The VAT payer status marks an important stage in a business’s evolution, whether it is a company or a sole proprietorship (PFA). It can be obtained when a certain turnover threshold is exceeded or voluntarily, at the taxpayer’s request.
In the following lines, you will learn when and how you become a VAT payer, what tax obligations come with this status, and the main advantages and disadvantages worth considering before making this choice.
VAT payer – General information
The VAT payer status is an essential aspect for any business that exceeds a certain income level or wishes to optimize its commercial relations. Understanding how VAT works and its fiscal implications is crucial for sound financial management.
What is VAT?
VAT (Value Added Tax) is an indirect tax applied to consumption. Practically, it is a tax paid by the final consumer but collected and remitted to the state budget by companies and sole proprietorships that carry out economic activities. VAT is regulated by the Fiscal Code and has different rates depending on the type of product or service.
What does a VAT payer mean?
A VAT payer is a legal or natural person (for example, a PFA) who has the obligation to collect VAT from its clients and remit it to the state. At the same time, these taxpayers can deduct the VAT related to purchases made for business purposes.
Therefore, the VAT payer status involves both reporting obligations and the right to deduct the tax paid on purchases, under the conditions provided by law. You can read more about this topic in the dedicated article on deductible VAT.
When do you become a VAT payer?
A legal person or a PFA becomes a VAT payer when it exceeds the turnover threshold established by law or when it voluntarily opts for this fiscal regime.
In Romania, the current threshold for mandatory VAT registration is 395,000 lei.
If, during a calendar year, the turnover exceeds this limit, the person must request registration as a VAT payer with ANAF. The request must be submitted within 10 days from the end of the month in which the threshold was exceeded.
However, some entities may choose voluntary registration before exceeding the threshold if their activity involves collaborations with EU partners or major purchases with VAT.
For example, if a Romanian company frequently buys services from suppliers within the European Union, VAT registration can be a strategic choice.
Also, a company selling products to other VAT-paying companies can benefit from smoother commercial relations, as clients can deduct the paid tax.
It is important to know that once registered for VAT purposes, the taxpayer must collect the tax on each issued invoice, declare it periodically, and remit it to the state according to the established deadlines.
VAT Payer PFA – What You Need to Know
A VAT-paying PFA has obligations similar to those of a company, but there are specific aspects regarding registration time, declaration method, and fiscal impact on net income.
When a PFA becomes a VAT payer
A PFA becomes a VAT payer when the annual turnover exceeds 395,000 lei or if it voluntarily opts for this regime.
Registration is done at ANAF by submitting form 070 (for PFAs) or form 010 or 700 (for legal entities), along with supporting documents.
It is recommended that a PFA carefully analyze whether its economic activity justifies registration, especially if most clients are individuals who cannot deduct VAT.
Obligations of a VAT paying PFA
After obtaining the VAT code, a PFA has the following obligations:
- to apply VAT on each issued invoice;
- to keep separate accounting records for collected and deductible VAT;
- to submit monthly or quarterly tax returns (form D300);
- to remit the collected VAT to the state budget;
- to report intra-community transactions through forms D390 and D394, if applicable.
Advantages and disadvantages of PFA
The advantages of a VAT-paying PFA include the possibility to deduct VAT on expenses (equipment, rent, professional services) and greater credibility with business partners.
The disadvantages relate to additional bureaucracy, higher accounting costs, and more complex tax returns.
Before deciding, it is advisable to analyze your clients’ profiles and the amount of VAT-related expenses. You can read more about individual entrepreneurial activity here.
Steps to become a VAT payer
The VAT registration process is carried out at ANAF and involves several stages. Here are the main steps:
- Check the income threshold: if turnover exceeds 395,000 lei, registration becomes mandatory;
- Fill in the registration form: form 010 (for companies) or 070 (for PFAs);
- Submit supporting documents: incorporation acts, tax certificate, proof of headquarters, declaration of economic activity;
- ANAF evaluation: fiscal risk analysis and additional verifications;
- Obtain the VAT code: ANAF issues the VAT registration certificate;
- Update accounting documents: all invoices and fiscal documents must include the new VAT code.
