Romania: Fiscal changes 2017

25.01.2017

Summary of the main changes on tax rates and tax laws in Romania.

Find out more about current tax rates in Romania:
Romania: Tax Changes & Tax Rates with 1.1.2018

1. General provisions of the Tax Law

The definition of a “stock option plan” has been amended to remove the condition that the shares of the company that initiated the programme must be listed on a stock exchange.

The provisions of article 11, regarding the right to deduct expenses and VAT incurred during the period for which a taxpayer has been declared inactive or its VAT registration number has been cancelled, have been amended. These provisions are applied to beneficiaries that purchase goods/services from taxable persons declared inactive or whose VAT registration number has been cancelled and who will be able to deduct any expenses or VAT recorded during the period for which the supplier was inactive or its VAT registration number was cancelled.

2. Corporate Income tax in Romania

As of 6 January 2017, the corporate income tax exemption has been introduced for taxpayers that exclusively perform innovation, research and development activities, as defined by Government Ordinance no. 57/2002, as well as other closely related activities. This exemption from corporate income tax is applicable during the first 10 years of activity of newly established companies subject to state aid regulations. For already incorporated taxpayers, the exemption applies for 10 years as from the date of entry into force of this Ordinance.

  • Further clarifications have been provided for taxpayers who chose to apply for a fiscal year different from the calendar year; the various deadlines for communicating a change of fiscal year to the tax authorities are also provided
  • Application of the tax exemption on reinvested profits has been extended for an indefinite period. In addition, taxpayers will now also be able to benefit from said tax incentive during the acquisition of software rights
  • The method for allocating non-deductible expenses related to non-taxable income has been clarified
  • Expenses incurred in respect of the provision technical and professional educational programmes, performed in accordance with the Education Law, are now considered tax deductible

3. Specific tax on micro-enterprises

As of 1 January 2017, any newly established Romanian legal entity with a share capital of at least RON 45,000 may opt to become a corporate income tax payer as of its date of incorporation. Previously, for this provision to be applicable, it was necessary to have a share capital of EUR 25,000 or more.

Any existing micro-enterprise with a share capital of at least RON 45,000, as well any existing micro-enterprise that increases its share capital up to or above said threshold, may also opt to become a corporate income tax payer either as of 1 January 2017, or beginning with the first quarter in which this condition is met.

  • The income threshold beneath which a legal person is required to apply the micro-enterprises tax regime has been increased from EUR 100,000 to EUR 500,000 (the equivalent in RON). The other conditions for application of micro-enterprises tax regime remain unchanged.
  • Taxpayers with annual revenues as at 31 December 2016 lower than the EUR 500,000 threshold will apply the micro-enterprises tax regime as from 1 February 2017. Companies that qualify as corporate income tax payers and have recorded as at 31 December 2016 annual revenues lower than the threshold of EUR 500,000 will remain corporate income tax payers for January 2017 only, and as from 1 February 2017 they will have the obligation to apply the micro-enterprises tax regime; they are also required to submit the corporate income tax return for January 2017 and to notify the tax authorities about changes in their tax regime until 25 February 2017. 
  • The 2% tax rate applicable for micro-enterprises with one employee has been eliminated. Instead, as from 6 January 2017, the new 1% tax rate in Romania will be applicable for micro-enterprises with at least one employee. The 3% tax rate remains applicable for micro-enterprises with no employees.

4. Income Tax 2017 in Romania

The following types of revenue have been included in the category of non-taxable revenue: scholarships, prizes and other rights in the form of accommodation, food, transport and work/safety equipment received by students during their technical and professional education in accordance with the Education Law.

The obligation on payers of salary income, as well as payers of intellectual property right income, to submit an informative statement on withholding tax and any gains/losses realised for each income beneficiary (Form 205) has been eliminated.

  • The income tax exemption in Romania has been introduced for salary income obtained by individuals based on an individual labour agreement concluded for a period of 12 months with Romanian legal entities performing seasonal activities as defined by art. 1 of the Law no. 170/2016 on specific tax for certain activities (e.g. hotels, restaurants, bars). This exemption applies starting with the salary income earned in February 2017;
  • Medical services provided on a subscription basis, which are borne by employees, are deductible for income tax purposes up to the threshold of EUR 400/year. This incentive applies as from 1 February 2017;
  • Revenues obtained by individuals from the sale of real estate properties are subject to 3% income tax on the amounts exceeding RON 450,000 (the revenues below this limit being non-taxable).

