Emergency Ordinance no. 114/2018 was published on 29 December 2018 (“the Ordinance”). It establishes fiscal, budgetary and public investment measures, amends and completes some normative acts and extends some deadlines.
The numerous economic and fiscal measures introduced by the Ordinance include new taxes on bank assets and on online gambling organisers' income. It also modifies the fees for granting radio licences and the financial contributions due by electricity, cogenerated electricity and thermal energy licence holders producing electricity from natural gas.
Further clarification is required regarding the planned implementation methods for some of the amendments and an in-depth analysis of their compliance with relevant European regulations and / or Court of Justice of the European Union jurisprudence principles.
I. The establishment of a tax on financial assets
The Ordinance establishes a tax on financial assets for banking institutions (credit institutions, Romanian legal persons or branches in Romania of credit institutions, foreign legal entities). The tax becomes due if the quarterly ROBOR average exceeds 2% and its payment is considered deductible expenditure for tax purposes.
The tax rate on financial assets varies from 0.1% to 0.5% of the adjusted (if applicable) financial assets stated in accounting records, with the variation depending on the amount by which the three- and six-month ROBOR (as determined by the National Commission for Strategy and Prognosis) exceeds 2%. The Ordinance does not, however, stipulate that the average of ROBOR 3M and ROBOR 6M will be calculated as a cumulative average of both variable indexes within the calculation period, or whether the individual average of those two indexes represent two cumulative conditions to be met by credit institutions.
This tax is due quarterly and calculated by applying the above-mentioned rates to the taxpayer's financial assets at the end of the quarter. The first quarter for calculation purposes is the first quarter of 2019, with the first deadline for declaring and paying the financial assets tax being 25 April 2019.
II. Electricity, natural gas and exploitation of natural resources
The Ordinance brings amendments to the Law on Electricity and Natural Gas no. 123/2012, such as:
- During 1 March 2019 - 28 February 2022, for household customers, the supply of electricity is performed by ANRE under regulated conditions;
- Producers, including their subsidiaries and / or affiliates of the same economic interest group carrying out both extraction activities and sales activities of natural gas extracted from Romania:
- have to sell natural gas quantities resulting from the current domestic production activity to suppliers and eligible final customers at RON 68 / MWh during the period 1 April 2019 – 28 February 2022;
- will no longer conclude sales contracts for delivery on the Romanian territory at prices higher than RON 68 / MWh. The differences in the acquisition costs in the years 2018 and 2019, not recovered by the prices charged, will be recovered by 30 June 2022, according to ANRE regulations;
- Suppliers’ acquisition costs for natural gas from the current domestic production necessary for covering final customers’ consumption cannot exceed the amount of RON 68 / MWh, regardless of the seller.
Government Emergency Ordinance no. 33/2007 on the organisation and functioning of the National Regulatory Authority for Energy ("ANRE") modifies the monetary contribution charged to holders of licences in the field of electric power, cogenerated electric and thermal energy, and natural gas. The level of the contribution is set at 2% of the economic operators’ turnover from the activities covered by the ANRE licences.
The special tax on monopoly activity in the electricity and natural gas sector, as subsequently amended, has been extended until 31 December 2021.
The tax stipulated in Government Ordinance no. 6/2013 on the introduction of special measures for the taxation of the exploitation of natural resources other than natural gas is also to be maintained and apply until 31 December 2021.
III. Granting licences for the use of radio frequencies and the regime of physical infrastructure of electronic communications networks
Government Emergency Ordinance no. 111/2011 on electronic communications has been amended and completed as follows:
- The granting of licences for the use of radio frequencies through competitive or comparative selection procedures is to be carried out as follows:
- License fees for the following radio frequency bands: 703-733 MHz / 758-788 MHz (2 x 30 MHz), 738-753 MHz (1 x 15 MHz), 880-915 MHz / 925-960 MHz (2 x 35 MHz), are calculated as a minimum value of 4% of the turnover of the year preceding, recorded at the level of the NACE branch where the electronic communications activity is conducted, multiplied by the number of years for which the licence is granted;
- Licence fees for the following radio frequency bands: 791 to 821 MHz / 832 to 862 MHz (2 x 30 MHz), 1920 to 1980/2110 to 2170 MHz (2 x 60 MHz), 3400 to 3800 MHz (400 MHz), are calculated as a minimum value of 2% of the previous year’s turnover, recorded at the level of the CAEN branch where the electronic communications activity is conducted, multiplied by the number of years for which the licence is granted.
