Romania Implements New Measures To Combat Tax Evasion

In response to the persistent issue of tax evasion, Romania has enacted Law no. 126/2024, published in the Official Gazette no. 437 on May 13, 2024. This legislation introduces significant measures aimed at enhancing the country's ability to combat tax evasion effectively. Key aspects of the law include stricter penalties for tax evasion activities, provisions for the mitigation of punishment under certain conditions, and measures to address the use of electronic systems for fraudulent purposes.

KEY PROVISIONS OF LAW NO. 126/2024

Mitigation of Punishment for Full Restitution

Under the new law, individuals who have caused financial damage up to EUR 1,000,000 can avoid imprisonment if they fully cover the amount of damage. In addition to covering the damage, they will also face a penalty. This measure is intended to encourage the timely restitution of defrauded funds to the state.

Criminalization of Tax Evasion Activities

The law explicitly defines several activities as criminal offenses, with penalties ranging from imprisonment to fines. Notable offenses include:

1. Failing to withhold taxes and/or contributions, punishable by imprisonment from 1 to 5 years or a fine.
2. Highlighting fictitious expenses or transactions in accounting documents or electronic invoices.
3. Altering, destroying, or concealing accounting documents or data storage devices.
4. Maintaining double accounting records using any means of data storage, including electronic ones.

Specific Penalties for E-invoice and Fiscal Machine Manipulations

Additional provisions target the misuse of electronic systems:

1. Using the national electronic invoice system, RO e-invoice, to legitimize fictitious operations or obscure real transactions.
2. Using or altering electronic fiscal marking machines to avoid transmitting accurate fiscal data.

Conditional Immunity and Sentence Reduction

Law no. 126/2024 includes provisions for conditional immunity from prosecution and reduced sentences under specific conditions:

1. Immunity from Prosecution: If, within 30 days from the completion of an official audit, the identified damage (up to EUR 1,000,000) plus an additional 15% of the value, along with interest and penalties, is fully paid, the offense is not prosecuted. In such cases, the authorities will not notify the criminal investigation bodies.
2. Sentence Reduction: If the damage is fully covered by the first court term, the punishment limits provided by the law are halved.
3. Increased Restitution Requirements: For damages not exceeding EUR 1,000,000, if during the criminal prosecution, the damage is increased by 25% and fully paid, the act is not punished.

Severe Penalties for High-Value Frauds

The law imposes severe penalties for fraudulent activities that reduce state budget resources by at least EUR 1,000,000. Such activities include:

1. Using or submitting false declarations or documents, or incorrect VAT electronic documents.
2. Failing to disclose VAT information when required.
3. Submitting accurate declarations or electronic VAT returns to fraudulently mask non-payment or to claim improper VAT refunds.

These offenses are punishable by imprisonment from 7 to 15 years and the prohibition of certain rights.

Conclusion

Law no. 126/2024 represents a comprehensive effort by the Romanian government to enhance its capacity to combat tax evasion. By imposing stricter penalties and providing incentives for the restitution of defrauded funds, the law aims to deter tax evasion and encourage compliance with tax obligations. These measures will significantly improve the integrity of Romania's fiscal system and ensure that the state budget is safeguarded against fraudulent activities.

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