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Tax alert no. 28 - August 2019

In this issue:

  The methodological norms regarding the determination of the market share, the interest margin, the net financial assets and those deducted from the taxable base, as well as the reporting of the indicators required for computation of the tax on assets

  Form 109 “Form regarding tax on financial assets”

The methodological norms regarding the determination of the market share, the interest margin, the net financial assets and those deducted from the taxable base, as well as the reporting of the indicators required for computation of the tax on assets

On 31 July 2019, in the Official Gazette no. 636 was published the Government Decision no. 542/2019 by which were approved the methodological norms regarding the determination of the market share, the interest margin, the net financial assets and those deducted from the taxable base, as well as the reporting of the indicators required for computation of the tax on assets stipulated at Art. 86 - 88 of the Government Emergency Ordinance no. 114/2018. 

These methodological norms contain provisions regarding the following aspects:

Assessment of the relevant net financial assets and the net financial assets which are deducted from the taxable base of the tax on assets

For credit institutions which are Romanian legal persons and for the branches in Romania of credit institutions from third countries:

·        identifying the relevant net financial assets stipulated at Art. 86, para. (2), b) of the GEO no. 114/2018 is performed according to the positions presented in form F 01.00 – Balance sheet “situation of the financial position”, drawn up according to NBR’s Order no. 9/2017, the correspondence between those being provided in one of the annexes of the methodological norms;

·        recognizing the financial assets which are deducted from the taxable base according to art. 87, para. (1) of the GEO no. 114/2018 is performed according to the positions presented in form F 01.00 – Balance sheet “situation of the financial position”, F 04.00 – classification of the financial assets by instruments and sectors of counterparties and F 18.00 – Information regarding the performing and non-performing exposures, drawn up accordingly to NBR’s Order no. 9/2017, the correspondence between those being provided in one of the annexes of the methodological norms;

The computation method of the market share of banking institutions

The market share represents the percentage of the assets of the banking institution in the total assets of the banking system and is calculated as a ratio between the total of the net accounting assets of the banking institution and the total of the aggregate net accounting assets for the banking system, including the branches in Romania of credit institutions which are foreign legal entities, as published on the NBR’s website.

The mechanism of reducing the tax on assets - the interest margin and the balance of loans

Computation methods for the following items are presented:

·        the weighted average of the interest rate on loans, denominated in RON, granted by a banking institution to non-financial corporations and households;

·        the weighted average of the interest rate on deposits, denominated in RON, attracted by a banking institution from non-financial companies and households;

·        the interest margin;

·        decrease in percentages of the interest margin.

Moreover, the methodological norms provide examples of calculation of the balance of loans for the computation of the interest margin, as well as for determining the increase in percentages of the balance of loans, which are relevant for determining the tax on financial assets according to GEO no. 114/2018.

Form 109 “Tax on financial assets”

Order no. 2.085 / 2 August 2019 for approval of the form and content of Form 109 „Tax on financial assets”

The order contains the template and content of the form 109 "Tax on financial assets”, which should be filed in and submitted by financial institutions, as defined at art. 86 of the Emergency Ordinance no. 114/2018.

 

Prepared by:
Răzvan Ungureanu, Senior Manager, Direct Tax
Carmen Afanasenco, Senior Manager, Direct Tax

 

For additional information, please contact:

Alex Milcev, Partner – Head of Tax&Legal

 

Ernst & Young SRL

Bucharest Tower Center Building,

22nd Floor, 15-17 Ion Mihalache Blvd.,

Sector 1, 011171, Bucharest, Romania

Tel: (40-21) 402 4000, Fax: (40-21) 310 7124

Email: office@ro.ey.com

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