"The year 2018 began as a tax revolution: moving contributions, split VAT, new restrictions to reduce funding costs. It seemed that this year was going to be a settlement of the changes already introduced. But in the last days of 2018, the government came up with a new and unexpected package of tax measures that surprised and puzzled both taxpayers and even some state authorities. And it seems that things are not stopping here, and there will be other changes coming soon. So, our appeal to the predictability of tax legislation is, and remains, the same, " said Alex Milcev, Partner, Leader of EY Romania's Tax and Legal Aid Department, at the 13th edition of the Annual EY Tax Conference.
In this edition, EY specialists approached topics on tax regulations in Romania with impact on tax reporting, direct taxes and indirect taxes, as well as the latest developments in tax and tax procedures globally.
Among the themes addressed during the 13th edition of the Annual EY Tax Conference were: 2019 trends in taxation and the need for transformation in Romania, Romania's fiscal strategy and alignment with international trends, amendments to tax legislation with impact for 2019 in the field of direct and indirect taxes or the 2019 challenges of income tax.
At the same time, EY specialists have analyzed international interest topics such as Brexit and some of its tax consequences for taxpayers in Romania and the legislative challenges for Romania brought by the European VAT Directives.
Significant tax issues for 2019:
- European directives ATAD and DST - among the strategic priorities of the presidency of Romania at the EU Council
"Today we have described the most recent changes in the Romanian tax legislation, but also what practical problems should be taken into account by the taxpayers on the closing of the fiscal year 2018. We also discussed international tax trends, such as the ATAD and DST European Directives, which will most likely be part of the strategic priorities of Romania's presidency of the EU Council, "emphasizes Andra Casu, Associate Indirect Tax Partner, EY Romania.
- Romania will have to take action on the VAT split payment mechanism, otherwise the infringement procedure may continue
Ioana Iorgulescu, Associate Partner of Indirect Taxes EY Romania: "The year 2018 did not bring major changes to VAT legislation. Perhaps the most important was the introduction of a 5% reduced rate for restaurant services. The year 2019 shows, however, more provocative for Romania, given that in November 2018 the European Commission sent to our country a formal notice on the VAT split payment mechanism, requesting it to cease its application, thus making the first step towards triggering the infringement procedure. Therefore, in 2019, Romania will have to take action in this regard, otherwise the infringement procedure may continue. "
Furthermore, in 2019 (until the end of the year), the so-called "quick fixes" - fast solutions, adopted at the end of 2018 at European Union level, will have to be implemented in Romania.
These relate to intra-Community trade in goods and are aimed at reducing VAT fraud.
- Next year is a challenge for both employers and employees
Stela Andrei, Director, Income Tax and Social Contributions EY Romania: " The changes in the tax field for the construction industry raised many questions about how to implement them. Will these changes solve the problems raised in this area regarding labor shortages and tax evasion? The relaxation of the conditions for obtaining work permits for foreign citizens could help to solve, to a certain extent and in some areas, the problem of labor shortage. In other areas, such a solution could come in the context of employers' concern to create flexible and attractive policies to motivate and retain employees. "
Amendments to the second pillar of pensions will come up with challenges for both taxpayers, the option they have to transfer, under certain conditions, to Pillar I of pensions, and to the funds that administer these private pensions that will be affected by the new legislative requirements.
Following the exchange of information both between the Romanian authorities and between the states, several controls are expected regarding the taxation of salary and personal income, tax residence and employee mobility, both for foreigners coming to Romania and for for Romanians going abroad.
- Risk management becomes a priority in transfer pricing
Gabriela Bancescu, Senior Manager, Transfer Pricing EY Romania: "In the context of increasing the number of controls carried out by the Romanian tax authorities in the field of transfer pricing and taking into account their complexity, risk management in this area is a priority for Romanian taxpayers."
Thus, adequate pricing and documentation of intra-group transaction prices, as well as managing tax controls and resolving possible controversies in transfer pricing, are critical for any multinational company.