Gruia Dufaut



Last updated: 13 April 2018

After a very active period in terms of new tax regulations introduced by the authorities, new rules aimed at verifying the fiscal situation of natural persons resident in Romania have become effective on 23.03.2018.

In this article, we will try to review the most important legal provisions recently adopted on this subject, namely the Order of the President of the National Tax Agency no. 675 of 15 March 2018 approving the indirect methods of income determination and their application procedure, published in the Official Journal no. 257 of 23.03.2018.

The Order of the President of the National Tax Agency no. 675/2018 repeals, on the date of its publication, the Order of the President of the National Tax Agency no. 3.733 of 22 December 2015, on the same subject.

Persons Concerned by the New Regulations

Please note that the new provisions of Order no. 675/2018 apply exclusively to natural persons resident for tax purposes in Romania during the period subject to verification and concern the income tax.

What is New

Order no. 675/2018 provides, among others, a less formal verification procedure and eliminates the preliminary audit of tax records (including the notification regarding the start of the inspection, by registered mail with acknowledgement of receipt and the posting of an announcement regarding the inspection on the National Tax Agency’s website etc.).

Therefore, pursuant to Order no. 675/2018, the tax authorities only perform the following preliminary activities:

a. analysis of the risk of non-compliance of the tax returns filed by resident natural persons and
b. the selection of persons subject to the verification of their personal fiscal situation.

If, when analyzing the risk of non-compliance, the tax authority finds a high risk of non-compliance, it orders the verification of the personal fiscal situation of the taxpayers in question.

In accordance with Order no. 675/2018, there is a risk of non-compliance if the difference between the income estimated by the tax authorities during the risk analysis and the income declared by resident natural persons in the same period is significant, i.e. more than 10% compared to income reported by natural persons, but not less than 50,000 Lei.

Please note that the tax audit is carried out by the tax authorities only after having notified the resident natural person in question at least 15 days before starting the audit.

Indirect Methods for Income Determination

When starting the tax audit of resident natural persons concerning the income tax, the tax authority examines all patrimonial rights and obligations, the cash flow and other elements relevant to the audit.

Thus, the establishment of the actual tax situation of the taxpayer subject to the audit can be carried out according to the following indirect methods:

a. the method concerning the source and the use of the funds – selected when the authorities find out that the funds used by the natural person are superior to the sources identified;
b. cash flow method – selected when the authorities find out that the natural person’s operations have taken place mainly through bank and financial accounts and that there are significant cash inflows;
c. the net assets method – selected when the authorities find out that the natural person’s assets grew significantly during the period subject to audit and the value of the assets at the end of such period has been established with a reasonable degree of certainty.

It should be noted that the choice of the indirect method for income determination used in the audit procedure belongs entirely to the tax authority.

However, when choosing the most appropriate method of verification, the tax authority must ensure a fair proportion between the purpose and the means used to achieve that goal.

The Result of the Personal Tax Audit

Following the tax audit of resident natural persons, the tax authority issues a report containing the results of the audit. The audited person may formulate a point of view concerning this report, within 5 business days from the date of its communication.

According to the report issued at the end of the audit, the tax authorities issue, as the case may be, either a taxation decision or a decision to terminate the audit.

The Possibility to Perform a New Tax Audit

It should be noted that, if additional data arises after the finalization of the initial audit, the tax authorities may re-check the tax situation of the resident natural person.

For this purpose, the authority informs the person concerned of its decision to resume the audit at least 15 days prior to the date of commencement of the new audit.

Final Considerations

The new regulations regarding the tax audit of resident natural persons are intended to ensure coherence between the income declared and the actual patrimonial situation of such persons, and to constantly provide the authorities with an exact image of the taxpayers’ fiscal situation.

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