Fiscal Code Amendments

In brief

Emergency Ordinance 89/2018 on certain fiscal and budgetary measures, and amending certain normative acts, including the Fiscal Code, was published on 9 October 2018.

The Ordinance also includes a derogation from the Water and Mines Act.

In detail

Tax treatment for specific operations conducted following the application of IFRS 9

  • The Ordinance provides the tax treatment for determining the corporate income tax for the specific operations carried out as a result of the application of IFRS 9 “Financial Instruments”;
  • When calculating the tax result at the time of sale / assignment of equity shares, taxpayers applying the accounting rules in line with International Financial Reporting Standards (IFRS) and recording the fair value of equity shares in “Other items of comprehensive income”, after having made this irrevocable choice at initial recognition, treat the valuation / revaluation differences in the credit / debit balance of the reserves accounts as expenditure / income items if at the date of sale / assignment they are not deemed non-taxable income.

Supplementary provisions regarding granting taxpayers 5% discounts for electronic submission of the single statement and advance income tax payment for the year 2018

The Ordinance states that the 5% reductions available apply to:

  • income tax / annual net income tax and / or annual income tax payable, for electronic submission of the single statement by 15 July 2018 and full payment by 15 March 2019;
  • estimated annual income tax reported in single statements and paid early in full by 15 December 2018.

Reduced VAT rate of 5%

The ordinance extends the 5% reduced VAT rate to include:

  • accommodation, restaurant and catering services (currently subject to a reduced VAT rate of 9%).

Specific-case analyses should be conducted by the taxpayers to assess the extent to which the supply of food and / or beverages is accompanied by a sufficient number of related services to qualify the operation as a supply of restaurant / catering services, subject to the 5% VAT rate, or as a mere supply of food and / or beverages, subject to the 9% VAT rate. Such analyses should be carried out in accordance with the principles set out in the relevant the Court of Justice of the European Union case law;

  • services consisting in giving access to amusement parks and recreational parks with activities classified under NACE 9321 and 9329, and to fairs (currently subject to a standard VAT rate of 19%);
  • the right to use sports facilities with activities classified under NACE 9311 and 9313 for the purpose of practicing sport and physical education, other than those exempt from VAT (currently subject to a standard VAT rate of 19%).

The above NACE codes are as those in Order of the President of the National Institute of Statistics no. 337/2007.

Payment obligations under “Taxation assessment form regarding the health insurance contributions due by individuals according to art. 180 par. (1) lit. a) of the Fiscal Code”

Such tax assessment forms apply until the date of submission of the single statement, so they remain valid until the submission of the single statement as provided by the law for the reporting of the estimated revenue for the fiscal year 2019.

The obligation to pay health insurance contribution as determined through the tax assessment forms can be terminated either by submission of the single statement or by notification to the tax authorities in the case of taxpayers that are exempted from the contribution and of taxpayers that earn income for which the reporting obligation lies with the income payers.

New deadlines for payment of tax liabilities established through tax assessment forms for 2014 – 2017:

  • The payment deadline for the amounts set through annual final income tax assessment decisions, issued and communicated by the competent fiscal authority after the date of entry into force of this Emergency Ordinance, for individuals in 2017 and for pension contributions for the period 2016 - 2017 is 30 June 2019. A reduction of 10% is granted for full advance payment by 15 December 2018 of the amounts stated in those tax assessment decisions.
  •  The payment deadline for the amounts set through annual final tax assessment decisions, issued and communicated by the competent fiscal authority after the date of entry into force of this Emergency Ordinance, for health insurance contributions for the period 2014 - 2017 is 30 June 2019. A 10% reduction is granted for full advance payment by 31 March 2019 of the amounts stated in those tax assessment decisions.

Elimination of the royalty on geothermal water and natural mineral water used for public consumption.

As of 1 November 2018, the 5% royalty on geothermal and natural mineral water used for public consumption is eliminated.

Source: Emergency Ordinance 89/2018 regarding certain fiscal and budgetary measures and for the amendment of some normative acts, published in the Official Gazette no. 854/2018.

The takeaway

This Emergency Ordinance provides:

  • the tax treatment for determining profit tax, for the specific operations carried out as a result of the application of IFRS 9 "Financial Instruments";
  • a uniform tax treatment for discounts granted to taxpayers that pay tax liabilities in advance;
  • a reduced VAT rate of 5% for sports and leisure activities, accommodation, restaurant and catering;
  • new payment deadlines for annual tax assessment decisions issued to settle annual tax on individuals’ income, social security and health insurance contributions for certain years, and a 10% reduction for advance payment of the amounts stated in those assessment decisions;
  • the elimination of the royalty on geothermal water and natural mineral water used for public consumption.

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