Latest Developments in Taxation
 |
Noiembrie 2010 |
 |
GABRIEL SINCU - Partner, Head of Tax & Outsourcing Services
MAZARS ROMÂNIA S.R.L. |
Adresa
Strada Economu Cezărescu, Nr. 31B
060754 Bucureşti, Sector 6
Telefon
+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.
Motto:
"A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain." (Robert Frost)
Although this article deals with tax issues, Robert Frost's words are highly appropriate for the times in which we are living as, looking at the 2008 – 2010 period, we can see that such conduct has been displayed not only by financial institutions in the credit process but also by the Romanian Government in respect to its taxation policy. Nonetheless, if banks, owing to the nature of their business, may act so (i.e. granting cheap loans in times of economic growth and expensive loans during economic depression), the Executive should not do the same because they are supposed to mitigate the negative effect of economic cycles.
Unfortunately, the latest developments in taxation are a telling proof of this fact, confirming it 100%: most of the tax regulations issued until October 2008 pursued to stimulate investment and economic growth (N.B.: particularly as regards the real property industry which probably benefited from the most favourable taxation regime in the European Union), while after the aforesaid period tax regulations have done nothing else but to inflict a heavy burden on companies and discourage initiatives and the investment process alike.
Prospects are rather bleak by the end of 2010 in point of taxation and the much desired economic recovery is to be long awaited. Our only hope is that others can find faster ways of revamping their economy and commence granting cheap loans to Romania helping it easier move the frail cart of the Romanian economy toward the long expected destination.
Yet, let us see what is new in the Romanian tax legislation in 2010.
Tax on profit
Government Emergency Ordinance No. 22 / 2010
According to the provisions of Government Emergency Ordinance No. 22 / 2010 which amends and supplements the Tax Code, published in Monitorul Oficial al României No. 201 / 30 March 2010, the application of the system of prepayments for the annual profit tax due by taxpayers other than banks which are Romanian legal entities and the Romanian branches of banks which are foreign legal entities has been postponed until January 1st, 2012.
The Ordinance also makes specific references to the method of calculation, declaration and payment of the minimum tax. In this respect, the taxpayers that emerged during the previous year and had no obligation to pay the minimum tax but recorded tax loss by the end of such year shall make quarterly prepayments, on the account of the profit tax, tantamount to one-fourth (1/4) of the annual minimum tax, which should be recalculated accordingly for the taxable period of the year in which these taxpayers have come into existence.
Law No. 76 / 2010
Both the transactions between Romanian affiliates and the transactions between Romanian entities and non-resident affiliates shall be subject to tax authorities' control in point of transfer pricing rules and regulations. Should the tax authorities identify that the aforesaid transactions do not reflect the fair market value, such authorities may adjust transfer prices accordingly.
On the other hand, new provisions are introduced regarding the exemption of taxpayers undergoing insolvency or dissolution proceedings from the payment of the minimum tax.
Taxation of microenterprises
In 2010, Title IV – Tax on Microenterprises' Income has been abrogated. Starting this year, microenterprises shall pay the regular tax on profit similar to all the other companies operating in Romania.
Value Added Tax
The rules for the determination of the place of delivery of services have been amended. New elements have been added to the terms on which VAT becomes due and payable, to the taxation base, to the VAT exemptions related to operations performed inside the country and special exemptions in the case of international movement of goods.
Clear references are made to the procedure for VAT refund to taxable entities that have not registered for VAT purposes in Romania and to VAT refund by other Member States to taxable entities established in Romania.
Taxpayers' right of VAT deduction over a period spanning five (5) consecutive years is specifically regulated, i.e. starting January 1st of the year following the year in which such right emerges, even after tax control, provided that the VAT contained in the acquisition invoice was due and payable in the period subject to inspection.
The VAT standard rate has been increased from 19% to 24%
A new article is added with reference to the creation and organization of the Register of Intra-Community Operators starting August 1st, 2010, which contains all the taxable entities and the non-taxable legal entities performing intra-Community operations.
