Romania - New UpWork Invoices not valid according to accounting law

[Ovidiu F]

Hello,

Until recently I used UpWork as a "Client" and registered all the invoices received in the company accounting system, paid them from my company bank account using credit card, everything fine.

All the invoices were issued by UpWork Inc. and the bank account was charged by UpWork Inc for that matter, so all good until here.

But recently, UpWork changed their invoicing system, and all the invoices are issued with the name of the freelancers.

But I am still charged by UpWork.

I am in a situation that it is impossible to register invoices into the company accounting.

That is because of two reasons:

1) in order to issue a valid invoice, (under the Romanian accounting law) the freelancer must be registered as a business name (PFA, II, SRL) with a fiscal code;

2) in order to be able to get a valid invoicing, the invoice must be issued by the same person/company that charged the bank account.

If you encountered a similar situation, please explain if you found any solution compatible with the Romanian accounting laws.

Thanks!

[Stefan C]

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@Ovidiu F wrote:

2) in order to be able to get a valid invoicing, the invoice must be issued by the same person/company that charged the bank account.

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 Where did yo get that info from?

[Ovidiu F]

Let's say my provider is ION POPESCU, he has a specific analitical sub-account under 401.1

When the invoice is registered, I owe to ION POPESCU.

Since bank account is charged by someone that has not issued an Invoice (in this case UpWork),

based on accounting logic, I do not owe UpWork any money. So I should not pay that debt to someone else (unless it is specified in the bank statement that transaction is for ION POPESCU).

Even if that happens, I still have the problem (1)

Have you successfully found a way to solve this issue?

[Bojana D]

Work directly with your providers - some of them will be able to issue your company a valid invoice under their own name (as this is a problem for freelancers too, Upwork's system-generated invoices don't work in most of Europe). For those who can't... unfortunately there's no easy solution (that I know of).

[Joachim M · Accepted solution]

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@Ovidiu F wrote:

All the invoices were issued by UpWork Inc. and the bank account was charged by UpWork Inc for that matter, so all good until here.

But recently, UpWork changed their invoicing system, and all the invoices are issued with the name of the freelancers.

But I am still charged by UpWork.

Upwork is not has never been your provider. Upwork has always been a go-between, an intermediary.

I am in a situation that it is impossible to register invoices into the company accounting.

That is because of two reasons:

1) in order to issue a valid invoice, (under the Romanian accounting law) the freelancer must be registered as a business name (PFA, II, SRL) with a fiscal code;

No freelancer outside of your country will be registered.

2) in order to be able to get a valid invoicing, the invoice must be issued by the same person/company that charged the bank account.

If this were true, how do you handle payments by say credit card? 

I suggest you have a word with a tax consultant. Using an intermediary is an absolutely normal business procedure. Your provider is the freelancer and the invoices are raised on their behalf. The freelancer uses Upwork as a service provider for handling the issuing of invoices and collecting the monies. Nothing unusal about that.

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[Ovidiu F]

> No freelancer outside of your country will be registered
The system works fine when freelancer and client are from different countries. The problem is when both have romanian residency.

> Your provider is the freelancer and the invoices are raised on their behalf.
Correct, but invoices are invalid in my country if the freelancer is working as a resident, unless the freelancer has tax registered business. In other words, a corporation cannot register invoices issued by natural persons. Of course, a natural person can apply for tax registration (and pay taxes resulted from individual independent activities, which is 'freelancing' in plain English) But this does not automatically authorize him/her to issue invoices. In order to issue invoices, a natural person must apply for Authorized Natural Person (which is equivalent of american "self-employed" I think).

Of course, I will ask a legal consultant as this is a jurisdiction very specific issue.
Thanks!

[Elena P]

Hi Ovidiu,

Have you found a solution to this? I am also looking to find a good legal advisor in this matter, in Romania.

Best regards,

Elena

[Ovidiu F]

Hello Elena,

I did not got in contact to any legal advisor yet. I am using shareholder natural person debit card to pay hourly contracts and I pay only fixed price contract with company card.

It should be possible to register the transaction without having an invoice based on a written paper document signed by the freelancer unauthorized natural person. As you do when you buy a car, or agricultural products for you company, without an invoice.

[Stefan C]

If you’re a RO business and you’re looking to contract a RO freelancer (or agency), that freelancer (or agency) should be a RO *registered business* (PFA/SRL/whatever). That way, they will be able to issue valid invoices, and you will should not care about their taxes.

If the freelancer is not a *registered business* your options pretty much are:

a. employ that freelancer under your company (aka individual employment contract), and pay 40% state taxes or whatever;

b. under certain circumstances, you could sign a “service contract” (also known as “civil convention” [“conventie civila”]) with that person. If you go with a “service contract”, you might be required to retain and pay some of your freelancer’s taxes (like 10 or 16%, not sure).

Here is a nice (RO) article referring to “PF service contracts”.

You should NOT take as facts whatever you read on the internet. Internet stuff should give you a good starting point on what you should ask your accountant/tax advisor.

You might want to keep in mind that the average RO accountant has pretty limited knowledge when it comes to stuff they don’t deal with on an everyday basis (talking from experience here). If you feel your accountant cannot properly answer your questions, or you feel his/her answers sound kind of dumb, you should find another accountant who can answer your questions (maybe an “expert” one).

[Elena P]

Thank you, Stefan! My answer is the same I gave to Ovidiu above, and it takes the form of a question - these solutions don't actually solve the issue of having an invoice with the freelancer's name and the money being taken by Upwork, right?

Re: the average Romanian accountant, I know how it is, they know virtually nothing about online work. Or maybe, the Romanian state doesn't properly regulate it yet. When I started working as a freelancer on Upwork, it was very difficult to get a clear answer regarding how to deal with my Upwork earnings.

I'll keep looking for a good advisor. If you know any, please share their names, it would be really helpful. 

Thank you again for taking the time to reply to this!