Law no. 125/2023 which amends Law no. 241/2005 for the prevention and combatting of tax evasion (Law 125/2023) was published in the Official Gazette of Romania on 22 May 2023. The law introduces a new offense specifically targeting cross-border fraud – including attempted fraud – which results in a loss of at least ten million euros from the European Union budget. These offenses will be treated as crimes and the perpetrators will face prison sentences ranging from seven to fifteen years.
Legal background
Law 125/2023 aims to incorporate Article 3(2)(d) of Directive 2017/1371 of the European Parliament and of the Council dated 5 July 2017 (the Directive) into the national legislation. The Directive addresses the combatting of fraud targeted at the financial interests of the Union through criminal law and it was published in the Official Journal of the European Union, Series L, No. 198 on 28 July 2017. Due to Romania’s delay in transposing the Directive, the new bill underwent an expedited legislative process.
Relevant amendment
The legal framework for the prevention and combating of tax evasion has undergone multiple amendments, introducing updated regulations and measures aimed at enhancing the effectiveness of combating tax evasion. Law 125/2023 includes a new article – Article 91 – which states:
“(1) Any action or inaction committed within cross-border fraudulent schemes resulting in a reduction of at least 10,000,000 euros, in the equivalent of the national currency, in the resources of the European Union budget, constitutes a crime and is punishable by imprisonment from 7 to 15 years and the prohibition of exercising certain rights. Such actions or inactions include:
a) the use or presentation of false, incorrect, or incomplete declarations or documents regarding VAT;
b) the non-disclosure of VAT-related information when such information must be disclosed according to the law;
c) the submission of accurate VAT declarations with the fraudulent intention of avoiding payment or obtaining unjustified VAT refunds.
(2) Attempted commission of the offense provided in paragraph (1) is punishable.”
Key takeaways
- The rules aim to combat criminal fraudulent schemes, especially those with a cross-border nature, put in place to avoid payment or obtain illegal VAT reimbursements – particularly those known as “VAT carousel[1]” – with an impact of at least ten million euros on the European Union budget;
- Attempted fraud is also subject to punishment; and
- The provisions of Law 125/2023 will enter into force on 25 May 2023.
The RTPR team specialises in tax disputes and provides assistance to taxpayers in tax inspections and in front of administrative and judicial courts. The team’s expertise is well-regarded and recognised by international directories. For further details, please contact the lawyers listed below.
[1] VAT carousel fraud involves an organised criminal attack on common duty tax systems to defraud governments of money that should be paid in VAT. In carousel fraud, VAT and goods are passed around between companies and jurisdictions, similar to how a carousel revolves.
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