Important amendments to the Fiscal Code and the Fiscal Procedure Code

23. December 2020 | Reading Time: 5 Min

A number of important amendments to the Fiscal Code and the Fiscal Procedure Code have been published.

We present some of the more important changes below.

1. FISCAL CODE

1.1. General aspects

• The following definitions have been modified: “place of effective management”, “related parties”, “resident”, “shares”.

• A new article is introduced regarding the place of effective management of a foreign legal entity specifying (i) the way in which the fiscal residence of a foreign legal entity is established and (ii) its related fiscal obligations.

1.2. Corporate tax

• Corporate tax exemption relating to reinvested profit is granted within the limit of the amount of profit tax calculated cumulatively from the beginning of the fiscal year. This incentive does not apply in the case of purchases of cash registers for which a tax credit has been granted.

• Expenses generated by transactions performed with persons resident in a state included on the List of Non-cooperative Jurisdictions are non-deductible.

• Expenses relating to benefits granted to employees in the form of equity instruments with share settlement are non-deductible and represent elements similar to expenses incurred at the time of the effective granting of the benefits (the condition vis-à-vis taxation at the level of the employee is eliminated).

• Expenses relating to the depreciation of cash registers for which a tax credit is obtained are non-deductible.

• The 30% deductibility limitation relating to the impairment of receivables is eliminated.

• The categories of taxpayers who can absorb tax losses in reorganisation operations has been expanded.

• The system of profit tax consolidation and the concept of a profit tax group are introduced.

The fiscal consolidation regime is to be maintained for 5 years, with each member of the group having the obligation to periodically calculate their individual fiscal result. The fiscal result of the entire group will be determined by adding together the tax results of all members.

Tax losses incurred by a member before applying the consolidation regime will be recovered by that member alone.

The transfer pricing file should be drawn up by each member of the group, including for transactions with other members of the group.

1.3. Microenterprise tax

• Dividends received by a microenterprise tax payer from Romanian legal persons are non-taxable.

1.4. Personal taxation

• The value of tourist and/or treatment services are non-taxable within the limit of the average gross salary.

• Benefits in kind consisting of the personal use of motor vehicles not used exclusively to carry out economic activity by legal persons applying the tax regime for micro-enterprises or the specific tax for certain activities are non-taxable.

• Amounts granted to employees (up to a ceiling of RON 400) to help cover expenses incurred as a result of teleworking are non-taxable.

• Rental income: for rental contracts in which the rental amount is expressed as an equivalent in RON of a foreign exchange, the annual gross income is calculated using the average annual exchange rate published by the National Bank of Romania. The annual net income is determined using the exchange rate for the day preceding that on which the unique tax return is submitted.

• The incentive comprising a reduction in social insurance contributions/exemption from the payment of health insurance contributions applicable to the construction field is to be applied regardless of the legal relationship that generates the income.

• The new deadline for submitting the unique tax return is 25 May.

1.5. Withholding tax

• The tax rate on certain types of income (e.g. interest payments, royalties, etc.) obtained by individuals resident in the EU/states with which Romania has concluded a double taxation agreement is reduced to 10%.

• The new deadline for submitting the annual informative declaration is the last day of February.

1.6. Value added tax

• The turnover ceiling for VAT upon collection is increased to RON 4.5 million.

• It is possible to adjust VAT for uncollected receivables from individuals under certain conditions.

• VAT on alcohol and tobacco purchases made for advertising or marketing purposes can be deducted.

• It is allowed to deduct VAT on purchase invoices received late, during the statute of limitation period, including in the event of cancellation of the subsequent verification as a result of a tax inspection. In addition, if the supplier issues correction invoices at its own initiative, the VAT can still be deducted, even if the statute of limitation period has expired.

1.7. Local taxes

• Wind turbine foundations are subject to taxation

• The revaluation of the buildings owned by legal entities is to be carried out at 5-year intervals

Source: Law no. 296/2020 on the amendment and supplementation of Law no. 227/2015 regarding the Fiscal Code

 

2. TAX PROCEDURE CODE

• Taxpayers without fiscal domicile in Romania may communicate with the tax authorities by remote means of communications, no longer having the obligation to empower a person with fiscal domicile in Romania in order to submit tax returns.

• New situations are introduced in which the fiscal administrative act is considered null, such as when the tax office does not present the arguments based on which it decided not to take into consideration the previous opinion or the solution previously adopted by another fiscal body or court.

• The taxpayer may, for justified reasons, extend or modify a deadline provided for in the fiscal legislation with respect to the fulfilment of certain obligations (by order of the Minister of Public Finance).

• The fiscal identification code can be also used by taxpayers in order to fulfil fiscal obligations relating to periods prior to the date of their tax registration.

• Clarifications are introduced with respect to activities that do not trigger secondary offices.

• If a tax inspection has begun and there then occurs the dissolution of the entity or the death of the individual, the tax inspection will continue with the successors of that person (where they exist); otherwise, the tax inspection ceases.

• The taxpayer is entitled to be informed about any other evidence obtained by the tax authority as a result of the actions taken that constituted the cause for the suspension of the tax inspection

• The taxpayer may challenge the decision of the tax authorities to suspend the tax inspection.

• The taxpayer is entitled to ask the tax inspection body to re-check certain types of tax obligation for a given taxable period (provided certain conditions are met).

Source: Law no. 295/2020 on the amendment of Law no. 207/2015 on the Tax Procedure Code, as well as the approval of certain fiscal-budgetary measures

Tax Flash 23 December 2020
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