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Romania: about the VAT

Alessandro PasutTaxable persons that have been de-registered for VAT purposes for not submitting the VAT returns for a period of six months or two consecutive calendar quarters may re-register for VAT purposes at any time, provided that they present the returns not submitted within the legal deadlines with a statement in which they undertake to file their future returns within the legal deadlines. If the supplier’s VAT code is cancelled, the beneficiary cannot deduct the input VAT starting the day following that on which the cancellation is performed in the Register of taxable persons. Taxable persons whose VAT code was erroneously cancelled by default are still regarded as taxable persons for VAT purposes, with the right to deduct input VAT. Persons erroneously registered for VAT purposes by the tax authorities are not obliged to invoice with VAT. In such circumstances, however, those persons have the obligation to pay the tax and their beneficiaries have the right to deduct the input VAT.

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Romania: new insolvency code

Alessandro PasutThe new Insolvency Code will be applicable also to ongoing procedures. Its adoption under an emergency procedure stressed the need to improve the efficiency of insolvency procedures and secure a balance between creditors’ and debtors’ interests. A major change to previous rules aiming at shortening the procedure is the reduction of the term for carrying out the reorganization plan from three to one year, with the possibility to extend it for just one other year as from the date of confirmation of the insolvency procedure. Pursuant to the new rules creditors – and, in particular, tax authorities – will now have the possibility to initiate enforcement actions during insolvency procedures if debtors fail to pay, within 90 days after maturity, a debt arising after insolvency procedures have been opened.


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Romania: Corporate Income Tax

Alessandro PasutRomania

Corporate Income Tax. Expenses resulting from the adjustment due to the difference between the nominal value and the acquisition cost of  previously acquired receivables are considered deductible.
The amendments to the Norms detail the supporting documents that need to be provided by a Romanian company to benefit from corporate income tax exemption for dividends received from a foreign company.


The amendments to the Norms bring various clarifications with respect to the declaration and payment of corporate income tax due by foreign companies for income from immovable property located in Romania and the sale of shares held in Romanian companies, corporate income tax due by taxpayers opting for a fiscal year different from the calendar year, micro-enterprise income tax due by taxpayers that cease to exist.


Certain changes are aimed at aligning the Norms with the Fiscal code, such as the application of the micro-enterprise regime for taxpayers deriving income from management and consultancy, the types of income included in the taxable base for micro-enterprise regime, the  minimum holding period required to benefit from dividend corporate income tax / withholding tax exemption.

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Coindu open a new factory in Romania

The portuguese company Coindu that produces textiles for the audio industry is planning to open a new factory in Drobeta Turnu Severin, according to local authorities and is about to start a hiring campaign.
What will be a €10 million investment is expected according to company officials to create 1,200 new jobs, bringing the total number of employees Coindu has in the country to 2,200. The currently owns a factory in Curtici, in Arad county.
Coindu Romania SRL plans to hire 450 employees in 2014 with the prospect of hiring another 800 in 2015, according to what Drobeta Turnu Severin’s deputy mayor, Marius Screciu, quoted as saying to Agerpres newswire.
The factory will be built on a 4.5 hectare area the company has bought in Drobeta Turnu Severin and is expected to cost €10 million, with the municipality agreeing to provide utilities for the new industrial platform.

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Romania: amendment in Fiscal Codes

An amendment to the Fiscal Codes regarding profit tax has entered into force on 1 February 2013.

The definition and calculation method of the fiscal value for fixed assets qualified as biological assets has been introduced. The new provisions are similar to the general provisions referring to depreciable fixed assets. Income/expenses incurred further to the modifications in the fair value of biological assets held by taxpayers applying IFRS are considered as non-taxable income / non-deductible expenses.

