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The draft law for amending and supplementing Law no. 227/2015 on the Fiscal Code

In this issue:

The draft law for amending and supplementing Law no. 227/2015 on the Fiscal Code

On 24 November the Parliament approved an amendment to the Fiscal Code that brings a series of clarifications and amendments long awaited by the Romanian business environment.

In a nutshell, a series of clarifications are brought with respect to: the place of effective management, establishing the tax residence in Romania based on the place of effective management, definition of affiliated parties, definition of participation title, reinvested profit, adjustments for impairment of receivables, leasing contracts, situations in which sponsorships are reimbursed in the same year or in different years,  granting a tax credit for the depreciation of electronic cash registers, recovery of tax losses as a result of reorganization operations, supporting documents necessary for the application of double taxation treaties, microenterprises’s income tax, alignment of the withholding tax rate for taxable income obtained from Romania by non-resident individuals, etc.

Among the most important amendments brought to the Fiscal code, we mention:

  • Introduction of fiscal consolidation for corporate income tax purposes. Shortly, companies belonging to the same group will be able to consolidate their positions of profit and tax loss and owe tax only on the consolidated profit of the group. This will allow the recovery of tax losses in real time, by compensating them with the profit made by other companies in the same group.
  • Development of the concept of “place of effective management” for foreign legal entities that are controlled and managed from Romania. The establishment of the residence based on the place of effective management will be done by completing and sending a Questionnaire to the Romanian Tax Authorities.
  • Deductibility of the employer's expenses related to the activity carried out by employees via telework. In addition, the amounts granted monthly to employees who carry out activities by teleworking within the limit of RON 400 will be non-taxable.
  • Provisions for impairment of receivables will be fully deductible, as such the current threshold of 30% will be eliminated.

 

Personal Income Tax

Among the amendments made, we list:
  • It clarifies the date from which the non-resident individuals become subject to income tax in Romania, depending on the fulfillment of fiscal residence condition;
  • Clarifications regarding the advantages in cash or in kind received by employees from third parties as well as regarding the person responsible for the calculation, withholding, declaration and payment, income tax and social contributions;
 
Changes / completions are made regarding certain non-taxable incomes and in certain cases exempted from the payment of social contributions:
  • aid for adoption;
  • gifts in cash or in kind given on certain special occasions;
  • the value of tourist and / or treatment services, including transport (limited to an average gross earnings);
  • costs for epidemiological testing / vaccination, to prevent the spread of diseases that endanger the health of employees will be paid by the employer.

The deadline for submitting the Declaration 205 – Informative declaration regarding the withholding tax and the gains / losses from investments, on income beneficiaries – becomes the last day of February inclusive.

 

VAT - Value Added Tax

  • changing the threshold for the application of the VAT cash-collection system at RON 4,500,000;
  • extending the possibility of reducing the collected VAT in the case of uncollected receivables from individuals, under certain conditions;
  • changing the threshold for the application of the reduced VAT rate of 5% in case of housing supplies as part of the social policy, from RON 450,000 to EUR 140,000, whose equivalent in RON is set at the exchange rate communicated by the NBR at the beginning of each year;
  • introducing the possibility for VAT deduction at the level of the beneficiary within 1 year from the receipt of the correction invoice issued by the supplier on its own initiative and not only as a result of a tax audit, even if the limitation period has been met;
  • introducing the facility for appointing an authorized tax representative by the non-residents who performs imports in Romania followed by intra-community supplies of goods;
  • relaxing the conditions under which taxpayers can benefit from the import VAT deferment;
  • extending of the application of simplification measures for gas supplies; important clarifications on the conditions for the application of simplification measures for energy supplies;
 

Excise duty

  • The specific excise duty level for cigarettes increases to 418.76 RON/1,000 cigarettes for the period 1 January - 31 March 2021;
  • In the case of distance sales of excisable products from another Member State in Romania, the excise duty will be paid on the first working day immediately following the day one in which the products were received;
  • Economic operators authorized in the field of natural gas will have the obligation to register with the competent authority before carrying out the activity with natural gas, provisions which also apply to electricity, coal, coke and lignite.
 

In order to enter into force, these measures must be promulgated by the President and published in the Official Gazette.

The EY team is available for details and clarification of the issues mentioned above.

 
Prepared by:
Geanina Ciorâță ― Tax Senior Manager, People Advisory Services
Cristina Mogoș ― Tax Senior Manager, Direct Tax
Daniela Neagoe ― Senior Manager, Indirect Tax
Ecaterina Boca ― Senior Consultant, Knowledge Management Department
 
For additional information, please contact:
Alex Milcev, Partner ― Tax & Law Leader Romania
Georgiana Iancu, Partner ― Head of the Indirect Tax Department
 
Ernst & Young SRL
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