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exe

Tax changes introduced by GEO 115/2023

21/12/2023
exe

1. Corporate tax

Changes and new expenditure provisions from January 1st, 2024

  • The following are included in the social expenses with limited deductibility: expenses for the proper functioning of nurseries and kindergartens managed by taxpayers and amounts paid by the taxpayer for the placement of children of employees in early education units, up to a limit of 1,500 lei/month per child.
  • Expenses related to private scholarships, granted according to the law, within the limit of 1,500 lei/each scholarship, are added to the social expenses and deducted to a limited extent and are eliminated from the category of expenses for which a tax credit is granted.
  • As regards expenditure on the operation, maintenance and repair of service housing, deductibility is maintained up to the limit corresponding to the built-up areas provided for in the Housing Law No. 114/1996 and the 10% tax increase is eliminated.
  • The deductibility of operating, maintenance and repair costs relating to premises located in a dwelling owned by an individual and used for personal purposes is limited to 50%, corresponding to the areas made available to the taxpayer under agreements concluded between the parties for this purpose.
  • A new limitation of 50% is introduced for operating, maintenance and repair costs relating to a registered office acquired by the taxpayer in residential buildings or individual residential buildings in residential complexes which is not used exclusively for business purposes. If the registered office, which is part of the taxpayer's assets, is used for personal purposes by the shareholders or associates, these expenses are considered to have been incurred in their favor and are not deductible when calculating the taxable income.
  • As far as tax depreciation is concerned, for a registered office that is not used exclusively for business purposes, located in residential buildings or in individual dwelling buildings, in residential complexes defined according to legal provisions, registered in the taxpayer's assets, depreciation is deductible at the rate of 50%. In the case of the use of registered offices owned by the taxpayer for personal purposes by shareholders or associates, the tax depreciation relating to the registered office is not deducted when calculating the taxable result.
  • A new paragraph is introduced, which provides additional information on the determination of the share of non-taxable income in total income, in determining non-deductible expenses related to non-taxable income. Thus, taxpayers applying accounting rules in accordance with International Financial Reporting Standards that record the valuation of equity securities at fair value through other comprehensive income as a result of applying the irrevocable option to recognize equity securities in this way also take into account the amounts of valuation/revaluation differences that are credited to the reserve accounts as a result of the sale/disposal of equity securities.
  • The facility to obtain the tax credit related to the purchase cost of electronic fiscal cash registers is eliminated. The last tax year in which the amounts of electronic tax counting devices remaining to be carried forward by law are deducted from income tax is the tax year 2023 or the amended tax year ending in 2024. The amounts of electronic tax counting devices remaining to be carried forward by law after deduction from income tax for the tax year 2023/amended tax year ending in 2024 are expense-like items beginning in 2024 or the amended tax year beginning in 2024. In this case, the expenses representing the tax depreciation of the electronic fiscal cash registers are non-deductible expenses when calculating the taxable income.
  • The deadline for filing corporate income tax redirection forms for sponsorships and/or acts of patronage and for expenses related to goods, funds and services provided to UNICEF is modified. This is until the deadlines for filing the annual corporate tax return. Previously, the deadline was a maximum of 6 months from the date of filing the annual corporate tax return for both types of redirections.

Amendments and new stipulations on provisions

  • For the adjustments for impairment of receivables, recorded in accordance with the applicable accounting regulations, the deductibility limit is changed from 50% to 30% of the amount of these adjustments. The 30% rate applies to claims registered from January 1st, 2024. It is noted that these adjustments are amounts due from internal and external customers for products, semi-finished goods, materials, goods sold, works performed and services rendered.
  • Changes are made to specific provisions/impairment adjustments from December 15th, 2023 and January 1st, 2024 for non-bank financial institutions and credit institutions, respectively.

Changes to the level of tax losses from January 1st, 2024

  • Annual tax losses determined by the corporate income tax return, beginning in the year 2024/amended tax year beginning in the year 2024, as the case may be, shall be recovered from the taxable profits obtained, up to and including 70%, in the following 5 consecutive years.
  • The annual tax losses established by the corporate income tax return, relating to the years preceding 2024/year beginning in 2024, which remain to be recovered on December 31st, 2023, shall be recovered from the taxable profits realized from 2024 onwards, up to a limit of 70% of the taxable profits in question, for the remaining period to be recovered in the 7 consecutive years following the year in which the losses in question were recorded.
  • If both annual tax losses are recovered from 2024 onwards and losses remaining to be recovered from December 31st, 2023 onwards, for the application of the 70% limit, these losses are cumulative.

