Government Emergency Ordinance no. 25/2018 (GEO 25/2018), amending Law 227/2015 on the Fiscal Code (“Fiscal Code”) and Law 2017/2015 on the Fiscal Procedure Code, has been published.
GEO 25/2018 introduces amendments across a range of fiscal areas. One of these amendments introduces specific regulations regarding the declaration and payment of liabilities due on income obtained based on sport activity contracts, concluded in accordance with Law no. 69/2000 regarding physical education and sport.
With respect to personal income tax and social contributions, the provisions of GEO 25/2018 amending the Fiscal Code enter into force on the date of publication in the Romania Official Gazette, 30 March 2018.
I. Fiscal Code
Corporate income tax
Taxpayers required to change their electronic cash registers will be allowed to write off the old cash registers for which they have applied the reinvested profit facility without calculating additional corporate income tax, related interest and penalties.
Taxpayers are now required to declare the beneficiaries of sponsorship, patronage and private scholarship expenses. To do this, taxpayers have to submit an informative statement for the year in which they recorded such expenses or deducted them from the corporate income tax, by the deadline for submitting the annual corporate income tax return.
Revenue tax for micro-enterprises
Micro-enterprises can opt once for the application of the provisions of Title II of the Fiscal Code if they fulfil both the following conditions:
· Have a subscribed share capital of at least RON 45,000;
· Have at least two employees;
The micro-enterprise option for the payment of corporate income tax is final. If the above conditions are not met, the Fiscal Code provisions on micro-enterprise revenue tax apply as of the fiscal year following that in which the share capital is lower than RON 45,000 and / or the number of employees falls below two. In the event of a decrease in the number of employees to fewer than two, the employer has 60 days to remedy the situation.
Micro-enterprises can now deduct sponsorship-related expenses of up to 20% of the micro-enterprise revenue tax, in accordance with Law no. 32/1994 for providers of social services accredited with at least one licensed social service. Amounts not deducted (i.e. when less than 20% is deducted) from the micro-enterprise revenue tax due for the quarter in which the related expense was recorded are carried forward to the following quarters over a period of 28 consecutive quarters.
Micro-enterprises also have to submit the informative statement regarding sponsorship beneficiaries for the year in which those expenses are booked within the legal deadline.
Personal income tax and social security contributions
Specific provisions have been introduced regarding the determination of income tax and social security contributions due on income from independent activities derived based on sport activity contracts, as follows:
- Income payers, legal entities or other entities obliged to keep bookkeeping records have to calculate, withhold and pay the 10% income tax due;
- The income tax calculated and withheld represents the final tax, with a payment deadline of the twenty-fifth of the month following that in which the income tax was withheld;
- Income payers also have to calculate, withhold and pay social security contributions (pension contributions) and health insurance contributions if the estimated income to be obtained for the current year is at least equal to 12 times the national minimum gross salary. This obligation applies if the income is obtained from a single payer or if the income is obtained from multiple payers and the income from at least one of them exceeds the above limit - the taxpayer nominates through contract the payer from which the income obtained is at least equal to 12 times the national minimum gross salary and which has to calculate, withhold and pay social security contributions;
- The gross income obtained based on sport activity contracts is taken into account when assessing the income considered for the annual cap of at least 12 times the national minimum gross salary for the purpose of establishing the obligation to pay social security contributions (pension contributions) and health insurance contributions;
- The taxpayer has to submit the Single Statement if:
· the estimated level of net income to be obtained from each source of intellectual property rights income or the level of the gross income obtained based on sport activity contracts, for which the income tax is withheld at source, is below 12 times the national gross minimum salary for the year for which the contribution is due;
· and the cumulated net or gross income, as appropriate, is at least 12 times the national minimum gross salary.
Similar provisions apply for health insurance contributions.
The percentage of income tax due which can be redirected to support non-profit entities and religious units which are accredited providers of social services, with at least one licensed social service, has been increased to 3.5%. In order to support non-profit entities established and functioning under the law, including religious units, and for granting private scholarships, according to the law, 2% of the income tax due (for the types of income provided by the Fiscal Code) can be redirected.
