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The solution to safeguard deductibility of VAT and expenses

Starting with 1st of January 2018, the Fiscal Code specifically allows ANAF to deny VAT deduction if it proves, beyond any doubt, that you knew or ought to have known that a fraud occurred in the delivery/supply chain of your purchases.

In line with the trends at EU level of fighting against tax evasion, the focus of the Romanian authorities in spotting potential fraudulent transaction is on an increasing trend during recent tax audits.

Impact of these changes

It becomes necessary to regularly check the potential tax risk of your suppliers and customers. You need to demonstrate that you have conducted reasonable business partner inquiries regarding: VAT IDs, tax domicile, debts, reputational risk, number of employees and others. All these checks should highlight whether there can be VAT fraud suspicions which will lead also to a strikethrough of the deductibility of the expense for corporate income tax purposes.

Our solution: PartnerSCAN

PartnerSCAN will allow you to automatically check whether your Romanian business partners can generate VAT fraud risks that may involve you indirectly. The consequence is the refusal of the VAT deduction on your purchases.

The results of the PartnerSCAN checks will help also in determining whether the correct corporate income tax treatment was applied to the expenses booked with purchases from such business partners.

How PartnerSCAN works

The application is based on a search algorithm looking on the VAT ID in public databases: the Trade Register, the Ministry of Public Finance, the ANAF, the Insolvency Proceedings Bulletin, the Courts' Portal, etc.

• Partner inactivity, canceled VAT code
• Calculating the risk of insolvency
• If shareholders/ administrators have criminal files
• If companies are insolvent/liquidated
• If the partner was set-up in the last year
• Number of employees
• Debt to the state budget
• If shareholders have more than one company
• Number of companies headquartered at the same address
• How many times the registered office has changed in one year
• Others

These are just a part from all the checks.
The application generates a report that synthesizes the risk profile of business partners based on an individual score. It also highlights the VAT impact and level of non-deductible expenses at your company level.

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