Romania: Amendments to the Fiscal Code

Long awaited tax changes have been finally approved and published after years of discussions between private companies and Romanian authorities. Laws no. 295 and no. 296 published in the Official Gazette on 21 December 2020 bring numerous changes to tax legislation. The most important of these are as follows.

I. Amendments to the Fiscal Code

1. Corporate income tax

• Fiscal consolidation allows companies that belong to the same tax group to compensate profits gained by companies with losses incurred by other companies. This facility allows group companies to use the loss in real time. The group’s consolidated fiscal result is calculated quarterly/annually, cumulated from the start of the fiscal year. Each member of the consolidated group is obliged to prepare the transfer pricing file;
• Adjustments for receivables impairment become fully deductible under the same conditions, eliminating the current 30% threshold;
• Sponsorship amounts that are reimbursed in a different year than the one in which they were granted are added as a difference to be paid to the corporate income tax due in the year/quarter when the amounts are reimbursed;
• Expenses related to the depreciation of electronic fiscal cash registers are not deductible (however, the old rules related to the deduction of their costs are maintained).
• Expenses related to employees working from home are deductible for corporate income tax computation.

2. Microenterprises

• Dividends received from a Romanian legal entity are not included in the taxable base;

3. Income tax and social insurance

• The limitation of EUR 400, equivalent in RON for non-taxable health insurance premiums is granted per each individual;
• For salary tax and social insurance computation, the amounts that are granted to employees working from home for expenses related to their work are not taxable up to a threshold of RON 400/month. Supporting documents are not necessary, but the thresholds must be regulated in employment contracts or company policies.
• The costs of epidemiological testing and/or the vaccination of employees to prevent the spread of diseases that endanger the health of employees and the public are not considered taxable income for salary tax computation.
• Expenses regarding the depreciation of personal assets used for the exercise of independent activities are not deductible for income tax computation;
• For employees of microenterprises or entities that apply a specific tax system, the use of a car is not taxable for salary tax and social insurance computation, regardless of the limitation of 50%, as it is the case for employees of corporate income taxpayers;
• The deadline for submission of the annual individual tax return is extended from 15 March to 25 May.

4. VAT

• No effective payment is to be made to customs for imports performed by taxable persons registered for VAT purposes if they, for example (i) have obtained a deferred payment certificate and (ii) have conducted imports in the last 6 months preceding the month in which they request the certificate, with a total value of at least RON 50 million, except for products subject to harmonised excise duties and (iii) they do not have any outstanding tax liabilities;
• The VAT base may be adjusted if the counter value of goods delivered or services supplied to individuals that is not collected within 12 months from the payment deadline or, in its absence, from the invoice date. The adjustment may be performed within a maximum of 5 years starting on 1 January of the year following the year of the payment deadline. The adjustment is allowed only if it has been proven that commercial measures have been taken for the recovery of debts up to RON 1,000 or that legal proceedings have been undertaken for the recovery of claims higher than RON 1,000;
• The threshold for application of the 5% reduced VAT rate for sales of housing is raised to EUR 140,000 from RON 450,000 (approximately EUR 94,000);

II. Amendments to Fiscal Procedure Code

• Administrative appeals are to be resolved by a specialised structure within the Ministry of Finance, thus allowing a more objective approach since until now they were resolved by the tax authorities against which the appeal was submitted;
• The decision issued in resolving the administrative appeal may be re-examined in specific cases at the request of the taxpayer by the competent resolution body, e.g. if a positive precedent appears (a contrary decision issued by the Court of Justice of the European Union, the Central Tax Commission, the High Court of Cassation and Justice) or if certain legal provisions which would have fundamentally changed the solution adopted were not taken into consideration;
• The risk category of each taxpayer will no longer be available on the tax authorities’ website;
• Individuals engaging in independent activities will guarantee the tax debts that cannot be covered by business property with their personal property
• New situations are being introduced under which a fiscal administrative act may be annulled;
• Special provisions regarding the reimbursement of tax for interim dividends paid are being introduced;
• Clarifications regarding the completion of antifraud investigations are being introduced, such as the possibility for the taxpayer to submit a point of view on the the conclusions of the antifraud investigation.