Methodological norms for the application of the Fiscal Code
(Government Decision No. 84 / 2013, published in the Official Gazette No. 136 / 14 March 2013)
Certain amendments and clarifications have been introduced concerning corporate income tax, personal income tax, microenterprises income tax, withholding tax, VAT, excise duties and social contributions.
The provisions of the Government Decision become effective on publication in the Romanian Official Gazette.
Among the most important changes, we mention the following:
• Corporate income tax
• Fiscal register
Certain clarifications have been introduced with respect to the filling-in of the fiscal register, which should specifically mention the taxable income (from any source, derived in the course of the tax year) and expenses incurred for the purpose of deriving such income, as well as any information included in the tax return, gathered from processing accounting records.
Tax rules for taxpayers applying IFRS
Clarifications have been provided as regards the tax treatment of retained earnings originating from the inflation rate adjustment of depreciable fixed assets and land through the gross method.
Protocol expenses subject to limited deduction for corporate income tax purposes should include also expenses related to output VAT for gifts offered by the taxpayer with a value equal to or higher than RON 100.
Recovery of tax losses
The concept of “transfer of a going concern” within carve-out operations has been referred to in the context of tax loss recovery at the level of the transferor.
Moreover, provisions have been introduced regarding the recovery of tax losses by taxpayers applying the system for taxation of microenterprises starting with 1 February 2013.
Income from immovable property and participation titles
Methodological norms have been amended so as to include the provisions as regards the cumulation for reporting and payment purposes of the fiscal result for transactions involving participation titles and immovable property carried out by foreign legal entities.
Corporate income tax with advance payments
Clarifications are provided regarding the application of the advance payments system by certain categories of taxpayers within re-organization operations.
Clarifications have been provided in terms of applying the system of taxation of microenterprises by:
- Romanian legal entities whose period of temporary inactivity / non-performance of operations ceases in the course of the year;
- Romanian legal entities newly established in the period 1 January – 31 January 2013;
- Romanian legal entities that, until 31 December 2012, earned income ranging between EUR 65,000 and EUR 100,000 and fulfilled the criteria provided by the legislation before 1 February 2013 and requested to no longer apply the microenterprise tax system by 31 January 2013.
As regards entities that were not to opt for the microenterprise tax system (e.g. banking companies, insurance-reinsurance companies, entities operating in the gambling, consultancy, management businesses, etc.), it has been specified that such entities “are not obliged” to apply this system.
Furthermore, additional provisions have been included in terms of the method for computing the income for the purpose of determining the ceiling of EUR 65,000.
Services rendered outside Romania
The categories of services rendered outside Romania for which income derived from Romania is subject to withholding tax are as follows: management, advisory in any field, marketing, technical assistance, research and design in any field, advertising and publicity, services of lawyers, engineers, architects, notaries, accountants, auditors.
Tax rate applicable in the absence of a legal instrument on exchange of information
Clarifications have been provided as regards the following:
- definition of the concept of legal instrument as basis of exchange of information;
- specific reference is made to the basis of computation of the 50% increased tax rate.
Tax residency certificate
The tax residency certificate issued in electronic format or online by the foreign competent authority is deemed as original for the purpose of applying the double tax treaty or EU legislation.
Annual withholding tax return
The section in the annual withholding tax return regarding the ID data of the non-resident income beneficiary may be filled in with either the taxpayer number assigned by the Romanian authority or within the beneficiary’s ID data, if no taxpayer number was assigned to it in Romania.
Amendments have been brought as regards the effective date of VAT group implementation, respectively when the treatment of a person as a group member / of taxable persons as a fiscal group is cancelled, depending on the tax period of the respective members.
Clarifications have been provided in terms of determining the taxable base of supplies between related parties for the specific situations mentioned at art. 137, para. 1, letter e) of the Fiscal Code. Thus, when comparable supplies of goods or services may be determined, the market value of the goods / services supplied is assessed by way of methods provided for in the transfer pricing methodology.
Deduction right / Adjustment of deduction right
The Ruling of the European Court of Justice in the C-257/11 Gran Via Moinesti case file was transposed into the Methodological norms for implementation of the Fiscal Code.
As such, the taxable person retains the right for VAT deduction for the acquisition of a plot of land together with the buildings erected on it, including VAT for buildings to be demolished, provided it produces evidence as to its intention, confirmed by objective elements, to further employ the land plot where the buildings used to stand for the purpose of its taxable operations, such as to erect other buildings intended for taxable operations. Moreover, the demolition of a building purchased together with the plot of land on which it stands does not result in the obligation to adjust the initial input VAT deducted at the acquisition of the buildings that were demolished, provided that evidence is produced as to the intention, confirmed by objective elements, to employ the land plot where the buildings used to stand for the purpose of its taxable operations, such as to erect other buildings intended for taxable operations.