- The extension of the validity period of the licence for the use of radio frequencies granted through the selection procedure is conditional upon payment to the state budget of a licence fee in the amount of 4% of the turnover of the year preceding the extension, registered at the level of the CAEN branch where the electronic communications activity is conducted, multiplied by the number of years for which the licence is granted.
- The monitoring fee pertaining to suppliers of public electronic communications networks and suppliers of electronic communications services is set at 3% of the previous year’s turnover, excluding postal and courier services.
- Fines for the civil offences stated in art. 142 of Ordinance no. 111/2011 have been increased from 2% to 5% of turnover for first offences 5% to 10% of turnover for repeated breaches.
- For the use of radio frequencies without a licence or after the validity period expires, penalties of 0.1% of the previous year's turnover, as registered at the level of the NACE branch where the electronic communications activity is conducted. The penalty applies for each day of usage without having a valid licence, starting with the day after the licence fee was due.
Law no. 159/2016 establishes the regime for the physical infrastructure of electronic communications networks and establishing measures to reduce the cost of installing electronic communications networks. It introduces a fine to be imposed on providers of electronic communications networks which conclude contracts for installation, maintenance, replacement of networks electronic communications and infrastructure elements necessary to support them or allowing access to property without the right of access or in the absence of a building permit. The fine is up to 10% of the turnover, in proportion to the number of users served without authorisation, at 1% per 100 users.
- As of 1 January 2019, organisers of online gambling within the scope of Government Emergency Ordinance no. 77/2009 on gambling are liable to pay an annual fee of 2% of the total participation fees collected in the previous year. The fee must be declared and paid by the twenty-fifth of the month following that in which the participation fees were collected.
- Government Emergency Ordinance no. 77/2009 on the organisation and operation of gambling has been amended as follows:
- A social responsibility activity in the field of gambling has been set up alongside the National Gambling Office. This activity is funded exclusively by annual contributions from licensed gambling operators. The contribution varies from EUR 1,000 to EUR 5,000, depending on the licensing class and the type of gambling. This contribution to the state budget replaces that to the fund for the prevention of gambling addiction.
- The fee for authorising gaming operations using type A slot machines has been increased from EUR 2,600 to EUR 3,600.
- The 10% reduction in fee is no longer granted for full advance payment of annual gambling authorisation fees for casinos, poker clubs and slot machines.
V. Private pension funds
Law no. 411/2004 on private pension funds, republished in the Official Gazette of Romania, Part I, no. 482 dated 18 July 2007, as subsequently amended and supplemented, has been amended and completed as follows:
- The Ordinance allows a private pension fund participant to opt to transfer their contributions to the public pension system. The option can be exercised after a period of five years of participation in a private pension fund, but the accumulated contributions up to the transfer date remain with the private pension fund.
- It also specifically mentions the right of the participant to withdraw from the private pension fund scheme at own request, without giving a reason.
- The amount of the minimum share capital needed to manage a private pension fund has been changed from a fixed amount (EUR 4 million) to a percentage of participants’ contributions (i.e. 5%, 7% or 10% of the amount of the contributions, depending on their total level). However, the new normative act does not specify the reference date according to which the value of the contribution will be determined or the deadline by which the share capital has to be updated. Only two dates set for the current year are stated (30 June and 31 December 2019).
- Administration fees charged by private fund managers have also undergone significant changes. The initial component of the administration fee has been reduced from a maximum of 2.5% to no more than 1%, of which 0.5 percentage points will be transferred to the National House of Public Pensions. The subsequent (monthly) component of the net asset value of a privately-managed pension fund will be calculated according to the rate of return of the fund against the inflation rate, ranging from 0.02% to 0.07% (compared to a previous maximum of 0.5% in all cases).
Fiscal Code and Fiscal Procedure Code Amendments
Income tax provisions
- The "Single Statement on individuals’ income tax and social contributions" is not filed for the proceeds of the disposal of the use of goods for which the rent is expressed in RON and for which the annual net income was not chosen in the real system, and at the end of the previous year the conditions for qualifying income in the category of self-employed income are not met.
- The deadline has been amended for submitting the annual income statements that include the distribution of the net income / loss of the associate's income by the association, excluding those who earn income from agricultural activities imposed on the basis of income rules, from 15 March to 15 February of the year following.
Value added tax provisions
- The deadline for applying the optional reverse charge mechanism for certain transactions provided for by VAT legislation, such as the supply of cereals, the transfer of green certificates or the supply of mobile phone, has been extended to 30 June 2022.
