Tax Flash No. 06/2013

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Emergency Ordinance 8/2013 amending and completing the Fiscal Code was published in Official Gazette 54/2013

We hereby mention the main amendments and completions:

GENERAL PROVISIONS

  • The Emergency Ordinance stipulates that in case of transactions qualified as artificial, provisions of the double tax treaties shall not be applicable. In this respect, the Emergency Ordinance defines artificial transactions as transactions which do not have economic substance and cannot be used within regular economic activities, performed with the main purpose of tax avoidance.
  • New provisions have been introduced regarding the determination of the fiscal value of the biological assets.
  • Incomes from services rendered outside Romania are included in the category of incomes derived from Romania.

CORPORATE INCOME TAX

  • Taxpayers are required to present in the fiscal register revenues from all sources and expenses performed with the view of realising such incomes.
  • Incomes representing the change of fair value of biological assets as a result of evaluation recorded by the taxpayers applying the IFRS accounting regulations are not taxable.
  • The deductible allowance for profits tax purposes of eligible expenses for research and development activities was increased from 20% to 50%.
  • New provisions regarding the expenses incurred with the evaluation of biological assets and with interest expense recorded by taxpayers who apply the IFRS accounting regulations were introduced.
  • Expenses recorded in the accounting records that are considered to be related to acts of corruption are non–deductible.
  • Clarifications are brought regarding the term credit/loan referring to any agreement concluded between the parties that generates for one party the obligation to pay interest and to repay the borrowed capital.
  • Intangible assets that have indefinite useful life are included in the category of non–depreciable assets.
  • Expenses representing the depreciation related to vehicles having maximum 9 passenger seats, including the driver’s seat are deductible within the limit of 1,500 lei/month for each vehicle. Such provisions shall also apply to vehicles purchased/produced prior to 1 February 2013 with respect to depreciation expenses determined based on the undepreciated fiscal value at that date.

INCOME TAX

  • Incomes from silviculture and fish breeding are included in the category of incomes subject to income tax and will be taxed in accordance with the rules applicable to income from independent activities. Thus, new fiscal rules to be considered when determining the income from agriculture activities were introduced.
  • Amounts representing interest granted in relation to the salary differences were included in the category of incomes from salaries.
  • The amounts received by employees during their delegation and secondment to another city, within the country and abroad over the limit of 2.5 times the level provided by the law for public institutions are taxable.

MICROENTERPRISES INCOME TAX

  • Changes were brought to the conditions needed by a Romanian legal entity in order to qualify as a microenterprise. Hence:
    • the requirement to have 1 to 9 employees was repealed;
    • the income limit by which a legal entity enters into the microentreprises system changed from 100,000 euro to 65,000 euro.
  • The posibility to opt for the payment of microentreprises income tax was eliminated, legal entities that meet all the conditions provided by the Fiscal Code being obliged to pay microentreprises income tax.

WITHHOLDING TAX

  • Incomes derived from services rendered outside Romania shall be taxed by 16%.
  • A tax rate of 50% is introduced for incomes from dividends, interest, royalties, commissions, services paid to a resident of a state with which Romania has not concluded a legal instrument under which the exchange of information can be performed.

VAT

  • The transfer for consideration during a certain period of rights in rem such as usufructus and superficies, over immovable goods, falls under the category of VAT exempted transactions. The VAT chargeable event shall occcur at each date specified in the contract for performing the payment.
  • In case of related parties, the taxable base is considered to be the market value, if it was different and the beneficiary and/or supplier, as the case may be, does not have a full deduction right, as per the law.
  • In case of stolen goods, regardless if such are capital goods or not, the adjustment made according to the law, may be canceled at the date the theft is acknowledged through a final court ruling.
  • In case of taxable persons not established in Romania whose VAT registration is canceled by default, the tax authorities will approve the applications for VAT registration purposes, even if they are submitted after 180 days from the date of cancellation of the VAT registration.
  • Taxable persons who have applied the VAT cash deferment system and their VAT code was canceled due to the application of the special VAT exemption regime will, under certain conditions, submit a statement regarding the collected VAT to be paid.
  • Provisions were set for the application of the VAT cash deferment system for taxable persons which have been registered or removed by error in/from the Register of taxable persons applying the VAT cash deferment system.
  • The taxable persons not submitting the criminal record of the new administrators and/or associates within the deadline and conditions provided by the law, shall be removed by default from the Register of Intra-Community Operators.

EXCISES

  • The main amendments regarding the excises duties refer to the following:
    • change of the definition of beer from an excise duties perspective;
    • increase of the excise duties level for beer and certain fermented beverages;
    • change of the date of increase of the total excise on cigarettes (the implementation date is April 1, previously was July 1).

SOCIAL CONTRIBUTIONS

  • Allowances granted during the delegation and secondment to another location, within the country and abroad, exceeding the limit of 2.5 times the level provided by the law for public institutions are included in the social security computation base.
  • In case of individuals who derive income from salaries from employers from states not covered by the EU regulations on coordination of social security systems or states with which Romania has not concluded agreements or conventions on social security matters, employers have the obligation to provide to the relevant tax authority the information regarding the agreement concluded with the employees. If between the employers and these persons no agreement has been concluded, on who will pay social security contributions to the Romanian State, employers are required to pay such social security contributions to the Romanian State and submit form 112 “Declaration regarding the payment liabilities in respect of social contributions, income tax and nominal record of insured persons”. The statement may be submitted directly or through a fiscal representative/empowered person. If employers failed to fulfill these obligations, individuals who derive income from wages should submit form 112 on a monthly basis (directly or through a fiscal representative/empowered person) and shall pay the related social security contributions.
  • Incomes from silviculture and fish breeding were included in the scope of social security contributions.

FISCAL PROCEDURE CODE

  • The deadline for reporting within the register of inactive/reactivated taxpayers is up to 5 days after the communication of the decision of inactivity/ reactivation (before, the deadline was 3 days).
  • The Emergency Ordinance introduces the obligation to submit a statement of patrimony for the individuals subject to verification. The template of this statement is established through an order of the Ministry of Public Finances. The duration of the verification is established by the fiscal authority and cannot exceed 6 months, respectively 12 months if information from abroad is necessary.
  • Tax liabilities for which the forced execution is suspended based on a bank guarantee letter are not settled, except for the case when the taxpayer opts for this.

The provisions of the Emergency Ordinance are applicable starting 1 February 2013, with certain exceptions.

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