Tax Shock for Companies Investing with EU Funds in Romania: ANAF Wants Tax Advantage Back

The Romanian Tax Authority (ANAF) is subjecting companies that purchased technological equipment and software using European Union funds and benefited from a legal tax advantage to retroactive tax audits. The tax exemption on reinvested profit under Article 22 of the country's Tax Code was used by business owners years ago as a completely legal incentive. However, today the state is canceling the exemption for the parts of these investments financed by EU grants and demanding millions of leı (Romanian currency) back. Many companies state that the bills resulting from these audits far exceed the initial tax savings they obtained. This unexpected burden has left countless businesses facing the risk of bankruptcy or insolvency.

The root cause of the problem is not a change in the law text or the introduction of a new tax, but entirely the way the laws are interpreted. The relevant regulation of the Tax Code explicitly states that there should be no difference between investments made with own funds, bank loans, or non-repayable EU funds. For years, thousands of entrepreneurs officially asked ANAF about this situation before investing and received written approvals that they could benefit from the incentive regardless of the source of the money used in the investment. Despite this, during the audit phase, inspectors divide the investment by its financing source and exclude the part financed by EU grants from the tax advantage. Companies, on the other hand, complain that two opposing interpretations based on the same law bring them to the brink of a severe financial crisis.

The issue is not limited to paying the recalculated tax amounts; the penalties and interest involved exponentially increase the debt. The late interest and penalties calculated retroactively by applying the Tax Procedure Code correspond to an extraordinarily high cost of approximately 36,5 percent on an annual basis. These extra burdens accumulated in retrospective audits can multiply the original debt amount of companies within a few years. While for large companies this situation disrupts investment plans and deteriorates cash flow, for small and medium-sized enterprises (SMEs) it has the potential to create much more devastating consequences. The freezing of accounts, seizure proceedings, and the risk of inability to find new credit have become a very concrete threat for many businesses in Romania.

Entrepreneurs are experiencing great desperation in explaining these audit processes and justifying to shareholders and banks why the legal incentive they obtained years ago has turned into a massive debt. This unfair and uncertain situation has been enough to worry not only taxpayers but also professional financial consultants. The Romanian Chamber of Financial Consultants, realizing the gravity of the situation, sent official letters to the Romanian Ministry of Finance and ANAF management. The institution officially reported that completely different interpretations are being applied to the same provision of the Tax Code in audits conducted nationwide. It is requested that a high-level intervention be made urgently to resolve this legal uncertainty and compensate the grievance of taxpayers.

These developments mark an extremely sensitive period for entrepreneurs in Romania, as the country is going through a period where the economy has already slowed down, consumption has fallen, and interest costs are still high. While the number of companies suspending their operations or closing completely is increasing day by day in the market, these extra and unpredictable tax burdens could be the last straw for many businesses. The state's application of retroactive penalties by ignoring its own written promises and incentives creates a serious crisis of confidence regarding future investments and the use of EU funds. Companies argue that this inconsistent attitude of the state undermines the ease of doing business and economic development. How this crisis will be resolved and what the fate of companies growing with EU funds will be will become clear depending on the steps to be taken by the Ministry of Finance.