The European Court of Justice has ruled that foreign energy traders in Romania are now permitted to reclaim input VAT incurred through the EU’s 8th Directive. This follows Romania’s withdrawal of the requirement for VAT registrations on energy traders last year.
From September 2013 Romania removed the option to register for VAT. Supplies were instead made under the VAT reverse charge mechanism. This became a huge issue for electricity resellers who had large amounts of unrecoverable VAT in Romania.
The case under review concerned the large German energy conglomerate, E.ON. The Romanian court of appeal referred to the ECJ a decision as to whether foreign energy companies were entitled to reclaim the Romanian VAT they are charged by local suppliers.
The court found that non-resident EU traders of electricity were entitled to use the 8th Directive reclaims based on the EU VAT Directive. This ruling should also extend to non-EU companies, although they may struggle to obtain a trading license from the Romanian authorities.
