A series of tax changes have been introduced to the methodological norms for the application of the Romanian Fiscal Code with the aim of clarifying the changes to the Fiscal Code made at the beginning of 2017. These fiscal amendments relate to the areas of corporate income tax, micro-enterprise income tax, VAT, income tax and social contributions and are summarised below.
1. VAT in Romania 2017
Vat Code in Romania
Various clarifications and practical examples have been provided in respect of the VAT treatment applicable in the case of transactions carried out by/with taxable persons whose VAT code has been cancelled:
- Taxpayers who re-register for VAT purposes after having had their VAT code cancelled will be able to deduct the VAT resulting from acquisitions performed during the period when their VAT code was cancelled, even though their VAT code is not included on the purchase invoice
- Practical examples have been provided with respect to the manner in which taxpayers, re-registered for VAT purposes after having had their VAT code cancelled, should issue invoices for supplies of goods and services performed during the period in question, such that the beneficiaries of those of goods and services are still able to exercise their right to deduct VAT on said acquisitions
Romania VAT registration
Amendments and examples were also provided in respect of the adjustment of the right to deduct input VAT on capital goods acquired by taxable persons whose VAT code has been cancelled and who re-registered (or not) for VAT purposes after 1 January 2017.
2. Corporate income tax in Romania
- Clarifications have been provided in respect of the application of the tax exemption on profit invested in the acquisition of software usage rights (exemption applies as of 1 January 2017)
- The allocation of management costs between taxable and non-taxable income for taxpayers who do not maintain separate accounting evidence for these types of costs has been clarified with the aid of practical examples
- It is now clearly mentioned that interest expense and foreign exchange losses (previously treated as non-deductible due to thin capitalisation restrictions) may be carried forward indefinitely until fully deducted The way in which taxpayers, who as of 1 February 2017 have been applying the micro-enterprise income tax regime, are able to recover their tax losses has been clarified
3. Micro-enterprise income tax
Clarification has been provided as to the qualification of companies subject to Law no. 170/2016 on the specific taxation of certain activities (HORECA) as payers of micro-enterprise income tax or corporate income tax. For example, companies that reported a turnover of no more than EUR 100,000 on 31 December 2016 and also met the other criteria to qualify as micro-enterprises will remain subject to micro-enterprises income tax
Additional clarification has been provided in respect of the rate of income tax applicable to micro-enterprises where there is a change in the number of employees:
- Micro-enterprises with one employee (therefore applying the 1% income tax rate) whose employment contract is terminated are deemed to meet the criteria regarding the number of employees if, during the same quarter, they employ another person based on an employment contract concluded for an indefinite period or for a period of at least 12 months
- Where a micro-enterprise with no employees hires someone for an indefinite period or for a period of at least 12 months, said micro-enterprise will be subject to an income tax rate of 1% (previously 3%).
4. Income tax in Romania
- Clarification has been provided of the types of activities (i.e. NACE codes) of employers performing seasonal activities and eligible to apply the income tax exemption in respect of employees with individual employment contracts concluded for a period of 12 months. This exemption also applies to individuals employed on part-time employment contracts
- Clarifications have also been provided with respect to the application of income tax on the transfer of real estate property. For example, an exchange of real estate property is to be treated as giving rise to two separate transactions, with the taxable income for each transaction considered to be the difference between the value of said transaction and the non-taxable threshold of RON 450,000.
- The deadline has been extended for the declaration and payment of personal income tax by non-resident individuals earning salary income from abroad and who stay in Romania for longer than the period stipulated in the Convention for the Avoidance of Double Taxation of Income (generally 183 days). The new deadline is the 25th day of the month following the month in which the said period expires (previously 15 days from the date when the said period expires)
5. Social contributions
The calculation basis for health insurance contributions due on dividend income has been clarified as being equal to the value of gross dividends, irrespective of whether these were paid out during the previous fiscal year
Are you doing business in Romania? If you have questions about the recent tax changes in Romania contact our local tax experts in Romania.