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The regulation of certain measures in the context of the epidemiological situation determined by the spread of the SARS-CoV-2 coronavirus

In this issue:

The main measures introduce by GEO no. 69/2020 and no. 70/2020

Incentives granted for tax due

Law no. 53/2020 for the approval of the GEO no. 95/2019 for completing the GEO no. 77/2011

 

The main measures introduced by GEO no. 69/2020

Government Emergency Ordinance no. 69/2020 amending and supplementing Law no. 227/2005 on Fiscal Code, and establishing various tax and budgetary measures, published in the Official Gazette no. 394, of 14 May 2020

 

Extension of the legal deadline for certain obligations:

The Government Emergency Ordinance provides the extension of the legal deadline from 25 May 2020 to 30 June 2020 for the following obligations:

   - Filing of the annual tax return for income tax and social charges due from individuals for tax year 2019;

   - Filing of the form 230 standing for „redirecting an amount of 2% or to 3,5% from the annual income tax due for salary income and pensions”;

   - Payment of the income tax and social charges due from individuals based on the annual tax return.

 

Value Added Tax

The Government Emergency Ordinance amends the registration procedure for VAT purposes of taxable persons with the seat of their economic activities in Romania, as follows:

   - The companies that request the registration for VAT purposes are subject to a risk assessment procedure after they obtain the VAT registration number.

 

Grant of certain incentives:

The Emergency Ordinance provides for the granting of the following incentives related to the 2019 tax year fiscal obligations:

   - 5% deduction from the income tax and social charges due for tax year 2019, if the due liabilities are entirely fulfilled by the means of payment or compensation, by 30 June 2020, inclusively;

   - 5% deduction from the income tax and social charges due, if the annual tax return si filed by electronic means (e.g. Virtual Private Space, E-guvernare).

The deduction for filing the annual tax return by electronic means is applicable only if the due liabilities are entirely paid by 30 June 2020, inclusively. Under this scenario, both deductions are applicable, cumulatively.

The deduction is determined by the concerned taxpayer, as a distinctive amount included within the annual tax return, being subject to subsequent verification to be performed by the tax authorities.

The taxpayers who have submitted the annual tax returns for income tax and social charges due for tax year 2019 without considering the deductions, have the option to benefit of such incentives by submitting an amended annual tax return by 30 June 2020, inclusively, provided that the aforementioned conditions would be fulfilled. Such option is available regardless of the manner by which the annual tax return has been submitted.

Also, the Emergency Ordinance provides for the granting of certain incentives, starting with 2021. As such, incentives of up to 10% may be granted for the following fiscal obligations:

   - Annual income tax;

   - Pension contribution due from individuals deriving income from freelancing activities or/and intellectual property rights;

   - Health fund contribution due from individuals deriving private income subject to such fiscal obligation.

The amount representing the discount, the payment due dates and the conditions to benefit of such discount are established through the annual Law concerning the State Budget, and the procedure for applying such incentives is established by the order of the Minister of Public Finance.

 

Tax incentives granted in the SARS-CoV-2 context

The amounts granted by the employers, in the form of incentives/bonuses, for employees who carry out activities that involve direct contact with individuals, having a higher degree of risk for SARS-CoV-2 infection, would not be included within the computation base for the following fiscal obligations:

   - Pension contribution;

   - Health fund contribution;

   - Work insurance contribution.

The beneficiaries, as well as the activities that confer eligibility to benefit of this incentive, would be determined by the employer.

The aforementioned provisions are applicable for the incentives/bonuses that are paid in the period between the date of entry into force of the Emergency Ordinance no. 69/2020, and 30 June 2020, inclusively. Such amounts may be paid for the activity related to the whole period of the state of emergency.

Health fund contribution. Provisions impacting individuals whose activity is suspended

Legal entities having the capacity of employers or entities assigned to the employer category will have the obligation to pay the health fund contribution for individuals who carry out the activity based on an individual employment contract, employment relationship or special status provided by law, during the period of suspension.

The computation and payment of the health fund contribution will be performed by the employers on a monthly basis, by 25th of the month following the one the income is paid.

The monthly computation base for the health fund contribution is represented by the minimum guaranteed gross salary, valid in the month for which the contribution is due.

The aforementioned provisions are applicable only if the concerned individuals, whose activity is suspended, did not derived any salary or salary assimilated income in the respective month.

 

Granting benefits for payment of the building taxes

The Government Emergency Ordinance no. 69/2020 was published in the Official Gazette no. 393/14 May 2020 and, among others, ammends and supplements Law no. 227/2015 regarding the Fiscal Code.

The current Emergency Ordinance sets the framework by which, the local councils and the General Council of the Municipality of Bucharest may adopt decisions until 14 August  2020 regarding:

   - Reduction of the annual building tax up to 50%, for non-residential buildings, being in the property of individuals or legal entities, used in economic activities or put into use through other types of lease agreement, bailment or other type of agreement for conducting economic activities towards individuals or legal entities, if during the state of emergency, as a result of the outbreak of the coronavirus SARS-CoV-2, the owners or the users of the buildings were forced, as provided by the law, to interrupt totally their economic activities or if they own the certificate for emergency situations issued by the Ministry of Economy, Energy and the Business Environment through which the partial interruption of the economic activity is certified.