The entities that have already registered for VAT purposes, intending to perform intra-Community operations as of August 1st, 2010, must apply for their registration in the Register of Intra-Community Operators, before performing any such operations.
The entities that are not recorded in the Register of Intra-Community Operators shall be deemed to have no valid VAT registration number for intra-Community operations even if they have registered for VAT purposes.
Tax on buildings
As an outcome of the latest amendments, starting July 1st, 2010, the tax which should be paid by natural persons owning two or more buildings has increased: by 65% if the taxpayer owns another building, apart from the building representing his/her domicile; by 150% if the taxpayer owns a second building besides the building representing his/her domicile and by 300% if the taxpayer owns a third and other buildings, exclusive of the building representing his/her domicile.
The buildings acquired by legal succession shall not be subject to such provisions.
Of all legislative changes brought this year, Governement Ordinance No. 58 / 2010, published in Monitorul Oficial al României No. 431 of 28 June 2010, and Governement Ordinance No. 82 / 2010, published in Monitorul Oficial al României No. 638 of 10 September 2010, have been subject to longest debates.
Some of the most important amendments contained in the aforesaid Ordinances refer to the following:
Governement Ordinance No 58 / 2010
1. Tax authorities may reclassify any activity as being a dependent activity, provided that at least one of the conditions set out by the Ordinance is met. When an activity is reconsidered to be dependent, the income tax and the mandatory social security contributions, determined in compliance with law, shall be recalculated and paid accordingly by both the income taxpayer and the income beneficiary.
2. With reference to the salary-related rights of July 2010, the taxable salary income shall also include the following amounts / salary-related rights granted to employees:
- gift vouchers granted in compliance with law
- childcare vouchers offered in accordance with law
- vacation vouchers granted under law
- meal tickets offered in accordance with law
- compensatory payments granted in compliance with law
The legal provisions of special laws, regarding exemption from the payment of compulsory social security contributions, continue to be in force.
3. Credited interest is no longer considered non-taxable and a 16% tax rate shall be applied to the income obtained from such interest on: sight deposits / current accounts, term deposits, deposit certificates and other saving instruments, created as of July 1st, 2010, at banks and other credit institutions authorised to operate in Romania.
4. The calculation basis of social security contributions in the case of professional income other than salary-related income has been limited to five (5) gross average salaries per the national economy used for the substantiation of the social security fund.
Governement Ordinance No 82 / 2010
The Ordinance abrogates the Norms for the application of Art. III of Government Emergency Ordinance No. 58 / 2010 and regulates the method for the calculation, declaration and payment of individual contributions related to professional income. The criteria regarding the reclassification of independent activity to dependent activity are also amended.
Other amendments
1. Certification of the profit tax return by a tax consultant
In compliance with Art. 83 (5) of Government Ordinance No. 92 / 2003, regarding the Tax Procedure Code, the annual tax returns of taxpayers that are legal entities shall be certified by a tax consultant, as provided under law, excepting those for which auditing is mandatory.
According to the written responses received from the Ministry of Finance, as well as to the informal conversations with this Ministry's representatives, the aforementioned provision applies to annual profit tax returns, i.e. Form 101, which should be submitted after January 1st, 2010, including, therefore, the 2009 profit tax return. The exception from certification does not apply to the legal entities which opted for auditing, although they are not obligated to have their financial statements audited.
2. Preparation of annual financial statements by entities that have chosen a period of account differing from the calendar year, according to accounting Law No. 82 / 1991
Only branches established in Romania by foreign legal entities, subsidiaries of foreign companies or subsidiaries of subsidiaries pertaining to foreign parent companies may choose a period of account differing from the calendar year. Romanian entities are not allowed to modify the fiscal year when they are obligated to prepare and submit their tax returns (January 1st – December 31st).
