Legal & Tax Updates

Tax Flash No. 23/2013

Emergency Ordinance 102/2013 regarding the amendment of the Fiscal Code and the regulation of certain financial and fiscal measures was published in the Official Gazette 703/2013

Please find below the main amendments and completions:

Corporate Income Tax

• Taxpayers which as per the accounting regulations have opted for a financial year different from the calendar year, may also opt for the fiscal year so as to correspond with the financial year. In this respect, provisions on the computation, declaration and payment of the corporate income tax owed by these taxpayers are introduced
• Certain provisions are introduced in order to encourage the regime specific to holding companies. Thus, the following types of revenues are included in the category of non – taxable revenues:
  • dividends received from a Romanian legal entity or a foreign legal entity established in a non-EU country with which Romania has concluded a double tax treaty;
  • income from the sale of participation titles held in a Romanian legal entity or a foreign legal entity established in a state with which Romania has concluded a double tax treaty;
  • income from the liquidation of another Romanian legal person or foreign legal entity established in a state with which Romania has concluded a double tax treaty

The main conditions for the application of these exemptions refer to a minimum holding of 10% of the share capital for an uninterrupted period of 1 year.

• The Ordinance amends to 1 year the condition regarding the holding period of the capital in case of dividends received by a Romanian parent company from its subsidiary located in a Member State and in case of dividends received by the Romanian permanent establishments of foreign legal entities from other Member States, that are distributed by their subsidiaries located in Member States, as well as in the case of dividends paid between Romanian legal entities
• The amounts related to sponsorship expenses that were not deducted from the owed corporate income tax, will be carried forward during the following 7 years
• The right to carry forward interest expenses and net losses from foreign exchange differences in case of reorganisation operations (e.g. merger, spin-off) is introduced

Income Tax

• Amendments are brought in respect of deductibility limitation of the interest expenses incurred by persons who derive income from independent activities
• As regards salary income, the Ordinance introduces provisions allowing the deduction from the gross income of the mandatory social security contributions due under EU provisions or conventions / agreements regarding the coordination of social security systems
• Clarifications are brought according to which advertising materials, brochures, samples, bonus points granted to stimulate sales do not represent taxable income from prizes
• The Ordinance introduces provisions for determining the taxable income basis in case of individuals resident in an EU Member State or in a State from the European Economic Area (“EEA”). As per these provisions, an individual resident in an EU Member State or an EEA state has the same deduction rights as the resident individuals, when determining the basis for the taxable income derived from Romania
• In case of income derived from abroad, that is similar to the income derived from Romania, qualified as non-taxable as per the Fiscal Code, the fiscal treatment is similar to the one applicable to the income derived from Romania

Microenterprises Income Tax

• The Ordinance amends the conditions for the qualification as a microentreprise in the sense that more than 80% of the total income should be derived from activities other than consultancy and management
• Amendments regarding the computation of the taxable basis are introduced

Withholding Tax

• The scope of the provisions of Directive 2011/96/EU regarding dividend payments and Directive 2003/49/EC regarding interest and royalties payments is limited only to EU states, the EFTA states (Iceland, Liechtenstein and Norway) being excluded
• The exemption provided in Directive 2011/96/EU will apply in case of shareholdings of minimum 10% held for a period of at least one year (before the amendment, the minimum holding period was of two years)

VAT

• The insurance recharged at cost effected by the lessor within a leasing agreement, when the lessor insures itself the good, is not subject to VAT
• Clarifications are brought regarding the adjustment of the taxable base in case of total or partial annulment of the agreement for the supply of goods/services, before their performance, for which advance invoices were issued
• Clarifications are brought regarding the application of the VAT exemption for the vessels used for navigation on the high seas
• The condition according to which the VAT requested for refund by non-resident taxable persons, in accordance with the provisions of the 9th or 13th VAT Directive, is paid to the suppliers of the goods/services, is removed
• The list of goods (inclusive capital goods) for which no adjustment of the VAT initially deducted shall be performed, is extended. In this respect, the lost, destroyed and stolen goods duly proved by the taxable person are specifically mentioned. In case of stolen goods, the adjustment of the deducted VAT shall not be performed providing that there are available documents issued by judiciary authorities, being thus removed the obligation of presenting the final court decision
• Provisions according to which no VAT adjustment shall be performed in respect of the acquisitions of capital goods subject to 50% limitation of the VAT deduction right, are introduced

Excises

• The sale of cigarettes to individuals at a price lower than the declared retail price is forbidden
• It is clarified that when applying the reduction of the guarantee, the resulting guarantee cannot be below 6% of the related excise duties
• It is forbidden to sell with a premium any products which are subject to marking with excise stamps or bands (fermented beverages other than beer and wine, intermediate products and alcohol and tobacco)
• If the exchange rate set on the first working day of October of the previous year, published in the Official Journal of the European Union, is lower than the exchange rate set on the first working day of October of the year preceding the previous year, the RON value of the excise and tax on crude oil shall be established by using the exchange rate set on the first day of October of the year preceding the previous year, indexed by the annual average of the consumer price index (for 2014 this average is 104.77%)
• The excise duty level for the following excisable products is established as follows:
  • leaded gasoline (637.91 euro/ton, respectively 491.59 euros/1,000 liters);
  • unleaded gasoline (557.91 euro/ton, respectively 429.59 euro/1,000 liters);
  • diesel (473.85 euro/ton, respectively 400.395 euros/1,000 liters);
  • lamp oil (kerosene) – used as motor fuel (557.39 euro/ton, respectively 445.91 euros/1,000 liters)

Tax on Constructions

• The tax on constructions is introduced and the reporting and payment rules are established thereof
• The tax is computed by applying a rate of 1.5% on the book value of the constructions existing in the patrimony as of 31 December of the previous year minus, among others, the value of the buildings, including the value of the reconstruction, modernisation and consolidation works for which building tax is due
• Taxpayers are required to compute and declare the tax on constructions by 25 May of the year for which the tax is due
• Payment will be made in two equal installments by 25 May and 25 September
• The expense with the tax on constructions is deductible from a corporate income tax perspective

Mining Royalties

• Mining royalties are generally increased by 25% (50% for noble metals). The increased levels apply from the date of the entry into force of this Emergency Ordinance, to all licenses / permits (holders of permits / licenses and the competent authorities are required to conclude additional acts in line with the new provisions, within 90 days from the entry into force of the Ordinance)

The above provisions shall enter into force as of 1 January 2014.