TVA, the acronym for Value Added Tax, is an indirect tax that is applied to the value of goods supplied or services provided by a VAT-registered company. The tax is paid to the State Budget and is one of the taxes with a high collection rate. VAT is a tax that exists worldwide, with the level of taxation varying in each country.
In Romania, there are several VAT rates, depending on the nature of the services/goods to which the tax applies. There are also several types of value added tax, categorized based on the method of collection.
How is VAT calculated for payment?
VAT for payment is calculated and paid monthly or quarterly to the State Budget, in a dedicated treasury account, following a simple VAT calculation algorithm. The basic formula is: Collected VAT – Deductible VAT. Deductible VAT: VAT from sales invoices – VAT from payment invoices.
Current VAT rates (value added tax) applicable in Romania
After undergoing several changes over time, having previously had values of 20% and even 24%, the standard VAT rate currently stands at 19%.
While the majority of goods supplied and services provided by Romanian companies have a 19% VAT rate, there are goods and services to which a 9% VAT rate and a 5% VAT rate are applied.
Therefore, Romania has three VAT rates, classification into one of the taxation standards being determined based on CAEN codes (areas of activity). For example, food products, including beverages, are subject to a 9% VAT rate, while alcoholic beverages are subject to a 19% VAT rate.
9% VAT rate
● Prosthetics and accessories as described in current legislation. There are also dental prosthetics that are not subject to value added tax. A 9% VAT rate applies even to the delivery of prosthetics;
● Delivery of medicines (human and veterinary);
● Marketing of food and beverages for animal and human consumption, including ingredients used for food preparation. For proper classification in tax codes, the methodological norms must be verified;
● Catering and restaurant services, excluding alcoholic beverages;
● Distribution of drinking water and irrigation water;
● Marketing of pesticides and fertilizers, as classified by the Ministry of Agriculture. The methodological norms should be verified to apply the corresponding VAT percentage!
5% VAT rate
● School textbooks, magazines, general publications, excluding advertising publications;
● Hotel services and accommodation in specific units, including land used for camping accommodation;
● Entrance fees to museums, memorial houses, archaeological or cultural sites, sports events, and other similar services;
● Social housing, including the land on which they are built;
● Houses with a surface area of less than 120 sqm and a value lower than 450 thousand lei (including the land);
● Construction of buildings for municipalities that will be used for social purposes;
● Eco, traditional, and mountain products.
Types of VAT from a taxation and collection point of view
There are several types of VAT, classified according to how they are collected: Cash VAT, Split VAT, and Reverse Charge VAT.
Cash VAT applies only to certain eligible companies according to current legislation. As the name suggests, VAT is deducted when invoices are paid.
With Split VAT, the value added tax and the cost of services/goods are separately stated, and the amounts are collected separately.