Changes to international tax issues from January 1st, 2024

  • Additions are introduced regarding the determination of the market value of the transfer between the foreign legal person and its permanent establishment, i.e. taking into account the provisions of the 2010 Report on the allocation of profits to permanent establishments issued by the OECD.

Amendments to the rules on limiting the deductibility of interest and other economically equivalent interest costs from January 1st, 2024

  • Excess debt costs resulting from transactions/operations that do not finance the acquisition/production of assets in progress/assets established according to the provisions relating to the minimum tax, respectively additional tax for legal entities operating in the oil and gas sectors, and which are carried out with affiliated persons, are deducted, in a tax period, up to the deductible limit represented by the equivalent in lei of the amount of 500,000 EUR.
  • The total excess costs of indebtedness resulting from transactions/operations carried out both with the relevant affiliated persons and with non-affiliated persons, which may be deducted in a tax period, may not exceed the deductible limit represented by the RON equivalent of the amount of 1,000,000 EUR.
  • The limit of 500,000 EUR for excess costs of indebtedness to affiliated persons does not apply to credit institutions - Romanian legal entities, to Romanian branches of credit institutions - foreign legal entities, to non-bank financial institutions, to Romanian branches of non-bank financial institutions and to investment firms as defined by law.
  • Excess costs of indebtedness carried forward to December 31st, 2023 shall be allocated to the deductible limit represented by the RON equivalent of 1,000,000 EUR.

2. Income tax on micro-enterprises

  • A member may hold more than 25% of the value/number of shares or voting rights in only one micro-enterprise. Before, the limit was 3 micro-enterprises. Furthermore, it is specified that both direct and indirect holdings are taken into account, limiting the possibility of creating company structures for this purpose. If a shareholder owns more than 25% of several companies that qualify for the micro-enterprise income tax system, he or she must determine by March 31st, of the following year which company will apply the system.
  • The exception that allowed firms operating in the tourism industry to apply the income tax to micro-enterprises even if the conditions are not met is repealed. Implicitly, the mixed tax regime disappears, whereby for tourism industry specific activities micro-enterprises are taxed and for other activities the corporate tax is applied.
  • An additional condition is added to be a micro-enterprise: to file financial statements within the legal deadline. For 2024, in order to meet this condition, the financial statements for 2023 must be submitted by March 31st, 2024.
  • The limit of 500,000 euro is verified by taking into account both the income of the micro-enterprise and the income of the enterprises related to it (as defined in Law 346/2004).
  • It introduces an income threshold of a maximum of 15% of insurance intermediation income, below which intermediaries can apply the micro-enterprise income tax system.
  • The possibility of deducting certain amounts from the micro-enterprise tax (i.e. sponsorships or the cost of cash registers) is repealed. The last tax year from which micro-enterprise income tax can be deducted is 2023.

The changes come into force from January 1st, 2024.

3) Taxation of individuals

  • With regard to tax facilities in the IT, construction and agri-food industry, if, during the same month, an individual earns income from wages and similar to wages for a fraction of a month, in the basic position, with one or, as the case may be, several employers in succession, for the application of the exemption, each employer shall determine the part of the 10,000 lei monthly limit corresponding to this period and shall grant the exemption for the gross monthly income earned, within the limit of the fraction of the limit thus determined. Moreover, the employee can choose to pay the full social security contribution. The employee can change his/her mind and opt out of the original option. The option applies from the month following its submission, according to the employer's internal regulation or other internal document. The reduction of the social security contribution with the percentage rates of the pension pillar II is applied proportionally to the number of days worked at the employer in case of termination/start of activity.
  • With respect to self-employment income, determined under the actual system, sponsorship and patronage expenses are excluded from the limited deductible expenses. Also, the limit for expenditure on sports subscriptions is reduced from 400 EUR to 100 EUR. The following non-deductible expenses are introduced: sponsorship and/or patronage expenses, incurred in accordance with the law; expenses recorded in the accounting records, regardless of their nature, subsequently proven to be related to acts of corruption, in accordance with the law.
  • Clarification is provided on the limit of 3 basic salaries corresponding to the place of work occupied for delegation/detachment/transnational secondment/extra benefits received by mobile workers. The provisions apply from December 15th, 2023.
  • For these salary benefits, the taxation regime changes:

