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SAF-T reporting, mandatory for large taxpayers from January 1, 2022. What does the implementation entail?

Source Vlad Boeriu

Unoffical translation:

The implementation of SAF-T (Standard Audit File for Taxation), as part of the digitization process of the National Agency for Fiscal Administration (ANAF), is also taking shape in Romania.

Large taxpayers who, according to the latest information from the authorities, will be required to report to ANAF through the new system starting January 1, 2022, have at their disposal the updated technical details on the basis of which the implementation of SAF-T must begin.

 Companies will have the opportunity to voluntarily enroll in the testing phase of the system, promised by the authorities starting in mid-August 2021, in order to make the necessary adjustments until reporting in the new system becomes mandatory. The option is extremely important, given the complexity of the new reporting mechanism and the limited time left to ensure optimal operation.

SAF-T reporting, which consists of the electronic transfer of accounting and tax data from companies to the tax administration, was developed by the Organization for Economic Co-operation and Development (OECD) as a unitary method of collecting fiscal and financial data that presents advantages for both tax authorities and multinational companies.

The main benefits of SAF-T

The initiative stemmed from the OECD’s intention to implement a uniform reporting standard for multinational companies whose tax reporting has become increasingly difficult to achieve and monitor over time by the authorities. Broadly speaking, the new standard aims to reduce the VAT collection deficit and digitize tax inspections.

In Romania, the need to implement such a system has become obvious for several years, given that our country traditionally has the lowest share of tax revenues in GDP (27% in 2019, compared to 40%, EU average) and the largest VAT collection deficit in the European Union (estimated at 37.4% for 2020, according to the latest data published by the European Commission).

Extensive and standardized transaction reporting could help gradually improve tax revenues to the state budget, given the experience of other countries that have already implemented SAF-T or other electronic reporting systems.

Therefore, the new procedure tends to simplify the compliance processes, for taxpayers, and analysis, for ANAF. Basically, it is about introducing a set of periodic data reports, in a predefined format, based on the information from the accounting and fiscal records of the taxpayers applicable to each. The information will be standardized, the taxpayers will report the same data, in the same format, so that the tax authority will be able to analyze them automatically. In this way, the authorities will have permanent access to all transactions carried out by taxpayers, and tax evasion will be reduced due to the faster identification of transactions that present a high risk of fraud.

The preparation of essential data for declaration and control will be automated, the tax inspection procedure will become less burdensome (the time spent by tax inspectors at taxpayers’ offices will be reduced) or even digitized, and VAT refunds will be possible in a while shorter. In addition, reducing the administrative burden will allow the redistribution of human resources in deficient areas. However, all these benefits will be observed in the long run, because, in the first phase, the companies, but also ANAF, will have to bear a cost of compliance with the new reporting system.

How have other European countries implemented electronic reporting?

The first version of SAF-T was published in 2005, and it was updated in 2010. Since then, many jurisdictions around the world have decided to implement this type of reporting based on the standard published by the OECD, but the transposition has not been uniform. , as the standard proposed by the organization is recommended. Thus, on a case-by-case basis, SAF-T reporting is mandatory, in a restricted or extended format, at predetermined deadlines (in Poland and Portugal) and / or on request (in Lithuania and Norway). In the EU, the system is also applied, in various variants, in countries such as France, Germany, Luxembourg, the Netherlands, Austria, Finland or Slovenia .

Other European countries have decided to adopt different ways of electronic reporting, but with similar effects, such as real-time reporting (Hungary or Italy), real-time “near” real-time reporting, ie without connecting companies’ accounting systems to those of the authorities. (Spain) or electronic invoicing (Greece, which has announced that it will also introduce real-time reporting).

The effects of the application of such measures were not long in coming. For example, in Poland, SAF-T became mandatory for large companies from July 1, 2016, and in 2017 and 2018 the VAT collection deficit was reduced by more than 10 percentage points, cumulatively. Hungary, which introduced real-time reporting on 1 July 2018, also reduced its VAT gap by five percentage points in the same year.

In Romania, the SAF-T scheme published by ANAF is based on the OECD model, comprising the five modules: journal register, receivables (AR), debts (AP), fixed assets and inventory. The first three modules will be submitted regularly (in line with the period of filing VAT returns or quarterly, in the case of companies that do not have a VAT code), the data on fixed assets will be submitted only once a year (up to submission of financial statements), and information related to inventory, only at the request of the tax authorities.

What do companies have to do?

Until the results are recorded, however, we must go through the implementation stage, which is not at all simple. Companies will be required to provide the authorities with a considerable amount of accounting and tax information related to their business, in a predefined but rather complex format. In these conditions, beyond the efforts that taxpayers must make in terms of allocating teams and financial resources, it is essential that they start implementation as soon as possible to verify the availability of data required by the SAF-T scheme, to map fees necessary for reporting, to choose an IT reporting solution and to have time and to test the reporting until it becomes mandatory.

In conclusion, the issues related to the implementation of SAF-T must be treated carefully, especially by large companies, given that it is one of the most important changes that the Romanian tax system has undergone so far.

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