Law no. 30/2019 has been published on the approval of Government Emergency Ordinance no. 25/2018 amending and supplementing specific items of legislation and approving fiscal and budgetary measures.
I. Corporate Income Tax (CIT)
- Cultural vouchers are treated as social expenses, tax-deductible up to 5% of the salary expenses.
- Amounts related to sponsorships granted to non-profit-making legal entities, including places of worship, can be deducted from the CIT due within the limits provided by the Fiscal Code, only if the sponsorship beneficiary is included, as at the date of the sponsorship contract signing, in the Registry of entities / places of worship for which such tax deductions are granted.
- The Registry of entities / places of worship is prepared by the National Agency for Fiscal Administration (“ANAF”) and posted on its website. Inclusion in the Registry is done based on the request made by the entities / places of worship, if certain conditions are met.
- These provisions apply as of 1 April 2019.
Interest deductibility rules
- The deductibility limit for the excess borrowing costs has been raised from EUR 200,000 plus 10% of the calculation base to EUR 1 million plus 30% of the calculation base.
- If the calculation base is negative or nil, the difference between the excess borrowing costs and the EUR 1 million limit is treated as non-deductible and can be carried forward for an unlimited period.
- Clarification is provided on the carry-forward right in the following situations:
- taxpayers cease to exist following a merger/ spin-off operation => the carry forward right is transferred to the newly-created taxpayers or to the existing ones that take over the patrimony of the absorbed or divided company, proportional to the assets transferred to the beneficiary legal entities, in accordance with the merger/spin-off project;
- taxpayers do not cease to exist following a demerger operation => the carry forward right is shared between these taxpayers and those that partially take over the patrimony of the transferring company, proportional to the assets transferred to the beneficiary legal entities, through the spin-off project, respectively to those retained by the transferring legal entity.
- These provisions apply as of 1 January 2019, or from the first day of a non-calendar fiscal year that starts after 1 January 2019, as appropriate.
II. Microenterprise income tax
- Revenues from expected impairment related to financial assets set up by Romanian legal entities operating in the banking, insurance and reinsurance sectors, capital market, which were non-deductible expenses for CIT purposes or were set up while the Romanian legal entity was subject to the microenterprise tax should not be included in the microenterprise taxable base.
- Amounts related to sponsorships made for supporting non-profit organisations and places of worship are deducted from the microenterprise tax within the limit provided by the Fiscal Code, only if the sponsorship beneficiary is included, as at the date of the sponsorship contract signing, in the Registry of entities / places of worship for which such tax deductions are granted. Under the former rules, such deduction was only allowed for sponsorship amounts to non-profit entities and places of worship that were social service providers authorised for at least one licensed social service.
- Microenterprises that opt to become CIT payers or those that exceed the EUR 1 million revenue threshold during the year are required to file the informative statement on sponsorship beneficiaries by the twenty-fifth of the month following the first quarter for which they owe CIT. Microenterprises that opt to become CIT payers or those that exceed the EUR 1 million revenue threshold in the first quarter of the fiscal year are no longer required to file this statement.
III. Personal Income Tax (PIT)
Disposal of up to 3.5% of PIT
- An article has been added regarding the taxpayers’ right to exercise discretion as to the destination of an amount of their annual PIT.
- The 2% percentage is eliminated, with only the 3.5% rate of the annual PIT maintained, which taxpayers can dispose to support non-profit entities and places of worship or to sponsor private scholarships, according to the law.
- Non-profit entities and places of worship can benefit from these amounts if they are included in the Registry of entities / places of worship for which such tax deductions are granted.
Taxation of virtual currency transfers
- Income from virtual currency transfers is included in the “income from other sources” category and is taxable.
- Individuals’ income from virtual currency transfers is subject to a 10% self-assessed tax on the gains, based on their single statement. The gains are determined as the positive difference between the sale price and the purchase price, including the direct costs of the transaction. Gain below RON 200 per transaction is not taxable, if the total gains in a fiscal year do not exceed RON 600.
IV. Value Added Tax (VAT)
VAT-able base adjustment
- Amendments have been brought to the VAT-able base adjustments where the value of the goods or services supplied cannot be collected due to the bankruptcy of the goods / services of the beneficiary. In such cases, the VAT adjustment is allowed as of the date of the court ruling or resolution, as appropriate, whereby the bankruptcy decision was rendered.
- The adjustment must be operated within five years as of 1 January of the year following the court ruling or resolution whereby the bankruptcy decision was rendered.
- If the bankruptcy proceedings started prior to 1 January 2019 and the final/ final and irrevocable court decision to close the insolvency proceedings has not been rendered until this date, the adjustment is to be operated within five years as of 1 January 2019.
Reduced 5% VAT rate on real estate purchases
- For the reduced 5% VAT rate on real estate purchases, the restrictions on the land surface on which the dwelling is built (a maximum of 250 square metres) and those allowing individuals to purchase a single dwelling at this reduced rate have been removed.
2. Fiscal Procedure Code
Active role and other rules of conduct for tax authorities
- Classification of taxpayers into three main risk classes has been introduced: low tax risk, medium tax risk and high tax risk. Taxpayers are classed following a risk analysis conducted by the tax authorities.
