Historic decision of the High Court on VAT. The explanations of the tax consultant Gabriel Biriș
The High Court of Cassation and Justice made a major decision for the business environment in Romania. In a ruling handed down on Monday, April 20, the supreme court made it clear that the right of taxable persons to carry forward the negative balance of value added tax (VAT) from previous tax periods is not time-barred. The decision definitively settles an old dispute between taxpayers and the National Tax Administration Agency (ANAF).
PHOTO Mediafax
According to the official release of the court, the panel for resolving the appeal in the interest of the law interpreted article 1473 of the Fiscal Code in favor of a fair ratio.
Thus, any economic agent or natural person with taxpayer status has the possibility to carry over the amounts of VAT paid and not compensated with the VAT due until the moment of the termination of the activity, without the state being able to invoke the fulfillment of the limitation period. The decision ensures equal treatment between the fiscal body and the taxpayer, applies constitutional principles and is definitive.
A clarification expected by the business environment
Fiscal expert Gabriel Biriș detailed the impact and technical underpinnings of this decision. He characterizes it as great news for businesses, designed to remove market blockages and disputes.
“First of all, it is good news for business, in general. This decision comes to bring clarification. There was an older dispute in the market, between consultants and ANAF, regarding the taxpayer's right to request reimbursement or compensation of the VAT collected on invoices, including for invoices older than 5 years”, explained Gabriel Biriș for “Adevărul”.
This decision is based on the monthly reporting mechanism itself. As VAT returns are submitted each month, the balance is simply carried over from one period to the next.
“There are two aspects here. First of all, the fact that any rectification declaration, according to the law, interrupts the limitation period. That is, the period no longer runs. If, for example, you submitted a rectification to the profit tax, practically any rectification declaration interrupts the limitation period – you have 5 years, but the period is reset. For VAT, the declarations are submitted monthly. This means that the balance is taken over from month to month. And this is where the dispute arises: since you take over the VAT from previous periods in every settlement, practically they don't get to prescribe anymore”, emphasizes Biriș.
The monthly statement works like a prescription reset
Gabriel Biriș anticipates that the judges of the supreme court will also rely on European legislation in motivating the decision, with a clear emphasis on the principle of tax neutrality.
“Probably, in the motivation of the decision, we will also see arguments from the VAT Directive, related to the principle of VAT neutrality for the business environment. But the main argument, I expect, will be this: the fact that the monthly statements must be considered as successive rectification statements. Because the amounts in question are taken from one statement to another, and, under these conditions, the statute of limitations practically never ends.” Biris shows.
According to the expert, some of the tax inspectors, especially from the administrations of big cities, already accepted this logical argument for some time, without the need for the intervention of the courts. Biriș reported from his own professional experience how he managed to prove to the authorities the correctness of this technical approach.
“We had this discussion a few years ago. And, since then, we have tried to support this interpretation. You know that, in some cases, we even managed to convince the tax authorities, from certain administrations, that there is no way to prescribe. We did not end up in court with this case. There was no need. We managed to convince them. We were probably also lucky, we met open-minded people”, the tax expert pointed out.
Equal treatment between the Tax Office and the taxpayer
An essential aspect highlighted by Gabriel Biriș is the need for equity. Prescription cannot act only as an instrument by which the state protects itself or collects money, but must provide the same guarantees and rights to those who pay taxes.
“If any rectification interrupts my prescription, then the VAT statement, which works as a rectification, because it takes the balance from month to month, should have the same effect. Those amounts are permanently included in the statement filed in the current month, so basically they are not time-barred. That's right. It can't just be in favor of the Tax Office. It has to be in favor of the taxpayer. I'm glad that we no longer have to explain this on a case-by-case basis. Now there will be a practice unitary”, Gabriel Biriș pointed out.
