Tax Flash no.19/2020 – The amendment of the Fiscal Code and of the Fiscal Procedure Code
27.11.2020 – Two draft laws amending the Fiscal Code and the Fiscal Procedure Code were adopted by the Chamber of Deputies
update 22.12.2020 – The laws amending the Fiscal Code and the Fiscal Procedure Code were published in the Official Gazette
The Romanian version of the document on the provisions of the draft Law amending the Fiscal Code is available HERE.
The Romanian version of the document on the main provisions of the draft Law amending the Fiscal Procedure Code is available HERE.
We hereby present the provisions of the draft Law amending the Fiscal Code
- The notion of “place of effective management” is amended to clarify the situations which trigger the place of effective management to be in Romania. Relevant procedures in this respect are established.
- The definition of affiliates for the case when a third person directly or indirectly holds stakes in the two persons concerned is clarified.
CORPORATE INCOME TAX
Corporate tax consolidation
- Rules on fiscal consolidation in the field of corporate income tax are introduced by establishing and registering a tax group.
- Among the main provisions regarding the tax group are:
- The system is optional, and its application period is 5 fiscal years calculated starting with the first year of application of the fiscal consolidation system until the abolition of the fiscal group;
- In order to set up the tax group, the members must cumulatively meet, at the date of the application, certain conditions:
- the holding condition (75%) must be fulfilled for an uninterrupted period of one year, prior to the beginning of the fiscal consolidation period;
- the members of the group must be taxpayers paying corporate income tax, and apply the same paying system;
- members of the group must have the same fiscal year;
- the members of the group cannot be part of another corporate income tax group;
- the members of the group cannot be micro-enterprises income taxpayers or are at the same time corporate income tax payers and specific tax payers;
- members of the group do not fall under the provisions of the special regime for taxpayers who carry out activities such as night bars, night clubs, discos, casinos;
- the members of the group cannot be in dissolution / liquidation, as per the law.
- The method of calculating the tax consolidation requires each member of the group to carry out its own corporate income tax calculation, and to submit the corporate income tax return to the responsible legal entity in the group, from the statements of the assembled members resulting in a net position of the group, respectively, a profit or a loss.
- Rules regarding the tax loss regime as well as anti-abuse rules, similar to those applicable to the tax reorganization are provided.
The ceiling of 30% of the amount of receivables for the deductibility of adjustments for impairment of receivables is eliminated.
- Clarifications are provided regarding the limit of the profit tax in which taxpayers can benefit from the exemption granted for reinvested profit, respectively the calculated profit tax cumulated from the beginning of the year until the quarter of commissioning of assets for taxpayers that apply the quarterly corporate income tax declaration and payment system, respectively within the limit of the cumulative profit tax calculated from the beginning of the year of putting the assets into operation until the end of the respective year for the taxpayers that apply the annual system of declaration and payment of the corporate income tax.
- The expenses incurred by the employer related to the telework activity for the employees that carry out their activity within this regime, as per the law, are considered deductible expenses when determining the fiscal result.
- Expenses related to transactions with persons located in states declared as non-cooperating jurisdictions are non-deductible.
- The tax credit can be granted if the resident legal entity proves the payment of the tax abroad with supporting documents issued by the income payer / agent withholding the tax or a copy of the tax return or similar document submitted to the foreign authority accompanied by documentation proving its payment.
- The treatment of leasing contracts for taxpayers that apply IFRS is regulated.
- The taking over of fiscal losses within reorganization operations involving micro-enterprises is regulated.
MICROENTERPRISES INCOME TAX
- Dividend income is excluded from the tax base.
- It is clarified that a non-resident individual which becomes resident in Romania owes tax from the first day of arrival if he has a presence of more than 183 days, or starting with the first day in which it is declared that the center of vital interest is in Romania.
- In case of transformation/change of the form of exercising an activity, the value of goods and rights, including uncollected receivables that are transferred to the business patrimony converted/exchanged are not included in the gross income of the activity to be transformed / change, and are not subject to taxation.
- Benefits in the form of personal use of vehicles that are not used exclusively for economic activity, owned or used by legal persons applying the tax regime of micro-enterprises or the specific tax of certain activities are not subject to income tax.
- The amounts granted to employees working in telework for the support of utilities expenses within the limit of 400 lei per month are not subject to income tax.
- The costs with epidemiological testing or vaccination of employees are not subject to income tax.
- Gift vouchers given to persons who are not their employees of the grantor for marketing, protocol, and advertising are taxed as income from other sources.
- Investment income is considered to be obtained from Romania, regardless of whether it is received in Romania or abroad, if it is made through an intermediary, who is a Romanian tax resident.
- For taxpayers working in Romania and deriving salaries and assimilated to salaries income from abroad, the obligations of calculation, withholding, payment and declaration of income tax and social contributions in case benefits received by the employee from third parties, are treated as follows:
- if the third parties granting the benefits are not Romanian tax residents, the income tax and social contributions are calculated, declared and paid by the taxpayer;
- if the benefits are granted by third parties, through a resident entity, the obligation to calculate, declare and pay rests with that resident entity.
- The deadline for submitting the informative declaration regarding the withholding tax for incomes derived by non-residents from Romania and the deadline for submitting the informative declaration regarding the gain/loss from transactions performed by non-resident individuals with securities issued by Romanian residents, respectively the informing of the non-resident taxpayer by intermediaries on the transactions performed is the last day of February.
