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Major amendments to the tax legislation in late may

The end of spring has ushered in several major changes to the provisions contained in the much-debated Ordinance No 8 / 2013. The substantive changes to the tax legislation, which became effective as of 1 February 2013, have been the topics of feverish discussions between business people and the tax authorities. Many experts have considered by that time that the changes have been hastily introduced, leaving room for interpretations, and, hence, Law No.168 / 2013 is intended by the authorities to put a finish on Ordinance No 8 and improve the tax legislation applicable from early June.

Monitorul Oficial al Romaniei, Part I, no. 310/29 May 2013 has published Law no. 168/29 May 2013 approving of Government Ordinance no. 8/2013 which amends and supplements Law no. 571/2003, regarding the Tax Code, and regulates financial and tax measures.

The newly published Law contains important changes and clarifies the following aspects:

Tax on Non-residents’ Income from Romania

– Categories of taxable income from services rendered in Romania and outside Romania;

– 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, provided that the related transactions are deemed artificial.

Profit Tax

– Exceptions provided for certain categories of means of transport as regards the limitation on deductibility of depreciation expenses to RON 1,500 per month;

– Exclusion of business travel allowances from restricted deductible expenses;

– Amendment of the method for the calculation of depreciation in the case of companies applying the International Financial Reporting Standards.

Changes related to permanent establishments of foreign legal entities:

– Foreign legal entities carrying on their activity through several permanent establishments in Romania shall have the obligation to designate only one permanent establishment which should pay and declare their profit tax.

– Methods are detailed for the calculation, declaration and payment of profit tax in consideration of the income and expenditure recorded by all permanent establishments pertaining to the same foreign legal entity.

– Several measures shall be undertaken to regulate the manner in which tax losses may be carried forward in the case of such permanent establishments.

Tax on Microenterprises’ Income

– Amendment of the definition of microenterprise, which excludes companies under dissolution and liquidation;

– Exclusion of the entities intending to perform activities such as gambling, consultancy and management from those applying the tax on microenterprises’ income;

– Option for the newly established Romanian legal entities having the share capital worth at least the RON equivalent of EUR 25,000 to be subject to profit tax.

Income Tax

– Assimilation of the part, exceeding the legal level, of the amounts received by employees of non-resident employers into salary income during their posting to Romania;

– Exclusion of business travel allowances from the category of restricted deductible expenses while determining the net annual income from independent activities, established on the basis of single-entry bookkeeping;

– Amendment of the categories and limits of non-taxable income related to the income obtained from agricultural activities, as well as of income standards; clarification on the determination of the annual income, which should be the sum total of the income corresponding to every agricultural activity for which income is determined on the basis of income standards.

VAT

– The reverse charge mechanism applicable to certain cereals and technical plants shall remain in effect until 31 May 2014.

Exercise Duty

– Clarification on the cases in which destruction or loss of excisable products should not be deemed release for consumption;

– Further mentions of the conditions which should be met so as to avoid payment of excise taxes in the case of destruction or loss of excisable products, as well as of the level of the excise duty in the case of losses for which such duty should be paid when losses cannot be itemised by categories of excisable products;

– Reformulation of the limit below which specific lower excise duties should be applied in the case of small-sized beer producers;

– Further requirements to be met by energy producers when preparing the application for their authorisation as tax warehouse keepers;

– Specific mention of the cases in which selling prices for excisable products may be set below the import cost or the production cost.

Social Security Contributions

– The part, in excess of the legal level, of the amounts received by employees of non-resident employers during their posting to Romania shall be subject to taxation inasmuch as social security contributions are concerned.

Tax Procedure Code

–  New provisions clarify the procedures applicable in the case of designated permanent establishments of foreign legal entities.

Law 168 / 2013 shall come into full force and effect three days after the date of its publication in Monitorul Oficial, excepting the provisions referring to designated permanent establishments of foreign legal entities and to the Tax Procedure Code, which shall become effective as of 1 July 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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