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5. Social security contributions

Gross remuneration received by daily workers is no longer subject to social security contributions in Romania. This provision already entered into force on 6 December 2016;

  • For salary income earned as from February 2017, the cap of five gross average salaries, which serves as computation basis for the monthly pension contribution due by the employer and employees will be removed.
  • For salary income earned as from February 2017, the cap of five average gross wages, which serves as computation basis for the monthly health insurance contribution due by individuals will be removed; this also applies for investment income and income from other sources;
  • Individuals deriving investment income (dividends, interest etc.) or income from other sources will not be liable to pay health insurance contributions on this type of income earned starting 1 February 2017, provided they also earn salary income, income from independent activities or pension income during the year. 

6. Value Added Tax 2017

Special VAT scheme for Romanian farmers

On 1 January 2017, a special VAT scheme for farmers will be introduced that applies to production activities and agricultural services. Among other things, farmers who use this special scheme will not be obliged to collect VAT for supplies of agricultural products and agricultural services; equally, farmers will not have the right to deduct VAT on acquisitions made under this scheme.

Provisions regarding VAT adjustments

The provisions regarding VAT adjustments in the case of capital goods will be harmonised with the provisions of the “VAT Directive” (2006/112/CE);

On 1 January 2017, the provisions of the Fiscal Code regarding the Register of Intra-community Operators will be repealed, thus eliminating the mandatory registration with the Register of Intra-community Operators of taxpayers who perform intracommunity transactions

Registration for VAT purposes in Romania

The provision under which the tax authorities may revoke the registration for VAT purposes of taxable persons who become temporarily inactive has been eliminated.

Important tax news from other CEE/SEE countries:

7. Changes to the Fiscal Procedure Code

Reactivation of inactive taxpayers

The conditions that must be met for the reactivation of inactive taxpayers in Romania have been modified. The reactivation of inactive taxpayers now no longer requires attestation by the tax authority that the taxpayer is performing its current activity at its registered headquarters, except in cases where failure to meet this condition has led to a declaration of inactivity or the taxpayer has attempted to avoid tax audits, providing information about unavailable headquarter

Payment of tax debts in Romania

New provisions have been introduced regarding the moment at which the payment of a tax debt is considered to have been completed; as well as regarding the supporting documents attesting to the payment of a tax debt and the date of payment in the case of cash payments, payments performed using payment terminals, internet banking and banking cards.

Main and ancillary fiscal obligations

The priority of the main and ancillary fiscal obligations assessed by a tax decision is now established based on the date of receipt of the tax decision by the taxpayer; previously, priority was established according to the payment due date. This provision applies to tax decisions issued as of 1 January 2017

VAT Reimbursement

VAT reimbursement – a new provision has been introduced whereby tax audits performed in order to solve VAT returns submitted with an option for VAT reimbursement will only cover the periods that generated the VAT subject to the reimbursement request. If, however, the tax authorities find any indications of a breach of tax legislation in respect of other periods, they may then extend the tax inspection to cover these periods as well

Other tax procedure changes in Romania

  • The tax authorities will no longer be required to indicate the type and amount of the tax liability in the enforcement title regarding the seizure of a taxpayer’s bank account
  • Decisions imposing precautionary measures may now be challenged directly in court within 30 days of the date of receipt of a decision imposing such measures
  • Changes have been introduced in respect of the issue of competence in the solving of tax appeals: appeals in respect of fiscal obligations in excess of RON 1,000,000 will be solved by the Directorate-General for Solving Tax Appeals; while tax appeals against decisions regarding ancillary tax obligations will be solved by the same tax authority with the competence to solve the appeal in respect of the main fiscal obligation that generated the ancillary debt
  • A series of new provisions have been introduced regarding administrative cooperation in the field of tax and the automatic exchange of information between countries.

Are you doing business in Romania? If you have questions about the recent tax changes in Romania contact our local tax experts in Romania.