1 August 2017
Law 177/2017 approving Government Emergency Ordinance no. 3/2017, amending and supplementing Law no. 227/2015 governing the Fiscal Code, has been recently published.
Law 177/2017, in effect from 24 July 2017, brings the following changes:
This facility is now applicable also to taxpayers that choose to become corporate income tax payers under the terms of Art. 48 par. 52 of the Fiscal Code (by subscribing a share capital of a minimum of RON 45,000).
Expanding the conditions for the deductibility of certain expenses on inventory goods or depreciable fixed assets found missing or damaged
New requirements / situations have been added to harmonise tax legislation with Law 217/2016 on reduction of food waste.
Expenses on write off of food or animal by-products not intended for human consumption or agri-food products unfit for human or animal consumption are deductible, provided that certain conditions on the reduction of food waste are met.
The provisions of the Fiscal Code related to the definition of micro-enterprises also apply to Romanian legal persons falling under Law no. 170/2016 on the tax on specific activities. According to the new provisions, the application of the micro-enterprise income tax system prevails over the provisions of Law no. 170/2016.
Rules for applying the micro-enterprise income tax system
Romanian legal persons falling under Law no. 170/2016 on the tax on specific activities and which as at 31 December 2016 generated revenues between EUR 100,001 and EUR 500,000, and which also qualify for the application of the micro-enterprise income tax system, are required to pay the micro-enterprise income tax starting with August 2017.
The switch in the tax system must be reported to the territorial tax authorities by 25 August, in accordance with the provisions of Law no. 207/2015 on the Fiscal Procedure Code.
By way of derogation from the legal deadline for the calculation, reporting and payment of the respective tax on specific activities / corporate income tax the deadline is 25 August 2017 (instead of 25 July 2017), and the first reporting period covers is 1 January 2017 - 31 July 2017 (instead of 1 January – 30 June 2017).
The taxable base for micro-enterprise income tax
Taxpayers now have the option to deduct from the tax base for micro-enterprise income tax purposes the income from provisions, depreciation adjustments or impairment losses that were set up while the Romanian legal person was subject to micro-enterprise income tax.
Subscription-based medical services - under Law no. 95/2006 - covered by employers for their employees are non-taxable income, providing that it is capped at the RON equivalent of EUR 400 per year.
For purposes of deduction from the gross salary income of voluntary health insurance premiums and/or subscription-based medical services, under Law no. 95/ 2006, which are covered by employees and are capped at EUR 400 per year, the insurance contracts/medical subscriptions may cover medical services provided to employees and/or to their dependent(s), as defined by the Fiscal Code.
The procedure for the application of the income tax exemption to fixed yearly income brackets in the case of individuals, i.e. sole proprietors, individual enterprises, family enterprises, in respect of production sold to/through agricultural cooperatives, is to be approved under an order by the ANAF president as endorsed by the Ministry of Agricultural and Rural Development.
Statutory retirement age allowances, granted as per Law no. 357/2015 supplementing Law no. 96/2006 regulating the Status of deputies and senators, and monthly allowances granted to persons who served as head of State, as per Law no. 406/2001 granting certain entitlements to persons who served as head of State, are now included in the category of income derived from other sources.
Income derived by individuals engaged in production activities, trade, provision of services, liberal professions, as well as income from intellectual property rights, agricultural, forestry and fishery activities (others than those listed in the Fiscal Code as independent activities and agricultural, forestry and fishery activities), will not be subject to the income tax withholding obligation applicable to payers of the income, providing that the individuals produce proof of their fiscal registration for these activities, by submitting to the payers of the income their self-statement at the time the income is paid.
New provisions have been added to regulations concerning unincorporated partnerships, to also include partnerships between individuals and legal entities subject to taxation under Law no. 170/2016 regarding the taxation of specific activities. In such cases the legal entity distributes to the individual a net income/net loss proportional to the participation share which corresponds to its contribution, determined in accordance with Title II “Corporate Income Tax” of the Fiscal Code.
Art. 287 on the adjustment of the taxable base for Value Added Tax purposes has been amended.
For supplies of goods or services whose value cannot be recovered following the enforcement of a reorganisation plan admitted and confirmed under a court ruling/bankruptcy of the beneficiary, the VAT adjustment may be performed within five years from 1 January of the year following the court ruling on the reorganisation plan/ completion of the bankruptcy proceedings.
Following the amendments to art. 316 regulating the registration of taxable persons for VAT purposes, the criteria to be met by operators for VAT registration purposes (i.e. obligation to support intent and capacity to carry on economic activities) have been replaced with fiscal risk assessment criteria.
These criteria will be established under an order by the ANAF president.
The Commission/territorial commissions in charge with authorising operators of goods subject to excise duties are dissolved.
Authorisation of tax warehouses, registered consignees/consignors and authorised importers is now the responsibility of the regional directorates for public finance. The relevant procedure and requirements will be regulated in an order by the Minister of Public Finance.
The challenge settlement division within the Ministry of Public Finance is the competent body in charge with settling challenges lodged by economic operators following:
• rejection of an application for an authorisation for a tax warehouse, registered consignee/consignor/ authorised importer;
• revocation of an authorisation for a tax warehouse, registered consignee/consignor/ authorised importer;
• annulment/suspension of a tax warehouse authorisation.
Following the amending of Annex No 1 from Title VIII of the Fiscal Code, the excise duty applicable in 2017 on cigarettes has increased from RON 435.58/1,000 cigarettes to RON 439.94 lei/1,000 cigarettes. The specific excise duty (applicable until 31 March 2018, inclusive) is increased from RON 329.222 /1,000 cigarettes to RON 333.582/1,000 cigarettes.
Annex No 1 also provides for the excise duty applicable as of 1 January of each year for the period 2018 – 2022. According to the Annex, the excise duty on cigarettes, fine-cut smoking tobacco intended for the rolling of cigarettes and other smoking tobaccos will be increased on an annual basis.
The main amendments and clarifications brought by Law 177/2017:
The switch in the tax system must be reported to the relevant tax authorities by August 25, and the first period for the calculation, reporting and payment of the respective tax on specific activities, and of the corporate income tax due by these taxpayers, is 1 January 2017 - 31 July 2017.
Where requirements for the application of the micro-enterprise tax system are fulfilled, this system will prevail over the provisions of Law no. 170/2016 on the tax on specific activities.
Starting August 2017, the micro-enterprise income tax system applies to legal entities that fall within the scope of Law 170/2016 on the specific tax and that also meet the requirements for applying the micro-enterprise income tax system.
Medical subscriptions covered by employers for their own employees are exempted from income tax, subject to certain conditions.
For purposes of calculation of the taxable income, insurance contracts/medical subscriptions may cover medical services provided to employees and/or to their dependent(s).
The obligation to withhold the income tax at source has been lifted, subject to certain conditions, in respect of specific types of income derived by individuals, which do not fall under the category of income from independent activities or income from agricultural, forestry and fishery activities.
VAT related to uncollected debts may be adjusted within five years starting with 1 January of the year following the court ruling on the reorganisation plan/ bankruptcy proceedings.
The obligation to support willingness and capacity to conduct economic activities, for purposes of VAT registration of companies / economic operators, have been removed and replaced with a VAT risk analysis criteria.
The main amendments to the Fiscal Code in excise duty matters include: a new competent authority in charge with authorising economic operators of products subject to harmonised excise duties, and the increase of the excise duty (the specific excise duty included) applicable in 2017 on cigarettes.
The amendments to excise duties entered into force on 24 July 2017.