Government Ordinance no. 30/2011 published in the Official Gazette no. 627 on September 2 2011 modifies the Tax Code and regulates some fiscal measurements.
A. The main changes of the Tax Code refer to:
1. General provisions
1.1. Introducing provisions related to fiduciary operation. The provisions of the Civil Code are being implemented in the Tax Code.
1.2. Requirement to register with the tax authorities the contracts for providing services, which may lead to creation of a permanent establishment, concluded between a resident (individuals and legal entities) and a non-resident (legal entities and individuals). Previously, only the resident legal entities were obliged to register the service contracts concluded with non-residents (legal entities and individuals), with the tax authorities.
1.3. Validity/invalidity of transactions concluded with inactive taxpayers.
Expenses related to the transactions concluded with an inactive taxpayer and the VAT related to such transactions will be considered as disallowed (non-deductible) expenses for the corporate income tax purposes. This requires periodic review of the status for existing and potential partners before signing a contract or billing for services or goods. Verification can be done via "Register of Inactive Taxpayers", which is published on-line by the Ministry of Finance.
2. Corporate income tax
2.1. The tax treatment of fiduciary contracts.
In case of fiduciary contracts, the mass transfer of trust property from the settlor (as beneficiary) to the fiduciary is not a taxable transfer, while mass transfer expenses recorded in the accounting records of the fiduciary are considered disallowed expenses if the beneficiary is the fiduciary or a third person (this applies with the entry into force of the new Civil Code on October 1 2011).
2.2. The following are considered as allowed (deductible) expenses for calculation of corporate income tax:
- Expenses recorded in relation to valuation of fixed assets received in concession / management belonging to the public domain of the state or local administrative authorities
- Expenses on land registration of the assets held by the state, received under management or concession by taxpayers(entered into force on September 5 2011)
2.3. The taxation of an association with legal personality established according to the legislation of another state (other than Romania) as follows:
- Non-resident legal entities and individuals within an association with legal personality, established according to the laws of another state, owe profit tax in Romania for the activities carried out in Romania according to the participation rate.
- A Romanian legal entity participating in an association with legal personality, established under the laws of another state, is taxed in Romania for the activities of the association carried out in Romania, according to the participation rate (enters into force on January 1 2012).
2.4. The declaration and payment of the withholding tax for revenues obtained from properties or sale/ cession of equity can be made only through authorized persons (comes into force on September 5 2011).
2.5. The taxpayers, other than the financial institutions, may choose(starting from January 1 2013) to make advance payments for the corporate income tax, based on the quarter of the tax due in the previous period, adjusted with the inflation index. The option is available until January 31st of the year in which the advance payments apply and is mandatory for at least 2 years.
Starting from January 1 2012, the deadline for submitting the annual corporate income tax forms becomes March 25 of the year following the reporting period, instead of April 25.
3. Income tax
3.1. Taxation of revenues obtained by non-residents who became residents in Romania as follows:
- Individuals that fulfill the residency conditions for 3 consecutive years before December 31 2011 are obliged to pay income tax (from any source in Romania or outside Romania) starting from January 1 2012 (goes into force from September 5 2011).
- Non-resident individuals not domiciled in Romania, have the option to be taxed on the revenues obtained from any sources in Romania or outside of Romania, starting with January 1 of the year following the year in which they became residents of Romania, based on the Tax Code and the double tax treaties (comes into force from January 1 2012).
3.2. Stipulating provisions regarding the tax base of revenues obtained by freelancers from fiduciary contracts (comes into force along with the new Civil Code)
3.3. Simplification of the procedure of setting the estimated annual net incomeof freelancers. The fiscal obligations are calculated based on this estimation (comes into force from 1 January 2012).
3.4. Changing the deadline for payment of the salary income tax and filling quarterly the tax forms regarding the social contributions, income tax and nominal records of insured personsfor small taxpayers, as opposed to the current provisions that stipulated the obligation of filling the tax forms monthly.
Conditions for the application of the above provision:
- The companies must have had in the previous year an average number of up to 2 employees and record a total annual income of under 100.000 euro;
- Micro-enterprises with an average number of employees of up to 2;
- Authorized individuals and individual enterprises;
- Liberal professions and associations without legal personality between individuals who have staff based on individual labour contract.
The above provisions will come into force starting from October 2011.
