Deductible expenses in Romania, with examples

An expense is business-deductible only if it is actually related to the business, is properly documented - and is recorded in the accounting on time.

var expense.isDeductible: Bool?

In order to demonstrate and support the deductibility of expenses, there are several documents that I need to present monthly to the accountant. These include, from case to case, bank statements, invoices, service reception notes (=ro. proces-verbal), as well as cash receipts, fuel receipts and additional travel documents. In detail:

1. Bank statements

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I have to provide the accountant with the monthly bank statements for each of my company's accounts - and in chronological order.

var bankStatement: Bool = true

Depending on the level of IT integration with my accountant, I can send the bank statements printed, or by email, or there are cases where the accounting software can be linked to my business bank accounts in real-time, making it much easier for processing. Since the deadline to file tax returns is 25, every month for the previous month, and an accounting firm that offers outsourced services has a higher number of clients, I must make sure that I send the account statements as soon as possible after the end of the month, ideally in the first days, to be properly processed.

2. The invoices I issue

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Again, this depends on the level of technological integration between the software which I use for invoicing - and the accounting software used by my accountant.

var invoice: Bool = true

Either I print them - or email them, or, ideally, the two pieces of software are communicating to each other via an API. If they are not yet integrated, then I must present the actual invoices to my accountant, either in hardcopy or soft-copy, in chronological order, including the credit notes (i.e. the cancelled invoices). My accountant declares all invoices in Tax Form 394. As of September 2020, I must also submit a monthly statement on related party transactions.

var taxForm394: Bool = true

The invoices I issue having as object services need to be accompanied by service reception notes. For unrecorded revenue, i.e. the services I rendered but not yet invoiced, I need to offer my accountant supporting documents, such as service reception notes. The service reception note is a document related to the collecting of the VAT - and it is very important for the companies which are VAT payers.

For example, I provide IT services and the services were received on 20 August. I issue the invoice on 6 September. VAT is due for August, not September.

ℹ️ These services reception notes are also required in case of a tax inspection for the refund of VAT, together with the Inspection Register (=ro. Registrul Unic de Control).

3. The bills I receive

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These must be accompanied by the service reception notes for the reception of services and by the contract.

var bill: Bool?
var contract: Bool = true
var serviceReceptionNote: Bool = true

A special case is represented by protocol expenses: I must provide supporting documents to justify these expenses: not only the receipt, which must include my company’s tax ID, but also documentation before and after the meeting, justifying its connection to my business. To be deductible, all protocol expenses must be directly related to the company’s core business. All restaurant costs which need to be deducted must be accompanied by an internal note beforehand, and by a report afterwards: participants & scope of the meeting.

4. Cash receipts

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The total amount of cash payments cannot exceed the amount of RON 10 000 / day. This ceiling also includes travel expense accounts. It is not possible to pay/receive in cash more than RON 5 000 for an invoice.

var receipt: Bool = true

For example, I issue an invoice of RON 10 000, for which I receive RON 5 000 on 31 August and RON 5 000 on 1 September. This is wrong and the fine is between RON 3 000 and RON 4 500.

The legal basis is the Law 70/2015 for strengthening the financial discipline regarding cash received and cash payment operations.

5. Supporting documents for travel expenses

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If I intend to deduct travel costs with fuel, then I need to have travel documents (=ro. foi de parcurs).

var transportDocuments: Bool?

If I cannot present travel documents, then I am only entitled to deduct half of the VAT. If my firm is a profit-tax payer, then the expense with the fuel itself will only be deductible 50%. The travel documents need to display the following information: category of the vehicle; reason for the trip; destination; the number of kilometres; the company standard fuel consumption per kilometre.

The fuel receipts must include the tax code - with the prefix RO, if my business is VAT-payer - and must include the car licence plate number. The total volume of fuel purchased in a month must correspond to the total volume of fuel listed in the travel documents. The quantity of fuel used is calculated in the following way: the number of kilometres times the company standard fuel consumption per kilometre must equal the quantity from the fuel receipts handed over to my accountant.

If I have trips abroad in the interest of work and I have the quality of employee, then I have the right to a daily allowance (per diem). The daily allowance for travel to EU countries can be granted up to the level of 2.5 x EUR 35 per day = EUR 87.5 per day. The difference granted above this level will be taxed and will appear in the Salary Statement. Complete list of countries: Government Decision 518/1995, updated.

var perDiem: Bool?