- It is clarified that the recipient of the assets is considered the successor of the transferor in terms of other rights / obligations provided by law, in addition to adjusting the right to deduct.
- In specific conditions the taxable base can be adjusted in case the taxpayer did not collect the value from individuals.
- Following decisions of the CJEU, it is provided that the right to deduct through the VAT return for the period in which the conditions and formalities for deducting the tax are met or by a subsequent return, but within the limitation period, including in case of cancellation of the subsequent verification tax inspection.
- The right to deduct is granted to the beneficiaries that receive correction invoices from suppliers/ providers outside the limitation period, in other situations than following a fiscal inspection at the supplier / provider. The right may be exercised by the beneficiary within one year from the date of receipt of the correction invoice.
- Some of the conditions for benefiting from the deferral of VAT payments for imports are modified.
- The analysis of the level of guarantee is performed annually, or whenever it is considered necessary, in order to update according to the changes in the volume of business, or in the level of due excise duties.
- Between January 1, 2021 and March 31, 2021, the specific excise duty for cigarettes is 418.76 lei / 1,000 cigarettes.
- Both the support towers related to wind turbines, and their foundations are considered buildings.
- The taxable value of the building owned by legal entities is updated every 5 years based on a building appraisal report prepared by an authorized appraiser(the previous term was 3 years).
- It is clarified that in case of submission of the building appraisal report after the first payment term of the reference year, it takes effect starting with January 1 of the following fiscal year.
- If the value of the buildings is not specified in the documents attesting the transfer of ownership, the last value registered in the database of the fiscal body is used.
- For the advance payment for the whole year of the building / land concession duty until March 31, a bonus of up to 10% can be granted (previously the bonus was applicable only for the building/land tax).
We hereby present the main provisions of the draft Law amending the Fiscal Procedure Code.
- New situations triggering the nullity of the fiscal administrative act are provided:
- the tax authority does not present the arguments for which it does not take into account the prior opinion issued in writing or the solution adopted by the tax authority or the court, provided by the taxpayer;
- the tax authority doing the reaudit does not comply with the considerations of the decision to solve the appeal;
- the issuance of the tax inspection report and the tax decision or the decision not to modify the tax base by the tax inspection body after the lapse of the maximum duration of the tax inspection;
- the tax authority issues a tax inspection report and a tax decision in the situation in which the criminal investigation bodies are notified. Hence, an important change is that the fiscal procedure and the criminal procedure are no longer happening in parallel.
- The definition of the secondary office is amended, by excluding from its scope:
- the activities carried out by the employees at their domicile, as per the provisions of Law no. 53/2003 – Labor Code and Law no. 81/2018 on the regulation of teleworking activity;
- the locations of the beneficiaries where the taxpayer / payer carries out other activities than a construction site, a construction project, assembly or assembly or related supervision activities.
- The measure of suspending the statue of limitation during the period of the criminal investigation is introduced.
- Regarding the tax inspection / fiscal controls, the following are provided:
- in case of exceeding twice the maximum period of fiscal inspection, it ceases, and can be resumed only once, with the approval of the hierarchically superior body;
- the right of the taxpayer to be informed about any other means of proof obtained by the tax authority as a result of the actions that constituted causes of suspension, with certain exceptions, is introduced;
- the possibility of requesting the re-verification of certain types of tax obligations by the taxpayer is introduced, under certain conditions, for example when the taxpayer cannot rectify its tax statements;
- a minimum period of 3 working days is introduced for establishing the final discussion from the date of communication of the draft tax inspection report (5 working days for large taxpayers).
- new provisions are introduced related to the results of the anti-fraud control, such as the fact that the report is a means of proof and also the introduction of the taxpayer’s right to express its point of view on the findings within 5 working days from communication.
- Provisions regarding the settlement by compensation in the case of the fiscal group constituted in the field of corporate income tax (as per the new provisions of the Fiscal Code), similar to those applicable in the case of the fiscal group constituted for VAT purposes are introduced.
- Special provisions are introduced regarding the refund of the dividend tax.
- The following amendments are made regarding the non-declaration penalty:
- the obligation of the taxpayer to request the reduction of the non-declaration penalty (by 75%) is eliminated, the obligation to ascertain the fulfillment of the conditions established by law for granting the reduction now falling to the fiscal body;
- the fiscal body will be deprived of the right to apply the non-declaration penalty in the absence of the mention of its application in the Fiscal Inspection Report;
- the non-declaration penalty shall also apply to regularization decisions issued as a result of the subsequent customs control procedure (for customs duties arising after the date of entry into force of this amendment).
- A limitation period of 5 years is established for the taxpayer’s right to request interest for the amounts to be refunded from the budget.
- New provisions on guarantees are introduced, especially for taxpayers who benefit from the procedure rescheduling tax liabilities.
- The competence for resolving the appeals formulated against the debt titles as well as against other fiscal administrative acts issued by the central fiscal body, is taken over from ANAF by the Ministry of Public Finance, through the specialized structure for resolving appeals within the Ministry of Public Finance.
- The possibility of re-examining the decision issued in resolving the appeal, at the request of the taxpayer, under certain conditions, is introduced, such as the subsequent settlement of a similar case by the Court of Justice of the European Union.