Romania – Changes to the Fiscal Code and Fiscal Procedural Code

Government Emergency Ordinance no. 84, published on 6 December 2016 in the Romanian Official Gazette, implements the following new fiscal law provisions which entered into force on 1 January 2017:

1. Corporate income tax

• Specific provisions for companies that have a financial year different from the calendar year and seek to either return to the calendar year or to change the modified fiscal year;
• Indefinite extension of the tax incentive for reinvested profit and broadening of the scope to also cover rights to use software;
• Clarifications regarding the allocation criteria for expenses related to non-taxable income; and
• Deductibility of expenses incurred for the theoretical and/or practical training of students in vocational and technical education including the depreciation of fixed assets or investments used for such purpose.

2. Micro-enterprise tax regime

• Reduction of the minimum share capital threshold for newly-incorporated companies to opt for the application of the corporate income tax regime from EUR 25,000 to RON 45,000 (equivalent to EUR 10,000); and
• Micro-enterprises with a share capital of at least RON 45,000 (but below the current threshold of EUR 25,000) can switch to the corporate income tax regime starting with 1 January 2017 or with the quarter when the condition is fulfilled.

3. Personal income tax

• Amendment of the definition of a stock option plan, eliminating the requirement that the securities be traded on a regulated market or alternative trading system; and
• Payers of salary/deemed salary income; income derived from intellectual property rights; pensions; and certain other legal entities required to submit the Income Tax and Social Contribution Form (“Form 112”), no longer have to submit the Informative Statement on Withholding Tax and Gains/Losses (“Form 205”) for each income beneficiary.

4. Social contributions

• For salaries and salary differences established by law which are granted for past periods, rectifying returns regarding social contributions must be submitted for each month affected.

5. VAT

• Taxpayers declared inactive or who have had their VAT registration number cancelled have the right to deduct input VAT related to the acquisition of goods/services during the period they were inactive/VAT number cancelled, after they re-register for VAT purposes;
• Similar provisions were introduced for the beneficiaries of acquisition of goods/services from inactive suppliers/suppliers with cancelled VAT registration numbers;
• With a few exceptions, VAT adjustments for capital goods will no longer be performed one-off for the remaining adjustment period (five or twenty years, depending on the goods), but instead on an annual basis, within the adjustment period, only for 1/5 or 1/20 of the initial input VAT;
• Introduction of a new special scheme for farmers, in line with VAT Directive 2006/112/CE; and
• Elimination of the obligation for taxpayers carrying out intra-community transactions to register in the Registry of Intra-community Operators and suspension of the obligation to submit certain reporting notifications (Forms 392A, 392B, 393) until 31 December 2019.

6. Fiscal Procedure Code

• Clarifications regarding the reactivation of inactive taxpayers as well as the timing of tax payments, budgetary obligations and other amounts collected by public bodies;
• Inclusion of additional payment methods (i.e., internet banking, mobile banking, payment terminals and ATMs) as accepted means of tax payment and the related documents as accepted proof of payment;
• Ability to challenge decisions enforcing precautionary measures directly before courts of law, within 30 days from the notice, without the previous requirement to follow the preliminary administrative procedure; and
• Amendments needed to transpose Directive 2015/2376/UE regarding the automatic mandatory exchange of information in the tax field.

Note that the Fiscal Procedure Code amendments entered into force on 6 December 2016, except for the last one which entered into force starting with 1 January 2017.

Additionally, the following provisions, already included in the Fiscal Code, entered into force on 1 January 2017:

• The standard VAT rate was reduced from 20% to 19%;
• The monthly health insurance contribution is capped at five times the national monthly average gross salary. This is applicable for income obtained starting 1 January 2017;
• Income from investments or income from other sources obtained starting 1 January 2017 is subject to the health insurance contribution even if the individuals obtain other types of income (e.g. salaries, pensions, freelancing activities);
• Excise duty levied on certain fuel products was decreased;
• The tax on special constructions was abolished;
• The specific tax for companies that carry out activities in the field of tourism, hotels, restaurants, bars and public food service is applicable.

If you would like to discuss how the changes affect your business, please contact Roxana PopelAndrei Tercu or .