Unauthorized economic activities – confiscation of revenues and assets

Law no. 296/2023 on some fiscal-budgetary measures to ensure Romania’s long-term financial sustainability (the “Tax Reform Law”) provides for a series of new sanctions for carrying out illicit economic activities, introducing substantial fines and even the potential confiscation of money and goods acquired from the offence.

Prior to the Tax Reform Law, this type of illicit economic activities were sanctioned by the Law no. 12/1990 against illicit production, trade or provision of services (“Law 12/1990”). However, Law 12/1990 was repealed on 5 November 2020 and since then, illicit economic activities have not been incriminated separately.

Following the repeal of Law 12/1990 over three years ago, the Tax Reform Law has instituted a stricter contravention system, effective from 11 November 2023, with severe sanctions, which are applied by the competent bodies of the National Tax Administration Agency and the Romanian Customs Authority, or by authorized representatives of the National Authority for Consumer Protection, as the case may be.

The concept of illicit economic activities

The Tax Reform Law defines the notion of illicit economic activity as the economic activity carried out by persons who are not organized in accordance with the legal provisions in force, as well as economic activity carried out with goods that are not accompanied by documents of origin.

Unlike Law 12/1990, where the notion of illicit economic activities was clearly defined, the Tax Reform Law has a much broader application, covering both economic operators and the products or services they provide.

The need for the economic operator to be organized in accordance with the law

The wording of the contravention recently introduced by the Tax Reform Law is vague, as the initial draft law only covered the conduct of economic activities by persons not registered for tax purposes.

In the light of this general notion of “organization in accordance with the law”, in addition to the lack of compulsory tax registrations, a number of irregularities can be included in the scope of the new contravention, some of which are relatively common among economic operators, such as failure to authorize CAEN codes at the competent Commercial Registry Office, failure to register or extend workplaces, failure to update the main activity, etc.

Thus, legal persons may be sanctioned with a fine of up to RON 30,000, and the goods intended, used or resulting from the contravention, as well as the sums of money and goods acquired are confiscated.

In view of the potential sanctions that may be applied by the authorities, the recommendation for economic operators is to carefully examine whether their registration documentation is up to date.

Documents of origin

At the same time, the Tax Reform Law introduces the obligation to hold origin documentation at all times. Thus, carrying out economic activities with goods that are not accompanied by documents of origin, regardless of where they are located, during transport, storage or marketing, is strictly prohibited.

Documents of origin means, where appropriate, the invoice, the goods accompanying document, customs documents or any other supporting documents required by law on which the accounting records are based, in physical or electronic form.

The Tax Reform Act also assimilates cash or cash substitutes to goods requiring the presentation of legal documents.

According to the Tax Reform Law, failure to produce documents of origin is punishable by a fine up to RON 30,000, if committed by legal persons.

The goods that are the subject of the offence, as well as the money or goods acquired, are seized for confiscation and the economic operator will have 24 hours to present the relevant documentation. Otherwise, they will be confiscated.

If, within 12 months of the first offence, the economic operator commits a new offence, it may be sanctioned with a fine up RON 60,000, for legal persons. In addition, the economic activity of the operator may be suspended for up to 15 days.