Latest Developments in the Romanian Tax and Fiscal Environment
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Octombrie 2009 |
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GABRIEL SINCU - Partner, Head of Tax & Outsourcing Services
MAZARS ROMÂNIA S.R.L. |
Adresa
Strada Economu Cezărescu, Nr. 31B
060754 Bucureşti, Sector 6
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+40-31-229.26.00
Fax
+40-31-229.26.01
Website
www.mazars.ro
GABRIEL SINCU
Partner, Head of Tax & Outsourcing Services
MAZARS ROMÂNIA S.R.L.
Romania, Anno Domini 2009. Two years have passed since Romania joined the European Union and the effects of the economic and financial crisis which has affected the world economy are fully felt here as well. Despite the optimistic declarations their leaders made less than one year ago, the Romanians (and, along with them, the foreigners who have chosen to live and work in Romania) are suffering from the consequences of globalisation which has generated multifarious problems in the last few decades.
Executives throughout the world strive to find solutions to minimise the negative effects of the crisis and, as is well known, taxation is a powerful means whereby the State intervenes to adjust an upset balance, stimulate investment, encourage the affected sectors and discourage others. Lack of cash is the key problem, and the economically developed countries have entered a fierce competition to provide tax relief solutions with a view to encouraging the investors owning proper resources to make investments so that the economy can be set in motion again. Thus, they have cut down on the tax rates applicable to the profit obtained from certain activities, just as salary-related taxes and contributions, seeking even to contrive tax amnesty schemes and apply low tax rates on the profit obtained in tax havens or in countries where taxation is very low, all of this being done in an attempt to re-launch investment and boost a genuine economy.
Under such circumstances, the same has been expected to happen in Romania, a country equally faced with the problems arisen in the other European Member States. Unfortunately, the Romanian Executive has decided to swim against the current and harshen the taxation regime particularly for small and medium-sized enterprises which have anyhow borne the brunt during this period. Two of the worst measures which could have been undertaken are the introduction of the minimum tax rate and the elimination of tax deductibility of losses upon the revaluation of fixed assets. Such measures are described in detail herein below.
In addition, other fiscal measures which were approved in 2008 and were to become effective in 2009 have been ruled out. One of these measures refers to the 5% reduction of the tax due from which any taxpayer that was to pay such tax on term would have benefited. Nonetheless, this incentive stopped being implemented before becoming applicable.
It goes without saying that the Executive has also been provided with realistic proposals for measures by business circles and experts in taxation and macroeconomics. Some of such proposals refer to:
■ lower tax on wages by setting a ceiling on the social security contributions that should be paid by both employers and employees, which would lead to encouraging legal labour and substantially diminishing grey labour;
■ introduction of the standard-rate tax and value added tax on real estate transactions performed by natural entities, a measure which may become a considerable income source in the future, although for the time being it would not generate significant additional income owing to the market blockage;
■ intensified control of transfer pricing practices; as is well known, most of the firms operating in Romania prefer to transfer their profit abroad by means of transactions, the prices of which are not fair, concluded with affiliates that are active in more favourable jurisdictions (tax havens);a strict control of such transactions would be conducive to the adjustment of the taxation base and, in this manner, to the creation of a significant income source for the State Treasury;
■ steady improvement of governmental tax control bodies so as to effectively cope with and fight against tax evasion.
Should such measures which are fundamental for the surmounting of the current economic obstacles be adopted simultaneously with a severe cut on budgetary expenses, the Romanian economy could recover in no time. Unfortunately, the aforesaid proposals have been ignored because either they have not complied with the principles underlying government, or they have not been understood by the people who should have implemented them.
Consequently, the lack of foresight and obvious wish to resolve problems has led to Romania's recording one of the biggest economic downfall in the European Union in the second quarter of 2009.
But what is new in the tax legislation in 2009?
The amendments brought to the Romanian tax legislation in 2009, which are actually applicable as of their publication in Monitorul Oficial al Romaniei (the Official Gazette of Romania) refer to the following:
■ Government Emergency Ordinance No. 29/2009 which amends Law 571/2003, regarding the Tax Code published in Monitorul Oficial al Romaniei No. 194 of March 27th, 2009.
This Ordinance updates Appendix 1 to Title VII - Excise and Other Special Taxes by modifying the amount of excise taxes applicable in 2009 and 2010 to certain categories of products (fermented beverages, alcoholic intermediary goods, cigars and cigarettes). The new values of these excise taxes become effective as of April 1st, 2009.
As a matter of fact, the amendment is not essential because the excise taxes on the aforesaid categories of products were to be anyhow applicable in the second half of 2009. This legislative act has solely introduced higher excise taxes earlier than planned as a result of the stringent need to finance the State Treasury.
■ Government Emergency Ordinance No. 34, concerning the rectification of the 2009 Budget and the regulation of certain financial and tax measures, published in Monitorul Oficial al Romaniei, Part I, No. 249 of April 14th, 2009.
