Romania permits bad debt relief which provides that subject to certain conditions, businesses that do not receive payment of Romanian VAT due on supplies of goods and services they make are permitted to claim relief.
This means they can recover the VAT previously declared and paid to the tax authority.
In Romania, prior to 1st January 2019 a supplier could only use this debt relief procedure once a final decision, finding the debtor bankrupt, was released by a judge and the bankruptcy procedure was considered closed.
From 1st January 2019, new rules allow for the supplier to adjust the value of the supply and output VAT on the unpaid for supplies, subject to a judge’s agreement, from the moment that a court decision is issued initiating a reorganisation plan. The relief must be claimed within five years from the start of the year following the one in which this court decision was made.
This is a welcome change for Romanian businesses because it potentially allows them to recover VAT earlier than they could and within a wider scope than under the previous law.