LATEST ON FISCALITY
Last Update: July, 2010
by Ernst&Young
Emergency Ordinance 58/2010 published in the Official Gazette 431/28 June 2010
The Emergency Ordinance amends the Fiscal Code and is applicable as of the 1st of July 2010.
The main amendments brought to the Fiscal Code include the following:
I. Corporate income tax
Fiscal credit
- Starting 1st of July 2010, claiming a deduction in respect of the tax paid to a foreign state is conditioned also by the applicability of the provisions of the conventions for the avoidance of double taxation concluded between Romania and the respective state (this is besides documentation requirements).
External fiscal losses
- Fiscal losses incurred by a permanent establishment located in a state that is not a member of the European Union, of the European Free Trade Association or with which Romania does not have concluded a convention for the avoidance of double taxation are deductible only from the income obtained by the respective permanent establishment (separately, on each income source) in the next 5 consecutive fiscal years.
- For the year 2010, fiscal losses incurred by a permanent establishment located in a state which is a member of the European Union, of the European Free Trade Association or with which Romania has concluded a convention for the avoidance of double taxation are computed by taking into account the income and expenses recorded from the beginning of the fiscal year.
Dividend tax
- Dividends distributed/paid by a Romanian legal entity to another Romanian legal entity are subject to 16% dividend tax applicable to the gross amount of distributed/paid dividend (unless exemptions apply).
- Exemptions from dividend tax are introduced in the Fiscal Code for dividends paid by a Romanian legal entity to:
- Optional pension funds and private pension funds (previously mentioned in the Application Norms); and
- Public administration bodies exercising the rights and obligations arising from the quality of state shareholder of the respective Romanian legal entities.
II. Personal income tax
Income from independent activities
- Certain criteria for reclassification of activities into “dependent” ones are introduced in the Fiscal Code (previously mentioned only in the Application Norms).
- Possibility to reassess an activity as “dependent” based on “any other element” reflecting it dependent nature.
- In case of such reclassification, the income tax and social charges are due from both the income payer and the beneficiary.
- “Intellectual property rights and the related rights” are defined within the Fiscal Code.
- The minimum annual net income derived from independent activities, based on income brackets is set as 12 national minimum gross salaries.
- The percent of deductible expenses for income derived from intellectual property rights is reduced from 40% to 20% from the gross income, while for income derived from creation of monumental art is reduced from 50% to 25% from the gross income.
Income from dependent activities
- Gift tickets, holiday tickets, meal tickets and nursery tickets, granted as per the law are taxable as from 1 July 2010.
- Compensation payments granted according to the law are taxable as from 1 July 2010.
Investment income
- Income taxable with 16% as from 1 July 2010 is:
- Interest on on-sight deposits/current accounts
- Interest on saving deposits created under the collective system for the real estate sector
- Interest on long-term deposits/saving instruments - The obligation of quarterly reporting of net earnings/losses resulted from transfers of shares, for intermediary agents/taxpayers is introduced.
- Sole tax rate of 16% applied to capital gains, regardless of the holding period of the shares.
- The taxpayer liable to make anticipated tax payments on a quarterly basis (until the 25th of the month following each quarter), in accordance with the quarterly statements to be submitted within the same deadlines.
- For income derived from foreign currency transactions, the anticipated tax to be withheld by intermediary agents increased from 1% to 16%.
- The possibility to carry forward fiscal losses resulted from transfer of shares (other than shares in limited liability companies and closed companies) for the next 7consecutive fiscal years is introduced.
Gambling income
- Sole tax rate of 25% applied to gambling income, regardless of the amount earned.
Other provisions
- Amendment of conditions for taxation of income derived by non-resident individuals from dependent activities carried out in Romania.
- Changes brought to the domestic requirements for granting foreign tax credit.
III. Withholding tax on income derived by non-residents from Romania
Gambling income
- As of the 1st of July 2010 the gambling income derived from Romania by non-residents is subject to a 25% withholding tax.
Waiver of exemptions
- The provision which excluded the income obtained from the transfer of derivatives from the category of taxable income in Romania was eliminated.
- For the following types of income derived from Romania by non-residents, the exemptions for withholding tax were eliminated:
- Interest on sight deposits/current accounts
- Interest on instruments/debt securities issued by Romanian companies and traded on a regulated securities market
- Income derived from performance of consultancy services, technical assistance and other similar services, in the frame of inter-alia contracts financed through loans, credit or other financial agreement guaranteed by the Romanian state
- Interest on term deposits/saving instruments derived by individuals resident outside the European Union
IV. Value added tax (VAT)
- As of the 1st of July 2010, the standard VAT rate is of 24% and applies to the taxable base for taxable operations which are not VAT exempt or for which the reduced rates are not applicable.
Emergency Ordinance 59/2010 published in the Official Gazette 442/30 June 2010
The Emergency Ordinance amends the Fiscal Code and is applicable as of 1 July 2010.
The amendments brought to the Fiscal Code include the following:
Building tax due by individuals owning more than one building
Individuals owning two or more buildings are liable to an increased building tax, computed progressively depending on the number of buildings owned. Starting 1st of July 2010 the percentages used to compute the increased building tax are higher. Moreover, the increased building tax is due irrespective if the respective buildings are used or not as residence and irrespective whether they are leased or not to another person.
Tax on means of transport
The tax due for means of transport is computed based on the vehicle’s type and cylinder capacity. Starting 1st of July 2010, the tax is doubled for cars with the cylinder capacity over 2,000cm3.
Law 118/2010 published in the Official Gazette 441 / 30 June 2010
Law introduces some measures to be implemented for re-establishing the budgetary balance.
- Wages and other salary rights paid from the public budget are reduced by 25%, but not less than 600 lei/month;
- Unemployment indemnities granted according to Law 76/2002 law are reduced by 15%;
- “The minimum social pension guaranteed” is redefined as “Social indemnity for retired persons”, which cannot be lower than 350 lei/month;
- The legal provisions regarding the requests for anticipated pension or partially anticipated pension in the public system are repealed;
- The allowance granted to support the family to raise a child is reduced by 15%, but no lower than 600 RON/month
*This update is accurate to the best of our knowledge at the time of issue. It is, however, meant as a general guide and comes with the recommendation that professional advice be sought before any action is taken.