Tax Flash No. 14/2017
Emergency Ordinance no. 79/2017 amending and completing Law
no. 227/2015 regarding the Fiscal Code was published in the Official Gazette 885/2017
The main amendments applicable as of January 1st 2018 are outlined below.
Corporate income tax
- The existing limitations on deductibility of interest and forex differences are repealed, and a new chapter “Rules against tax evasion practices that have a direct impact on the functioning of the internal market” transposing the provisions of Directive 2016/1164 / EU is introduced.
The following aspects are introduced through these norms:
Limitation of interest deductibility and other interest-equivalent costs from an economic point of view
- The indebtedness costs exceeding the deductible
EUR 200,000 limit are deductible within the limit of 10% applied to the calculation basis resulted as the difference between revenues and expenses recorded as per the applicable accounting regulations at the tax reference period from which the non-taxable income is deducted while the profits tax expense, as well as the excess indebtedness costs, and deductible amounts representing tax depreciation are added.
- If the calculation basis is negative or equal to zero, the excess debt is non-deductible and is reported to further periods for an unlimited period of time under the same deduction conditions.
- The above rules also apply to interest and foreign exchange differences carried forward until 31 December 2017.
- Independent entities that are not part of a consolidated group for financial accounting purposes and have no associate entity or permanent establishment as well as long-term public infrastructure project operators registered in the EU whose assets, revenues and borrowing costs come from / have the right to fully deduct the indebtedness costs in the fiscal period in which they are incurred.
The tax regime of transfers of assets, tax residence and/or economic activity carried out through a permanent establishment for which Romania loses its taxation right (exit tax)
- If the market value of the assets transferred in the context of a transfer of assets, tax residency and/or economic activity carried out through a permanent establishment for which Romania loses the right to tax is higher than their tax value, the difference represents a taxable profit subject to a 16 % tax rate.
- The taxpayer may shall be entitled to reschedule the payment for this tax under certain conditions.
- If the price of the transferred assets under a transfer of assets, tax residence and / or economic activity carried out through a permanent establishment for which Romania loses the right to tax is lower than their tax value, the difference is a loss that is recovered from the earnings resulting from operations of the same nature.
Rules on controlled foreign companies
- Under certain conditions corporate income taxpayers in Romania include in their taxable base the undistributed income of foreign entities controlled by that taxpayer.
Microenterprise income tax
- The concept of microenterprise is redefined by including within category of microenterprises, also the legal entities that:
- derive income from activities in the following areas: banking, insurance and reinsurance, capital market, gambling, exploration, development, oil and natural gas exploitation; or
- derive income from consulting and management, regardless of their proportion in total revenues.
- The revenue cap used for the qualification of a microenterprise is increased to EUR 1,000,000.
- The possibility to opt for the application of the corporate income tax rules for newly established Romanian legal entities or existing microenterprises that have subscribed a minimum share capital of 45,000 lei is cancelled.
- The tax rate is reduced to 10% for the following revenue categories:
a) independent activities;
b) salaries and assimilated to salaries;
c) income from immovable property;
d) investments, excluding dividend income
for which the 5% quota remains applicable;
f) agriculture, forestry and pisciculture activities;
h) other sources.
- The tax rates for intellectual property income are reduced:
- from 10% to 7%, for determining anticipated payments made to the annual tax account, if the beneficiary of the income did not opt to set the income tax as the final tax;
- from 16% to 10%, for determining the income tax as the final tax. In this case, the basis of calculation is the gross income from which the flat rate of expenditure is deducted.
- The gross monthly income, obtained from salaried, according to which the level of personal deduction is fixed is increased to lei 1,950. Also, the ceiling up to which a degressive personal deduction is granted increases to lei 3,600.
Social security contributions
- The rates for compulsory social contributions are as follows:
- 25% for the individual social security contribution; and
- 10% for the individual health insurance contribution;
- Legal persons who are or are assimilated to employers must pay the following:
- 4% for the social security contribution for special working conditions;
- 8% for the social security contribution for difficult conditions and other working conditions; and
- 2.25% for the insurance contribution for work.
- Individuals that derive income from independent activities exceeding the minimum gross salary cap, owe the contribution rates as follows:
- social security contribution: 25% of the insured income, that cannot be lower than the country’s gross minimum salary;
- health insurance: 10% of the country’s gross minimum salary
- In line with the decision of the European Court of Justice, tax authorities may refuse the VAT deduction only if they can prove beyond any doubt that the taxable person knew or ought to have known that the transaction put forward to justify the right to deduct was involved in VAT fraud.
- Holding excisable products outside the fiscal warehouse without complying with the marking obligations or selling on the Romanian territory such products triggers the seizure of the tanks, containers and means of transport used for such purposes.
- The tax for freight cars with a total authorized weight of 12 tons or more, differentiated by the number of axles and maximum permissible gross weight is updated according to the euro exchange rate published in the Official Journal of the EU on 2 October 2017.