For acquisitions of goods and services based on fiscal receipts issued in line with GEO 28/1999, the VAT deduction may be justified only based on fiscal receipts that meet the requirements of a simplified invoice and provided that the supplier recorded the beneficiary’s VAT number on the fiscal receipt, with the aid of the electronic cash register.
Clarifications have been provided as regards the adjustment of VAT for missing goods, in the case of financial lease agreements. Thus, for financial lease agreements that are terminated and whose subject matter is tangible movable assets or capital goods that are not returned by the user within the timeline referred to in the agreement, the goods in question are not considered missing from the inventory of the lessor / financer, provided that evidence is produced in terms of initiating and taking the necessary steps to recover the assets, irrespective of the outcome of such steps. Under the circumstances, the lessor / financer is no longer bound to adjust VAT related to relevant missing goods.
Registration of taxable persons for VAT purposes
Clarifications have been provided as regards the date when the cancellation of the VAT registration for taxable persons established in Romania becomes valid.
Thus, for persons established in Romania, the cancellation of the VAT registration becomes effective as of the end date of the economic activity.
Records of operations
The invoices with fully or partially non-chargeable VAT are included in the purchases ledgers until becoming chargeable.
However, the situations where the statute of limitations has elapsed and relevant invoices are no longer paid, taken out from the records of the taxable person are exempted from this rule.
Clarifications have been provided as regards the cases where the reverse charge mechanism was not applied for operations subject to simplification measures.
If, during a tax audit at the level of the beneficiaries of such operations, it is established that no VAT was charged at the moment the VAT chargeability for the respective operation occurred, concurrently with exerting the deduction right, resulting thus in the beneficiary being required to pay VAT based on the fiscal administrative document, the suppliers may issue rectifying invoices with the minus sign in order to adjust the relevant VAT and to reimburse the tax to the beneficiary.
Excise duties and other special taxes
Method for reimbursing excise duties in certain cases
Clarifications have been provided as regards the method for reimbursing excise duties both for green coffee, roasted coffee, instant coffee, including mixtures with instant coffee, as well as for beer / beer base from the mixture of beer with non-alcoholic beverages, in which the weight of Plato degrees from malt, malting and/or non-malting cereals is less than 30% of total Plato degrees and for fermented beverages, other than beer and wine in which the weight of absolute alcohol originating from the exclusive fermentation of fruit, fruit juices and concentrated fruit juices is less than 50%.
Exceptions from the excising regime
Methodological norms provides for the method of exempting from paying the excise duties for additives not intended for use, sale or used as motor fuel or for heating
Obligation to mark certain excisable products
Rules have been introduced as regards the application of stamps, procured by importers, in tax warehouses, free warehouses or free zones, for the purpose of importing products subject to marking.
Income derived from exploitation of property from personal patrimony, such as wood materials exploited by individuals under their own control, up to 20 m3/year, is not considered as taxable income.
The remuneration paid to the coordinator attorney appointed / elected to coordinate the activity in a law partnership and limited liability law partnership, as provided by the law, is also assessed as salary income.
The taxation of the amount exceeding the limit stipulated by the Fiscal Code regarding the delegation and assignment allowance and any other amounts of similar nature is due starting with the salary rights related to February 2013.
Starting with January 2013, the Romanian employers have no obligation to compute, withhold and pay income tax on salary paid to their employees who are on delegation / assignment to another state which has the right to tax under the Double Tax Treaty (e.g., assignee is present in the other state for more than 183 days, salary costs are borne by the permanent establishment). This rule applies to on-going assignments as well.
Salary income payers will have the obligation to fill in the statement regarding the computation and withholding of income tax for employees assigned abroad, regardless of whether the tax on such income was computed, withheld and paid, or not.
Methodological norms regulate the procedure for settling the income tax payment for the retroactive period if the assignment is terminated before the period provided in the Double Tax Treaty, and respectively Romania has the right to taxation. In such a case, the Romanian employer has the obligation to withhold and pay the tax due unless the employment contract is terminated.
The assignees would have the obligation to file the statement regarding income earned from abroad (form 201), accompanied by supporting documents, including the proof of income tax payment from the other state, to adjust the tax due in Romania for the work activities carried abroad. If the income tax was withheld and paid by the Romanian employer, the above mentioned statement represents also the claim for partial or full tax refund.
If the assignees are paid by the entity where they are assigned to, the obligation for reporting salary income through the statement regarding the computation and withholding of income tax stays with the salary income payer.
Income from agricultural activities, forestry and fisheries
Clarifications are brought regarding certain amendments to the Fiscal Code in respect of the taxation of income from agricultural activities, forestry and fisheries.