%20additional%20product%20categories%20is%20being%20planned%20by%20Romanian%20authorities.){kind=link}