Following the financial crisis of 2007/8 Romania entered into a number of arrangements with international financial institutions. This led to financial discipline which meant that Romania was one of the countries in which internal borrowing was reduced. As major economies have not reduced there borrowings and world indebtedness has increased one can ask what was the benefit for Romania.This was a major step.
Despite all of this the Government which is now in the course of further negotiations with the IMF has made certain amendments to taxation and the laws which will it is hoped stimulate the economy further. The Government has made changes in some areas which will affect businesses in Romania. Each one in itself may not be important but taken as a whole may increase business confidence and therefore the economy.
From 27th January 2015, the tax-deductible daily allowance received by employees of public institutions for domestic travel has been increased to RON 17. For private businesses this means that the tax deductibility limit for daily allowances has gone up to RON 42.5 a day (i.e. 2.5 times the amount for public institutions). The Government has lowered the rate of VAT on accommodation to 9%. This it is hoped will stimulate tourism at all levels and will be especially important to local packager holidays and will make Romania more attractive to foreign visitors.
New criteria for the VAT registration of Romanian legal entities have been introduced, which will apply from 1st February 2015. A new procedure for VAT registration following cancellation of registration for VAT purposes was also approved. New criteria for the VAT registration of Romanian legal entities have been introduced, applicable as of 1 February 2015. Some of the main changes are presented below.
VAT registration is now no longer conditioned on the existence of headquarters (physically verified by the tax authorities). Taxpayers are now required to submit an affidavit to the tax authorities for the purpose of assessment by the tax authorities of the taxpayer’s intention and capacity to carry out activities requiring VAT registration; taxpayers whose VAT registration was cancelled and who intend to re-register for VAT purposes should now submit a registration application.
If the VAT registration criteria are only partially fulfilled by the taxpayer, the tax authorities will invite the taxpayer’s legal representative to provide more information at the tax office’s location.
The tax treatment of income derived from gambling activities will be amended from 13thFebruary 2015. The National Bank of Romania has reduced the reference interest rate from 2.75% to 2.5%, applicable as of 8 January 2015.
The consumer price index to be used to calculate advance quarterly payments of profit tax for 2015 is 102.2%. Under current fiscal legislation, these advance quarterly payments are the equivalent of one quarter of the previous year’s profit tax adjusted for the consumer price index. The mechanism for determining the amount of output VAT on taxable supplies of goods/provisions of services has been amended. Under new provisions, if the price of the goods supplied/services rendered was established without any reference to VAT, then the output VAT on taxable supplies of goods/provisions of services is to be determined using the gross-up method, where the supplier is not able to recover the VAT from the customer. Finally, the average net salary in Romania was the RON equivalent of four hundred and nineteen (419) EURO in December 2014, up by twenty seven (27) EUR or 7.1% compared to the previous month. The increases of the average net earnings against the previous month were mainly due to occasional bonuses, including quarterly, annual or holiday bonuses. When compared to December 2013, the increase was of 6%, according to latest data from the National Statistics Institute.
The highest average net earnings were registered in the crude oil and natural gas extraction sector; One thousand three hundred and three (1,303) Euro; the lowest incomes were reported in hotels and restaurant two hundred and thirty eight (238) EURO. Most economic sectors registered increases in average net earnings in December last year, compared to November.
These as mentioned above are just some of the steps taken by the Government. As the year unfolds more changes will no doubt be made depending on the Government at that time. But that is the subject for another blog.