25 October 2016

Main Office expiry = voidance of VAT code?

Which are the relevant legal provisions?

The new Tax Procedure Code presents in art. 92 (1) g) the case when the tax-payer is declared inactive as a consequence of the main office space holding duration’s expiry.

According to the same article, the effects of the inactivity are those stipulated by the Tax Code.

As far as the procedure of declaring the inactivity and the possibility of reactivation are concerned, the relevant provisions are those of Order no. 3846/2015 issued by ANAF’s President.

How is the inactivity declared?

The procedure starts with the determination of the tax inspection authority that follows the visit of the office as to carry out a control. During this inspection the identified situations shall be compared with the information in ANAF’s database. If the respective tax-payer finds itself in the situation set forth by the provisions of art. 92 (10 g), the determination will be recorded in report that is to be concluded at the end of the inspection.

Addendum 1 of Order no. 3846/2015 regulates the monthly drafting of a list containing the tax-payers that find themselves in the situation of main office expiry.

After the list is compiled, the tax-payers have to be notified as to clarify the situation that led to the proposition to declare them inactive.

The Law provides, in art. 6, Chapter III of the Addendum to the Order, the possibility of the tax-payers to prove in 30 days since receiving the notification that they no longer find themselves in situation stipulated by art. 92 (1) g). This proof needs to be submitted to the responsible tax authority.

The means of proof are expressly and specifically set forth in the Addendum. The Tax-payers can either use the information sent by the National Trade Register Office or the determination certificate issued by the same authority.

If the situation is not clarified in the 30 days’ period, the Decision declaring inactivity shall be drafted and forwarded to the tax-payer.

This Decision is also effective toward third-parties, according to the regulations of art. 92 (13).

Which are the effects of inactivity?

First of all, Order no. 3846/2015 stipulates the immediate consequence of voiding the VAT purposes registration ex officio, starting with the date of the Decision’s intimation. Thus, the Tax Code regulates that these tax-payers will no longer benefit from expense and VAT deductions pertaining to their acquisitions.

Another effect is produced towards the secondary offices which are tax registered. These are considered inactive as long as the tax-payers that set them up remain inactive.

Which is the reactivation procedure?

Addendum 1 of the Order stipulates that the first step towards obtaining the reactivation is the cumulative fulfillment of four conditions:

  • fulfilling all legal declarative obligations;

  • the tax-payers does not have residual tax obligations;

  • the main tax authority determines that the tax-payers function at the declared tax domicile;

  • the tax-payer does not find itself in the situation for which it has been declared inactive.

In order to continue the procedure, the tax-payer submits a request to the tax authority through which it applies for reactivation. Following this request, the four cumulative conditions shall be verified.

If following the analysis of each condition by the responsible departments it is determined that they are fulfilled, the Decision to Reactivate will be drafted and forwarded.

The tax-payer is reactivated starting from the date when the Decision was received and will also be effective towards third-parties since the legally provided date. Moreover, the secondary offices will be considered active from the date of reactivation.

Conclusions

This inactivity declaration situation is a novelty compared with the provisions of art. 78 of the old Tax Procedure Code. Subsequently, the tax-payers find themselves in an incipient state of comprehending the working mechanism of this procedure.

Therefore, we found it useful to briefly present the legal steps that those who will encounter such a decision in their activity can take and to highlight the effects that the Decision has over the economic activities.

The voidance of the VAT code can have dramatic consequence over the proper course of your business! Be prepared to follow an arduous path in order to fix this situation. You should be diligent by trying to prevent the negative effects of the main office’s expiry and use the 30-day period you are entitled to for clarifying the situation to your benefit!