ANAF aligns with global tax administration trends and introduces for the first time in Romania a new mechanism to increase the degree of voluntary compliance – horizontal monitoring. The tool, already used in other states for over ten years, involves a real-time verification of companies from the perspective of how they calculate and pay their taxes to the state, not just a retroactive one based on fiscal control. At the moment, the method has only been implemented as a pilot program, in which large taxpayers could be enrolled upon request and only for certain types of tax obligations, and depending on the results, it may be expanded in the future to include all large companies as well as other tax categories.

At the global level, tax administrations have been directing their attention for several years to the development of cooperative relations with taxpayers, especially with large and very large ones, the tendency being to change the vertical monitoring of companies, i.e. retroactive verification, with horizontal monitoring, which involves a real-time tax check. Collaborative compliance systems operate in various ways both globally, in the United States, Australia, South Africa, Canada, New Zealand or Japan, and on the European continent, where countries such as Austria, Ireland, Denmark, France, Spain or Sweden have been implementing similar tools for large companies for more than ten years, in some states even for 20 years.

In our region, Slovenia has such a formal collaborative compliance program for large taxpayers, operational since 2010, and Hungary has introduced a CRM system for large taxpayers that responds to requests and questions raised by them.
Romania aligns itself with these trends and at the end of January regulated a voluntary compliance mechanism through horizontal monitoring, which will operate in a pilot program until 2028, for five companies that opted to participate in this type of fiscal supervision.

This approach aims to improve tax compliance and strengthen the partnership between the tax administration and the private sector, and is also an important step towards modernizing tax monitoring for large taxpayers. The program, focused on profit tax and VAT, proposes a real-time fiscal control during a fiscal year, with quarterly checks. Eligibility for the program is determined by precise criteria, including an adequate tax control system and appropriate tax behaviour.

It should be noted that horizontal monitoring will not replace traditional surveillance, which will continue to exist for companies that do not want or are considered ineligible for this type of verification.

How exactly will work the system set up to be launched this year by the Romanian Tax Office

For the implementation of the horizontal monitoring mechanism in Romania, the National Fiscal Administration Agency relied on the data and experience of a similar pilot project carried out by the Austrian tax authority in the period 2011-2016. The Romanian project will only concern the profit tax and the value added tax, and the real-time verification requires that, during a fiscal year, four fiscal control actions be organized after the completion of each quarter.

The objectives include ensuring tax compliance, increasing legal certainty for companies, efficient collection of tax revenues and reducing tax compliance costs.

The pilot program is run by the Directorate of Large Taxpayers within ANAF, it involves five large companies that have opted to be monitored through this instrument and will actually start from April 1, 2024, to be completed after four years, on March 31, 2028.

By the end of February, the tax authorities will announce the five large companies that have been selected to participate in the pilot program. These companies will sign a voluntary agreement with ANAF, gradually entering the program starting from April 2024. The first taxpayer will enter the pilot program from the very beginning, from April 1, and every six months another will be included in the pilot program company from the selected ones.

Companies are chosen by ANAF based on applications submitted by them in the first part of February, and eligibility for the program is determined by certain criteria that taxpayers must meet. Thus, it is necessary for participating companies to have an internal system of procedures for controlling taxes and fees owed to the state budget and to have appropriate fiscal behavior. Also, companies must not be part of a tax group, nor must they carry out financial intermediation or insurance activities.

In the event that one of the five companies selected by ANAF withdraws on its own initiative or is removed from the program because it no longer meets the eligibility criteria, its place in the program will be offered to the next company on the list, in the order of submission of enrollment applications in horizontal monitoring program.

Article published in Bursa.ro