Tax Flash No. 1/2012

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Emergency Ordinance 125/2011 amending and completing the Fiscal Code was published in Official Gazette 938/2011

We hereby mention the main amendments and completions:

GENERAL PROVISIONS

  • Amendments/completions are brought to the tax treatment applicable to the transactions carried out by inactive taxpayers, respectively such taxpayers are subject to the payment of tax liabilities, but are not allowed to deduct the expenses and the related VAT. In addition, taxpayers that purchase goods or services from inactive taxpayers are not entitled to deduct such expenses and the related VAT.

CORPORATE INCOME TAX

  • Favorable, respectively unfavorable differences resulted from the valuation of securities and long-term bonds are excluded from the category of non-taxable incomes, respectively from the category of nondeductible expenses upon the computation of the corporate income tax.
  • Incomes resulting from the cancellation of the reserve recorded further to the in-kind contribution to the capital of other legal persons are included in the category of non-taxable incomes.
  • The following expenses are also considered deductible:
    • the expenses representing the reimbursement of subsidies, according to the law;
    • the expenses incurred with the remuneration consisting in equity instruments granted to employees and taxed at their level;
    • 50% of the value of the fuel expenses, under certain conditions;
    • the expenses with the un-depreciated fiscal value corresponding to the replaced parts, components of depreciable fixed assets, respectively of intangible assets.
  • Tax rules for taxpayers applying the International Financial Reporting Standards are introduced,regulating issues such as:
    • the assessment of the fiscal value;
    • the treatment of the amounts recorded in retained earnings following the implementation of the above-mentioned accounting regulations;
    • the treatment of the incomes and expenses in respect of the deferred corporate income tax;
    • the assessment of the advanced quarterly payments on account for the annual corporate income tax.

INCOME TAX

  • Revenues obtained further to the sale through waste collection centers of goods subject to the National programs financed by the state budget or other public funds are mentioned as non-taxable.
  • Fuel expenses incurred under certain conditions established by the law are deductible in proportion of 50% for the purpose of determining the net annual income from independent activities.
  • Taxpayers for whom the net income from independent activities is determined based on the income quotas and during the previous fiscal year registered an annual gross income higher than EUR 100,000 will be liable to determine the net annual income based on the single entry bookkeeping system.
  • Incomes obtained further to the sale through the waste collection centers of scrap metal, paper, glass and other materials alike are considered incomes from other sources.
  • The deadline for the tax prepayment in case of taxpayers obtaining incomes from independent activities, from the transfer of property use and from agricultural activities, will be the 25th of the last month of each quarter (previously, the deadline was the 15th of the last month).
  • Amendments and completions are brought in respect of the tax regime of incomes obtained from the transfer of property use and from agricultural activities (for example, the taxation of incomes obtained from rental for touristic purposes is regulated).

VAT

  • Starting 1 January 2012, 50% of the VAT related to the acquisition of vehicles not exceeding 3,500 kilograms and which have less than 9 passenger seats will be deductible and 50% of the VAT related to the acquisition of the fuel to be used for such vehicles will also be deductible. Those provisions are applicable also for the advances which were paid prior to the 1st of January 2012, in case the supply of those goods is performed after this date.
  • The taxable persons not exceeding the VAT exemption threshold of EUR 35,000 in the previous year, may request the deregistration for VAT purposes until the 10th day of each month, provided at the date when requesting the VAT deregistration the exemption threshold for the current year was not exceeded, such being calculated proportionally for the period elapsed from the beginning of the current year. Taxable persons requesting the deregistration for VAT purposes during 2012 do not have the obligation to adjust the VAT related to the goods and services acquired until 30 September 2011.
  • The option to register for VAT purposes has been introduced for non-resident taxable persons performing imports of goods and lease and rental of immovable goods and supply of constructions, in case the taxation of such operations is opted for.
  • New regulations were brought regarding the cancellation of the registration for VAT purposes performed by the tax authorities, as follows:
    • in case the shareholders, administrators or the taxable person itself have criminal offences registered in the fiscal record;
    • in case, during one semester, no VAT Return was submitted. The VAT re-registration will be possible only after a 3 months period from the cancellation of the VAT registration and only if the conditions stipulated by the law are fulfilled. In case the error will repeat, the tax authorities will no longer approve the subsequent VAT re-registration requests.
    • in case VAT Returns were submitted, without reporting any acquisitions and supplies of goods / services during one semester. The taxable person can re-register for VAT purposes provided in maximum 180 days from the date when the VAT deregistration was performed, it will submit a declaration on own responsibility stating that it will perform taxable operations during the month following the one in which the VAT re-registration was requested. Otherwise, the tax authorities will not approve the subsequent VAT registration requests.
  • On the National Agency of Fiscal Administration (“NAFA”) site will be available a Register of taxable persons registered for VAT purposes, as well as a Register of taxable persons registered based on the provisions of art. 153, for which the VAT registration number was cancelled.
  • The correction of VAT adjustments subsequent to the cancellation of the registration for VAT purposes is permitted.
  • Inactive taxpayers or those for which the VAT registration was cancelled are obliged to pay the VAT related to the operations perfomed during this period without having the right to deduct the VAT related to the acquisitions performed. These persons have to submit a declaration regarding the VAT to be paid until the 25th of the month following the one in which the VAT is due for the operations performed.
  • In order to register in the Registry of Intra-community operators, the taxable persons have to present the criminal records of the shareholders holding at least 5% of the company’ share capital.

Other provisions

  • The notion of new construction was re-defined.
  • If the supplier is neither VAT registered nor established in Romania, the obligation to pay the VAT stays with the beneficiary that is registered for VAT purposes in Romania (irrespective if it is registered for VAT purposes directly or via a fiscal representative).
  • Clarifications were brought on the categories of goods for which the simplification measures are applicable.

