Government Emergency Ordinance no. 102/2013 amending the Fiscal Code and regulating financial and fiscal measures was published on 15 November 2013.
The major changes are summarised below:
I. Profit tax
• Taxpayers with a financial year different from the calendar year may opt for a fiscal year different from the calendar year. The Fiscal Code sets out the basic rules regarding the calculation, payment and declaration of corporate income tax by these taxpayers.
• Favourable fiscal measures for the setting up of holding companies have been introduced. Dividend revenues, capital gains and income derived from the liquidation of another entity are non-taxable provided that the beneficiary, a Romanian legal entity, holds a minimum of 10% of the share capital of its subsidiary (i.e. a Romanian legal entity or foreign legal entity established in a state with which Romania has a Double Tax Treaty) for a continuous period of at least one year.
In light of the above, the condition regarding the minimum holding period changes from two years to one year for the application of the Parent-Subsidiary Directive (2011/96) transposed into the domestic fiscal legislation.
• Taxpayers which do not benefit from fiscal credit in the year when they grant sponsorship according to the law may carry forward the fiscal credit for the next seven consecutive years.
• For taxpayers going through a restructuring process, the right to carry forward non-deductible interest expenses and net foreign exchange losses is split between the beneficiary / assignor in proportion to the assets and liabilities transferred / maintained under the merger / spin-off project.
• A Romanian permanent establishment of a legal entity resident in the European Union (“EU”) or the European Economic Area (“EEA”) which obtains revenues from another EU or EEA member state, taxed both in Romania and in that member state, may claim a tax credit in Romania under the applicable tax law provisions.
Revenue tax for micro-enterprises
• If revenues derived from management and consultancy activities exceed 20% of its total revenues, a micro-enterprise becomes a profit tax payer.
• Amendments have been made to the method of calculating the taxable base for determining micro-enterprise revenue tax.
• The condition regarding the minimum shareholding period has been reduced from two years to one year for the application of the withholding tax exemption for dividends paid by a Romanian company to a company resident in the EU or to a permanent establishment of a company resident in the EU.
• The provisions of the Parent-Subsidiary Directive (2011/96) and of the Interest and Royalties Directive (2003/49) as transposed into the domestic fiscal legislation apply only to EU member states, with the member states of the European Free Trade Association (Iceland, Norway and Lichtenstein) being excluded.
Tax on constructions
• A new tax has been introduced for constructions included in the first group of the Catalogue for classification and normal useful life of fixed assets, except for those which are subject to building tax under the provisions of Title IX of the Fiscal Code.
• The tax on constructions is calculated by applying a 1.5% rate to the value of the constructions recorded in the taxpayers’ books as at 31 December of the previous year, with the value determined in accord with the provisions of the law.
• The Fiscal Code also sets out the categories of taxpayers subject to this tax as well as the rules for calculating the taxable base, declaration and payment of the tax on constructions.
II. Personal income tax
• Income from independent activities
The list of limited deductibility expenses for independent activities is extended to include the following:
• Contributions on behalf of employees to voluntary pension schemes to authorised entities, established in EU Member States or EEA countries, capped at the RON equivalent of EUR 400 / employee / fiscal year;
• The interest related to loans in foreign currency from individuals or companies, capped at the level of the interest rate published in the Fiscal Code art. 23, para. (5), let. b) and updated annually through Government Decision.
• Employment income
The tax on employment income is to be calculated by taking the following into account as deductible elements:
• Mandatory social security contributions in accordance with domestic law and the provisions of the European Union or conventions / agreements regarding coordination of social security systems;
• Contributions to voluntary pension schemes made to authorised entities, established in EU member states or EEA member states, capped at the RON equivalent of EUR 400 / employee / fiscal year.
• Income from rental activities
• The provisions regarding taxation of income from leasing of agricultural land using a real income system are repealed.
• The mandatory social security contributions owed for the current fiscal year in accordance with the provisions of the Fiscal Code are considered deductible regardless of whether the annual net income from renting out goods is determined using a real income system, income quotas or a fixed quotas expenses.
• Income from agricultural activities
New provisions regarding non-taxable income and income quotas are introduced.
• Income from prizes
Publicity materials, flyers, samples and bonus points granted with the purpose of stimulating sales do not represent taxable income.
• Payment deadline for tax liabilities imposed as a result of tax inspections
A new article addresses the payment deadline for tax liabilities arising as a result of tax inspections. The new deadline will be the same as that established by order of the President of the National Agency for Fiscal Administration for the issuing of tax decisions.
• Income of non-resident individuals from dependent activities
New provisions are introduced regarding the assessment of taxable income for individuals who are residents of other EU member states or EEA member countries. These individuals benefit from the same deduction rights as resident individuals, under certain conditions.
III. Value added tax
• VAT adjustment is no longer necessary for goods which have been destroyed, lost or stolen, if these situations can be duly proved or confirmed. For stolen goods, no VAT adjustment is necessary if the goods are considered stolen based on documentation issued by the judicial authorities.
• The VAT exemption for vessels is conditioned by their use on the high seas. The new provision is necessary in order to align the legislation with the VAT Directive.
• Insurance expenses incurred for leased goods are reinvoiced to users by applying the VAT exemption regime, in accordance with European case law.
• Romanian taxable persons which perform or intend to perform financial, banking or insurance transactions for clients established outside the European Union or transactions with a direct link to goods to be exported outside the European Union, as well as other transactions which give rise to a deduction right, even though they are not taxable in Romania, are obliged to register for VAT purposes in Romania.
• VAT for goods which have been the subject to the 50% deduction right limitation cannot be further adjusted.
• Non-resident companies should be approved for VAT reimbursement even though they do not have proof of payment of the VAT to Romanian suppliers. This provision is required to avoid a possible infringement case.
IV. Excise duties
• The introduction of a new method of calculating the value in RON of excise duties and tax on oil from internal production, if the value of the exchange rate from the year of reference is lower than that for the previous year. In this specific situation, the value in RON for the year 2014 is to be calculated using the exchange rate for 2013 (4.5223 RON / EUR) multiplied by the consumer price index (inflation index) communicated by the National Statistics Institute for the month of September 2013 (104.77%).
• The new levels of excise duties have been published for:
o Lead gasoline: EUR 637.91 / metric ton or EUR 491.19 / 1,000 litres.
o Unleaded gasoline: EUR 557.91 / metric ton or EUR 429.59 / 1,000 litres.
o Diesel fuel: EUR 473.85 / metric ton or EUR 400.395 / 1,000 litres.
• The introduction of a prohibition on sales of cigarettes to individuals at a price lower than the declared retail price.
• Processed tobacco and spirits which are marked using stamps and banderoles will no longer be sold using the system “buy one, get one free”.
These provisions will enter into force starting with 1 January 2014
[Source: Official Gazette of Romania no. 703 / 15 November 2013]
For more information, please contact Mihaela Mitroi, Ionut Simion and Daniel Anghel.
Country Managing Partner, Romania
Tel: +40 21 225 3708