CHANGES TO THE TAX CODE (LAW NO. 30/10.01.2019)
1. VAT (changes valid from 01 January 2019)
5% value added tax on the sale of social housing
The definition of social housing, for which the reduced VAT rate of 5% instead of 19% is levied, is changing. According to the new provisions, a social house is defined as a house which is habitable at the time of sale, for which the selling price without VAT is less than 450,000 lei and which has a living area (excluding annexes) of less than 120 m2.
This eliminates the conditions that the land size must be less than 250 m2 and that only one apartment with 5% VAT may be acquired and owned as a buyer.
In principle, anyone can now purchase several apartments at the reduced VAT rate of 5%, as long as the living space of each apartment does not exceed 120 m2 and a price of 450,000 lei.
VAT refund from open invoices of customers for whom insolvency proceedings have been opened
A refund of paid sales tax for outstanding invoices to customers is now already possible when insolvency proceedings are initiated for the customer company, not only after it has been concluded as until now. However, the refund must be booked and applied for within 5 years of 1 January of the year following the initiation of the insolvency proceedings. If the insolvency was initiated before January 1, 2019, the refund can be made within 5 years from January 1, 2019.
2. Profit tax (changes valid from 01 January 2019)
Culture tickets and contributions to the intervention fund miners‘ professional associations become deductible (changes valid from 01 January 2019)
Culture tickets and contributions to the intervention fund of the miners’ professional associations are now classified as social expenditure for tax purposes. These are deductible as long as they do not exceed 5% of the company’s total wage and salary costs.
Sponsoring (changes valid from 01 April 2019)
The possibility of deducting sponsoring expenses directly from the profit tax is restricted. This is now only possible if the beneficiary of the sponsorship is registered in the register of institutions/religious institutions for tax deductions at the time the contract is concluded. This register is kept by the tax office and is published on the website of the tax office. Foundations are entered in the register on the basis of an application if the following cumulative conditions are met when the application is submitted:
a) the foundation carries out its activities in the field for which it was established (declaration on its own responsibility in this sense);
b) it has fulfilled all the obligations prescribed by law with regard to the tax returns;
c) it has no outstanding tax liabilities older than 90 days;
d) it has filed the annual accounts required by law;
e) it has not been declared inactive pursuant to Art. 92 of the Code of Criminal Procedure
Indebtedness costs (changes valid from 01 January 2019)
The upper limit for the deductible indebtedness costs increases as follows:
- To €1,000,000 or the equivalent in lei, converted at the exchange rate of the National Bank of Romania on the last day of the quarter/year, as the case may be;
- If the debt costs exceed €1,000,000, an additional deduction of up to a maximum of 30% of the difference between the posted operating income and the operating expenses, less non-taxable turnover plus profit tax expenses, may be made;
- Excess debt costs that cannot be claimed in a fiscal year will be carried forward without time limit. In the case of company mergers or split-ups, these are also assumed and can be claimed for tax purposes in subsequent years.
3. MICROENTERPRISE TAX
Microenterprises can now deduct sponsorship expenses up to a maximum of 20% of the microenterprise tax in the same way as profit-tax-liable enterprises, provided that the recipients of the sponsorship are registered in the register of institutions/religious institutions and registered units for the tax deductions are granted. Previously, this was only possible for microenterprises sponsoring to special service providers accredited for social services with at least one licensed social service.
4. INCOME TAX
Allocation of 3.5% of income tax (valid from 1 April 2019)
Taxable individuals can choose which non-profit organizations (including private scholarships) they wish to receive up to 3.5% of their income tax liability. Previously, income tax payers could only directly support accredited social service providers. However, non-profit organizations will receive the amounts only if they are registered in the register of institutions/religious institutions for tax deductions at the time of payment by the tax authority or by the employer/income payer.
Crypto currency
The profit from the transfer of virtual currency, determined as the positive difference between the selling price and the purchase price, which includes the direct expenses related to the transaction, is taxed at 10%. If the profit is less than 200 lei per transaction, it will not be taxed, provided that the total income in a tax year does not exceed 600 lei.
AMENDMENTS TO THE TAX IMPLEMENTATION ORDINANCE (ALSO LAW NO. 30/10.01.2019)
1. CLASSIFICATION OF TAXABLE PERSONS INTO TAX RISK CLASSES
In the Tax Implementation Ordinance, the criteria for classifying taxpayers into tax risk classes/subclasses are supplemented:
a) criteria relating to tax registration;
b) criteria relating to the submission of tax returns;
c) criteria relating to the extent of the declared amount;
d) criteria relating to the extent to which payment obligations to the consolidated general budget and to other creditors are met.
On the basis of these criteria, the tax authority determines the risk class (low, medium or high risk) of the taxpayer and the method used to manage tax claims. This risk analysis will be carried out regularly and the tax authority will publish the results (taxpayer’s tax risk class/sub-class) on its website. The taxpayer cannot object to the method of tax risk assessment and the tax risk class/sub-class in which he is classified.
2. ELECTRONIC TRANSMISSION OF TAX DOCUMENTS
The tax authority may ex officio include taxpayers in the electronic communication system. If the administrative and tax documents are officially transmitted to taxpayers/payers electronically and the taxpayer does not access the electronic communication system within 15 days of receiving the data, the communication is carried out by the tax authorities in the form of public announcements.
3. OFFSETTING TAX RECEIVABLES
A taxpayer has no outstanding tax obligations if the amount of tax owed by the taxpayer is less than or equal to the expected tax refund requested by the tax authority and the tax refund was requested by the taxpayer. If a tax certificate is issued, a note to this effect is included.
4. MEDIATION PROCEDURE
The term mediation procedure between debtor and tax authority is introduced and deadlines and terms are defined. The aim of the mediation procedure is to find the best possible solutions for the repayment of tax debts, including the payment facilities provided for by law.