The extension, which was made possible by amending an ordinance completing the Tax Code, allows Romania to continue applying a reverse taxation on cereal until May 31, 2014, instead of end-May 2013.
Romania in October last year asked for an extension of the system until 2015, after a similar extension obtained in 2011, which expires at the end of May 2013.
Reverse taxation entails that transaction taxes, such as VAT, are paid by beneficiaries instead of entities that deliver the merchandise. Romania’s Finance Ministry estimated reverse taxation was to bring in an extra 240 million lei (EUR55.3 million) to the state budget in 2011 and RON410 million in 2012.
A document drafted by the Finance Ministry in March this year shows the EC has not approved a new extension and said the previous extension had been granted in specific circumstances and Romania had undertaken to implement tax reforms and return to its previous VAT collection system.
An EU Directive, currently analyzed by the EC, targets to fight VAT fraud by introducing a rapid response mechanism and allowing the Commission to grant temporary derogations and to allow the extension of the reverse taxation system to several sectors, including farming products.
According to official data, Romania loses out billions of lei annually from cereal trading due to VAT fraud. (EUR1=RON4.3375)