Changes of certain tax provisions

At the beginning of the year, a series of amendments and completions of the fiscal legislation came into force, brought by Law 296/2020 for the amendment and completion of Law 227/2015 on the Fiscal Code, published in the Official Gazette no. 1269/21.12.2020, law amended in its turn by the Emergency Ordinance 226/2020 regarding some fiscal-budgetary measures, published in the Official Gazette no. 1332/31.12.2020.

We present below the main changes brought to the tax legislation by these normative acts.

Income tax

Salary and salary-assimilated revenues

The amounts granted to the employees performing telework activities to support utility expenses at the location where the employees work, such as electricity, heating, water and data subscription, and the purchase of office furniture and equipment, within the limits set by the employer by the employment contract or the internal regulation, within the limit of a monthly ceiling of RON 400, corresponding to the number of days in the month in which the individual performs telework activity, are included in the category of non-taxable incomes.

These non-taxable benefits have the same tax treatment in terms of social security contributions.

New deadlines

The deadline for submitting the Single Return is officially extended from March 15th to May 25th of the following year.

The deadline for submitting Form 230 "Application for the destination of the amount representing up to 3.5% of the annual tax due" is amended to May 25th, inclusively.

Microenterprise income tax

Dividend incomes received from a Romanian legal entity are excluded from the tax base.

Tax on the income obtained in Romania by non-residents

In the case of the individuals resident in a European Union Member State or in a state with which Romania has concluded a double taxation agreement, a 10% tax (previously 16%) shall be withheld for income obtained from Romania such as: interest income, royalties, commissions, sports and entertainment activities performed in Romania, management or consultancy services, services provided in Romania, revenues obtained by artists or sportsmen.

The more favorable provisions of the Double Taxation Conventions remain applicable, when the conditions of application are met.

Value added tax

The turnover ceiling for the applicability of the VAT cash-accounting system is increased, reaching the value of RON 4,500,000 (previous RON 2,250,000).

The VAT payment measure is extended by the reverse charge mechanism in the case of imports of goods to which simplification measures are applicable (waste, residues and other recyclable materials, wood and wood materials, cereals and technical plants, mobile phones, integrated circuit devices and consoles games, tablet PCs and laptops).

The transfer of ownership over an immovable property from a taxable person to a public institution, for the purpose of settling an outstanding tax liability, does not represent a delivery of goods.

Local taxes

The deadline for updating the valuation report for determining the taxable value of buildings owned by legal entities is extended from 3 to 5 years.

If the valuation report is submitted after the first tax payment deadline, it shall only be taken into account starting with the year following the submission.

Corporate income tax

Tax consolidation

The tax consolidation system is optional, with a period of application of 5 tax years, calculated starting with the first year of application of the tax consolidation system and until the dissolution thereof.

In order to set up the fiscal group, members must cumulatively meet the following conditions:

• direct / indirect holding of at least 75% of the value / number of shares / voting rights for an uninterrupted period of one year, prior to the beginning of the tax consolidation period,
• the members of the group are corporate income tax payers, applying the same declaration and payment system,
• the members of the group have the same tax year,
• the members of the group are not part of another fiscal group in terms of corporate tax,
• the members of the group may not be taxpayers on the revenues of micro-enterprises, the members of the group do not apply the special scheme for the taxpayers performing nightclub activities,
• the members of the group are not subject to the dissolution/ winding-up procedure.

The application is submitted at least 60 days prior to the beginning of the period for which the tax consolidation application is requested. The tax consolidation system in the field of corporate tax is applied starting with the tax year following the submission of the application. Therefore, the first tax year of the tax consolidation system is 2022.

Each member of the group makes its own corporate tax calculation and sends it to the taxpayer in charge by the 25th day of the month following the end of first to the third quarters, and for the completion of the annual calculation, by the deadline for filing the corporate tax return.

The completion and payment of the corporate tax related to such tax year is made by the legal entity in charge by the deadline for the submission of the corporate tax return.

The obligation to prepare the transfer pricing file shall also remain the responsibility of each member of the fiscal.

Amendments of the concept of actual place of effective leadership

The definition of the actual management location is amended in the sense that a foreign legal entity shall be deemed as having the actual management location in Romania and therefore, taxpayer in terms of the corporate tax, if it performs operations corresponding to economic, real and substantial purposes and where at least one of the following conditions is met:

• The economic-strategic decisions necessary for the management of the activity of the foreign legal entity as a whole are made in Romania by the executive managers/ members of the board of directors; or
• At least 50% of the executive managers / members of the board of directors of the foreign legal entity are residents.

In this respect, a specific procedure has been introduced to determine the tax residence based on the actual management location. The legal entity shall submit to the relevant central tax authority "The questionnaire for the establishment of the tax residence of the foreign legal entity according to the actual management location in Romania" accompanied by a series of supporting documents. The tax authority shall analyze the documentation and shall establish whether the foreign legal entity retains the residence of the foreign state or becomes a foreign legal entity resident in Romania.

Foreign legal entities registered with the actual management location in Romania until December 31st, 2020 inclusively are bound to submit the questionnaire accompanied by the supporting documents to the relevant tax authority by June 30th, 2021, for the establishment of the tax residence according to the new criteria.

In order to have an efficient communication, we established a direct link with the related department. For the subject of the current Update, the requests for tax consultancy may be sent to [email protected] with a brief description of the query. One of our consultants will answer or contact you shortly.

Disclaimer

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