The publication of NAFA Order No. 1308/2009, concerning certain measures for resolving VAT returns with negative amounts requesting reimbursement, as well as for settling VAT amounts approved by reimbursement decisions through offsetting or refunding, appears to bring a glimmer of hope in the field of VAT refund files. The initiative is commendable, but its practical effectiveness will only be measurable after several months of implementation.
The emergence of these regulations is most likely a direct result of the financial crisis, which has heavily impacted the state budget, as evidenced by the difficulties in reimbursing VAT amounts approved in refund decisions.
The Order has two fiscally sound objectives:
- To accelerate the resolution of VAT refund claims;
- To utilize Article 30 of the Fiscal Procedure Code on the assignment of tax claims, effectively replacing VAT cash refunds with a debt-offsetting mechanism due to liquidity shortages, by offsetting tax receivables with the company’s creditors’ liabilities to the state.
Below are the most relevant details for each objective.
1. Accelerating the VAT Refund Process
To expedite the VAT refund process, the following measures were adopted:
Maximum timeframe for completing cross-check audits: The tax authority may request a cross-check from other tax bodies, which must respond within 45 days, extendable by another 45 days with NAFA approval. Refund processing is suspended for the entire amount during this time.
Expanded authority to conduct cross-checks: In justified cases, cross-checks may be requested from the Financial Guard inspectors, with the NAFA president’s approval.
Priority ranking system: Cross-checks related to high-risk refund claims take precedence over other tax audit activities. These are to be prioritized during audit planning.
Mandatory real-time database updates: Tax office managers must appoint staff to keep local VAT refund databases updated in real time to better monitor VAT refund processes.
2. Implementation of the Assignment Procedure for Main or Ancillary Tax Claims Eligible for Refund or Reimbursement
Although the concept of assigning tax claims was included in the Fiscal Procedure Code from its inception, its practical application has been limited or nonexistent. The financial crisis—especially the state’s inability to honor VAT refunds—created the pressure needed for this mechanism to be considered seriously.
NAFA Order No. 1308/2009 introduces practical rules and forms for implementing the assignment procedure. Key points include:
Scope of Application
The procedure applies to:
VAT returns with negative amounts requesting reimbursement pending as of the Order’s publication, and
Returns submitted after July 10, 2009.
Eligible Tax Claims
According to Article 30(1) of the Fiscal Procedure Code, only lawfully established tax claims are assignable. Only VAT amounts effectively refundable to the assignor may be assigned. If the assignor has outstanding tax liabilities, these must be offset first.
Notification Procedure
Assignment of tax claims (main or ancillary) is only effective after notification to the competent tax authority managing the assignor. The effects of assignment begin on the date the assignee notifies the authority, as per Article 30(2).
Interaction with Tax Authorities
Tax claims may be assigned to third parties, provided the assignment contract is submitted by the assignee. If the assignee has outstanding tax debts, they must also file a compensation request with the competent tax authority.
The date the compensation request is filed becomes the effective date for settling the assignee’s tax debts.
If no compensation request is filed despite outstanding debts, the debts are settled when the Treasury serving the assignor’s tax authority records the compensation operation.
Compensation Note Process
The assignor’s tax authority prepares a standardized compensation note in four copies, sending them to the Treasury unit serving the assignor.
Once three of the four copies are returned by the Treasury:
One is sent to the assignee,
One is archived in the assignor’s tax file,
One is archived in the assignee’s tax file.
Treasury-Level Procedure
If assignor and assignee are under the same Treasury unit:
The Treasury issues an accounting note to cancel the assignee’s liabilities,
Registers the compensation electronically,
Returns three compensation note copies to the tax office.
If assignor and assignee are under different Treasury units:
The assignor’s tax office sends the compensation note to the Treasury unit for registration,
A payment order is issued specifying:
Payer tax ID: assignor’s fiscal code
Beneficiary tax ID: assignee’s fiscal code
Relevant budget accounts
Payment date: the date of liability clearance
After processing, the three compensation note copies are sent to the competent tax authorities for archiving as outlined above.
Use of Claims Without Assignment
If taxpayers choose not to assign their VAT refund rights, a national database will be created to track:
Taxpayers with tax claims, and
Their creditors.
This database will help identify relationships between tax claim holders and their creditors to potentially initiate garnishment proceedings. The necessary forms are included in the Order.