Tax alert No. 16

Tax alert No. 16

We have summarized below the main amendments and completions brought to the Tax Code by the Law no. 177/2017 for the approval of the Government Emergency Ordinance no. 3/2017 and by Ordinance no. 4/2017 for amending and completing Law no. 227/2015 regarding the Tax Code.

- Corporate income tax


- Taxpayers


A new category of taxpayers not subject to corporate income tax was introduced, namely the associations of owners set up as legal persons and associations of tenants recognized as associations of owners, with the exception of those that obtain income from exploiting the common property, according to the law.


- Tax exemption on reinvested profit


The exemption is applicable also to the taxpayers which become corporate income taxpayers (from taxpayers subject to the tax on income derived by microenterprises) as a consequence of fulfilling the condition of having at least 45.000 RON as sharecapital.


- Expenses


New situations/conditions are introduced regarding the deductibility of expenses related to goods consisting in inventory or depreciable fixed assets found missing or that are damaged, non-chargeable. Alongside the deductibility conditions already in place, the following are introduced:


- Food for human consumption, with a limit-date for consumption close to expiry;


- Subproducts of animal origin, not forhuman consumption;


- Agrifood products, rendered unfit for humanor animalconsumption.


The above situations for which deductibility is granted are applicable in the context of the legal provisions regarding the reduction of food waste.


- Tax on income derived by microenterprises


Certain clarifications are brought regarding the Romanian legal persons that are subject to the specific tax on certain activities and which, at the same time, also fulfill the conditions for taxation under the microenterprises regime. The provisions of Title III Tax on income derived by microenterprises from the Tax Code prevail over the provisions of Law no.170/2016.



Moreover, clarifications are brought as regards the change in the tax regime (from specific tax on certain activities to taxon income derived bymicroenterprises).


Separately, amendments are brought also regarding the taxable base of the tax on income derived by microenterprises. As such, the income from provisions and adjustments for depreciation or impairment will be subtracted from the taxable base also in case the income was set up in the period when the taxpayer was subject to the microenterprises tax.


- Income tax

From an individual tax perspective, inter alia, the following amendments are in place as of 24 July 2017:


- A new non-taxable benefit is available for employees, namely the medical subscription services paid by the employer up to EUR 400/ year/ employee (including also the private medical insurance);


- The medical subscription services borne by employees for themselves and dependent individuals, along with the private medicalinsurance, are deductible for income tax computation purposes up to the limit of EUR 400/year;


- The category of income from other sources is extended to include the old age indemnities of the deputies and senators and the monthly indemnityof the former Presidents of the state;


- Income obtained from activities other than freelancing, intellectual property rights, agricultural, forestry and fishery is excluded from the category of income from other sources, where a tax registration proof for carrying out the respective activities is presented to the income payer, by means of an affidavit; (Law no. 177/2017)


- As of 1 August 2017, the employer’s monthly contribution base for pension and health fund contributions will be the minimum national gross wage, if the employee’s monthly gross earnings obtained based on a full/ part time employment agreement does not meet such reference amount; there are certain exemptions from the general rule (e.g., students up to 26 years old, apprentices upto 18 years old,etc) (Ordinance no. 4/2017)





- Chargeable event

Amendments were introduced regarding the chargeable event for the supply of services.


Specifically, the letting, leasing, concession, leasing of goods services, granting with payment for a certain period of certain real rights, such as beneficial interest right and superficies right over an immovable property were also included in the category of supplies of goods and services which are carried out on a continuous basis (alongside the supplies of natural gas, water, energy, phone services). In the case of such operations, the chargeable event occurs at the date specified in the contract for the payment of the goods delievered/services rendered, or, in the absence of such provisions, at the date of issuance of an invoice, but the settlement period cannot exceed one year.


- Adjustment of the taxable base


A new provision was introduced in the case of adjustments of the VAT taxable base due to the bankruptcy of the beneficiary or as a result of enforcing a restructuring plan admitted and confirmed by a court ruling, whereby the creditor’s receivables are changed or eliminated. As such, the adjustment is allowed even though the subsequent audit reserve was cancelled according to the Tax Procedure Code. Such an adjustment can reopen the subsequent tax audit for the tax period during which the VAT chargeability for the operation subject to the adjustment occurred.


- Tax registration for VAT purposes

The rules regarding the VAT registration for taxable persons Romanian legal entities set up according to Law no. 31/1990 were amended. As such:


- The tax authorities do not register for VATpurposes the taxable person that has a high taxrisk;


- The tax authorities cancel the registration for VAT purposes of the taxable person having high taxrisk;


- The registration/re-registration for VAT purposeswill not be possible as long as the taxpayers fall under the category of high taxrisk;


- The requirement related to the justifying of the intention and capacity of carrying out economic activity in case of a VAT registration waseliminated;


- The criteria for the assessment of the tax risk willbe established by a NAFA Order to bepublished.


The new provisions regarding VAT will enter into force starting 1 October 2017.


- Excise duties


- Competent authority


The list of competent authorities on excise duties matterswas updated. In this respect, the structure with monitoring, control and appeal settlement atributions under the Ministry of Public Finance was introduced as a central tax authority


- Level of harmonized excise duties


The levels of excise duties for the period 2017 – 2022 was updated.


- Authorisations


The authorization of tax warehouses, of registered consignees, of registered consignors and of authorized importers will be carried out by the regional directorates of public finances, following that, within 15 days from the date of the present law, a new procedure to be published in this respect.


Any appeals regarding the non-granting/cancellation of authorisations will be settled by the structure in charge with monitoring, control and appeal settlement atributions under the Ministry of Public Finance.


The activity of monitoring and control of how the relevant legislation is applied by the authorities which carried out the authorisations as registered consignee, as registered consignor and as authorised importer will be carried out by the Ministry of Public Finances.