Recovering from the crisis: Halfway there
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Noiembrie 2011 |
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GABRIEL SINCU - Partner, Head of Tax & Outsourcing Services
MAZARS ROMÂNIA S.R.L. |
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Website
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GABRIEL SINCU
Partner, Head of Tax & Outsourcing Services
MAZARS ROMÂNIA S.R.L.
Latest developments in the Romanian tax and fiscal environment.
Should the assertions according to which the world economic and financial crisis hassettled in Romania on October 1st, 2008 be actually true, it would mean that we have embarked on the fourth year of crisis. Unfortunately, the prospects to get soon rid of it are not at all optimistic. The sky of the world economy continues to be lead-like, almost black, even if a feeble sunbeam is slightly apparent here and there, lighting our faces just a little.
A famous economist has recently invited us to refresh our memory of Genesis teachings: seven years of wealth, followed by seven years of poverty. Anotheropinion leader has urged us to accept the facts as they are because the following decade will be a loss and nothing better will come earlier than 2020.
In Romania, at least, such prospects are regrettably transparent in statistical data. The information regarding the evolution of GDP (see figure 1) in the last 10 years maintains the assertion.
At the publication date of this article no information relevant for 2011 is available, but, undoubtedly, the final percentage will be close to zero. Whether above or below the line, it matters less; the problem is that, despite resounding statements and courageous measures which have been appreciated in the international economic environment, things have not been channelled into the right direction. This isbut natural, we may say, if we take into account the biblical prophecy: this is the fourth year of crisis, which should be the worst. But who can say what we should expect under such conditions, when the world economy and markets tumultuously move from one direction to another?
If we were highly reasonable, in spite of the commendable words received by our executives from international institutions, we should say that the measures which the executives have taken have been rather desperate, without hinting at any preliminary preparation or analysis, pursuing only to balance the budget at once, by cutting down on State employees’ salaries and increasing the VAT rate. It has happened just like in the case of a car driver who could no longer activate the brakes and, to avoid falling down the precipice, decided to sacrifice the right side of his car, bumping it into the stone wall nearby: the disaster was avoided but the car was seriously damaged and needed repairs.Unfortunately, it is precisely these repairs that have not been done and our vehicle, called the national economy, crawls slowly, without any clear destination, waiting for a trailer pulled by a truck to move it faster, but, as it has its own problems, such trailer is late and seems to never come...
Under such conditions, three large categories of measures should be undertaken, which might have beneficial effects:
- Basic restructuring of public administration; better said: putting an end to the misappropriation of public funds.
- Massive investment in infrastructure, preferably by obtaining funds from European structures. Such measure would immediately impact on and stimulate consumption about which everybody has a say.
- Definition of a clear and ambitious fiscal strategy wherefrom we should not depart.
And so we can approach the subject proper of this article. Given the fact that ever more voices can be heard from Brussels claiming tax consolidation at a EU level, the tax measures taken in Romania in the years of crisis have been, as pointed out above, unreflective, awkward and reactive rather than proactive. The ideas of encouraging microenterprises or attracting foreign capital have remained solely in writing, the only memorable things being mumbles, of which the reference to the introduction and annulment of the minimum tax is the most representative.
For 2012 the Tax Code seems to lack too many surprises, as the amendments made thereto in summer this year are applicable from its beginning and are apparent rather than substantial. This will certainly be so, if no unexpected emergencyordinance on tax issues is released when winter holidays are nearing, which may revolutionise a lot of principles and concepts.
But what is new in the Romanian tax legislation?
The legislative act whereby the Tax Code has been amended and supplemented in summer this year is Government Ordinance No. 30/2011 (the “Ordinance”). The major amendments contained therein refer to the following:
Title I – General Provisions
New provisions have been introduced regarding fiduciary operations. All provisions referring to fiduciary transactions become applicable when Law No. 287/2009, regarding the Civil Code, as republished, comes into full force and effect.
The provisions referring to the registration with the relevant tax authorities of services agreements concluded between residents and non-residents, which may generate a permanent establishment at provider’s level have been supplemented.
The provision concerning the validity of transactions with inactive taxpayers has also been supplemented; such provision comes into force fifteen (15) days after the publication of the Ordinance in Monitorul Oficial.
Title II – Profit Tax
The Ordinance defines the manner in which fiduciary contracts should be taxed.
Mention is made of the tax treatment of expenses made by taxpayers in relation to the tangible fixed assets pertaining to the public domain or to territorial administrative authorities, which have been received under concession/administration agreements. Such provision becomes effective three(3) days after the Ordinance has been published in Monitorul Oficial.
The Ordinance also introduces provisions regarding the taxation of associations having legal personality in a state other than Romania.
The income obtained by non-residents in Romania from real property or from the sale / assignment of securities may be declared and paid only by their authorised representatives.
The Ordinance provides that, starting January 1st, 2013, economic operators other than credit institutions may choose to pay their annual profit tax in advance bymaking quarterly payments, each payment amounting to one-fourth of the tax paid the previous year, which should be updated by the inflation index. Starting January 1st, 2012, the deadline for the submission of the annual profit tax return will be modified.