- It is provided that the inter-community development associations defined according to the Law of the community services of public utilities no. 51/2006 are taxable persons for the purposes of VAT for the provision of public utility services for the member-administrative territorial units, when acting as a buyer-reseller in terms of VAT. The amount of the minimum fine that applies to contraventions governed by this law has been doubled, including the application of a fine of 5% of the turnover in the case of repeated breaches.
Excise duties and special taxes provisions
- For beer, wine and other fermented beverages, intermediate products, ethyl alcohol, cigarettes and cigarillos, the 1% of special taxes and excise duties contribution to the Ministry of Youth and Sport is no longer due, as provided by the Law on Physical Education and Sport no. 69/2000, subsequently amended and supplemented. For ethyl alcohol and processed tobacco, the contribution to the financing of certain health expenditures provided under Title XI of Law no. 95/2006 on Health Reform, republished, has also been removed. Thus, for these products, the excises are paid in full to the state budget at the level stipulated in Annex 1 of Title VIII - Excise duties and other special taxes of the Fiscal Code.
- The specific excise duty on cigarettes will be approved and published by 1 March each year by Order of the Minister of Public Finance. For the period 1 January 2019 - 31 March 2019, the specific excise duty for cigarettes has been increased from RON 337.727 / 1,000 cigarettes to RON 372.73 / 1,000 cigarettes.
- The total excise rate for cigarettes has also been increased, with the new levels for the period 2019 - 2022 being set out in Tax Code of Title VIII - Excise duties and other special taxes, Annex no. 1.
Local taxes / Local taxes and duties
- In the case of local taxes, which are indexed annually and approved by decision of the local council, applicable in the following fiscal year, according to art. 491, if the decision of the local council was not adopted at least three working days before the end of the fiscal year, the maximum percentages stipulated in the Fiscal Code apply in the following fiscal year.
e) Fiscal Procedure Code Amendments
- Entities with reporting obligations under the law on the prevention and combating of money laundering and terrorist financing will be obliged to communicate to the central fiscal body, upon request, the information and details of the procedures adopted to comply with this legislation, the monitoring of the business relationship with the counterparties and records of transactions.
- Amendments have been made to the instalment payments procedure. They also apply to the instalment payment procedures already initiated at the time these amendments enter into force. Thus, the new legal provision provides that during an on going installment payment procedure it is permitted to modify the decision granting the instalment payments as to include in the procedure new tax liabilities born after the issuance of this decision. No more than two applications for a modification of the instalment payment decision are to be admitted in a calendar year.
- The new legal provision provides that late-payment penalties are also annulled in cases where, given the lack of property rights of the debtor or due to insufficient funds of the latter, the installment payment procedure was granted without the provision of guarantees.
- Debtors may request that the competent tax authority maintain an instalment payment with expired validity, no more than twice in a calendar year, if it submits a request for that purpose before the guarantee is executed by the competent fiscal body; or prior to the expunging of all tax liabilities that have been the subject of the instalment payment and only on condition that they are not in insolvency or dissolution proceedings.
VII. New incentives for the construction sector
For the period 1 January 2019 - 31 December 2028, individuals who earn salary income or income treated as such from construction sector (according to the NACE list) employers with turnover from such activities generating at least 80% of their total turnover can benefit from the following facilities:
- Exemption from payroll tax. The exemption will be applied on the basis of a joint order to be issued by the Minister of Public Finance, the Minister of Labour, Family, Social Protection and Elderly, and the Minister of Health. Statement form 112 is the statutory declaration necessary to fulfill the conditions for the exemption to be applied.
- Exemption from the payment of the health insurance contribution for salary income and income treated as such obtained under the aforementioned conditions. Such people are insured during the period 1 January 2019 – 31 December 2028 in the social health insurance system without payment of the contribution;
- The social security contribution paid by employees has been reduced from 25% to 21.25%. They are also exempted from paying the contributions to privately-managed pension funds.
- Exemption from the payment of social security contributions owed by employers for work done under special or other conditions of work;
- The labour insurance contribution has been reduced to the level of the contribution to the Guarantee Fund for the payment of income taxes, resulting in a 0.34% contribution to be paid. The contribution has to be be fully distributed to the Guarantee Fund for the payment of salary debts;
- Benefit from the rights granted by the insurance scheme for accidents at work, occupational diseases, the unemployment insurance system and holidays and social health insurance indemnities without the employers paying the corresponding labour insurance contribution.
