Starting November 1, 2018, several categories of services benefit from the reduced VAT rate of 5%, a legislative change with a strong positive impact on the restaurant and catering services sector.
The new legislative changes are not such good news for certain economic agents operating in the field of food preparation and delivery. If their activities do not qualify, from a VAT perspective, as restaurant or catering services, the reduced 5% VAT rate will not be applicable.
Restaurant and catering services involve the supply of food and/or beverages, prepared or unprepared, but always accompanied by “related services.” These services must be sufficient to allow for the immediate consumption of the food.
In order to correctly apply the reduced 5% VAT rate, the Ministry of Public Finance published a draft Order providing clarifications regarding the definition of “related services.”
The draft mentions that for the classification of operations carried out by a taxable person as food delivery or the provision of restaurant/catering services, the CAEN code assigned to their activity is irrelevant. Furthermore, the complexity of food preparation does not influence the VAT treatment applicable to the operation in any way.
The draft Order includes examples of “elements that do not qualify as related services”: presenting food on shelves, food preparation, transporting food to the destination indicated by the customer, cooling or heating food, packaging food, providing the customer with disposable cutlery, providing paper napkins, sauces, providing trash cans, the general presentation of the offer/menu, providing customers with rudimentary furniture elements, such as a counter or bar tables, which do not allow customers to sit down.
On the other hand, elements that would be qualified as “related services” include, among others: providing an appropriate setting that allows for food consumption, serving food, providing/making available serving staff, cooks, or cleaning staff, providing dishes or cutlery, providing furniture suitable for food consumption, such as tables and chairs, cleaning or clearing tables, individual advice on food selection, advising customers on the composition and quantity of food for certain events.
It is important to specify that, for restaurants, immediate consumption must take place on the provider’s premises, while in the case of catering services, immediate consumption takes place outside the provider’s premises.
The reduction of the VAT rate to 5% is also applicable to restaurants located in the “food-court” area of malls. However, to apply the 5% VAT rate, economic operators must bear the maintenance costs of the serving area, as well as other common costs.
Supermarket/hypermarket chains can also apply the 5% rate if: they include an area inside the store where food is prepared and served; there is an area equipped with chairs and tables where the dishes can be consumed immediately (using trays, plates/containers, and disposable cutlery), with table clearing and cleaning services also being provided.
Furthermore, economic operators providing food preparations at events (festivals, concerts, shows, product fairs) can also benefit from the 5% rate if the providers make tables with chairs available to customers in the space they use and ensure table clearing and cleaning.
Public catering units that do not possess a space in which sufficient related services are provided to allow for the immediate consumption of food and/or beverages, which offer food preparations and/or beverages for consumption at bar counters or in restricted serving spaces, without any possibility of sitting at a table or which allow a limited number of customers to consume products on the spot, are not considered to be performing restaurant services. This category includes, for example, stand-type units, kiosks, vending machines or snack bars, and pretzel shops (simigerii).
Additionally, public catering units that offer food preparations and/or beverages exclusively through home delivery systems or pick-up from a delivery point cannot apply the reduced 5% VAT rate, because in this case, we are talking only about a delivery of food—which benefits from the reduced 9% VAT rate.
Source: Wall-Street
Frequently Asked Questions
What is the main requirement to benefit from the 5% VAT rate?
To apply the 5% rate, the activity must be classified as a restaurant or catering service, which implies providing food accompanied by sufficient related services (tables, chairs, serving, cleaning) that allow for immediate consumption.
Does home delivery benefit from the reduced 5% rate?
No, home delivery or picking up from delivery points is considered a delivery of goods (food) and is taxed at the 9% VAT rate, as the specific related services of a restaurant are missing.
Can supermarkets apply the 5% rate for prepared food?
Yes, supermarkets can apply the 5% rate only if they have a specially designated area with tables and chairs where customers can consume the products immediately and if they provide table clearing and cleaning services.