Romania: Tax relief on reinvested profits

A Law regarding the reorganization of some public authorities, the efficiency of public expenses, support for the business environment and compliance with the general agreement with the European Commission and the International Monetary Fund introduces a new article into the Fiscal Code regarding a tax exemption for certain reinvested profits.
This incentive is available from 1 October 2009 until 31 December 2010 and applies to reinvested profits used for the production and/or acquisition of new technological equipment used in the business. The amount for which the incentive is applied is deducted from the fiscal value of the equipment produced/acquired. Therefore the tax deduction for depreciating the equipment will be reduced in the future.
The reinvested profit is allocated for the creation of a reserve but the release of such reserve in the future might have unintended tax consequences. If, as a result of the application of the exemption, the income tax due falls below the minimum tax, the minimum tax will be have to be paid.
The assets created/acquired in relation to the incentive must be kept for at least half their normal useful life, otherwise profit tax is recalculated and delay penalties are due from the date the exemption was granted.
Taxpayers who have to pay quarterly profit tax may deduct any profit reinvested in a previous quarter from the cumulated annual profit tax calculated since the start of the year. For those taxpayers who have previously paid income tax (i.e. micro-enterprises) and have subsequently become corporate taxpayers, the corporate tax relief is calculated by taking into consideration the accumulated accounting profit invested in the above mentioned fixed assets starting with the quarter in which they became corporate taxpayers.
In this case also, for 2009 the accounting profit considered for the application of the tax relief will be the profit earned since 1 October 2009. Moreover, taxpayers benefiting from the facilities offered by this Law cannot benefit from the provisions regarding the stimulation of the setting-up and development of Small and Medium Enterprises.


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