The rapid growth of e-commerce has led to an increasing number of cases involving VAT on intra-Community distance sales of goods being handled by the Costaș, Negru & Asociații law firm.
More specifically, during tax audits carried out by the Romanian tax authorities, the inspection teams developed their reasoning in support of the existence of an obligation to register for VAT purposes in Romania for companies established in other European Union Member States that sell goods to non-taxable persons in Romania through online platforms or their own websites.
In the field of intra-Community distance sales of goods, the correct determination of the place of taxation is of particular importance, as it establishes the Member State in which VAT becomes chargeable and, consequently, the tax obligations incumbent upon the supplier.
The general rule is that the place of intra-Community distance sales, namely the place of VAT taxation, is the Member State in which the dispatch or transport of the goods to the customer ends. In other words, VAT is, in principle, due in the Member State of consumption, namely where the final customer is located.
As an exception to the general rule, the place of sale is considered to be the Member State from which the dispatch or transport of the goods to the customer begins. This exception applies where the supplier is established or has its permanent address or usual residence in a single Member State, the goods are dispatched or transported to another Member State, and the total value of such supplies, excluding VAT, has not exceeded the threshold of EUR 10,000 in either the previous or the current calendar year, pursuant to Article 278¹ of Law no. 227/2015 regarding the Fiscal Code.
Therefore, as long as the EUR 10,000 threshold is not exceeded, the supplier may continue to declare and pay VAT in the Member State of establishment, without the need to register for VAT purposes in the Member States of consumption.
However, where this threshold is exceeded during the course of a calendar year, the general rule becomes applicable from the moment the threshold is exceeded. Therefore, VAT will be due in the Member States where the final consumers are located. Furthermore, the supplier may voluntarily opt to apply the general rule even before exceeding the threshold, such option producing effects for a minimum period of two calendar years.
Moreover, where the supplier carries out supplies of goods to non-taxable persons in several Member States, the EUR 10,000 threshold is not calculated separately for each individual Member State, but cumulatively, by reference to the total intra-Community distance sales carried out across the entire European Union.
Therefore, for the purpose of determining the applicable VAT regime, the relevant criterion is the total value of all supplies made to consumers in other Member States, regardless of the Member State of destination of the goods.
In this context, in order to simplify the tax obligations related to intra-Community trade, European legislation introduced the OSS (One Stop Shop) system starting from 2021.
This system allows the supplier to declare and pay the VAT due in all Member States of consumption through a single VAT registration and a single return filed in the Member State of establishment. Thus, by using the OSS system, economic operators avoid the obligation to register separately for VAT purposes in each Member State in which they make supplies to non-taxable persons.
However, the OSS regime does not produce retroactive effects and applies exclusively to transactions carried out after registration within the system. Therefore, where a taxable person exceeded the EUR 10,000 threshold prior to registering for OSS, the tax authorities may consider that VAT declaration and payment obligations existed in the Member States of consumption for the period preceding the application of this regime.
This article was prepared for the blog of the law firm Costaș, Negru & Asociații by Ms. Rovena Fetico, from the Cluj Bar Association.
Costaș, Negru & Asociații is a law firm with offices in Cluj-Napoca, Bucharest and Arad, which provides assistance, legal representation and advice in several practice areas through a team of 16 lawyers and consultants. Details of the legal services and the composition of the team can be found at https://www.costas-negru.ro. All rights for materials published on the company’s website and via social media belong to Costaș, Negru & Asociații, reproduction is permitted for information purposes only and with full and correct citation of the source.
