Substantive changes to the tax Code

In an attempt to replenish the Treasury coffers, the authorities have decided to render widely publicised amendments effective, thus bringing about dramatic changes in the Romanian tax environment.  The new provisions cover aspects related to the major issues approached by the Tax Code: profit tax, VAT, excise duty, withholding tax, social security contributions, tax on microenterprises’ income, as well as a reconsideration of the farm income tax. New provisions have also been introduced in relation to the Tax Procedure Code and to adjustments of local taxes.

Monitorul Oficial al Romaniei, Part I, No 54 / 23 January 2013 has published Government Ordinance No 8 / 23 January 2013 which amends and supplements Law No 571 / 2003, regarding the Tax Code, and regulates certain financial and tax measures.

The major provisions contained in this Ordinance refer to the following:

Title I – General Provisions

  • Definition of biological assets
  • Clarification on the treatment of transactions having no economic purpose and introduction of the notion of artificial transaction
  • Additions to the categories of income deemed to have been obtained from Romania.

Title II – Profit Tax

  • Amendment of provisions regarding additional deduction of research-development expenses
  • Changes to the tax rules concerning the taxpayers that apply accounting regulations in compliance with the International Financial Reporting Standards
  • Definition of loans from a debt/equity-ratio perspective
  • Aspects related to the tax credit applicable for the taxes paid abroad
  • Aspects related to depreciation, including limitation on deductibility of depreciation expenses to RON 1,500 per month in the case of certain means of transport, as well as to the deduction of amortisation expenses in the case of intangible fixed assets and biological assets
  • Clarification on how the profit tax payable by foreign legal entities should be adjusted when obtaining profit from transfers of securities

Title III – Income Tax

  • New, detailed, provisions regarding the manner in which the income achieved from forestry and fish rearing activities should be taxed
  • Amendment of salary-related provisions, including categories of income similar to salary, and limitation on secondment and daily allowances from the income-tax perspective
  • Changes to the provisions referring to the determination of advance payments by taxpayers obtaining income from independent activities, the assignment of usufruct and from agricultural activities.

Title IV1 – Tax on Microenterprises’ Income

  • Redefinition of microenterprise, according to which its annual income should be EUR 65,000, at the most, instead of EUR 100,000, while the criterion on its employees’ number has been eliminated. Starting 1 February 2013, the entities meeting the requirements to be considered microenterprises by the end of 2012, inclusive of the newly established ones, shall be subject to taxation in compliance with the tax system provided for this category of taxpayers.

Title V – Tax on Non-residents’ Income from Romania

  • Introduction of the 50% tax rate applicable to the income paid in a state with which Romania has not entered into a legal act by virtue of which information can be exchanged.

Title VI – Value Added Tax

  • Clarification on the VAT treatment of operations related to the granting of real rights, usufruct and superficies rights over land and building during a certain period of time in exchange for a consideration
  • Introduction of the notion of market value from the VAT calculation perspective
  • Additions to the provisions regarding the determination of the tax base in the case of imports
  • Clarification on the adjustment of the right of deduction in the case of acquisitions of services and goods other than capital goods
  • Amendment of provisions referring to the special VAT return and other declarations
  • Aspects related to the entities recorded in the Register of Intra-Community Operators and to deregistration of such entities.

Title VII – Excise Duty

  • Additions to provisions regarding non-harmonised excisable products, including in such category beer-based and fermented beverages other than beer and wine the alcohol content of which, obtained from fermentation, is less than 50%
  • Higher excise duty rate on beer and on cigarettes, becoming effective for the latter three (3) month in advance, i.e. on 1 April instead of 1 July.

Title IX2 – Social Security Contributions

  • Extension of the sphere of income, on which payment of health insurance contributions is imposed, to the income obtained under specific conditions from plant growing, animal breeding, forestry and fish rearing activities
  • Additional obligations of natural persons obtaining income from salaries paid by employers of states that are not subject to EU regulations concerning the coordination of social security systems, or of states with which Romania has not concluded social security agreements or conventions from the perspective of social contributions
  • Changes to secondment and daily allowances received either in the country or abroad
  • New, special, provisions regarding the treatment of income obtained from agricultural activities in point of social security contributions.

Local Taxes

Reconsidering Government Ordinance No 1 / 2013 on the regulation of financial and tax measures applicable to local taxes, the leading authority has decided that it is only the local public administration having recorded no arrears that may adopt resolutions on the decrease of taxable values and local taxes.

The Ordinance sets out several measures providing for an equitable treatment of public administrations that have already adopted such resolutions, as well as of the natural persons who have paid the local taxes for 2013.  These provisions become effective three (3) days after their publication in Monitorul Oficial.

Tax Procedure Code

The amendments to the Tax Procedure Code refer to the following:

  • verification of the natural persons who are subject to income tax;
  • enforcement rules.

The provisions of this Ordinance come into full force and effect on 1 February 2013, excepting those referring to higher excise duty rate on cigarettes which are applicable from 1 April 2013.

TAX ALERT by Mazars Consulting / MAZARS ROMANIA

* Note: You may find Romanian, German and French versions of the newsletter in Mazars’ archive

* TAX ALERTcontains a selection of the latest major issues occurred in the Romanian legislative framework, is intended only to provide information and, hence, shall not be deemed to provide professional advice or consultancy.  Therefore, we assume no responsibility in this respect.

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