Amendments to the Fiscal Code and Fiscal Procedural Code

Amendments to the Fiscal Code and Fiscal Procedural Code

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31 May 2013

Law no. 168 / 2013 approving Government Ordinance no. 8 / 2013 amending the Fiscal Code was published on 29 May 2013 (“the Law”).

The Law approves Government Ordinance no. 8 / 2013 published in Official Gazette of Romania no. 54 dated 23 January 2013 with a number of amendments, as follows:

Amendments to the Fiscal Code

I. Profit tax

The taxable profit of a foreign legal entity carrying out activities in Romania through one or more permanent establishments

  • Foreign legal entities which perform economic activities in Romania through several permanent establishments must register one of them as their permanent establishment designated to fulfil the fiscal obligations for all the permanent establishments owned.
  • If the permanent establishment (fixed establishment) under VAT obligations is the same as the permanent establishment from a corporate income tax perspective, then it will also be the permanent establishment designated for corporate income tax purposes.
  • The revenues and expenses of all the permanent establishments belonging to the same foreign legal entity will be cumulated at the level of the designated permanent establishment.
  • The profit tax rate will be applied to the taxable profit at the level of the designated permanent establishment, calculated based on revenues and expenses allocated to each permanent establishment using transfer pricing rules.
  • Permanent establishments belonging to the same foreign legal entity are required to close their taxable period by 30 June 2013. Profit tax for the period 1 January – 30 June 2013 has to be calculated, paid and declared by 25 July 2013.
  • Fiscal losses incurred up to 30 June 2013 by permanent establishments belonging to the same foreign legal entity are passed on to the designated permanent establishment and recovered as follows:
    • The fiscal loss incurred during the period 1 January - 30 June 2013 is included in the calculation of the taxable profit / fiscal loss for the period 1 July - 31 December 2013, before recovering the fiscal losses carried forward from previous years. The period 1 July - 31 December 2013 is not considered a fiscal year within the meaning of the seven consecutive years;
    • The fiscal loss from years prior to 2013 which is still unrecovered as of 30 June 2013 will be recovered during the period remaining from the initial five or seven years. The year 2013 is considered a single fiscal year within the meaning of the five or seven consecutive years.

Entry into force: 1 July 2013

Deductibility for profit tax calculation of expenses related to employee daily allowances

  • The Law repeals the provision according to which deductible expenses for daily allowances granted to employees who travel in Romania or abroad are capped at 2.5 times the ceiling set for public institutions.

Entry into force: 1 July 2013

Fiscal depreciation

  • For taxpayers applying the IFRS accounting regulations in relation to fixed assets used for the exploitation and production of oil and gas resources, as well as other natural substances, the undepreciated fiscal value of these assets remaining at the moment of write-off / IFRS restatement will be deducted during the remaining period through the same fiscal depreciation method used before their write-off / IFRS restatement.
  • The Law mentions certain categories of vehicles for transporting people, with up to 9 seats, which are exempt from the limitation of depreciation to RON 1,500 / month. Accordingly, car depreciation is fully deductible for several categories of vehicles, including: vehicles used exclusively for emergency, protection and courier services; vehicles used by sales and acquisitions agents, vehicles used for paid passenger transport, as well as those rented or granted to third parties under operational leasing contracts.

Entry into force: 1 July 2013

II. Revenue tax for micro-enterprises

  • An additional criterion was introduced for the classification of companies as micro-enterprises, namely legal entities which are under dissolution through liquidation procedure registered with the Trade Registry or with the courts.
  • The option of paying profit tax was introduced for newly incorporated Romanian legal entities which, upon registration with the Trade Registry, are due to perform banking, insurance and reinsurance, consultancy and management or gambling activities, as well as those which have an issued share capital of at least EUR 25,000. These companies will not be required to apply the micro-enterprises tax regime for the first fiscal year.

Entry into force: 1 July 2013

III. Withholding tax

  • The Fiscal Code provisions were correlated with the existing provisions of the Fiscal Code Norms regarding the types of services rendered abroad that are subject to a 16% tax rate.
  • Clarifications were also brought regarding the application of the 50% withholding tax rate for income paid in a state with which Romania does not have a legal instrument in place for the exchange of information. Specifically, the 50% rate will apply only in situations where the income is paid as part of a transaction deemed artificial.

Entry into force: 1 July 2013

IV. Income tax

  • Expenses incurred for employees during assignment and detachment inside the country and abroad for business purposes, consisting of secondment allowances paid to them, as well as transport and lodging expenses, can be fully deducted when determining the yearly taxable income of freelancers.
  • New provisions are added to establish the tax-free level of secondment allowances and other amounts of the same type received by employees working for foreign employers during their assignment and detachment to Romania for business purposes. This is set at the same level as for public institutions in the country of residence of the foreign employer which Romanian public servants would receive if assigned to that foreign country.
  • New rules of taxing income from agriculture are introduced.

Entry into force: 1 July 2013

V. Value added tax

  • The application of the simplification measures for the domestic supply of cereals and industrial crops is extended to 31 May 2014.

VI. Excise duties

  • The guarantees lodged by excise duties payers may not be higher than a maximum threshold, which will be further established through Government Decision.
  • It is mentioned that restrictions of sales below costs do not apply either to movements of excise goods under duty suspension arrangements or to excisable products for which international or stock exchange quotation exist.
  • References are made to the studies regarding the maximum coefficients of losses specific to storage, handling, distribution and transport of excise goods on which the respective losses are deemed non-taxable for excise duties purposes.
  • The excise duties rates adopted through Government Ordinance no. 8/2013 for beer (0.8228 euro/hl/1 Plato degree and 0.473 euro/hl/1 Plato degree, for beer produced by small independent producers whose annual production does not exceed 200,000 hl) apply until 31 December 2015.

Entry into force: 1 June 2013

Amendments to the Fiscal Procedural Code

The Law introduces the following provisions regarding foreign legal entities performing economic activities in Romania through several permanent establishments:

  • The designated permanent establishment has the obligation to declare, in the name of the other permanent establishments, the taxes on salary income due by these permanent establishments.
  • The competence to administer tax liabilities due by a foreign legal entity to the state budget rests with the tax administration office in which jurisdiction the designated permanent establishment is located.
  • The permanent establishments defined by the Fiscal Code are secondary establishments.

Entry into force: 1 June 2013

Additional provisions

  • Non-resident taxpayers with one or more permanent establishments registered in Romania for tax purposes prior to 30 June 2013 have the obligation to submit the fiscal registration statement during the period 1 – 31 July 2013.
  • The fiscal registration statement must be accompanied by a list of the permanent establishments which fulfil the legal conditions for qualifying as salary payers, as well as a list of the other permanent establishments.
  • When the tax registration code is assigned to the non-resident taxpayer, the tax registration codes of the permanent establishments which do not fulfil the legal conditions for qualifying as salary payers will be cancelled.
  • The tax liabilities of permanent establishments which are not paid by 30 June 2013 will be taken over by the designated permanent establishment.

Entry into force: 1 June 2013

[Source: Official Gazette of Romania no. 310 / 29 May 2013]

For more information, please contact Peter de Ruiter, Mihaela Mitroi, Ionut Simion and Daniel Anghel.

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