- It is important for the process to be completed correctly, as failure to meet deadlines can lead to penalties or the inability to deduct VAT for a certain period. Many entrepreneurs choose to work with an accountant to ensure registration is done according to the regulations.
Tax obligations of a VAT payer
A VAT payer must comply with the rules of collection, deduction, and reporting imposed by the Fiscal Code. Compliance with these obligations is essential to avoid penalties and maintain sound financial management.
VAT declaration and payment
Collected VAT must be declared periodically through Declaration 300, which is submitted monthly or quarterly, depending on activity volume. Payment is made by the 25th of the month following the reporting period. The declared amounts must be accurate, as discrepancies may generate fiscal penalties.
Tax audits and periodic reporting
Companies and PFAs registered for VAT are subject to ANAF checks, which verify the accuracy of declarations and supporting documents. They must also periodically submit forms D394 and D390, depending on the type of operations performed (domestic or intra-community).
Issuing VAT invoices
A VAT payer must issue invoices containing all mandatory information: company name, fiscal code, VAT code, taxable base, and VAT amount. VAT is calculated at the appropriate rate (19%, 9%, or 5%), depending on the nature of goods or services.
E-invoice – What VAT payers need to know
How does E-invoice work in Romania?
The E-invoice system became mandatory for most VAT payers starting in 2024. Through this system, all invoices must be sent electronically through the platform provided by ANAF. This digitalization aims to reduce tax evasion and increase transaction transparency.
Obligations of VAT payers regarding E-invoice
VAT payers must send issued invoices to clients through the E-invoice system within a maximum of five working days from issuance. Documents are automatically validated, and invoices not accepted by the system have no fiscal value.
Additionally, companies must ensure electronic archiving of invoices for a 10-year period.
Advantages and challenges for companies and PFA
E-invoice brings significant advantages: reduced transmission time, elimination of calculation errors, document traceability, and protection against fraud.
However, for some PFAs and small firms, implementing the system can be a technical challenge, requiring accounting software adaptation and staff training.
How to return to VAT non-payer status (if applicable)
A taxpayer can revert to non-VAT payer status if the annual turnover drops below 395,000 lei and no longer meets VAT registration conditions.
The request is submitted to ANAF with supporting documents. There is no fixed two-year period, but ANAF individually analyzes the request according to Article 316 paragraph (11) letter a) of the Fiscal Code.
After approval, the taxpayer no longer has the right to collect or deduct VAT, and subsequent invoices will be issued without VAT.
Advantages and disadvantages of VAT payer status
The VAT payer status has different implications depending on business specifics, client type, and expense volume.
Advantages:
- Possibility to deduct VAT on purchases (raw materials, equipment, services);
- Greater credibility with business partners;
- Easier access to international collaborations, especially within the EU;
- Increased fiscal transparency;
- VAT recovery in cases of exports or major investments.
Disadvantages:
- More complex accounting and tax obligations;
- Additional costs for accounting services;
- Need to file monthly or quarterly declarations;
- Cash flow impact (difference between collected and deductible VAT);
- Possible delays or temporary blockages caused by tax inspections.
For some small businesses, non-VAT payer status may be more advantageous, especially when dealing directly with final consumers who cannot deduct VAT. On the other hand, for companies working with other professionals or EU-based businesses, VAT payer status is usually preferable.
Conclusion: What you need to remember about VAT payer status
Becoming a VAT payer is not just a fiscal formality but an important step that can influence how you manage your finances, business relationships, and administrative obligations. Before making this change, it is advisable to carefully analyze the advantages and disadvantages, consult an accountant, and choose the right time for registration so that the decision brings real value to your business.