Tax on income obtained in Romania by non-residents and the tax on representative offices of foreign companies established in Romania
The provisions of the chapter “Taxation of savings income obtained from Romania by individuals deemed as tax resident in other Member States and the application of the exchange of information in relation to this category of income” have been abolished.
Value Added Tax
Research and development activities do not qualify as operations falling within the scope of VAT if the related results are not transferred to third parties.
It remains to be seen whether taxable persons that do not transfer the results of research and development activities to third parties are entitled to deduct input VAT incurred on related purchases.
Excises and other special taxes
The amount by which excise duty is reduced on diesel fuel for use as motor fuel for road carriage of goods and people has been changed. The new reduction is set at RON 183.62 / 1,000 litres (RON 0.059 / 1,000 litres lower than the previous level) and RON 217.31 tonne (RON 0.0699 / tonne lower than the previous level. It is also reiterated that these measures apply subject to the fulfilment of the legal requirement set for state aid.
In addition, the conditions for authorisation of fiscal warehouses are now in line with the provisions regarding their revocation. As such, the condition that the person requesting the fiscal warehouse authorisation should not have any outstanding fiscal liabilities to the ANAF consolidated general budget is now expressly provided in the law.
Special taxes for tourism promotion of localities are to be considered local budget income and have to be used for the purposes for which they were established.
II. Fiscal Procedure Code
GEO no 25/2018 introduces a number of significant amendments in order to simplify the mechanism of paying tax liabilities.
The first amendment relates to taxpayers who benefit from a payment schedule and have submitted VAT returns, in accordance with Fiscal Procedure Code Chapter IV, for which reimbursement will be subject to a subsequent tax inspection.
In this case, the new amendments stipulate that the reimbursement will be made with subsequent tax inspection, regardless of the amount requested for reimbursement. This situation is similar to that where the amount of a VAT refund is lower than RON 45,000, where the legislator also established that the reimbursement requires subsequent tax inspection.
Secondly, the payment rescheduling measures have been simplified for debtors who do not own any properties. According to the new legal provisions:
· the payment rescheduling application may be accompanied by a proposal for a payment schedule, so that the financial pressure can be adapted to the debtor’s activity and own financial needs;
· a shorter 15-day deadline has been established for settling payment rescheduling applications;
· initial agreements are no longer issued on rescheduling payments;
· interest for rescheduled tax liabilities is owed, calculated and paid at the end of the payment schedule or on the date of loss of the rescheduling validity;
· the criteria for the category of taxpayers with low fiscal risk have been changed:
§ The directors and / or associates should have a clean fiscal record;
§ Tax liabilities should not exceed 12 months;
§ The taxpayer should not have operating losses in the last closed financial year, according to the accounting provisions.
It should be noted that these new amendments apply to applications and VAT returns filed after the date of entry into force of GEO 25/2018.
III. Other provisions of the GEO 25/2018
The income tax established for 2018 through a decision on anticipated tax payments, communicated by the tax authorities to taxpayers has been cancelled ex officio though a decision on cancelling tax liabilities, which will also be communicated to the taxpayer. In cases where the tax authority had issued a tax decision, but did not communicate it to the taxpayer, the tax decision through which the anticipated payments were established will no longer be communicated to the taxpayer and the fiscal obligation is removed from the authorities’ database. In cases where the tax decisions related to anticipated payments for 2018 were not issued before GEO 25/2018 entered into force, such tax decisions will no longer be issued.
Corporate income tax payers are required to declare the beneficiaries of sponsorship, patronage and private scholarships by the date of filing the annual corporate income tax return.
Micro-enterprises can opt once to apply the provisions of Title II of the Fiscal Code if they have a subscribed share capital of at least RON 45,000 and at least two employees.
Specific provisions have been introduced regarding the determination of income tax and social security contributions due on income from independent activities derived based on sport activity contracts.
The percentage of income tax due which can be redirected to support non-profit entities and religious units which are accredited providers of social services with at least one licensed social service has been increased to 3.5%.
Fiscal Procedure Code
The mechanism of paying tax liabilities and the steps related to rescheduling payment procedures for debtors who do not own property have been simplified.
Partner, Tax Services, Romania
Tel: +40 21 225 3681