EXCISE DUTIES

  • The procedure whereby the sender from Romania must inform the competent tax authorities before commencing a movement of excisable products under suspensive regime, where the electronic system is not available in Romania, shall be regulated in an Order of the chairman of NAFA.
  • Starting 1 April 2012, in the case of registered recipients, the deadline for payment of excises is the next working day after the excises become chargeable.
  • The excise due for diesel fuel is of 374 EUR/ton, respectively 316.03 EUR/1,000 litres.

LOCAL TAXES

  • The deliberative local authority may set additional rates for local taxes and levies, except for stamp duties and extrajudicial stamp duties, of maximum 20% compared to the levels approved by Government Decision.
  • For the credit institutions that apply the International Financial Reporting Standards, the taxable value for determining the tax for buildings is the value resulted from the valuation report.

SOCIAL CONTRIBUTIONS

  • Title IX2 is reorganised based on specific chapters (as you will see below), the Emergency Ordinance mainly adding provisions regarding the mandatory social contributions for the persons obtaining incomes from independent activities, as well as other categories of incomes.
  • We mention the following main amendments:

Chapter 1 – Mandatory social contributions for the persons obtaining salary incomes, or assimilated as such, pension incomes, as well as for the persons placed under the protection or custody of the state:

  • The exemption from the payment of social contributions is restricted only to certain benefits received in relation to a dependent activity, respectively:
    • the use of a company car, for the transport from the domicile to the workplace and vice versa;
    • the accommodation in own units;
    • the meals granted as per the law;
    • the travel permits by any transport means, granted for business purposes;
    • the contributions paid to occupational pension funds, respectively to optional pension funds, professional insurance premiums and voluntary health insurance premiums, incurred by the employer on behalf of own employees, within the deductibility limits provided for by the law, as the case may be.

Chapter 2 – Mandatory social contributions for the persons obtaining incomes from independent activities, agricultural activities and associations without legal personality:

  • The chapter refers to the social security contribution („SSC”) and healthcare contribution („HC”) due by the following categories of persons:

a) entrepreneurs owning an individual enterprise;

b) members of a family business;

c) persons qualifying as authorized persons to carry out economic activities;

d) freelancers;

e) persons realising incomes from intellectual property rights, for which the income tax is determined based on data from the single entry bookkeeping system;

f) persons obtaining incomes, for which the income tax is withheld at source and from associations without legal personality;

g) persons realizing incomes from agricultural activities;

h) persons obtaining incomes, for which the income tax is withheld at source, from certain agricultural activities mentioned by the Fiscal Code.

  • The persons insured under the public pension system as per art. 6 par. (1) points I – III and V of the Law 263/2010, as well as the ones benefitting from one of the pension categories granted under the public pension system, are not subject to SSC for the incomes obtained in the context of the present chapter.
  • The computation base for SSC is the following:
    • for the taxpayers mentioned above under points a)-e) the declared income, which cannot be lower than 35% of the average gross salary nor higher than 5 times such salary;
    • for the taxpayers mentioned under points f) and h), the gross income mentioned in the agreement concluded by the parties or the difference between the gross income and the deductible expense, as the case may be;
    • the taxpayers at point g) do not owe the contribution.
  • The computation base for HC is the following:
    • for the taxpayers mentioned above under points a)-e), the difference between the cashed incomes and the expenses incurred for the purpose of obtaining such incomes, or the value of the income quota (the computation base cannot be lower than one national minimum gross salary);
    • for the taxpayers mentioned under points f) and h), the gross income mentioned in the agreement concluded by the parties, or the difference between the gross income and the deductible expense, as the case may be (the computation base cannot be lower than one national minimum gross salary);
    • for the taxpayers at point g), the net income determined as per the rules on the income tax.
  • Certain specific exceptions apply for incomes from intellectual property rights, but also for other incomes (such as salary or pension incomes).
  • The Emergency Ordinance also includes provisions in respect of the declaration and payment of such contributions.

Chapter 3 – Healthcare contribution in case of persons realising other incomes, as well as persons who do not obtain incomes:

  • Similarly to the previous treatment, the persons obtaining incomes from the transfer of property use, investments, prizes and gambling, fiduciary operations and incomes from other sources have also the obligation to pay HC, in case such persons do not obtain incomes for which the payment of the contribution is mandatory (for example, salary incomes);
  • The persons who do not obtain incomes and do not fall into the categories of persons who benefit from health insurance without paying the contribution, in order to become insured are liable to pay the individual contribution, for which the computation base is represented by the minimum gross salary.

Other provisions related to social contributions

  • Starting 1 July 2012, the mandatory social contributions due by the individuals mentioned under Chapters 2 and 3 should be administered by the NAFA.

OTHER PROVISIONS

  • As of 1 July 2012, the provisions of art. III of GEO 58/2010 regarding the amendment and completion of the Fiscal Code and other financial-fiscal measures are repealed (these taxpayers have been included under Chapter 2 of the mandatory social contributions section).

The provisions of the present Emergency Ordinance are applicable starting 1 January 2012, with certain exceptions. The exceptions include Chapters 2 and 3 corresponding to the rules on social contributions, which are applicable as of 1 July 2012.

The deadline of 1 January 2012, stipulated for the application of art. I points 50, 52, 66 and 69 of the Government Ordinance 30/2011 amending and completing the Fiscal Code, as well as regulating certain fiscal-financial measures is delayed until 31 January 2012 (these provisions refer to specific administrative obligations of excise duty payers).

The deadline of 31 January 2012 inclusive, provided for by art. III par. (1) of the Government Ordinance 30/2011, is delayed until 29 February 2012 inclusive (these provisions refer to authorized warehouse keepers for excisable products).

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