- the favorable difference between the negotiated preferential interest rate and the market interest rate for loans and deposits is taxable up to an overall limit of 33% of the basic salary corresponding to the job held or the monthly salary/monthly wage granted;

- the amounts paid by the employer for the placement of children of their employees in early education units are not taxable up to 1,500 lei/month/child and the overall limit of 33% of the basic salary corresponding to the job held or of the monthly salary/monthly wage granted;

- amounts paid to employees working on telework become fully taxable;

- the deductible/ non-taxable amount for a gym membership is reduced (from €400/year to €100/year) if it is borne by both the employee and the employer.

  • Clarification is provided on the timing of taxation for certain benefits of a salary nature, included in the overall limit of 33% of the basic salary corresponding to the job held or the monthly salary/monthly wage granted, respectively: the cost of tourist and/or treatment services, including transport, during the period of leave; contributions to a voluntary pension fund paid by the employer for its own employees; voluntary health insurance premiums and medical services provided in the form of subscriptions paid by the employer for its own employees; the cost of sports subscriptions paid by the employer for its own employees; amounts paid/allowed by the employer for the placement of children of its own employees in early education establishments; amounts representing the favorable difference between the preferential interest rate established by negotiation and the market interest rate for loans and deposits.
  • For the income from the transfer of goods, the flat rate of 20% is reintroduced and the possibility of determining income under the actual system is eliminated. If the taxpayer is a taxpayer with accounting obligations, he withholds the tax at source.
  • The annual tax loss incurred for certain types of income is carried forward and offset by the taxpayer up to 70% of the annual net income earned from the same source of income in the following 5 consecutive tax years (the previous provision was 100% for 7 years);
  • The possibility of redirecting an amount of income tax to support non-profit entities and religious establishments in the case of income other than salaries is repealed.
  • Where several values of the gross minimum salary per country are used in the same year, the value of the gross minimum salary per country in force on May 25th, of the year in which the income is earned for which the social security contributions are determined shall be taken into account when verifying that the income falls within the annual limits and when determining the annual basis for calculating the social security contribution and the health insurance contribution due. So, for the year 2023, the minimum gross salary to be taken into account is 3,000 RON.
  • Social health insurance contributions are due for social health insurance benefits granted under the Government Emergency Ordinance no. 158/2005.
  • The provisions relating to the obligation to calculate, withhold, declare and pay compulsory social security contributions, due according to the law in the case of benefits in cash and/or in kind received from third parties, also apply to income in cash and/or in kind received from third parties on the basis of an individual employment contract, an employment relationship, an act of secondment or a special status provided for by law or a contractual relationship between the parties.
  • The provisions on the non-taxable amount of 200 lei/month, which is not included in the monthly basis for calculating social security contributions, representing income from salaries and similar salaries, under the law, are maintained in 2024.

The above provisions take effect from January 2024/for income earned in 2024, subject to certain exceptions, mentioned above.

4. Value added tax (VAT)

  • The right to deduct tax on the purchase, rental or leasing of buildings/occupied premises, whatever their purpose, situated in residential areas or blocks of flats and tax on expenditure relating to such buildings/occupied premises, where these are not used exclusively for business purposes, is limited to 50%.

The provision enters into force from the 1st of the month following the date from which Romania is authorized to apply a special measure derogating from the provisions of the EU VAT Directive.

  • The conditions for the application of the facility for deferment of payment of VAT at customs are amended. The facility will be available for imports made by persons lodging customs declarations using the centralized clearance procedure or for imports made by lodging a customs statement in the form of an entry in the declarant's records, by taxable persons registered for VAT purposes and who have obtained an authorization under the Union Customs Code Regulation (EU). In addition, among the conditions to be accomplished by persons who have obtained a certificate of deferment of payment of VAT at customs is an affidavit that the person has no outstanding budgetary obligations.
  • The definition of "added sugar" applicable for the determination of the VAT rate of 9% or 19% is reworded. According to the new definition, for the determination of added sugar content, products assimilated to sugar when added as ingredients are taken into account and sugars in unsweetened fruit juices, fruit juice concentrate and sugars in fruit purées are eliminated.
  • Exempted from the 19% VAT rate in the category of foods with added sugar, in addition to cake and biscuits, are powdered milk for newborn babies, infants and young children - for these the reduced rate of 9% will apply.

