Fiscal Code Amendments
The amendments to the Fiscal Code introduced by Emergency Ordinance no. 102/2013 are applicable starting from 1 January 2014.
The main amendments to the Fiscal Code include the following:
Corporate income tax
Fiscal year different of calendar year The taxpayers which have opted for a financial year different from the calendar year may opt for the fiscal year to correspond to the financial year. The first modified fiscal year includes also the period of the calendar year between 1 January and the day preceding the first day of the modified fiscal year.
The tax authorities have to be notified in this respect with at least 30 days before the beginning of the modified fiscal year.
Non-taxable income
The following types of income are included in the non-taxable income category:
- dividends received from foreign legal entities subject to corporate income tax or a similar tax, located in countries which are not members of the European Union and with which Romania has concluded a double tax treaty;
- capital gains derived from the sale/assignment of shares held in Romanian legal entities or in legal entities from countries with which Romania has concluded a double tax treaty; and
- income derived from the liquidation of another Romanian legal entities or of foreign legal entities located in countries with which Romania has concluded a double tax treaty.
These provisions apply if the taxpayer holds for an uninterrupted period of 1 year, at least 10% of the share capital of the legal entity distributing the dividends or of the legal entity in which the shares sold/assigned are held or, respectively, of the legal entity which is subject to liquidation.
Holding period for tax exemption of dividend income
The uninterrupted holding period for the exemption of dividend income derived by Romanian legal entities/permanent establishments in Romania of foreign legal entities from Member States, parent companies, from their subsidiaries located in another Member States is reduced from 2 years to 1 year.
Dividend income derived by a Romanian legal entity from another Romanian legal entity are tax exempt if the recipient holds at least 10% of the share capital of the entity distributing the dividends for an uninterrupted period of at least 1 year (previously, there were no holding period requirements in this case).
Income of permanent establishments
Romanian permanent establishments of foreign legal entities resident in an European Union Member State or a state of the European Economic Area, which derive income from another European Union Member State or from a state of the European Economic Area, benefit under certain conditions of a fiscal credit for the tax paid in the state where the income included in the taxable income of the permanent establishment from Romania was derived.
This provision does not apply to Romanian permanent establishments of foreign legal entities residents in a state of the European Economic Area, other than a Member State of the European Union, if Romania does not have concluded with that state a legal instrument under which an exchange of information may be performed.
Tax credit for sponsorship/patronage/private scholarships
Amounts representing e.g., sponsorship/patronage/private scholarships which can not be deducted from the corporate income tax in the respective fiscal year (because they exceed the threshold provided for under the Fiscal Code) are carried forward for the following 7 consecutive years.
Interest expenses and net foreign exchange losses
Clarifications were brought with regard to the carry forward right of interest expenses and net foreign exchange losses in case of taxpayers that are entering into a restructuring process (mergers, spin-offs, detachment of a part of the patrimony).
Income tax
Income from independent activities
Certain clarifications have been introduced concerning the deductible interest rate for loans, both in RON and foreign currencies.
Salary income
For determining the salary tax applicable for both primary and secondary positions, the mandatory social charges due according to the law and to the European Union provisions or the agreements regarding the coordination of the social security systems in which Romania is a part of, may be deducted from the gross income.
Income from the demise of the use of goods
Certain clarifications have been introduced as regards the determination of the taxable base of the in kind income derived from the demise of agricultural goods, where the average prices of agricultural products change during the fiscal year in which the income is earned.
Taxpayers who obtain income from the demise of agricultural goods can no longer choose for their net income to be assessed under the real system.
The deductibility of the health fund contributions, stated under Title IX2 from the Fiscal Code, from the annual income obtained from the demise of the use of goods derived irrespective of the method applied for the computation of the net income (real system, income quota, flat rate expenses) has been introduced.
Income from agriculture, forestry and fisheries
Certain clarifications have been brought as regards the tax exemption for the income obtained by individuals/members of associations without legal personality from the cultivation of plants destinated to feeding animals.
Income from prizes and gambling
Clarifications regarding the income from prizes are introduced. Thus, advertising materials, flyers, samples, bonus points awarded with the purpose of stimulating sales are tax exempt.
The annual taxable income
The possibility to compensate the fiscal losses for income from forestry and fisheries is introduced as of the 1 January 2014.
A new article is introduced as regards the due date of the payment obligation assessed as a result of verifications initiated within the statute of limitation period in case of the annual income tax return.
International tax aspects
A new article is introduced as regards the assessment of the tax base for the taxable income of individuals resident within the European Union or European Economic Area, according to which they can benefit from the same deductions as Romanian resident individuals. The deductions are granted within the limit stipulated in the Romanian legislation, based on supporting documents if they are not deducted in the state of residency. This provision does not apply to individuals from European Economic Area countries, other than the ones resident in the European Union, with which Romania does not have concluded a legal instrument under which exchange of information may be performed.
Incomes obtained from abroad of similar nature to those which are tax exempt in Romania, have the same tax treatment.
