Anti-fraud controls in tandem with labor inspections in ride-sharing companies or certain courier companies have been strengthened, and individuals with large assets have been clearly identified by ANAF and may have additional tax obligations. Along with an increase in the tax burden in 2023, it seems that the legislator intends to increase the criminal pressure in 2024. The Directive on combating fraud against the financial interests of the Union by means of criminal law (the PIF Directive) has been poorly transposed. ANAF makes extensive use of e-transport and e-invoice to collect funds from sanctions for violations. And the information in the SAF-T files could be used both in tax audits and in document checks. These topics were discussed during the annual PwC Tax Conference in Romania on panel III, coordinated by Dan Dascalu, Partner at D&B David and Baias, Bohdan Carpe-veke, Director of PwC in Romania, Mihai Boyan and Ana-Maria Iordake, D&B David Partners and Baias. The panel includes the ten most relevant areas that our experts predict may be of interest for ANAF’s 2024 inspection, and the first part of this analysis can be read here.

You can view the full conference here:

Basic statements

Bohdan Karpeviče: Anti-fraud control along with labor inspection in ride-sharing companies or some courier companies has increased

We have seen the recent intensification of control measures carried out by the Labor Inspectorate and the Directorate General for Combating Fraud, mainly targeting ride-sharing companies or courier companies in the food sector that use mobile applications. The findings show quite clearly whether declared or undeclared income was found in these areas. In the case of only one company, an additional tax liability of approximately 10 million lei was imposed, so the consequences can be significant, and therefore we believe that the registration of activities deserves special attention. It is not easy to determine whether this activity is independent or dependent, but given recent events, we need to look more closely at this area of ​​contractors, whether they are individuals or companies, especially sole proprietorships and those that do not have other employees .

There is another measure that caused a stir, with the beginning of this year, the tax rate has increased to 70% for the income of individuals whose source is not established. The fact that this measure was approved last year, but applies from July 1, 2024, from the point of view of the authorities, represents a window of opportunity for individuals who have not yet declared their income to do so so that they are not classified as individuals with fiscal risk.

27% of verified individuals received a tax decision

Since last year, we have defined high net worth individuals. High net worth individuals have been clearly defined, they will be notified and, in addition, some voluntary compliance procedures will be applied. Last year alone, more than 800 audits were completed at the level of individuals, resulting in numerous tax rulings. 27% of audited individuals received tax rulings, which in general should bring the state additional revenues of more than 100 million lei. Therefore, the impact is significant, considering that only a small proportion of these taxpayers were audited.

According to ANAF, there are approximately 900,000 individuals who annually declare investment, self-employment or rental income, and ANAF’s practical experience suggests that there are segments of the taxpayer population that haverelatively low level of compliance with tax legislation.

Mykhailo Boyan: With an increase in the tax burden in 2023, it seems that the legislator intends to increase criminal pressure in 2024

Unsurprisingly, the energy sector was highly rated and preferred by tax authorities, especially anti-fraud authorities. The latter recorded generous revenues to the budget last year, so we believe that in 2024, energy will occupy an important place on the agenda of fiscal authorities and will be an object of control. In fact, we see two directions in the energy sector, one is a solidarity contribution and a contribution to the energy transition fund, especially given that the ambiguity of the current legislation has not yet been resolved. Even if we are also resolving these issues in court, and some courts have also stayed the execution of tax documents issued by tax authorities, we believe that disputes will continue and it remains to be hoped that they will be resolved in the sense of the arguments presented, as well as the amounts paid by taxpayers, which are non-refundable, together with the relevant interest.

Another major source of checks in the energy sector is an additional tax, which was introduced into the legislation in a completely opaque way, the legislator did not show in any way what was the reason and what was the justification for the establishment of this tax. If we mechanically apply the text that governs the additional tax, we will end up taxing non-oil activities in the oil and gas sector in addition to the fact that this taxpayer carries them out, in addition to energy distribution activities, subject to exceptional treatment.

The Directive on combating fraud against the Union’s financial interests by means of criminal law (the PIF Directive) was poorly transposed

It seems that with an increase in the tax burden in 2023, the legislator intends to increase the criminal pressure in 2024. As you are well aware, the PIF Directive was transposed in Romania in May 2023, but the way in which the transposition into the Tax Avoidance Legislation was completely flawed.

