Tax incentive measures for the increase of equity
In this issue:
Government Emergency Ordinance (GEO) no. 153/2020 on tax incentive measures for the increase of equity, as well as amending some normative acts
The Ordinance introduces the following main changes:
- Clarifications regarding the application of the bonification granted for the payment of the corporate income tax (‘CIT’);
- Modification of the terms for filing and paying the corporate income tax, the micro-enterprise tax and the specific tax;
- Granting tax reductions to stimulate the maintenance and growth of equity.
These provisions are detailed below:
I. Clarifications on the application of bonification granted for the payment of corporate income tax
- Clarifications are provided regarding the completion of the annual CIT – for the preparation of the annual income tax return, the bonification computed for the first, second and third quarters of 2020 according to GEO 33/2020, is deducted from the value of annual CIT, within the amount of profit tax due;
- It is clarified that the bonification is also granted for the CIT due quarterly/quarterly advance payment, which is settled with the CIT recoverable from the previous fiscal years;
- Last but not least, it is mentioned that those taxpayers who have not applied the profit tax bonification for the quarters for which they have already submitted the declarations can also benefit from the bonification by submitting a rectifying declaration;
- Clarifications are also brought for the application of the bonification for taxpayers with a fiscal year different from the calendar year.
Amendment of the terms for filing and paying CIT, micro-enterprise tax and specific tax on certain activities
Starting with 2021, the terms for declaring and paying CIT, micro-enterprise tax and the specific tax are amended, as follows:
- The deadline for submitting the annual income tax return will be until June 25 inclusively of the following year, respectively until the 25th inclusively of the sixth month from the end of the amended fiscal year for taxpayers with modified fiscal year;
- The deadline for submitting the declaration for the fourth quarter for the micro-enterprise tax will be until June 25 inclusively of the following year;
- The deadline for submitting the declaration for the second semester for the specific tax will be until June 25 inclusively of the following year.
II. Granting tax reductions to stimulate the maintenance and growth of equity
- Tax reductions of up to 15% are granted for taxpayers paying CIT, micro-enterprise tax or specific tax in the period 2021-2025, as follows:
- 2%, if the value of accounting equity in the year for which the tax is due is positive and at least half of the value of the subscribed share capital;
- between 5% and 10% for annual increases in adjusted equity, depending on the increase percentage (provided that equity is at least half of the value of the subscribed share capital). The adjusted equity includes: the subscribed share capital, the patrimony of the directorate/public/private, capital premiums, statutory legal reserves or other reserves constituted from the net profit, the credit balance of the carried forward net result.
- 3% starting with 2022, if the taxpayer registers increases of the adjusted equity compared to 2020.
- The reductions are cumulated, so that in 2021 a taxpayer can obtain a maximum discount of 12% and starting with 2022 a maximum discount of 15%.
- These provisions do not apply to taxpayers for whom the accounting regulations are issued by the National Bank of Romania, respectively by the Financial Supervisory Authority (for example banks, NFIs, insurance brokers, pension funds).
Separately, in addition to these main changes, the Ordinance introduces the following changes:
- The monthly and occasional draws of the Fiscal Lottery shall be suspended and will resume within 90 days from the end of the state of emergency/alert;
- The provision of information and documents between the Ministry of Public Finance/NAFA and public authorities, public and public interest institutions and other persons, shall be carried out, by electronic means, using the computer system PatrimVen, with certain exceptions.
How does the above influence the activity of your company?
- Regarding the bonification, if your company did not apply the bonification because it has a CIT to be recovered and it was not in a payment position, now you will be able to submit corrective statements to apply the bonification;
- Regarding the change of the filing deadlines, you will have more time to complete the tax calculations and you will avoid the situation in which you have to submit corrective statements to reflect the audit adjustments;
- Regarding the new tax incentives for maintaining/increasing the equity, you can get discounts up to 15% tax. It is recommended to perform an analysis to estimate the benefits you can get by applying various solutions to improve your equity.
The specialized EY team is at your disposal for clarifying the above aspects as well as for the assistance for the application of the tax bonifications/reductions.