   - Exemption from the monthly payment of the building tax due by concessionaires, tenants, holders to administer or use a public or private property of the state or administrative-territorial units, for the users of the buildings which were forced, as provided by the law, as a result of the outbreak of the coronavirus SARS-CoV-2, to interrupt totally their economic activities.

To benefit of the above-mentioned tax reduction/exemption, the users of the buildings must submit to the competent local tax authority, until 15 September 2020, inclusively, a request for such reduction/exemption, together with an own liability statement.

In the case of owners of non-residential buildings rented for conducting economic activities to individual or legal entities, during the emergency state period, from the own liability statement it shall result that the owners cumulatively meet the following:

   - They waved up their right of rent for at least 50% of the rent, royalty or other form of payment as per the contractual agreement, for the period of state of emergency;

   - At least 50% of the total areas for economic activities were not used, because of the partial/ total interruption of the economic activity conducted in those areas as at 14 May 2020.

The owners of the non-residential buildings rented to other parties for carrying out economic activities, shall attach the following to the request:

   - Own liability statement from which it shall result the fulfillment of the conditions mentioned above;

   - Own liability statement from which it shall result the total interruption of the economic activities and / or;

   - The certificate for emergency situations issued by the Ministry of Economy, Energy and Business Environment, in case of the users of which economic activities were partially interrupted, as the case may be.

The owners who paid the building tax for year 2020 until the first payment date, as well as the monthly building tax due for the state emergency period, may request a refund, within the prescription period of the right to request such refund, in accordance with the legal provisions.

Separately from the reduction of up to 50% on the building tax, the owners of the non-residential buildings can benefit from the 10% allowance provided by the art. 462, par. (2) of the Tax Code, as per the decision of the local councils.

 

For more details, you may consult the Official Gazette no. 393/ 14 May 2020, or you can contact us directly for clarification of any questions regarding the content presented.

 

The main measures introduced by GEO no. 70/2020

Government Emergency Ordinance no. 70/2020 on regulation of certain measures, starting with 15 May 2020, in the context of the epidemiological situation determined by the spread of the SARS-CoV-2 coronavirus, for the extension of certain due dates, for amendment and supplementation on Law no. 227/2005 on Fiscal Code and Law no. 1/2011 on National education, as well as other normative acts

 

Amendments brought to Law no. 227/2015 regarding the Fiscal Code

Corporate income tax

Tax treatment applicable to the assignment of government bonds and other debt instruments

The Government Emergency Ordinance no. 70/2020 was published in the Official Gazette no. 394 / 14 May 2020 and, among others, ammends and supplements Law no. 227/2015 regarding the Fiscal Code.

Thus, the tax treatment applicable of transactions of governemnt bonds and other debt instruments is clarified, as fully deductible when computing the corporate income tax.

For more information or details on the above you may consult the Official Gazette no. 394/14 May 2020 or you could contact us directly in order to clarify any other questions.

 

Extension of certain social protection measures in the context of the epidemiological situation determined by the spread of the SARS-CoV-2 coronavirus.

Amongst other, the Emergency Ordinance no. 70/2020 brings relevant provisions concerning individuals included within the following categories:

   - Individuals benefiting of the leave and child care allowance granted for cases of children with disabilities, up to the age of 7 years;

   - Individuals benefiting of the leave and allowance rights, as provided by Law 273/2004 regulating the adoption procedure.

As such, the Emergency Ordinance provides that the rights to social benefits received by individuals included within the aforementioned categories remain applicable until 31 May 2020.

Also, the Emergency Ordinance provides for the insertion incentives to which the aforementioned categories of individuals are entitled to, to be granted from the date when the request is submitted, should certain criteria are fulfilled.

 

Tax and budgetary measures

The Emergency Ordinance no. 70/2020 introduce specific measures regarding the tax liability due by residents and non-residents obtaining income from activities carried out in the field of planning cultural, artistic, sports, scientific, educational or entertainment events, or from effective participation in such activities.

Thus, the tax liabilities due for such income would be computed and withheld at the moment when the income is effectively paid. The reporting and payment of the tax liabilities to the State Budget should be made by the 25 of the month following the one in which the event took place.

The aforementioned provisions are applicable in case the events are rescheduled until the end of 2021, due to the situation imposed by the spread of the SARS – Cov – 2 coronavirus. Moreover, the tax certificate attesting the tax liabilities paid in Romania may be obtained by the non-residents only after the payment of such liabilities are performed to the State Budget.

