An accurate tax and fiscal expertise based on best practices can help contruction companies to better manage their finances and maximize their profit.
In recent years, the construction field has grown in importance and experienced a significant evolution in Romania. From this perspective, the field offers important business opportunities for local and international companies, but these also come with challenges such as the need to comply with quality and safety standards, issues related to corruption and sustainable resource management, but also changes extremely frequent of legislative acts affecting long-term decisions.
Accounting and tax expertise thus becomes vital in the field of construction because it ensures compliance with tax regulations, tax optimization, assessment of project profitability and compliance with international accounting standards. Adequate and best-practice expertise can help construction companies manage their finances more efficiently and maximize their profits.
Here are some areas where accounting and tax expertise is essential:
- Compliance with tax regulations to avoid errors and possible problems with the tax authorities;
- Tax optimization by identifying legal options to reduce costs and maximize profit. A concrete example would be identifying all available tax deductions and credits, or differentiating between capital and operating expenses. On the other hand, patrimonial and reputational liability must be carefully monitored and contractually updated;
- Transfer of know-how - Romania currently enjoys reduced taxation at the level of the European Union and numerous facilities in the field of construction, a fact that attracts foreign investors. For them, the transfer of know-how is important, the investors bringing international expertise, and the accountant and fiscal consultant offering local expertise and the tools needed to manage unforeseen elements and fiscal uncertainty;
- Evaluating the profitability of projects by analyzing costs and revenues, but also by identifying possible cash-flow problems;
- Compliance with international accounting standards such as IFRS, which are important if companies want to attract financing from international investors;
- Maximum use of all fiscal facilities such as those related to: purchase of goods, vouchers for employees, tax depreciation, tax group for VAT and profit tax, sponsorships, advance payment of tax.
Some concrete examples are:
- VAT reduction for construction - currently the value added tax (VAT) for construction works is 19%. However, in the case of some construction projects, the VAT can be reduced to 5% or even zero, depending on the type of construction and its location;
- Deduction of investment expenses over a certain number of years, depending on the type and size of the investment. This tax facility is intended to stimulate investment in construction and support economic development;
- Reduction of the profit tax depending on the size of the company's own capital;
- Deduction of research and development expenses, including for innovation and the development of new technologies;
- Income tax reduction for construction workers, depending on salary and level of professional training.
In addition to substantive issues related to quality and safety standards, corruption or changes in legislation, the construction sector also faces a number of social challenges such as the lack of skilled labor and the COVID-19 pandemic that can lead to delays in projects, increasing costs, decreasing the quality of works and reducing the demand for services. In this direction, the tax and accounting consultant can make an important contribution by managing risks and improving cash flow and financial management.
Regardless of the challenge, a solution that centralizes all financial accounting information in a single database is essential to ensure transparency and easy reporting, so necessary to identify the problems and risks a company is facing. Inventory records, along with monitoring projects in all their phases, purchases and seasonal staff, become the key through which any financial and accounting optimization can be achieved. Thus, the accountant or tax consultant can even compare and assess which is the best IT solution for the client to obtain the integration of all information and, subsequently, substantiated business decisions.
In terms of IT solutions, the most used are ERP-type solutions, solutions for human resources management, business intelligence solutions for reporting, or project management solutions for managing projects and contracts. Similarly, the mandatory SAF-T reporting introduced in 2022 raised several problems for companies in Romania, being very difficult to achieve it without an IT solution, especially when this involves collecting data from several platforms.
"From an accounting point of view, a difficult aspect that can be quickly solved by technology is keeping a clear, up-to-date record of material stocks and their periodic inventory to reconcile the actual with the script. We do not impose an IT solution on the client, but rely on what we have available – either a solution already implemented by the client, or we migrate their data into our system. We most often use Charisma ERP, Saga and SAP, but we also adapt according to operational needs and emergencies", stated Nicoleta Vrăjescu Dobre, Financial Services Director, Nexia ABS Financial Services.
On the digitization side, the accounting financial consultant is aware of its impact on the construction industry, among the most important being:
- Improving administrative efficiency by automating processes such as invoicing and payment management, which can reduce errors, delays, but also staff and paper costs;
- Improving financial control through better reporting and monitoring of cash flows, as well as faster identification of problems and opportunities;
- Improving transparency and reporting by increasing access to data and improving audit processes;
- Reducing bureaucracy by automating administrative processes, thus reducing the time and costs involved in managing fiscal and accounting documents;
- Increasing data security through the use of cyber security and data encryption solutions;
- The adoption of the electronic invoicing system - the Romanian Government has recently implemented the electronic invoicing system, in a first phase in the B2G relationship, and for goods with high fiscal risk, following which from 2024 it will become mandatory in the B2B relationship as well, through which all companies that issue invoices must use this system. This measure will increase efficiency and transparency in invoicing processes, while reducing tax evasion.
- There are signals that the implementation of e-TVA will follow, this new optimization is already being tested in Hungary and in the Nexia network we can observe the evolution of projects in advance, estimated to be a requirement for 2024, in Romania it will probably take longer but being expected to cover a large part of current syncope.
Regardless of the level of development, but also of the ongoing projects, the contribution of an accounting and tax expert becomes vital in the healthy growth of the company.
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