Tax Flash

1. Government Ordinance no. 8 of 31 August  2021 (amendments to the Tax Code)

Government Ordinance no. 8 was published in the Official Gazette no. 832 of 31 August 2021, whereby significant amendments are established to Law no. 227/2015 regarding the Tax Code.

This legislative document aims a wide range of amendments and additions; of which we are highlighting below the most relevant ones:

I. Corporate Tax

• It is clarified that in the case of a foreign company with the effective management seat in Romania, which is established during a fiscal year, in terms of corporate tax the taxable period shall commence on the date of such company’s registration with the central tax body;
• It is clearly established that the Romanian companies, non-payers of corporate tax but payers a tax replacing the former (i.e. micro-enterprise income tax), may also enjoy the exemption for dividend proceeds received from subsidiaries of other Member States. Conversely, the exemption may also be applied in the case of dividends paid by a Romanian subsidiary to a company from another Member State, if the latter pays a tax which replaces the corporate tax.
• The cap up to which the expenditure with impairment of uncollected receivables exceeding 270 days may be deducted in the corporate tax calculation shall be increased from 30% to 50%. This change shall become applicable on 1 January 2022.
• The tax on distributed and unpaid dividends shall be payable until 25th January of the year following the year when such dividends have been distributed (previously the baseline year was the year in which the financial statements were approved).

II. Value Added Tax

 Several correlations and technical adaptations shall be performed so that the legislation is unitary following the introduction of the special regimens regarding the electronic commerce, through GEO 59/2021.

III. Tax on the income obtained in Romania by non-residents

 The obligation to submit the Informative Declaration regarding the withholding tax/exempt revenues shall be extended to non-resident income beneficiaries (D207), even if the tax payable by the non-resident is covered by the income payer.

IV. Mandatory contributions to social security

The possibility of Romanian fiscal resident employer or the non-Romanian fiscal resident subjected to the European legislation applicable in the social security area, as well as subjected to the agreements on social security systems signed by Romania, to opt for the obligation of calculation, retention and payment of social security contributions in the case of natural persons who obtain monetary and/or in kind benefits from third parties which are non-Romanian fiscal residents.

V. Local taxes and duties

 When calculating the tax on mixed-use buildings owned by natural persons, the current restriction related to the deduction of utility costs for the person performing an economic activity shall be removed.

2. Government Ordinance no. 11 of 31 August  2021 (amendments to the Tax Procedure Code)

This legislative document which establishes a series of amendments to the Tax Procedure Code was published in the Official Gazette no 832 of 31 August 2021. From among the new elements, we are highlighting the following:

I. Payment Scheduling Perpetuity

In Title VII (Collection of fiscal receivables) of the Tax Procedure Code, a new chapter is entered (Chapter IV^1) which stipulates a permanent procedure for payment scheduling in simplified form, in relation to the budget obligations managed by the central fiscal body.

The conditions for maintaining the payment scheduling shall be suspended if the business is restricted/closed by the “competent governmental bodies” similarly with the provisions on the suspension of the conditions for maintaining the payment scheduling which was regulated by GEO no. 48/2020 and whose applicability has ceased on 25 December 2020.

As such, in order to support the taxpayers, upon request, the debtors whose business is restricted or closed during the state of emergency/alert may apply for the suspension of the conditions for maintaining the payment scheduling, in whatever form this is granted (scheduling granted according to Chapter VI in Title VII of the Tax Procedure Code, payment scheduling in simplified form according to GEO No. 181/2020, restructuring of budget obligations according to GO No. 6/2019 or simplified scheduling proposed by this legislative document). This suspension shall be granted until the date when the business is resumed free of any restriction.

II. Extension of refund mechanism with further control

As of 1 February 2022, as a general rule, VAT refund applied for shall be reimbursed by the central fiscal body with the execution of a subsequent fiscal control.

However, there are two exceptions from this rule:

• In the case of large and medium-sized companies: this fiscal control shall be carried out in advance if offences are recorded in the tax offence records of these companies, if they are in the  voluntary liquidation or insolvency procedure or if the competent tax administration has information showing the risk of undue refund;
• In the case of other taxpayers - in addition to the above mentioned aspects, this control shall be carried out in advance if it is a taxpayer who submits the first VAT return after obtaining the VAT code or if the balance of the negative amount comes from several periods longer than the number of reporting periods used during a 12-month interval.

Same as until now, the refunds with subsequent control shall be decided based on a risk analysis regarding a possible undue refund.

III. Extension of Tax Amnesty

According to the legislative document, the tax amnesty application shall be extended as follows:

• Cancellation of the accessories related to the main obligations with due dates prior to 31 March 2020 shall be extended also to the taxpayers who have been subjected to tax inspection and for which the taxation decision was communicated between 14 May 2020 and 29 March 2021. In this case, the taxpayer must pay in full, on the deadlines established, the main obligations specified in the taxation decision and must submit the application for cancellation by 31 January 2022.
• Cancellation of interest, penalties and all accessories related to the main budget obligations managed by the tax authority, with due dates prior to 31 March 2020, shall be also extended to taxpayers who have been subjected to the verification of documents (not just to the tax control, as it was worded until now) after 14 May 2020. Taxpayers in this situation will have to pay the main obligations and submit the application for cancellation no later than 31 January 2022 included, respectively within 90 days as of the taxation decision communication if this 90-day deadline ends after 31 January  2022.
• Accessories which can be cancelled, already paid by the taxpayer shall be reimbursed.

IV. SAF-T Inclusion in the Romanian Legislation

SAF-T (Standard Audit File for Tax - standard tax control file) is an international standard file for the accounting data exchange between companies and tax authorities.

As of 1 January 2022, SAF-T reporting shall become mandatory for large taxpayers, while the others will be enrolled in the reporting system later, during year 2022 (for the medium taxpayers), respectively year 2023 (for the remaining taxpayers). Taxpayers shall be able to submit the tax return monthly or quarterly, complying with the fiscal period applicable to the Value Added Tax. Taxpayers who are not registered for VAT purposes shall submit the SAF-T quarterly.

We must specify that, during the following period, a series of legislative updates will be operated in order to transpose the information wholly in the Romanian legislation.

By the legislative document, the obligation to submit the SAF-T file, as well the SAF-T file-related-offences are established.

• Failure to submit the standard tax control file on the deadlines can be fined with an amount between RON 1,000 and RON 5,000.
• Incorrect or incomplete submission of the standard tax control file on the deadlines can be fined with an amount between RON 500 and RON 1,500.

However, given the complexity and novelty of this reporting obligation, the taxpayers shall have a grace period of 3 months for the first reporting.

V. Obligation of Enrollment in the Private Virtual Space

By the legislative document, the obligation of SPV enrollment shall be established for the following categories of persons:

• Taxpayers - legal entities
• Associations and other entities without legal authority, when holding the capacity of taxpayer;
• Natural persons who are carrying-out liberal professions or are self-employed.

Thus, if the above mentioned categories of taxpayers will send the documents to the tax authority by mail, these shall not be taken into account.

Electronic format transmission of documents shall become mandatory as of 1 March 2022.

Disclaimer

The information included in this newsletter is intended to provide an overview of the new elements of legislation; the newsletter does not include a comprehensive review of each topic. For additional information on the topics presented, please contact us. No liability is accepted for the decisions or omissions determined by the use of this newsletter’s text. All Crowe notices are available for consultation on the webpage: www.crowe.ro.

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