The re-invoicing operation can cause an inconvenience to companies regarding the VAT regime applicable to each specific case. Depending in the transaction flow, certain re-invoicings represent operations to which VAT is applied, and other are exempt from VAT.

Legal provisions

For an easier identification of the operation to which VAT is added or not, re-invoicing could be included in the following categories that are frequently met in practice.

1. Recovering the amounts paid by a taxable person on behalf and in the account of another person

According to art. 286, para. (4), letter e) from the Tax Code “The taxation base does not include (…) the amounts paid by a taxable person on behalf and in the account of another person and that it is later reimbursed to it, including when the lessor insures alone the asset that represents the object of a financial or operational leasing contract and re-invoices the lessor the exact cost of the insurance, as well as the amounts cashed by a taxable person on behalf and in the account of another person“.

As a consequence, the operation that implies only the reimbursement of certain amount does not represent a VAT operation, and thus VAT is not added to such re-invoicing.

2. Consignee structure

The consignee structure is defined in the Tax Code by art. 270, para. (2), respectively art. 271, para. (2), which provides that “a taxable person, that acts in his/her own name, but in the account of another person, as broker, in a delivery of goods or takes part at a service provision, acquired and delivered the respective assets or received and provided him/herself the respective services“.

Thus, within the consignee structure, the related methodology rules provide the fact that, for each re-invoiced expenditure the tax regime of the re-invoicing operation shall be applied, related to, among others, the place of the delivery/provision, the rates, delivery exemption/ re-invoiced provision.

3. Ancillary expenditures

However, the consignee structure does not apply to the cases in which the re-invoiced expenditures represent ancillary expenditures of a main asset delivery or service provision operation, as well as expenditures with duties and tax, as it is provided in art. 286, para. (3), letter a) and b) “a) duties and tax […] except the value added tax” şi “b) ancillary expenditures such as: commission, packing expenditures, transport and insurance, requested by the provider/supplier to the buyer or beneficiary. The expenditures invoiced by the goods supplier or service provider to the buyer, which make the object of a separate contract and are connected with the goods delivery and the service provision, are considered to be ancillary expenditures“.

In these situations, the re-invoicings represent operations to which VAT is added, as long as the main operation is an operation taxable in VAT field.

Practical aspects

Next, we present few of the elements that have to be taken into consideration for each of the re-invoicing operations presented above, and an example for each situation.

1. Recovering the amount paid by a taxable person on behalf and in the account of another person

The transactional flow for this type of re-invoicing can be the following:

  • The company receives invoices issued by different suppliers/providers on behalf of another person that pays them from own resources;
  • In order to recover the amounts paid on behalf and in the account of another person the company can issue a reimbursement invoice that shall be sent to the beneficiary together with the invoice paid on its behalf- on this invoice the VAT shall not be mentioned separately, because it is included in the amount to be reimbursed.

The functional mechanism regarding the deductible VAT, respectively collected, is the following:

  • The company that paid the invoice on behalf of another person does not exercise its right to deduct the VAT for the paid amounts, does not collect VAT based on the reimbursement invoice and does not register these amounts in the expenditures account, respectively the income account;
  • The beneficiary whose invoices were paid by another person shall deduct in the conditions of the VAT law based on the invoice issues on his behalf by the suppliers/providers, the reimbursement invoice being just a document that is annexed to the paid invoice.

2. Consignee structure

The transactional flow for this type of re-invoicing is the following:

  • The company receives invoices on its behalf for goods that are not its property or for services it has not benefited from, respectively goods/services that were actually acquired for a third company;
  • For its part, in order to recover these expenditures, the company issues invoices on its behalf to the client, meaning to the third company that is the final beneficiary of the goods/services;

For example, the companies X and Y, part of the same group, acquire marketing services, and the provider (from Romania) issues only one invoice on behalf of company X with 19% VAT. Whereas the company Y has benefited from these services, then company X has to re-invoice this share from the amount issued to the provider.

Taking into consideration the fact that, company X only wants to recover the value of the service provision that was made on its behalf, but in the account of another person and cannot recover more that the expenditure made, the consignee structure can be applied.

As a consequence, for the re-invoicing operation made by company X to the company Y the VAT in the amount of 19% shall be applied, whereas the regime of the re-invoiced operation is followed.

3. Ancillary expenditures

As we previously mentioned, the consignee structure does not apply in the cases in which:

  • The reinvoiced expenditures represent the ancillary expenditures of a main operation of delivering goods or providing services, that fall within the duty of the supplier/provider in connection with the operations achieved, being recovered from the client;
  • The duties and tax expenditures owed by a company in connection with a goods delivery or service provisions, if these are not included in the price of the goods delivered or of the provided services, but are recovered from the clients by re-invoicing.

For example, company X started the development of an office building for which it concluded a sale-purchase agreement with a client for selling it upon completion.

For the construction of the building, company X registers expenditures with taxes for obtaining the building permit (without VAT), that it re-invoices to the future buyer of the building. For this re-invoicing operation, company X shall issue an invoice with VAT (if the building is sold under VAT regime).

Also, company X registers various expenditures with consultancy services, legal services, notary tax, that it wants to recover from the client. Thus, for this re-invoicing operation, company X shall also issue an invoice with VAT (if the building is sold under VAT regime), regardless if the invoices received regarding the consultancy services, legal services, notary tax include or not VAT taking into consideration that these are ancillary expenditures.

In conclusion, it is necessary that each re-invoicing operation be analysed depending on the specific conditions in which it is carried out, thus removing the risk to apply a wrong VAT, which could lead to additional VAT amounts and ancillary obligations.
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