Newsletter 3/2019 – Tax legislative amendments

Newsletter 3/2019 – Tax legislative amendments

References: GEO 114/2018, Law 30/2019, GEO 25/2018, Law 227/2015

Newsletter 3/2019 – Tax legislative amendments

In the last two months, certain fiscal and budgetary measures have been introduced through the following normative acts: Emergency Ordinance 114/2018 regarding the establishment of certain measures in the field of public investments and certain fiscal and budgetary measures, the change and completion of some normative acts and the extension of certain deadlines, published in the Official Gazette no. 1116/29.12.2018 and Law no. 30/2019 for the approval of the Government Emergency Ordinance no. 25/2018 regarding the amendment and update of certain normative acts and the approval of fiscal-budgetary measures, published in the Official Gazette no. 44/17.01.2019.


We present below the main amendments brought to the tax legislation by the normative acts mentioned above.



Corporate income tax and income tax for microenterprises




Starting with 1 April 2019, a new condition for granting the tax credit for sponsorships to non-profit entities is introduced. Thus, taxpayers can deduct from the corporate income tax/income tax for microenterprises the sponsorship amount, only if the sponsorship beneficiary is included, as at the date of the sponsorship contract signing, in the Registry of entities/places of worship for which such tax deductions are granted.


At the same time, the requirement for sponsorship beneficiaries to be social service providers accredited with at least one licensed social service is eliminated for microenterprises.


The Registry is prepared by the National Agency for Fiscal Administration (“NAFA”) and posted on its website. Non-profit entities will be included in the registry by request, after NAFA will verify the fulfillment of the submission and payment obligations.



Interest deductibility rules


The deductibility limit for the exceeding borrowing costs has been raised from EUR 200,000 to EUR 1,000,000. The exceeding borrowing costs which exceed this threshold will be deductible up to the limit of 30% (previously 10%) from EBITDA.


These provisions apply starting with 1 January 2019, respectively with the first day of the amended fiscal year.



Personal income tax and social contributions


Incentives for the construction sector


During the period 1 January 2019 – 31 December 2028, the employees of the companies operating in the construction sector, including the construction activity (NACE codes 41.42.43), the production of construction materials, as well as the NACE code 711 - Architectural, engineering and technical consultancy services and which has the turnover derived from such activities within the limit of at least 80% of their annual turnover calculated cumulative from the beginning of the year, shall apply the following facilities:


  • Exemption from the payment of income tax;
  • Exemption from the payment of the health insurance contribution, while maintaining the quality of being insured;
  • The social security contribution paid by employees has been reduced from 25% to 21.25% (the employees are exempted from paying the contributions to privately-managed pension funds);
  • The labor insurance contribution has been reduced from 2.25% to 0.3375% contribution to be paid.


These measures supplement the amendments made to the Labor Code, based on which for the period 1 January 2019 – 31 December 2028, for the construction sector, the guaranteed national minimum gross monthly salary is set at RON 3,000.


Since the application of these facilities raises many issues, the authorities need to clarify how these facilities would be applied in practice.



Redistribution of certain amounts to non-profit entities


The introducing of Registry of non-profit entities also affects the private individuals. As such, the taxpayers earning salary revenues, pensions, income from self-employment, intellectual property rights etc. may redirect amounts up to 3.5% (previously 2%) of the income tax due per year to support nonprofit entities which are included in the Registry of entities for which such tax deductions are granted.


These provisions apply starting with the April 2019 income.



Value added tax


Simplification measures


The period for applying the reverse charge mechanism for certain transactions provided by the VAT legislation, such as supply of cereals, constructions, energy, the transfer of green certificates or the supply of mobile phones, games, PC tablets and laptops, has been extended to 30 June 2022.



VAT base adjustment in case of bankruptcy of the beneficiary


For the bad debts, the VAT adjustment is allowed as of the date of the court resolution for beginning the bankruptcy proceedings (previously as of the date the bankruptcy procedure was closed).


In case the bankruptcy proceedings started prior to 1 January 2019 and the final court decision to close the insolvency proceedings has not been rendered until this date, the adjustment is to be made within five years as of 1 January 2019.



Reduced VAT rate for supply of residential properties to private individuals


Starting with 2019, for the supply of residential properties with a maximum useful surface of 120sqm and with a value of maximum RON 450,000 (excluding VAT), will be applicable the reduced rate of 5%, notwithstanding the number of acquisitions of this type performed by the same private individual. It’s eliminated the restriction based on which a private individual could benefit of the reduced VAT rate of 5% just for a single acquisition.



The establishment of a tax on financial assets („Tax on greed”)


Banking institutions will owe a tax on their financial assets, if the quarterly ROBOR (Romanian Interbank Offer Rate) average exceeds 2%.


This tax is due quarterly and is calculated by applying rates ranging from 0.1% to 0.5% on the taxpayer's financial assets at the end of the each quarter of calculation.


These provisions apply starting with 1 January 2019 and the bank institutions are required to calculate, declare and pay this tax on quarterly basis, until the 25th of the month following the quarter for which the asset tax is due.





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