Tax alert no. 8 – Government Emergency Ordinance no. 19/ March 29, 2019
In this issue:
The Government Emergency Ordinance no. 19 / 29 March 2019 for the amendment and completion of certain normative acts.
On 29 March 2019, the Government Emergency Ordinance no. 19, through which amendments are brought to various normative acts, was published in the Official Gazette no. 245. We have summarized below some of the main tax related aspects introduced by OUG 19.
Financial assets tax
The Emergency Ordinance brings a number of amendments to the financial assets tax introduced by GEO 114/2018. Among the most important of these amendments, we mention the following:
Amendments in respect of the tax computation method and the categories of financial assets included in the tax base
Unlike the original version introduced by GEO 114/2018 (which provided a differentiated tax rate based on the ROBOR quarterly average), the assets tax shall be computed by applying to the tax base the rate of:
- 0.4% per year, in case of banking institutions that hold a market share higher or equal to 1%, respectively
- 0.2 per year, in case of the other banking institutions.
The tax base on which the tax rate is applied shall be represented by the net financial assets of the banking institutions existing the end of the semester, respectively of the year for which the assets tax is due. The GEO specifically defines the term of net financial assets (as well as other terms used for the purpose of assets tax, such as: market share, interest spread, lending growth target, interest spread reduction target, etc.), specifying the categories of financial assets included in the tax base.
Certain categories of financial assets shall not be included in the tax base, such as: cash, loans granted to credit institutions and deposits at credit institutions, loans and advance payments granted to public administrations or debt instruments issued by public administrations, etc.
Possibility to decrease the financial assets tax
The GEO 19 introduces provisions related to the possibility to decrease the financial assets tax – namely:
- decrease by (up to) 50% of the tax, further to the financial intermediation growth, by increasing the balance of the loans granted to non-financial companies and the population households (compared to the lending growth target, as defined by the Ordinance);
- decrease by (up to) 50% of the tax, further to the interest spread reduction (by reporting to the interest spread reference or to the interest spread reduction target).
The previously mentioned indicators shall be established on an annual basis through a Government Decision. For 2019, the lending growth target is of +8%, the interest spread reduction target is of -8%, and the interest spread reference is of 4%.
Amendment of the tax reporting and payment deadline
The assets tax, computed based on the financial indicators for the first semester of the year for which the tax is due (and by reference to half of the target levels for the lending growth target and the interest spread reduction target) shall be declared and paid until August 25 of the year for which it is due.
Subsequently, the amounts resulting from the tax computation based on the financial indicators determined at the level of the year (for which it is due) shall be declared by 25 August of the year following the one for which the tax is due (this being also the payment deadline for the additional amounts due as compared to the ones due at the level of the first semester). The possible differences in minus shall be refunded or compensated according to the Tax Procedure Code.
The tax is not due or declared at the level of the first semester in case the lending growth target or the interest spread reduction target is 100% met, respectively if the aggregate percentage level of the lending growth and of the interest spread reduction is at least 100%.
Also, the credit institutions registering an accounting loss (before the assets tax computation, at the end of the semester, respectively of the year for which it is due) shall not be subject to the tax. In case the tax due exceeds the level of the registered accounting profit, the tax shall be limited to the latter level.
Amendments to the Law on Electricity and Natural Gas and to the Emergency Ordinance on the organization and operation of ANRE
The Government Ordinance no. 19 brings amendments with impact on the Law on Electricity and Natural Gas no. 123/2012, as well as on the GEO no. 33/2007 on the organization and operation of ANRE. Among the amendments, we mention:
- The 2% annual contribution charged from the license holders in the electricity and gas sectors shall not apply to holders of licenses related to the commercial exploitation for coal-based electricity production capacities, and neither the ones for the electricity and thermal energy production in cogeneration. The annual contribution charged from the holders of these licenses shall be established annually by order of the ANRE president.
- Producers’ obligation, including of their subsidiaries and / or affiliates belonging to the same economic interest group, carrying out extraction and sales activities in respect of the natural gas extracted from the territory of Romania, of selling at the price of 68 lei / MWh the natural gas quantities resulted from the current domestic production activity shall apply for the period 1 May 2019 – 28 February 2022 and refers only to the sales to the suppliers for household customers and thermal energy producers, only for the natural gas quantity used for the production of thermal energy in cogeneration power plants and in thermal power plants for household consumption;
- For the computation of transport and distribution tariffs for electricity and natural gas, for the regulatory period 2019 -2024, the rate of return on invested capital, expressed in real terms, before tax is of 6.9%.
Amendments to Law no. 159/2016 on the physical infrastructure of electronic communications networks and on the establishment of measures to reduce the cost of installing communications networks
Applying the fine of up to 10% on the turnover applicable to the providers of electronic communications networks which conclude contracts for the installation, maintenance, replacement of the electronic communications networks and of infrastructure elements required to support them or performing property access works, without the right of access or in the absence of the construction authorization has been suspended until 1 September 2019.
Amendments to Law no. 411/2004 on privately managed pension funds
It has been suspended until 31 May 2019 the applicability of the new provisions introduced by GEO 114/2018 on the minimum share capital required to manage a pension fund (according to the initial provisions introduced by GEO 114/2018, 50% of the minimum required share capital, updated according to the new provisions, should have been paid until 30 June 2019). During the suspension, the minimum share capital required is EUR 4 million.
Alexandru Mândru, Tax Manager
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