Ionescu si Sava legal advice regarding the CURENCY USED FOR VALID PAYMENTS BETWEEN RESIDENTS

After seeing time and again questions on the correct currency to be used for payments between residents, Ionescu si Sava consultancy team recommends Romanian residents to include in sale or services contracts a provision according to which payment under the contract must be made in Lei and a reference to the Regulation of the National Bank of Romania on the foreign exchange regime. Another important contract provision in this respect should specify that any payments made in foreign currency by a Romanian resident to another Romanian resident shall be returned to the payer and the payment obligation under the contract shall therefore be considered to not have been performed, with delay penalties to be applicable immediately.

It is important to define the notion of resident in order to know exactly what falls under this category and if the rules referred to below can be applied. Therefore, according to the Fiscal Code, natural person resident is any person who fulfills at least one of the following conditions, namely: has his/her place of residence in Romania, the center of the vital interests of the respective person is set in Romania, the person is present in Romania for one or more periods which together exceed 183 days, during any period of 12 consecutive months, ending in the respective calendar year or, is a Romanian citizen who works abroad, as an official or employee of the Romanian State in a foreign State. In terms of resident legal entities, the Fiscal Code refers to them as any Romanian legal entity, any foreign legal entity having its actual management in Romania or any legal entity with its registered seat set-up in Romania, incorporated according to the European Law.

Although legal provisions are quite clear in terms of how currency can be used for making payments, there are situations in which resident legal entities, against applicable legal provisions, collect payments in Euro from other resident legal entities, although contracts concluded between the parties state that the payment of the price of the contract shall be made in Lei.

Regulation of the National Bank of Romania n.4 of April 1st 2005, concerning the foreign exchange regime, states that payments, collections, transfers and any other such procedures which arise from the sale of goods and services between residents, regardless of the legal relationship which regulates them, shall be made only in the national currency (Leu), with the exception of some operations stated with limitations in the Annex n.2 of the Regulations, which may be made in foreign currency. Operations between residents, which may be carried out in foreign currency, include: direct payments and collections arising from contracts of foreign commerce of goods and services (export – import of goods and services), payments and collections according to the contracts of outsourcing arising from contracts of international economic collaboration (cooperation), operations which arise from commerce carried out between harbours, airports and customs on state borders assimilated to free trade zones, or commerce carried out on the external routes of international trains, on board of airplanes and ships.

“We consider that a better communication regarding the regulations of the foreign exchange regime is needed, as we are convinced that most payments made in foreign currency between Romanian residents were made because the parties were unaware of the applicable legal provisions.” said Ana Gerota, attorney at Ionescu si Sava.