 

Measures for foreign nationals, in the context of the epidemiological situation caused by the spread of the SARS-CoV-2 coronavirus

The Emergency Ordinance no. 70/2020 brings provisions concerning foreign nationals. Among others, the following relevant provisions are to be considered:

   - The validity of the documents issued by the Romanian Immigration Authorities shall be maintained throughout the state of emergency and for a period of 90 days after the end of this state;

   - The right of stay for foreigners located in Romania, granted by visas, international conventions, unilaterally normative acts for the abolishing visa regime is maintained for 90 days after the end of the state of emergency, without being subject to any sanction or restrictive measures; for subsequent travels to Romania, the additional days granted the present order will not be taken into account when calculating the stay period of maximum 90 days during any 180-day period;

   - Visas whose validity expires without being used by its holders due to temporary travel restrictions in the EU, will not maintain their validity. When lifting the temporary travel restrictions, the holders can request new entry visas;

   - The work authorizations for local employment, secondment or the family reunification approvals issued by the Romanian Immigration Authorities, whose validity is maintained according to the present order, will be used to apply for an entry visa only if these documents have not been used before for obtaining prior visas.

 

Paid days off for childcare

The Emergency Ordinance no. 70/2020 also clarifies the period in which parents will be able to benefit from paid days off for the supervision of children, as they are granted according to Law no. 19/2020.

Thus, for the year 2020, the number of paid days off for one of the parents is established until the end of the 2019-2020 school year.

 

Measures concerning employees and other professionals

Amongst the relevant measures brought by the Emergency Ordinance no. 70/2020, with regards to the employees, the following are to be considered:

   - The granting of the technical unemployment indemnity provided by the Government Emergency Ordinance no. 30/2020 shall be extended after the state of emergency ends, until 31 May 2020. The measure targets employees, as well as other professionals (Rom: PFA, II, IF), lawyers, sportsmen, people who obtain income from copyright, etc. The normative act also provides for the possibility that technical unemployment will continue to be granted after 31 May 2020, but only in those areas where restrictions will be kept;

   - Collective bargaining agreements will remain valid for 90 days after the end of the state of emergency;

   - Employers with more than 50 employees are required to establish individualized work schedules, without the employee's consent, in order to ensure for their employees a one-hour period at the beginning and at the end of the work schedule, within a 3 hour interval.

 

Law no. 54/2020 approving Government Emergency Ordinance no. 33/2020 regarding certain fiscal measures and amendments of certain normative acts

 

Incentives granted for tax due

Law no. 54/2020 approving the Government Emergency Ordinance no. 33/ 2020 regarding fiscal measures and ammendments to certain normative acts, was published in the Official Gazette no. 396 / 15 May 2020 and refers to tax incentives for taxes due for the second and third quarter of 2020.

As such, the taxpayers applying the corporate income tax regime, irrespective of the declaration and payment system, as well as taxpayers applying the microenterprise tax regime, which pay their tax until the due dates, respectively 25 July 2020 inclusive for the second quarter of 2020 and 25 October 2020 inclusive for the third quarter of 2020, benefit from a 10% reduction of the tax due.

 

Law no. 53/2020 for the approval of the Government Emergency Ordinance no. 95/2019 for completing the Government Emergency Ordinance no. 77/2011 brings the following amendments:

   - The classification of medicines products into type I, type II and type III medicines are established, for the purpose of computing the quarterly contribution;

   - Starting with the first quarter of 2020, differentiated computation of the quarterly contribution, depending on the type of medicines:

  • For type I medicines, the contribution is computed by applying a percentage of 25% on the value related to the centralized consumption of each category, communicated by the National Health Insurance House, after deducting the VAT;
  • For type II medicines, the percentage is set at 15%;
  • For type III medicines, the percentage is set at 20%;
 

   - The list of "type I, type II and type III medicines" will be approved on a quarterly basis by order of the Ministry of Health, until the 25th of the month following the end of a quarter;

   - Starting with the quarter following the one when the current law entered into force, the value of BAt (quarterly approved budget) shall be indexed with the inflation rate, compared to the value of the last quarter of the previous year (value set starting with the fourth quarter of 2019 to RON 1.668 million).

For more information or details on the above you may consult the Official Gazette no. 396/15 May 2020 or you could contact us directly in order to clarify any other questions.

 

How does the above influence the activity of your company?

We recommend that you consider whether your company is in one of the situations described above, to  determine the possibility to benefit from them.

Our team is happy to assist you with the analysis (including tax healthchecks) and the assessment of the potential cash benefits for the company and its employees, especially in the context of the recent Tax Amnesty (for details you may consult our Tax Alert no. 37).

 
Prepared by:
Miruna Enache – Partner, Tax and Law Department, Transaction Tax Leader
Ana Maria Călțun – Tax Manager, Direct Tax
Cristina Muntean – Tax Manager, Direct Tax
Inga Țîgai – Director, People Advisory Services
Bogdan Papavă – Tax Manager, Indirect Tax
Anca Atanasiu – Senior Associate – Radu și Asociații
 
For additional information, please contact:
Alex Milcev – Partner, Tax & Law Leader Romania
 
Ernst & Young SRL
Bucharest Tower Center, Building 
22nd floor, 15-17 ,Bd. 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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