Withholding tax
Narrowing the scope of tax exemption
No withholding tax exemption applies for dividend income, interest and royalties derived from Romania by foreign legal entities located in the states which belong to the European Free Trade Association (Iceland, Liechtenstein and Norway).
Holding period for tax exemption of dividend income
Dividends paid by Romanian legal entities towards foreign legal entities from a Member State/permanent establishments of an enterprise from another Member State located in another Member State of the European Union are tax exempt if the foreign entity holds at least 10% of the share capital of the Romanian legal entity for an uninterrupted period of at least 1 year at the date of the dividend payment (the previous holding period was of 2 years). Other conditions have to be also met to benefit of this exemption.
Tax on income of micro-enterprises
Requirements for application of micro-enterprises taxation regime
Micro-enterprises which during a fiscal year derive revenues of above EUR 65,000 or the share of revenues from consultancy and management activities in the total revenues is above 20% inclusively, are subject to corporate income tax starting with the quarter in which any of the mentioned thresholds is exceeded.
Taxable base
Certain amendments are brought regarding the computation of taxable base for legal entities which apply the micro-enterprises taxation regime.
Local taxes
Taxable value of buildings
The taxable value of buildings owned by legal entities applying the International Financial Reporting Standards, which opt for the cost-based model as a subsequent evaluation method, is determined based on an evaluation report issued by an authorized evaluator (such provision was previously applicable only for credit instutions).
Construction tax
Starting with 1 January 2014, a new tax on constructions other than buildings will be introduced.
The persons liable to pay construction tax are the Romanian legal entities (with certain exceptions), the permanent establishments in Romania of foreign legal entities and the legal entities set up in Romania according to the European legislation.
Constructions subject to construction tax are those included in the group 1 of the Catalogue regarding classification and normal useful lives of fixed assets (approved by Government Decision no. 2139/2004, as subsequently amended), with certain exceptions.
The tax is computed by applying a 1.5% rate to the value of the constructions existing in patrimony as of 31 December of the previous year, recorded in the accounting books, subtracting from that certain elements such as the value of buildings (including certain works) for which building tax is due.
Construction tax has to be computed and declared to the tax authorities up to 25 May of the year for which such tax is due, and paid in two equal installments, up to 25 May and 25 September of the respective year.
Value added tax (VAT)
VAT taxable base
The decision issued by the Court of Justice of the European Union in Case C-224/11 BG? Leasing sp. z o.o providing that the VAT taxable amount shall not include the insurance cost of goods subject to a lease agreement, including where the lessor insures the leased goods itself and re-invoices the exact cost of the insurance to the lessee was transposed into national legislation.
Please refer to our Tax Alert no. 2/January 2013 for further details on the Decision.
VAT refund to taxable persons which are neither established nor registered for VAT purposes in Romania
The condition regarding the payment of VAT requested for refund by taxable persons established in another Member State, which are not VAT registered and not obliged to be VAT registered in Romania was removed, provided that the other conditions provided by the law are fulfilled.
Similarly, this condition was also removed for taxable persons established outside the Community, which are not VAT registered and not obliged to be VAT registered in Romania requesting the refund of VAT on imports and purchases of goods/services performed in Romania.
VAT adjustment
Changes have been introduced in respect of VAT adjustment in the following situations:
- VAT adjustment is not required in case of stolen goods (including in case of capital goods), provided that the theft is demonstrated by the taxable person based on documents issued by judicial bodies;
- the specific provisions according to which no VAT adjustment is required for qualitatively damaged inventories that cannot be recovered, written-off fixed assets, other than capital goods, perishables within the limits provided by law as well as technological losses or, if the case, other own consumptions have been removed; and
- VAT adjustment is not required in respect of the acquisitions of capital goods subject to 50% limitation of the VAT deduction right.
VAT registration
Taxable persons having the seat of their economic activities in Romania are liable to register for VAT purposes for provision of financial services and insurance and/or reinsurance, if the buyer has established the seat of its economic activities outside the Community or if these operations are directly linked to goods which are to be exported outside the Community.
Excise duty
Level of excise duties
The excise duties for the following energy products are increased as follows:
- leaded petrol: EUR 637.91/ton, respectively EUR 491.19/1,000 liters;
- unleaded petrol: EUR 557.91/ton, respectively EUR 429.59/1,000 liters;
- diesel: EUR 473.85/ton, respectively EUR 400,395/ 1,000 liters; and
- kerosene: EUR 557.39/ton, respectively EUR 445.91/ 1,000 liters.
Exchange rate used to determine the level of excise duties
Amendments are brought to the methodology of converting into RON the EUR denominated excise duties, in the situation in which the exchange rate of the first working day of October of the previous year, published in the Official Journal of European Union, is lower than the exchange rate of the first working day of October of the year preceding the previous year, published in the Official Journal of European Union.
In this case, the RON level of excise duties is determined based on the exchange rate of the first working day of October of the year preceding the previous year, published in the Official Journal of European Union, and is indexed with the annual average consumer price index communicated by the National Institute of Statistics for the month of September of the previous year.
