Tax Flash No. 4/2012

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Government Decision 50/2012 amending and completing the Methodological Norms for the application of the Fiscal Code was published in Official Gazette 78/2012

We hereby mention the main amendments and completions:

GENERAL PROVISIONS

  • In case no written contracts are concluded, the beneficiaries of services rendered in Romania by non-residents (e.g. construction and assembly works, supervision, etc.) should register with the competent tax authorities the documents justifying the effective rendering of such services (e.g. work statements, reception minutes, work reports, etc.).
  • Clarifications regarding the “centre of vital interests” criterion used for determining the tax residency of individuals were brought.

CORPORATE INCOME TAX

  • The following expenses should be considered as expenses incurred for the purpose of deriving taxable revenues:
    • expenses incurred with the depreciation of shares, recorded in accordance with the accounting regulations;
    • expenses representing the quantity of consumed electricity incurred at the level of the own technological consumption norm or the norm approved by the Romanian Energy Regulatory Authority.
  • Written-off investments that are no longer completed are non-deductible expenses under certain conditions.
  • Contractual interests, penalties or damages cancelled through additional acts are considered taxable incomes, respectively deductible expenses under certain conditions.

INCOME TAX

  • We hereby mention the following main amendments brought in the field of income tax:
    • examples of aids granted to individuals from the state budget and external non-reimbursable funds, considered non-taxable incomes;
    • clarifications regarding the procedure for determining the annual net income for the individuals that obtain incomes from independent activities;
    • clarifications regarding the withholding of the advanced tax payments for certain incomes obtained from independent activities;
    • delegation and secondment expenses shall include the expenses incurred with the transportation, accommodation and delegation allowances within the country and abroad, established as per the relevant law or in accordance with the applicable employment agreement;
    • clarifications were brought with respect to the determination of the basic function, in case of salary incomes.

WITHHOLDING TAX

  • Details regarding the refund of the withholding tax paid in excess as compared to the tax resulted from the application of the double tax treaties or of the European Union legislation were brought:
    • the income payer will compute and refund the withholding tax paid in excess, and the amounts refunded to the non-resident will be subsequently recovered from the state budget;
    • in case the income payer cannot refund the withholding tax paid in excess, the non-resident will recover such tax from the state budget, personally or through an empowered agent (the procedure will be approved by a NAFA order).

VAT

  • The VAT group shall be formed by taxable persons administered by the same tax authority.
  • In the case of electricity distribution companies, no VAT shall be due for the quantities of electricity consumed within the level of their own technological consumption norm or, in the absence of this, at the level of the standard consumption norm approved by the Romanian Energy Regulatory Authority, which includes also the own commercial consumption.
  • As regards the place of supply of services, the following clarifications were brought:
    • the manner of proving the taxable person status of the beneficiary located abroad;
    • determination of the place of supply for services used fully or partially by the beneficiary for personal purposes;
    • a list of services deemed as supplied in connection with immovable properties and separately, a list of services deemed as not supplied in connection with immovable properties are exemplified;
    • examples regarding the means of transport, events and admission to events.
  • Clarifications on the trading with receivables were brought. Thus, such operations are defined as follows:
    • operations whereby a person undertakes to recover the receivables without the assignment of the receivables – taxable supply of services;
    • operations involving the assignment of receivables. The following cases are defined:
      • the assignment is not aimed at debt recovery. The assignment will be exempt of VAT if the selling price is higher than the value of the receivables;
      • the assignee levies a commission, whether or not he undertakes the default risk – taxable supply of services performed by the assignee;
      • the assignee does not levy a commission, the purchase price is lower than the receivables value and the assignee undertakes the default risk – non-taxable transaction.

The norm reflects the European Court of Justice decision in the GFKL case.

  • Taxable persons maintain the VAT deduction right on investments which are written-off based on a write-off decision, irrespective if such are further sold or not, if the write-off is due to objective reasons beyond their will.
  • The vehicles which were subject to the partial limitation of the VAT deduction right upon their acquisition shall not be VAT exempt upon supply.
  • To justify the intention of making taxable transactions with immovable goods before their delivery/lease, the taxation notification should be filled in.
  • The capital goods written-off according to the provisions of a normative act are not subject to the adjustment of the VAT deduction right.
  • Other changes:
    • the granting of goods/services free of charge for the purpose of stimulating the supply of goods/services with the same characteristics as the ones that will be supplied to the clients, does not represent a supply of goods/services;
    • clarifications were brought on processing of digital photos and the supply of software as regards their qualification as a supply of goods or a supply of services;
    • clarifications were brought on the write-off of the tangible fixed assets/capital goods which are subject to VAT adjustment;
    • clarifications on the hospital services which can be VAT exempt were brought;
    • if the fiscal authorities identify during a tax inspection that the reverse charge regime was not applied for certain transactions and such regime may no longer be applied because of the status of the supplier beneficiary, the normal taxation regime shall remain applicable;
    • it is provided the VAT adjustment for goods and services acquired before the date of the deregistration/registration request for VAT purposes, if the chargeable event occurs after such date;
    • clarifications were brought as regards the VAT payment for taxpayers that were deregistered for VAT purposes and make supplies of goods through the enforcement bodies.

EXCISE DUTIES

  • The Decision establishes the minimum share capital that must be set-up in case of persons who intend to authorise as fiscal warehouse keepers for production of excisable products.
  • Also, the Decision provides for a minimum guarantee to be set-up by the warehouse keepers authorised for production.
  • In order to be stored under a suspensive regime in a tax warehouse, excisable products need not to have been produced in the respective tax warehouse.
  • Other completions/amendments brought in the excise duty area refer to the following:
    • definition of processed tobacco and exemptions applicable thereto;
    • definition of metallurgical and mineralogical processes;
    • treatment applicable to losses occurred during the intra-Community and domestic transport of excisable products under suspensive regime;
    • set-up of guarantees for excisable products (e.g. economic operators holding registered recipient authorisation, as well as final user authorisation for the used energy products from own intra- Community acquisitions, should set-up the guarantee for the registered recipient quality by 29 February 2012);
    • obligation of final user authorisation holders to notify the competent authority with regard to the changes occurred in certain data;
    • movement of still wines traded by small producers to tax warehouses;
    • obligations of the proposed warehouse keepers, in the case of certain excisable products;
    • introduction in production of a new product;
    • reauthorisation of tax warehouses;
    • authorisation conditions applicable to registered sender/recipient and the cases where the respective authorisation may be revoked;
    • procedure for reimbursement of excises for certain excisable products;
    • operations that may be performed with/on ethylic alcohol;
    • exemptions for ethylic alcohol and other alcoholic products (denaturation of ethylic alcohol, etc.);
    • exemptions applicable to energy products and electricity;
    • exemptions for coffee;
    • marking of alcoholic products and processed tobacco;
    • operations performed with wastes of energy products;
    • legal effects of appeals submitted by taxpayers against decisions for revocation/cancelation of certain authorisations.
  • The templates of certain documents used in the excise duty area were amended.

LOCAL TAXES

  • For building tax purposes, the works for reconstruction, consolidation, modernization, modification or extension of a building, performed by the lessee, are defined as works that increase the building’s value with minimum 25%.
  • Clarifications were brought regarding the date from which the lessor owes the building tax, the land tax and the vehicle tax, in case the related finance lease contracts are terminated.

SOCIAL CONTRIBUTIONS

  • The Decision brings examples related to certain category of incomes subject to individual social contributions.

The provisions of the present Decision are applicable starting 31 January 2012.

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