If you’re here, you’re a non-VAT paying business and you’re wondering what you need to do to be legally OK when you campaign on Facebook, Google, or similar tools outside Romania.
Or maybe you’ve heard on some Facebook group that you need “a certificate” and want to understand what on earth it is, if you really need it and how to get it.
Welcome, you’ve come to the right place.
We’ll answer these questions, plus I hope to help you avoid some mistakes and misguided advice that can cost you a lot of time or even hefty fines.
VAT is not to be trifled with!
Before I go into detail, I’d like to point out how important the topic we’re talking about here is and why you need to be careful where you get your information from.
Sometimes even the accountant isn’t the best source of information when it comes to newer solutions.
Around 2015-2016 a former high school classmate and his then-girlfriend started a company importing products for nail girls (I don’t know the official name of the occupation).
The business went well, sales kept growing and at some point he reached out to us to help him with a website (we were offering this service at the time) and give him some advice on Facebook promotion.
At the end of the strategy advice, I told him to talk to the accountant and get that “certificate”, specifically an intra-community VAT payer certificate (I’ll explain what and how in a moment).
He said he seemed to have asked her, but she said he said he didn’t need it because he was small, he was exempt.
I told him to check again and insist because I’m 99% sure he needs it.
If we needed it, he’ll need it.
He spoke to her again, but apparently they concluded they didn’t need it.
A few months later, right around the holidays, she calls me.
He tells me that it had been a good year, that he was planning to take a well-deserved vacation and start the new year strong, to place some big orders with the profit he had made this year.
Except that he didn’t get off to a good start and received a notice from ANAF that he owed tens of thousands of lei and risked criminal charges.
He managed to discuss with them a staggered payment of the debt.
But the budget that was supposed to be invested in new merchandise turned into a budget to pay off the debt.
He couldn’t recover, and a few months later he shut everything down.
Why do we have to pay VAT if we are not VAT payers in the country?
This is probably the hardest thing to understand in the whole context and leads to the biggest confusion and mistakes.
It’s all about European legislation.
Specifically, when the foundations of the European Union were laid, in the treaty that founded its creation, there is a clause that says something like:
“VAT remains in the country from which the money comes”.
The EU’s aim is to make transactions between companies and individuals in all member countries simpler.
Only they agreed that this value-added tax should remain and be paid in the country of origin of the money.
And it kind of makes sense:
The money for the service you buy goes to the country you buy it from. But the Romanian state also deserves to be rewarded in some way for creating the environment for you to operate in and earn the money you are about to send to the Netherlands. That’s why you pay VAT in Romania.
The important thing in this equation is not that YOU are not paying VAT, but that the one you are buying from is.
When buying from Romania, it’s simple – the VAT paying companies (the bigger ones than you, if you’re reading this) are also VAT collectors for the Romanian state. They include VAT in the invoice and you don’t even notice it.
But the problem is when you buy from a VAT payer outside Romania.
They are payers… but not collectors.
They don’t have a VAT code that allows them to come to the IRS in your county and pay that tax.
Therefore, these businesses, although paying VAT, bill with 0 VAT and it becomes your responsibility to pay the VAT.
What is an EU VAT payer’s certificate and why do we need it?
Well, this is where the VAT payer’s certificate you’ve been hearing about comes in.
This is a document that allows you to get a special VAT code, which is only for purchases within the EU and on which you pay VAT.
So you are still not liable for VAT.
This is more of a “VAT collector” certificate, you basically pay it for the companies you buy from, so to speak.
But it’s your legal responsibility to do it!
If you don’t, you risk fines and even jail time.
I repeat: you need it for any service you buy from EU member states from VAT paying companies (and most will be).
They will invoice with 0 VAT and you will pay the VAT in the country (usually 19% of the invoiced amount).
Don’t let anyone tell you otherwise, or you’ll end up like my former high school classmate.
Also, if I’m not mistaken, you can also use that VAT code when you purchase products whose value exceeds €10,000. It’s not necessary here, but if the VAT is lower in Romania than in that country it might be worth it. But I’m not a financial expert, better ask one.
What do I have to do to get this intra-Community VAT payer certificate?
This is where it gets simpler, at least for you as a marketer/entrepreneur.
This is where your accountant should know what to do.
If he doesn’t, tell him to look it up.
He will have to go to the ANAF in your county and start the process to get this special code.
It generally takes about a few days to get it.
We were lucky when we set out to find an accounting firm that did their homework and understood what it was all about. If you’re from Timis County, we highly recommend them.
After that, it’s important that every time you buy something from a company in another EU member state you use this code in the VAT or Tax ID field.
If you promote yourself on Facebook, Google or other similar platforms, you will need to put this code in the company details.
I recommend that in general when buying from foreign platforms you check which country they are based in.
Many of them have subsidiaries in Europe (usually Ireland or the Netherlands) and you have to pay VAT on purchases from them.