The incentives apply to monthly gross income ranging between RON 3,000 and RON 30,000.
In addition, through the amendments to the Labor Code, for the construction field, the guaranteed national minimum gross monthly salary for 2019, without bonuses and other additions, is set at RON 3,000 per month, for an average work schedule of 167.333 hours.
VIII. Activities of casual workers
Law no. 52/2011 on activities carried out by casual workers has undergone a number of changes, with the most important being the reduction of the number of activity fields where casual workers can be employed to only the following three:
- Agriculture, hunting and related services;
- Forestry, except logging;
- Fishery and aquaculture.
Other areas of activity where employment of casual workers was allowed, including restaurants, hotels, catering, collection, treatment and disposal of non-hazardous waste, materials recovery, have been removed.
Some limits on the number of days allowed for performing casual work have also been introduced.
For not complying with the provision on the maximum number of days a person can perform casual work (i.e. 120 days and 180 days), the casual worker will be fined from RON 500 to RON 2,000.
IX. Public Procurement and Public-Private Partnership
Government Emergency Ordinance no. 98/2017 on the ex-ante control function of the procurement / public procurement framework procedures, sectoral framework contracts / agreements, works and services concession contracts has been amended and supplemented as follows:
- The definition of the ex-ante control concept has been introduced and the methodology for carrying out the control by NAPA modified at the request of the contracting authority. The proportion of award procedures that must be subject to ex-ante control each year has been reduced to 5%.
The Public-Private Partnership Financing Fund has been set up. It is used to co-finance programmes developed under public-private partnerships. The Fund will be financed from sums allocated by the principal credit officers, with amounts determined through Government decree, under the state budget law of the respective year.
X. Establishment of the Development and Investment Fund and other financing programmes
The Ordinance provides for the establishment of the Development and Investment Fund, without legal personality, a financing programme for spa resorts and a programme supporting investments in the construction and / or setting up, arrangement and equipment of kindergartens with a sporting profile.
- A quarterly tax on financial assets is due if the ROBOR quarterly average exceeds 2%. The tax on financial assets is applicable to banking institutions, defined as credit institutions, Romanian legal entities and branches in Romania of credit institutions of foreign legal persons.
- There are a series of amendments in the electricity and natural gas sector on the regulation by ANRE of the supply of electricity to households and the capping of the natural gas price at RON 68 / MWh. The financial monetary contribution collected from licence holders in the field of electricity, cogenerated electric and thermal energy and natural gas has also been amended, to 2% of the turnover.
- A minimum value for granting licences for the use of radio frequencies has been established through competitive or comparative selection procedures, set at between 2% and 4% of the turnover, depending on the radio frequency bands used.
- A penalty of 10% of the turnover is to be imposed on suppliers of electronic communications networks that conclude contracts for the installation, maintenance, replacement of electronic communications networks and the infrastructure elements necessary to support them or access property without the existence of the right of access or in the absence of the construction licence.
- An annual fee of 2% of the previous year’s total participation fees has been set for online gambling organisers.
- The law on privately-managed pension funds has been amended to allow participants to opt, under certain conditions, for the transfer of their contributions to the public pension system. It also changes the amount of minimum share capital required to manage a private pension fund, from a fixed amount to a percentage of the value of participants' contributions. Administration fees charged by private pension fund managers have been changed significantly.
- The number of branches of activities where casual workers can be employed has been reduced to 3 : (1) agriculture, hunting and related services, (2) forestry, except lodging, and (3) fishing and aquaculture.
- For the period 1 January 2019 - 31 December 2028, certain tax incentives have been introduced in the construction sector, under certain conditions.
- The period of application of the optional reverse charge mechanism in connection with certain transactions under VAT law, such as the supply of grain delivery, green certificates transfer or mobile phone provision, has been extended to 30 June 2022.
- The specific excise duty on cigarettes will be approved and published by 1 March of each year by Order of the Minister of Public Finance. For the period 1 January 2019 - 31 March 2019, the specific excise duty for cigarettes has been increased from RON 337.727 / 1,000 cigarettes to RON 372.73 / 1,000 cigarettes. The total excise rate for cigarettes has also been increased, with the new levels for the period 2019-2022 being set out in Tax Code Title VIII - Excise duties and other special taxes, Annex no. 1.
- Amendments have been made to the instalment payments procedure. They also apply to the instalment payment procedures already initiated at the time these amendments enter into force.