In addition, it is believed that mistakes in the preparation of VAT returns will lead to investigations or criminal proceedings, even for domestic transactions. He also went so far as to criminalize withholding tax, although the business community, as you know, has been fighting for years with the Romanian state not to criminalize this issue, which is essentially a fiscal dispute. This time it is in the draft approved by the parliament, but it has not entered into force, and it remains to be seen what will be the result in the Constitutional Court and then in the President of Romania.

Although in 2020 it was finally possible to separate the two criminal and tax procedures, it seems that the intentions of the legislator are changing and they will be mixed again, so that if this project enters into force, the criminal will decide the tax issues, which will decide whether there is an obligation to maintain at the source, whether a correct declaration has been made in accordance with VAT legislation. Instead, fiscal authorities seem to be able to and will have powers similar to true judicial authorities, assessing fiscal situations with criminal consequences.

Ana-Maria Yordake: ANAF makes extensive use of e-transport and e-invoicing to collect money from infringement sanctions

If we look at what is happening with digital tools, e-transportation and e-invoicing, we will see that ANAF is heavily using them to collect money in 2024. We see how sanctions, fines, confiscations through the use of these tools become a new form of taxation, given that the sums collected are significant, and we don’t say that, ANAF statistics say that. The number of fines or penalties imposed for offenses increased by 32% compared to the previous year, and the value of the amounts established by these offense protocols increased by 1001% compared to the previous year. So this trend of raising money through controversial sanctions is clearly separate. The e-invoicing and e-transportation legislation now provides much higher, more significant fines that we can no longer afford to ignore.

I have seen cases of protocols in which additional confiscation measures were imposed for millions and tens of millions of lei. And if we look again at the ANAF statistics, which show that in the first half of 2023, more than 600,000 traffic controls were carried out, we can obviously imagine how we achieved such a percentage of growth.

I referred to the unconstitutionality exception to the e-transportation legislation and this issue must be resolved before the CRC

But what should we do if we still find ourselves in a situation where we have such a violation report? We also have some solutions. On the one hand, we have to say that there are a number of arguments that can be invoked both procedurally and materially. It should be borne in mind that there are already many discussions about the unconstitutionality of the automatic application of the measure of confiscation. And here it remains to be seen what the Constitutional Court will say about this aspect, because we have already referred to the exception of unconstitutionality in relation to the e-transport legislation, and this aspect has yet to be decided in the Constitutional Court.

On the other hand, the question arises as to how proportionate the application of the fine is to the maximum limit of the upper limit provided by the law, given that we still have the principle of proportionality to be respected, as well as the reference to the purpose of the law, which is to avoid fraud, and a fine automatically applied to the maximum limit is usually enforced without analyzing the specific circumstances of each individual case. And, last but not least, also from a procedural point of view, it is necessary to analyze what is the actual maximum limit of the penalty that can be applied to the taxpayer in case of contesting illegal actions or continuous actions, depending on how they will be qualified .

Dan Daskelu: Information in SAF-T files can be used in both tax audits and background checks

It’s been two years since SAF-T was implemented at the large taxpayer level, and based on the experience of our technology department, I offer some points to consider. On the one hand, we expect that fines will be applied. Although the amounts are slightly lower than in other cases, they should not be neglected, since the application of penalties to each of the unfiled SAF-T returns can also be questioned. Of course, we have options for appeals, to discuss the statute of limitations, and a number of other things like capping fines at two times the statutory maximum – I won’t go into detail about that, but you have to be very careful.

On the other hand, the analysis of this data and the greatest impact will be in the future period, and we expect that it will be used in tax audits or, even worse, in document audits. The data included in the SAF-T sections will be cross-checked, namely: possible differences between the balance sheet and the Journal Register, the amount of taxes from the primary documents compared to the data in the Journal Register. The data from the SAF-T will be interpreted by the tax authorities and we must not forget that the SAF-T contains all the accounting and tax information. We must not forget that they are transmitted and must be transmitted in a certain format, following the codes and rules, and the declaration is prepared automatically by receiving data from the system. And often exceptions or manual fixes are not picked up in SAF-T.

However, we expect ANAF itself to semi-automatically analyze this information, tax codes and customer codes based on pre-set criteria. And in this circumstance, when we talk about technology, because of the way data is recorded in accounting systems, it is very likely that there will be differences at the level of accounting accounts, transactions, tax returns and data submitted in SAF -T will not correspond to those that in systems or other tax declarations. When we discuss audits, we expect their results to be reflected in the amounts that tax authorities collect from taxpayers.

Article supported by PwC Romania