Newsletter no. 1/2021

LEGISLATIVE AMENDMENTS APPLICABLE AS OF 2021 (IN
PARTICULAR LAW 296/2020 AND EMERGENCY ORDINANCE) 226/2020

1. VAT

1. The upper limit for being able to apply actual taxation increases from
2,250,000 lei to 4,500,000 lei.
2. Apartment sales: the upper value limit for the sale of apartments to individuals
subject to the reduced tax rate (5%) remains at 450,000 lei. Originally, this was
changed by Law 296/2020 to €140,000 as of January 1, 2021, but on the last
day of the year, due to the impact on the state budget, this change was
postponed to January 1, 2022. Therefore, the upper limit of 450,000 lei applies
for 2021.
3. Brexit: from a VAT perspective, transactions with the UK will follow the rules
applicable to third countries from 2021.
4. VAT exemptions related to the pandemic: supplies of medical devices for in
vitro diagnosis of covid-19, vaccines against covid-19 and related vaccination
and testing services will be exempt from VAT until December 31, 2022.
5. Alcoholic beverages / tobacco: input tax on alcoholic beverages and tobacco
is deductible if they are given free of charge for advertising or sales promotion
purposes.
6. Refund of VAT from invoices to natural persons not paid within a period
exceeding 12 months: the VAT paid shall be refunded if the full or partial
consideration of the supplies or services has not been paid by the beneficiary
natural persons within 12 months from the payment deadline set by the parties
or, in the absence of such deadline, from the date of issuance of the invoice.
This does not apply if the supplier / service provider and the beneficiary are
related parties.

2. PAYROLL

1. The measure for granting technical unemployment under Emergency
Ordinance 30/2020 and the measure for granting aid for reduced working hours
(short-time work) are extended until June 30, 2021.
2. Private use of company vehicles: the private use of company vehicles will no
longer be considered a benefit in kind in the case of microenterprises or
companies that pay a tax specific to certain activities and will therefore not be
subject to income tax or social security contributions.
3. Telework: the amounts paid to teleworkers for maintenance expenses such as
electricity, heating, water, data subscription and the purchase of office furniture
and equipment related to the place where the workers work are not subject to
income tax and social security contributions up to a monthly ceiling of 400 lei.
These expenses are flat-rate deductible business expenses for profit tax
payers.
4. Covering the costs of epidemiological tests and / or vaccination of employees
to prevent the spread of diseases that endanger the health of employees and
the public is not considered taxable income and is not subject to social security
contributions.
5. Suspension of the individual employment contract: The Labor Code
introduces a new case in which, at the employer’s instigation, the individual
employment contract may be suspended. Thus, a temporary suspension of the
activity and/or its reduction as a result of the imposition of a curfew or a state
of emergency is now allowed under Art. 93 paragraph (1) of the Romanian
Constitution.
6. Tax relief: the measure of granting 50% of the employee’s salary, but not more
than 2,500 lei, for the employment of persons older than 50 years of age whose
employment relationships were discontinued during the state of emergency or
state of emergency, for reasons not attributable to them, for the employment of
young people between 16 and 29 years of age who are registered as
unemployed, or of Romanian citizens of the same age groups whose
employment relationships were discontinued for reasons not attributable to
them, is extended until June 30, 2021.
7. Day laborers: the measure of granting 35% of the remuneration per working
day to day laborers for a period of three months is also extended until June 30,
2021.
8. Motivation and retention of personnel through stock option plans:
expenses for benefits granted to employees in the form of equity-settled capital
instruments become deductible business expenses at the time the benefits are
actually granted.
9. Amounts paid by employers for the early education of employees’ children
are not subject to social security contributions.
10. For the period until December 31, 2028, the following tax benefits shall be
granted to all individuals who derive income from employment from employers
operating in the construction sector:

  • Reduction of the pension insurance contribution by 3.75 percentage points;
  • Exemption from payment of the health insurance contribution.

3. MICROENTERPRISES

1. Dividends received by a microenterprise from a Romanian legal entity are not
taxed.
2. Private use of company cars will now also be tax and social security exempt for
employees of microenterprises or of companies that owe specific taxes for
certain activities.

4. PROFIT TAX

1. The concept of tax group from the perspective of profit tax and the possibility
of tax consolidation at the group level is introduced. Each member of the tax
group determines the tax result individually, and the consolidated tax result of
the tax group is determined by algebraically summing up the individually
determined tax results for each tax group member. The positive consolidated
result represents a taxable profit, and the negative consolidated tax result
represents a loss.
2. Allowances for bad debts are also deductible at 30% in 2021 if the
receivables cumulatively meet the following conditions: a) they have not been
settled within a period of more than 270 days from the due date; b) they are not
guaranteed by another person; c) they are not owed by an affiliated company.
Thus, the introduction of 100% deductibility as of January 2021, as provided for
in Law 296/2020, has been postponed to 2022.
3. Reinvested profit: profit used for the acquisition or production of technical
equipment used for business purposes is exempt from tax under certain
conditions. Previously, the maximum tax benefit was limited to the profit tax of
the quarter in which the equipment was put into operation. Now, the tax
exemption may amount to a maximum of the profit tax calculated cumulatively
from the beginning of the year until the quarter in which the equipment was put
into operation.
4. Expenses related to the depreciation of electronic tax marking equipment
are not deductible.
5. Sponsorship amounts reimbursed in a year other than the one in which they
were granted shall be taken into account as a difference from the profit tax due
in the year/quarter in which the amounts are reimbursed.

5. NATURAL PERSONS

1. All gift vouchers given by a company to natural persons with whom there is no
wage- or salary-generating employment relationship are other income and are
subject only to 10% income tax.
2. The deadline for filing the annual return on income tax and social security
contributions of natural persons, as well as the payment deadline, is changed
to May 25 of the following year (previously March 15). The deadline for filing
the application related to the determination of the use of 3.5% of the annual tax
(Form 230) is also changed to May 25.
3. Brexit: All Romanian citizens wishing to travel to the UK for the purpose of
work, study or development of their own business as of January 1, 2021 must
apply for a visa.

6. OTHER CHANGES

1. Extension of the deadline for submitting requests for cancellation of
interest and late payment penalties: they can now be submitted between
January 1, 2021 and March 31, 2021. The original deadline was December 15,
2020.
2. Local taxes: The deadline for updating the valuation report to determine the
taxable value of buildings owned by legal entities is extended to 5 years
(currently it is updated every three years). If the valuation report is submitted
after the first tax deadline, it will be taken into account only from the year of
submission.
3. New obligations for foreign entities with the place of management in
Romania: a foreign legal entity resident in Romania pursuant to the double
taxation treaty concluded with the foreign state has the following obligations:

  • register with the competent central tax office within 30 days from the date
    on which it was notified that it is resident in Romania
  • to keep the minutes of the meetings of the Board of Directors and of the
    meetings of the shareholders/partners
  • to perform and keep accounting records in Romania, i.e. to prepare the
    financial statements in accordance with the Romanian Accounting Law;
  • to register as a profit taxpayer
  • to keep their registered office in Romania for at least one fiscal year