Fiscal Update for 2009 in Romania
Published in International Tax Review, 2009
The end of 2008 and the beginning of 2009 brought significant changes to the Romanian tax legislation, mainly aimed at counterbalancing the downgrade of the Romanian economy, especially as regards the capital market, banking and real estate sector.
Important changes in income taxation
With a view to stimulating the capital market, the government decided to exempt from taxation the gains realised by companies and individuals throughout the year 2009 out of shares trading on the Romanian Stock Exchange. Moreover, as a way to encourage saving, interest revenues derived by individuals on deposits and other saving instruments are exempt from tax starting January 1 2009 (previously interest on term deposits was taxable at 16%).
Separately, a tax exemption was introduced in respect of dividends reinvested starting 2009 for the purpose of maintaining or increasing the number of work places for the development of the dividend’s payer activities. The exemption also applies to dividends reinvested in the share capital of another legal entity. The methodology for applying this exemption is still unclear, however related application norms are expected shortly. Research and development is recognised as a key instrument for increasing the economic competitiveness and for ensuring long-term development, hence a supplementary 20% deduction for profits tax purposes was introduced in this respect. The deduction is in addition to the normal deduction obtained via (amortisation of) research and development expenses. Furthermore, machinery and equipment used for research and development may benefit from the accelerated depreciation method. These incentives for research and development are granted subject to the elaboration of a related state aid scheme by the ministry of education, research and youth.
New VAT regime for social dwellings
As an exception to the 19% standard VAT rate, a 5% reduced rate was introduced in December 2008 in respect of the sale of social dwellings. These include social facilities such as retirement homes, care homes for disabled children but also dwellings which do not exceed 120 sqm in surface and which have a value lower than approximately EUR 90,000 ($115,000).
As of February 23, the State budget law is still subject to parliamentary debates and approvals. The government’s declared intention is to maintain the 16% tax rate for income and profits, while social security contributions will be slightly increased, by approximately three percentage points. Separately, new amendments to the Fiscal Code have been announced by the government for March 2009.