The percentage of additional deduction for profit tax purposes for research and development expenses has been increased from 20% to 50%. As before, the deduction is granted on a quarterly/ annual basis. If a company registers fiscal loss, it can be recovered according to the law. The deduction is granted separately for each research and development project.Alessandro Pasut

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Romania: Changes to the Fiscal Procedure Code

At the end of January a Government ordinance was published in the Official Journal of Romania providing for some changes to the Fiscal Procedure Code.

The modifications include, among other things, changes to the method by which official fiscal documents (e.g. decisions on tax liabilities) are communicated to the taxpayer, fiscal registration of non-residents, amicable disputes resolution procedure for double taxation treaties and changes in relation to fiscal cooperation at the European Union level.

Official fiscal documents can be sent to the taxpayer or its authorized representative either in person or by mail. If sent in person, the taxpayer (or representative) must sign on receiving the documents. If sent by mail, registered post must be used with confirmation of receipt.

Official fiscal documents may also be sent by other means, such as fax, provided the taxpayer has made an explicit request to the tax authorities to use such a means of communication and only when confirmation of receipt of the documents can be given.

The Ordinance clarifies that fiscal registration of non-resident individuals or legal entities which receive income from Romania subject to taxation at source can also be carried out at the request of the income payer. The fiscal registration number given by the fiscal authorities must be stated in the tax returns which must be submitted by the income payer for payments made to the non-residents.

In cases in which a resident tax payer believes that the provisions of a treaty for the avoidance of double taxation have not been correctly implemented in the other contracting state, he can ask the National Agency for Fiscal Administration (ANAF) to initiate an amicable disputes resolution procedure. ANAF may intervene also in cases when the relevant authority in a state with which Romania has signed a treaty for the avoidance of double taxation requests the initiation of an amicable disputes resolution procedure.

The Ordinance implements the European Directive on fiscal administrative cooperation between Romania and the other European Union member states. The new provisions will apply from 1 January 2013, except for those related to the exchange of information, which will apply from 1 January 2015.


Romania: Default assessment

The National Agency for Fiscal Administration (ANAF) has issued an order regarding the default assessment by the tax authorities of tax liabilities subject to self-assessment or withholding. The procedure for default assessment of these tax liabilities is applied with regard to every fiscal obligation of the taxpayer and to each fiscal period for which tax returns were not submitted.

The default assessment of taxes will be performed by the tax authority department responsible for the administration of tax returns, during the prescription period, but does not cover the tax inspection periods.

According to the procedure, taxpayers who have failed to comply with their obligations will be notified that they have not met the legal deadline for submitting the tax returns. If they do not fulfil their obligations within 20 days, the default assessment of taxes will be performed. For VAT liabilities a separate procedure is put in place.

The tax authorities will verify for each non-compliant taxpayer, for each tax, fee or contribution whether there are at least four tax returns in the analysed period. The analysed period covers the last 24 months for monthly fiscal obligations and 36 months for the quarterly or half-yearly fiscal obligations.

If four tax returns are identified, the automatic assessment procedure applies and the amount established by default is calculated as the arithmetic mean of the taxes, fees or contributions declared by the taxpayer in the analysed period. If the tax authorities do not find four tax returns from the analysed period, the default assessment is made based on documentary analysis.

The documentary analysis is performed based on documents and information relevant for the assessment available at the moment the analysis begins. If the taxpayer submits the tax returns for the obligations that were assessed by the tax authorities within 60 days of receiving the default assessment decision, the decision is annulled.


Romania: Amendments to the Fiscal Code

A Government Ordinance published at the beginning of September brought further amendments to the Fiscal Code and among others the following changes.

General provisions. The obligation to register contracts concluded with non-resident legal entities and non-resident individuals for services provided in Romania has been extended to resident individuals and Romanian permanent establishments of non-resident entities. The provision will enter into force on 1 January 2012.

Corporate Profits Tax. Partnerships with legal personality established according to the legislation of another state that are performing activities in Romania fall under the existing tax treatment applicable to partnerships without legal personality set up under the Romanian legislation. This rule enters into force on 1 January 2012.

