Make the Most of Now - Tax and Employment Incentives, State Aid, Investment Stimulation Framework
 |
Septembrie 2008 |
 |
MIHAELA MITROI - Tax Partner
PRICEWATERHOUSECOOPERS in ROMANIA |
Adresa
Strada Barbu Văcărescu, Nr. 301-311
Cladirea Clădirea Lakeview
020276 Bucureşti, Sector 2
Telefon
+40-21-225 3000
Fax
+40-21-225 3600
Website
www.pwc.com/ro
The previous issue of the Romanian Business Digest hosted the article titled „Unlock the Potential of Your Business - the Second Year After Romania’s Accession to the EU”, a contribution of PricewaterhouseCoopers and D&B David și Baias. A key conclusion of that article has been stated in the following paragraph: “One year after Romania’s accession to the European Union the Structural and Cohesion Funds are like “the Loch Ness monster - everybody has heard about it, but nobody knows what it looks like”. This statement belongs to Donato Chiarini, the former Head of the European Commission Representation in Romania. What was missing? The list of possible answers is long and includes the delay in launching the funding opportunities and poor information at the level of the potential beneficiaries.” Half a year later, it only seems proper that we follow up on our previous statements with a review of available incentives and soon to become accessible funding opportunities in Romania.
Tax and employment incentives
Most tax and employment incentives have been abolished and phased out in compliance with demands of the EU accession process. The few advantageous tax provisions in force are, however, worth reviewing.
Tax incentives
Accelerated depreciation. Under the Fiscal Code, machinery and equipment, computers and their peripherals, as well as patents, may be depreciated by using the accelerated method. That is, up to 50% of the fiscal asset’s value may be deducted during the first year of usage, while the rest of the asset’s value can be depreciated over the remaining useful life.
Accounting revaluation recognised for tax purposes. Starting with 2007 tax year, the fixed assets revaluation pursuant to an accounting requirement is also recognised for corporate income tax purposes. In other words, if a Romanian company revalues its fixed assets at a value higher than the book value, due to the increase in their net fiscal value thus achieved, the company can benefit from increased tax depreciation, as well as a lower tax on the profits obtained through a sale of these assets. The taxable moment for these revaluations is when the related realised revaluation reserves which were previously deducted are distributed to the shareholders. Therefore, these tax provisions have the advantage that the moment of taxation can be deferred, controlled and 100% of the cash from divestment can be used for reinvestment.
Industrial parks / Scientific and technological parks. No property tax is due for buildings and constructions located in an Industrial Park. In addition, land within Industrial Parks is exempt from land tax.
Companies operating within Scientific and Technology parks benefit from various services offered by the park administrator free of charge or with reduced fees, payment in instalments, and advantageous conditions with regard to location, use of the infrastructure and communications of the park. The incentives granted for the set up and development of industrial parks include:
- lower taxes on tangible assets and land used by the park;
- exemption from specific taxes on land;
- deferred payment of VAT for materials, equipment and connection to the public utilities networks during the investment period, until the park is put into operation;
- development programmes for infrastructure, investments and equipment endowments granted by the local and central public administration, companies and foreign financial assistance;
- donations, concessions and structural funds for development.
Micro-company regime. Businesses can opt for the micro-company regime if several criteria are met:
- annual turnover up to EUR 100,000;
- between 1 and 9 employees;
- derive more than 50% of their turnover from activities other than consultancy and management.
In 2008, micro-companies are subject to tax on revenues of 2.5% applied to their annual turnover, excluding some types of income. The tax rate increases to 3% in 2009. If a micro-company fails to meet one of the criteria presented above during a year, it becomes a profit tax payer from the next year. However, by way of exception, if during a fiscal year a micro-company derives revenues higher than EUR 100,000 or the percentage of income derived from management and consultancy services equals or exceeds 50% of the turnover, it becomes a profit tax payer from the quarter in which one of the two limits are met.