- For the purpose of determining the risk class, the following criteria are considered: tax registration, filing of tax returns, reporting compliance degree and payments made to the general consolidated budget and to other creditors.
- The risk analysis is to be conducted periodically, with the outcome (i.e. the specific risk class determined) posted on ANAF’s website.
- Within 90 days as of the entry into force of Law 30/2019, ANAF will issue orders for:
- developing the main risk classes into risk sub-classes, the general criteria into sub-criteria, and the procedures for determining the sub-classes and sub-criteria;
- detailing the management procedures relevant for each tax risk class / sub-class.
- The way in which the tax risk and the tax risk class / sub-class are determined cannot be disputed by taxpayers.
Communication of fiscal administrative documents
- The tax authorities are now allowed to register taxpayers in the Virtual Private Space (SPV) and to communicate certain fiscal administrative documents exclusively via this electronic means of remote transmission.
- The fiscal administrative documents to be communicated mandatorily via the SPV will be established by an Ministry of Public Finance Order.
- If taxpayers fail to access the SPV within 15 days as of communication of the data regarding their registration by the authorities, the administrative documents transmitted by electronic means will be communicated by advertising only.
Outstanding tax liabilities
The following are not treated as outstanding tax liabilities:
- Liabilities assessed in the fiscal administrative documents disputed by debtors and in respect of which the debtors have provided guarantees, in the form of a bank guarantee letter / guarantee insurance policy, by tying up sums of money at the State Treasury, by establishing a mortgage on immovable or movable assets in Romania or a pledge on movable assets.
- Amounts owed by taxpayers with documented, due and payable receivables against the contracting authority on the basis of pre-existing public procurement contracts, if the amounts due are lower than or equal to the receivables they have to collect.
Publishing the lists of individual debtors with outstanding tax obligations
- The list of individuals who are debtors with outstanding tax liabilities will no longer be published by the tax authorities.
Guarantees set up
- The tax authorities require the setting up of guarantees for suspending enforcement proceedings where compulsory enforcement is suspended or it does not start running for tax receivables assessed under a competent tax authority decision if, after communication of the decision, the debtor notifies the tax authority of its filing of a letter of guarantee / guarantee insurance policy in accordance with the law.
- A mediation procedure has been established. Debtors have 15 days as of receiving the demand notice to notify the tax authority of their intention to initiate the mediation procedure. Debtors are required to submit with the notification documents and information supporting their economic and financial standing. The tax authority has to arrange and hold the meeting to start the mediation procedure within 10 days of notification receipt.
- The purpose of mediation is to clarify the tax liability included in the notice, when a debtor has objections, and to analyse the economic and financial standing to identify optimum solutions for the settlement of tax liabilities (including the possibility of benefiting from payment incentives as provided by law).
- The result of the mediation and the optimum solutions for the settlement of the tax liabilities are recorded in an official report.
- If the payment is not settled within 15 days after the completion of the mediation or the payment incentive is not sought, the enforcement measures will be continued.
- During the mediation procedure, the tax authority may order precautionary measures (seizure and garnishment).
- The mediation procedure and the documents to be produced by debtors to support their economic and financial standing will be approved by an ANAF order.
Suspension of enforcement proceedings
It is stipulated that, if a taxpayer subject to initiated enforcement proceedings files a bank guarantee letter for the suspension of the enforcement, the tax authority, within two days of the date of the suspension, will cancel the compulsory enforcement documents drawn up prior to the filing of the enforcement letter and lift the enforcement measures.
It is stipulated that, if after the issuance of a tax assessment decision establishing the main tax liabilities the taxpayer notifies the tax authority of its intention to file a bank guarantee letter to suspend the enforced collection of the debit, as of the date of filing this notification the tax authority will no longer calculate and issue a decision regarding the accessory tax liabilities of the principal debit for which the notification was filed.
Source: Law no. 30/2019 approving Government Emergency Ordinance no. 25/2018 amending and supplementing specific items of legislation and approving certain fiscal-budgetary measures, published in the Official Gazette no. 44 of 17 January 2019
A number of major changes have been introduced in several areas of taxation, such as:
- The deductibility limit for the excess borrowing costs of legal entities has been raised to EUR 1 million plus 30% of the calculation base, from EUR 200,000 plus 10% of the calculation base.
- ANAF should prepare and post on its website the Registry of non-profit-making entities / places of worship for which tax deductions are granted in relation to sponsorships.
- Individuals’ income from virtual currency transfers is included in the category of income from other sources and subject to a 10% self-assessed tax on the gains. Gains are determined as a positive difference between the sale price and the purchase price. Gains below RON 200 per transaction are not subject to taxation, if the total gains in a a fiscal year do not exceed RON 600.
- For the reduced 5% VAT rate on real estate purchases, the restrictions on the land surface (a maximum of 250 square metres) and those allowing an individual to purchase only one dwelling at this reduced rate have been removed.
- A classification of taxpayers into three main risk classes has been introduced: low tax risk, medium tax risk and high tax risk.