VAT must be paid by the supplier to the state budget, even if it was not collected from the customer. VAT paid to the state budget and unpaid from customers attracts financing costs from creditors or even from tax, if it is not paid on time.
The recent jurisprudence of the European Court of Justice has in recent years analyzed a number of cases relating to VAT on unclaimed debts, clarifying the applicable VAT treatment (eg C-246/16 Enzo di Maura, C-242/18 Unicredit Leasing).
The case of Unicredit was solved by our colleagues in Bulgaria, the tax authorities considering that the previous Enzo di Maura case was not specific enough in the analyzed case. The cases are, in substance, almost indigo. Taxable persons have difficulty in recovering debts over very long periods (for example, around 10 years), being able to pre-finance the state with a non-incuded VAT from customers.
The conclusions of the European Court of Justice leave no room for interpretation in these situations: taxable persons can recover VAT on receivables for which there is a reasonable probability of non-payment. Practically, suppliers are not required to fund the state with a non- invoiced VAT from customers. The Court also provides for the possibility of canceling this adjustment if the claim is ultimately collected, and thus there is a balance.
There are countries in the European Union that allow for VAT refunds on non-in-term receivables, for example, 6 months from the due date (Great Britain case). This term is also proposed in the opinion of the General Advocate in the Enzo di Maura case.
But what does the VAT law provide in Romania?
Romanian taxpayers have stricter provisions: VAT on unpaid claims can be recovered if the debtor goes bankrupt or in the case of a reduction of the claim in the reorganization procedure.
Although there are no clear deadlines in Romanian legislation beyond which VAT can be recovered, practice shows us that these procedures can extend for years.
We have encountered concrete cases in which the debtor's bankruptcy occurred after more than 10 years, being similar to those in the cases mentioned. Under the obligations assumed in the EU Accession Treaty (transposed also in the Fiscal Code), Romania must comply with the decisions of the European Court of Justice.
Thus, the legislation on VAT recovery for uncollected claims raises questions about compliance with these decisions. We can ask ourselves what we can do in this case? There are solutions: there are currently several procedures for recovering this unpaid VAT, some are administrative, others involve the courts. Even on the basis of the restrictive legislative provisions in Romania, taxpayers can recover VAT on unpaid claims, and claims older than 5 years are also eligible.
A distinct look is the sold receivable, often on modest amounts due to the low probability of cashing. But even in this case, there are solutions that can make them eligible for VAT refunds (where recoverable VAT amounts can significantly exceed any amount of the actual claim with reasonable chances of recovery).
However, given the constant jurisprudence on this VAT line, the optimal solution would be to put national legislation in line with the decisions of the European Court of Justice, thus allowing VAT to be recovered with minimal effort.