Tax alert 4 - Law 30/2019 for the approval the Government Emergency Ordinance no. 25/2018
· Corporate income tax
Deductibility limitation of interest and of other costs economically equivalent to interest
Taxpayers can deduct, during a fiscal period, the exceeding borrowing costs up to the deductible limit of the RON equivalent of EUR 1,000,000 (instead of EUR 200,000).
Furthermore, the difference between the exceeding borrowing costs and the deductible limit of EUR 1,000,000 may be deducted in the fiscal period in which it is incurred, up to 30% (instead of 10%) from the computation base.
At the same time, clarifications are brought regarding the right to carry over the exceeding costs for taxpayers in case of merger and spin-off operations.
The above provisions are applicable starting from 1 January 2019, respectively starting from the first day of the modified tax year beginning after 1 January 2019.
Starting from 1 April 2019, taxpayers performing sponsorship actions for non-profit legal entities, including cult units, will be able to deduct the related amounts from the corporate income tax liability within the limits provided by the Tax Code, only if the beneficiary of the sponsorship is included, at the date of the conclusion of the contract, in the Register of cult entities / establishments for which tax deductions are granted.
The Register of cult entities / establishments for which tax deductions are granted is organized by NATA, it is public and is displayed on the NATA’s site.
Expenses with limited deductibility
Starting with 1 January 2019, the category of social expenses that can be deducted within the limit of up to 5% applied to the value of employees’ salary expenses will include also cultural vouchers.
The declaring and payment of the corporate income tax
Clarifications are brought regarding the advanced payments for the annual corporate income tax advanced reporting and payment system, with advanced quarterly payments, for taxpayers who were taxpayers on income derived by microenterprises in the previous year.
· Tax on income derived by the micro-enterprises
A new category of income which is deducted from the tax base of micro-enterprises is introduced, namely the income from adjustments for expected losses related to the financial assets set-up by Romanian legal entities which carry out activities in the banking, insurance, reinsurance and capital markets industry, which were non-deductible expenses for the computation of the taxable profit or were set-up during the period in which the Romanian legal entity was subject to the tax on income derived by micro-enterprises.
Also, amendments are introduced regarding the deadline for submitting the informative statement regarding the beneficiaries of sponsorships.
The provisions on sponsorship actions performed by microenterprises have been aligned with those applicable to the corporate income tax regime. Thus, starting 1 April 2019, microenterprises can deduct the amount of the sponsorships from the tax according to the provisions of the Tax Code, only if the beneficiary of the sponsorship is included, at the date of conclusion of the contract, in the Register of cult entities / establishments for which tax deductions are granted.
· Income tax and social security charges
The provisions of the Tax Code are amended by introducing the income from virtual currency transfer as income from other sources. In this respect, the law provides as follows:
- the gain from the virtual currency transfers is determined as the difference between the selling price and the acquisition price including the transfer related costs;
- the gain below RON 200/transaction is not taxable if the total annual transfer gains do not exceed the amount of RON 600.
The law amends the provisions of the Fiscal Code with respect to the possibility of the taxpayers to redirect 2% from the annual income tax to support non profit entities which are established and function under the law and cults, as well as for private scholarships, provided by the law.
According to the new provisions, the taxpayers may decide to redirect 3,5% from the income tax due to support not for profit entities which are established and function under the law, and cults, as well as for private scholarships, provided by the law.
Also, taxpayers who obtain income from abroad of the same type as the Romanian sourced income which may be the subject to 3.5% redirection of the income tax due, have the right to redirect 3.5% of the income tax made abroad, due in Romania, after the fiscal tax credit deduction.
· Value added tax
It was limited to 5 years the period during which the VAT adjustment related to the supply of goods / services is allowed for a client that:
- applies a reorganization plan confirmed a court decision through which the debt is changed or removed;
- has declared bankruptcy;
This period starts from the 1st of January of the year following to the one during which the reorganization plan was approved or bankruptcy was decided. By exception, where the bankruptcy was declared before 1st of January 2019, but the final court decision has not been issued, the adjustment is allowed within 5 years from the 1st January 2019.
The conditions for applying the reduced VAT rate of 5% for the acquisition of houses were changed as follows:
- the condition regarding the maximum limit of 250 sqm of the land area, including the ground footprint on which the house is built, respectively of the undivided share of the land related to the house has been eliminated;
- it was eliminated the condition regarding the fact that the reduced VAT rate of 5% for the acquisition of the first house only.
· Excise duties
It was introduced the possibility to provide the security for excise duty purposes in a form of an insurance policy issued by a Registered Insurance Company in European Union or in the European Economic Space.
Camelia Stanciu – Senior Manager, Direct Taxes
Corina Mindoiu – Director, People Advisory Services
Cristina Galin – Senior Manager, Indirect taxes