3.5. Introducing new deadlines regarding declarative obligations of certain taxpayers (comes into force from January 1 2012):
Statement of net revenue of taxpayers obtained from independent activities
May 15 of the year following the reporting period
May 25 of the year following the reporting period
Statement of all revenues obtained in foreign countries by residents taxpayers
May 15 of the year following the reporting period
May 25 of the year following the reporting period
Statement of taxes retained under withholding regime for incomes obtained by residents
June 30 of the year following the reporting year
last day of February of the year following the reporting year
4. Taxes on incomes obtained in Romania by non-residents
4.1. The incomes obtained by non-residents in fiduciary operations are taxable incomes, depending on the nature of income (applies along with the new Civil Code).
4.2. The deadline for submitting the statement of taxes retained under withholding tax regime for incomes obtained by non-residents, filled by the payers of incomes, will be the last day of February of the year following the reporting year. Until now, the deadline was June 30 of the year following the reporting year (comes into force from January 1 2012).
5. Value added tax (VAT)
5.1. Supplies of services determined by successive settlements or payments (building - assembling, consulting, etc.) are deemed to be effected (VAT chargeable) when work reports or work statements are issued or, depending on the contractual provisions, on their acceptance by the beneficiaries. Therefore, the settlement period of such services is no longer limited to 1 year (comes into force from September 5th 2011).
5.2. The deadline for submitting the VIES statement, starting with the declaration for August 2011, is 25th of the month following the reporting month, compared to 15th of the month following the reporting month as it was previously stipulated.
5.3. Detailing the waste categories for which the reverse charge mechanism apply:
- Delivery of ferrous waste, scrap and recyclable materials, used recyclable materials consisting of paper, paperboard, cardboard, fabric, rubber and plastic, glass and glass shards;
- Delivery of materials after processing through cleaning, polishing, selection, cutting, fragmenting, pressing or casting into ingots (comes into force on 5 September 2011)
6.1. Changes regarding the situations in which the reimbursement of excise is possible:
- Excisable products released for consumption that are afterwards exported (comes into force from January 1 2012);
- Expired beverages or unsuitable for trading (comes into force from January 1 2012).
6.2. New penalties for payers of excises (comes into force from January 1 2012).
6.3. Selling excisable products below the acquisition price is strictly forbidden (comes into force from September 5 2011).
7. Local taxes
7.1. The tax rate on buildings that have not been revaluated in the past 3 years varies between 10% to 20%, while for buildings that have not been revaluated in the past 5 years varies between 30% to 40% (comes into force from January 1 2012).
7.2. Even the buildings which are not registered with the Office of Cadastre are obliged to make a tax declaration for local taxes (comes into force on January 1 2012).
7.3. Obligation to pay tax on buildings whose construction was not completed within the time provided in the building permit and the authorisation was not renewed (comes into force from 1 January 2012).
7.4. Declaring buildings for taxation and registration in the records of local authorities is a legal obligation of taxpayers who own these buildings, even if they were executed without a building permit (comes into force on January 1 2012).
7.5. Setting a fix accomodation tax for hotels which can be imposed by Local councils, namely a rate of 1% of the total accomodation tariff per hotel day per tourist (comes into force on January 1 2012).
7.6. Granting discounts on the tax on buildings or even exemptions for a period of maximum 7 years, starting with October 1 2011, for the following categories of buildings:
- Rehabilitated buildings under the legal provisions of the program on increasing the energy efficency of housing blocks;
- Rehabilitated buildings based on the Law 153/2011 on measures to increase the quality of architectural - environmental buildings.
8. Social contributions
Option to submit quarterly the statements, regarding the payment obligations of social contributions, income tax and the nominal records of insured individuals for taxpayers who qualify for quarterly payments of income tax, which are related to each month of the quarter until 25th of the month following the quarter. The option must be declared by the taxpayers qualified until September 25th 2011.
Quarterly submission of declaration consists of completing and submitting a statement for each month of the quarter. Remittance of contributions withheld by the payers of income mentioned above can also be quarterly. Provision comes into force starting with revenues of October 2011.
B. Granting reliefs for outstanding tax obligations that needs to be settled by August 31 2011 (comes into force on September 5 2011) namely:
a) Cancelation of late payment penalties if the outstanding obligations and interest are settled through voluntary payment or compensation until December 31 2011.
b) 50% reduction in penalties for late payment if the outstanding obligations and interest are settled through voluntary payment or compensation until June 30 2012.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.