With some exceptions (e.g. banks, non-profit organisations, taxpayers deriving most of their income from agriculture, etc.), as of 1 January 2013, taxpayers may opt to declare and pay the annual profit tax by making quarterly advanced payments. Such an option has to be transmitted by 31 January of the fiscal year for which the taxpayer wants to apply it and has to be kept for at least two years.

Quarterly advance payments represent a quarter of the profit tax due for the previous year, updated with consumer index prices. The consumer index prices will be published in a Ministry of Finance Order by 15 April of the year for which the anticipated payments are made. The annual income statement has to be submitted by 25 March of the following year. Profit tax due for 2011 has to be declared and paid according to the provisions in force up to 31 December 2011.

Personal Income Tax. The three year exclusion period before non-resident individuals meeting residency requirements become taxable in Romania on their worldwide income has been reduced to one year only.

Value added tax. The new deadline for the completion and submission of the Recapitulative Statement will be the twenty-fifth of the month following the month to which the statement relates.


Romania: Amendments to the Fiscal Procedural Code

Period for correction of errors. A Government Emergency Ordinance has extended the period in which a taxpayer may file a request to the tax authorities for the correction of errors in payment documents to five years. The term of five years starts on 1 January of the year following that in which the payment in error was made.

From June 2011, taxpayers also owe a default interest rate of 0.05% for each day of delay in the case of unpaid tax obligations. Before this change, the maximum period for filing an application to correct errors was one year from the date of payment while the interest rate payable in the case of unpaid tax obligations was 0.04% for each day of delay.

Free movement of persons. On 27 June 2011 amendments to the provisions regarding the free movement on Romanian territory of citizens of the European Union and citizens of the European Economic Area entered into force. Under these provisions EU citizens who enter Romanian territory and are in search of employment can now benefit from a residency right of up to six months from the date of entry, without meeting any additional conditions.

The registration certificate issued to EU citizens now has a validity period of 5 years from the date of issuance. Upon request of the EU citizen, the registration certificate may be issued for a period of less than 5 years, but not less than one year.

EU citizens or their family members who are able to prove their status as frontier workers under EC Regulations regarding social security systems will be assigned a Personal Identification Number without issuing a document attesting their residence on Romanian territory.

The registration certificates and residency card issued to EU citizens in accordance with the provisions prior to the present changes will be valid for five years and ten years, respectively, from date of issue.



Romania: Instalment payment of tax debts

The Romanian Government has introduced the possibility for taxpayers to pay their tax debts in instalments. In an ordinance the requirements taxpayers have to meet in order to benefit from payment of their debts in instalments are set out.
The requirements will be detailed in the application norms still to be issued. The new rules will apply to both individuals and legal entities for a period of up to 5 years, and will cover all the tax liabilities.
In order to benefit from the provisions of this ordinance, taxpayers must file an application with the Romanian Tax Authority, which will then issue a tax clearance certificate authorising the payment of debts in instalments.
To this end, the following requirements must be cumulatively met by taxpayers: all required tax returns must have been submitted; the taxpayer’s difficulties must have been caused by a temporary lack of liquidities; the guarantee established by the law must have been given; the taxpayer must not be subject to insolvency or dissolution, and not be held liable under Insolvency Law and/or jointly liable according to the Fiscal Procedure Code.
Taxpayers’ applications will be assessed by the relevant tax authorities. The amount and the deadline for the payment of instalments will be defined under payment schedules that will be integral part of the resolution issued by the tax authority.
As soon as a taxpayer’s application has been accepted in principle, a guarantee must be issued in the form of the confirmation of availability of funds at an office of the State Treasury, a bank guarantee, a pledge or mortgage of assets held in property or belonging to a third person.
During the term set for the payment of fiscal debts in instalments, interest will be calculated for each day of delay at the rate of 0.04%. Interest will amount to 0.03% for each day overdue if the guarantee was in the form of a bank letter of guarantee and/or confirmation of availability of funds at an office of the State Treasury.