Tax alert 16 – Government Emergency Ordinance no. 25/2018

Government Emergency Ordinance no. 25/2018 for the amendment and completion of several normative acts and for the approval of some tax-budgetary measures

  • Corporate income tax

Tax exemption for reinvested profit

Starting with 30 March 2018, the provision regarding the obligation of the taxpayers for the assets for which they applied the facility for reinvested profit to keep them in their patrimony for a period which is at least equal to half of their economic use determined as per applicable accounting regulations, but not more than 5 years, it will be no longer applicable in case of assets which are written down from the patrimony following the fulfillment of obligations provided by the law.

Sponsorship expenses

Starting with 30 March 2018, taxpayers which perform actions of sponsorship and/or patronage or private scolarships will have the obligation to submit an informative statement regarding the beneficiaries of the sponsorships/patronage or private scolarships in respect of the year to which the respective expenses were booked, until the deadline for submitting of the annual corporate income tax.

  • Tax on income derived by the micro-enterprises

Starting with 1 April 2018, the micro-enterprises which have at least RON 45.000 as subscribed share capital and at least 2 employees will be able to opt, only once, for the application of the corporate income tax regime, starting with the quarter in which the two aforementioned conditions have been fulfilled, the option being a definitive one.

A new definition for employee is introduced in the sense of tax on income derived by the micro-enterprises.

Also, micro-enterprises which perform sponsorship actions, according to the Sponsorship Law no. 32/1994, to support non-profit organisations and religious institutions, which are accredited suppliers of social services with at least one licensed social service, will be able to claim tax credit for the respective sponsorship expenses up to 20% of the tax on income derived by the micro-enterprises due for the respective quarter.

The amounts which are not deducted as tax credit for sponsorship can be reported for a period of 28 consecutive quarters, the deduction being performed in the order of registration of such expenses.

Taxpayers subject to these provisions will also have to submit the informative statement regarding the beneficiaries of the sponsorships, similar to the corporate income tax provisions.

  • Tax on income derived from Romania by non-residents and tax on foreign representative offices incorporated in Romania

The provisions of chapter IV „Taxation of savings income earned in Romania by natural persons resident in EU Member States and application of the exchange of information in relation to this income category” from title IV „Tax on income derived from Romania by non-residents and tax on foreign representative offices incorporated in Romania” are abrogated.

  • Value added tax

The operations carried out within the research & development and innovation projects do not fall within the VAT scope if the result of the research is not transferred to another person. At the same time, the deduction right for the acquisitions for the realization of these research and development and innovation projects is exercised within the limits and conditions stipulated in art. 297-300 of the Tax Code.

  • Excise

The level of differentiated excise duty is set by reducing with 183,62 lei/1.000 liters, respectively 217.31 lei/ton, of the standard level set for diesel used as motor fuel. The reduction is made by restitution of the difference between the standard level and the differentiated level of excise duties.

A new condition is added for the Issuance of the tax warehouse authorization, namely, the person who is going to carry out the activity as authorized warehouse should not register outstanding tax liabilities to the general budget. This requirement also applies to persons who have requested the issuance of a fiscal warehouse authorization and whose applications are pending on 30 March 2018.

  • Amendments to the Tax Procedure Code

The VAT is reimbursed with subsequent tax audit in case of the VAT return with negative VAT amount with a refund option submitted by the taxpayer who benefits from a rescheduling payment. These provisions apply to claims and VAT returns with a refund option submitted after the date of entry into force of this Ordinance.

  • Income tax and social security charges

Taxpayers who obtain income from sport activity contracts are liable to pay income tax, thus the income tax is final. The income tax is computed by the income payer by applying a 10% rate on the gross income and must be withheld at the time of the income payment.

The income payer is also required to compute, withhold and pay the social insurance contribution and health insurance contribution under specific conditions.

As a newly introduced provision, taxpayers may redirect 2% or 3.5% from income tax due as follows:

– 2% for the support of non-profit entities and cults, as well as for private scholarships, according to the law;

– 3.5% to support nonprofits and cult units that are providers of social services accredited with at least one licensed social service under the law. As an exception, taxpayers may opt for the computation, withholding and payment of the aforementioned amount by the income payer until the legal payment deadline of the income tax.

Transitional provisions are mentioned with reference to income earned in 2018 on the basis of sport activity contracts, in respect of the establishment, withholding, payment and reporting of taxes and social charges.

  • The procedure for rescheduling the payment of tax debt

A new hypothesis regarding debtors who do not own any assets is regulated, which was not provided by the Tax Procedure Code prior to the amendments brought by Emergency Ordinance no. 25/2018.

As regards such debtors, the request for rescheduling tax debt shall indicate the lack of assets as well as the effect of such circumstance over the debtor’s possibility to pay the tax debt for which the rescheduling is requested. All information provided by the debtor in this respect shall be verified by the tax authority.

Furthermore, certain additional conditions are regulated with regard to obtaining the rescheduling of tax debt, i.e. (i) the debtor’s administrators must not have events registered in their tax record (“cazier fiscal”), (ii) the debtor must not incur tax liabilities older than 12 months and (iii) the debtor must not incur exploration losses in the last closed financial year.

Authors:

Arcadie Parfenie – Senior Manager, Corporate Income Tax

Corina Mindoiu – Senior Manager, People Advisory Services

Cristina Galin – Senior Manager, Indirect Tax

Calin Stan – Manager, Tax Controversy

 

For additional information, please contact: 

Alex Milcev, Partner – Head of Tax & Legal

Email: office@ro.ey.com



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