These provisions shall enter into force on January 1st, 2024.

  • Also suspended from January 1st, 2024 until December 31st, 2026 inclusive are the notifications to be submitted to the tax authorities by registered and non-registered VAT persons who at the end of a calendar year have a turnover of less than 300,000 lei and by VAT-registered persons providing international transport services (i.e. D392A, D392B and D393 statements).

5. Other changes

RO e-Factura

  • From January 1st, 2024, they are exempted from the obligation to send electronic invoices via the e-Factura system:

- intra-community exports and supplies of goods;

- supplies of goods/provisions of services to taxable persons who are neither established nor registered for VAT in Romania;

- supplies of goods/provisions of services for which simplified invoices are issued;

- the provision of services for which invoicing is not subject to the invoicing rules applicable in Romania.

  • From July 1st, 2024, for B2B transactions between taxable persons established in Romania, the obligation to transmit electronic invoices via the RO e-Factura system by issuers to their recipients is introduced. The deadline for transmission is 5 calendar days from the date of issuance of the invoice, but no later than 5 calendar days from the deadline provided for in Art. 319 para. (16) of the Fiscal Code for the issuance of the invoice. Exceptions are simplified invoices.
  • Failure by the issuer to issue the invoice and by the recipient to receive and register it via the RO e-Factura system constitutes an infringement and is punishable by a fine equal to 15% of the total value of the invoice (previously, the fine was equal to the amount of VAT shown on the invoice).
  • Failure by issuers to submit electronic invoices via the e-Factura system within the deadline is punishable by a fine:

- from 5,000 lei to 10,000 lei for large taxpayers;

- from 2,500 lei to 5,000 lei for medium taxpayers;

- from 1,000 lei to 2,500 lei for small taxpayers and individuals.

  • If the national system RO e-Factura is not operational for at least 24 hours, the obligation to submit the invoice is suspended until the system is back online. In this case, invoices may be issued in accordance with the provisions of Article 319 of the Fiscal Code, and sent to the recipients, provided that the issued e-Factura are subsequently transmitted to the national system RO e-Factura. The periods of non-functioning of the national electronic invoice system RO e-Factura will be published on the websites of the National Tax Administration Agency and the Ministry of Finance.

Other aspects

  • A new deadline is set for certain penalties provided for in Emergency Ordinance no. 28/1999 on the obligation for economic operators to use electronic fiscal cash registers, i.e. the application from October 1st, 2024 of fines, confiscation of amounts and suspension of activities for economic operators who deliver goods or provide services by means of commercial vending machines operating on the basis of card payments and banknote or coin acceptors.
  • New definitions are introduced in Law 70/2015 to strengthen the financial discipline on cash receipts and payments operations regarding what is meant by: superstore and hypermarket.
  • Clarifications are made in Law 70/2015 for strengthening financial discipline on cash receipts and payment operations regarding:

- the limit for advances for settlement set at 5,000 lei for each person who has received advances for settlement,

- cash receipts and payments made in relation to natural persons for supplies/purchases of goods, provision of services, dividends, assignment of claims or other rights are capped at RON 10,000 to/from one person,

- the limit for existing cash in the cash desk is increased in the case of cash and carry stores, supermarkets and hypermarkets, it will be 500,000 lei at the end of each day,

- the branches and other secondary offices of legal entities, which have their own cash office and/or an account with a credit institution shall apply the provisions for each individual cash office,

- a new sanction is introduced for non-compliance with the use of cashless instruments for cash receipts/payments in relation to natural entities representing receipt or repayment of loans or other financing, i.e. a fine of 25% of the amount received/paid, but not less than 500 lei.

  • The accounting law is supplemented with provisions on the obligation of non-profit legal entities to draw up a statement accompanying the annual financial statements and showing the amounts received/used from grants, sponsorships, redirected amounts, according to the law.
  • The provisions relating to the National System for Monitoring the Road Transport of Goods RO e-Transport are completed and amended and contraventions are introduced in the form of fines and confiscation of the equivalent value of undeclared goods, where appropriate.

 

Disclaimer

The information contained in this newsletter is intended to give you an overview of new legislation; the newsletter does not contain a comprehensive analysis of each topic. For more information on the topics covered please contact us. No liability is accepted for decisions or omissions following the use of the contents of this newsletter. All Crowe newsletters are available at the address www.crowe.ro.

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