International Taxation of Real Estate Investments

Global commercial real estate investments reached in 2019 an all-time high of USD 800bn as investors continued to seek out the solid return and relative stability of the asset class. Despite the corona crisis we do not await major changes in the attractiveness of real estate assets, especially due to the fact that the spending policy of national budget “stabilize” the low interest environment and the bottleneck of valid investment opportunities. In parallel the deficit spending increases the importance of taxation for the fiscal authorities. Therefore tax issues related to real estate remain crucial.

We hope this Real Estate Investment Guide prepared by WTS Global, the international network of tax consultancy firms we are partners with, will not only assist you in avoiding the pitfalls of manoeuvring through the tax jungle of international real estate investments, but also support you in finding new markets and business opportunities. If you need any further in-depth information on real estate investments, please feel free to contact us at contact@ensight.ro

Extension of tax facilities

by Florin Gherghel, Tax Manager Ensight Finance

Emergency Ordinance 99 / 2020 regarding some fiscal measures was published in Official Gazette 551 as of 25 June 2020

a. Non-computation of interest and penalties / non-enforcement of unpaid taxes

Interest and penalties for late payment will not be computed for taxes due starting with March 21, 2020 and not paid until October 25, 2020 (the previous term as June 25).

The above due and unpaid taxes will not be considered outstanding taxes and their enforcement will be suspended / will not start until October 25, 2020 (with certain exceptions, such as in criminal cases).

No interest and penalties will be computed for late payment of the installments from reschedulement of taxes until October 25, 2020, the validity of these reschedulements is maintained also until October 25, 2020.

The prescription terms of the tax authorities to compute additional taxes and to request forced execution are suspended until October 25, 2020.

b. Extension of VAT refund without control

The VAT can be refunded until October 25, 2020 with the subsequent performance of the tax inspection (with certain exceptions, such as the submission of the first VAT refund request after registration for VAT purposes, the reimbursable VAT is older than 1 year). The subsequent fiscal inspection is decided based on a risk analysis made by the fiscal authorities.

c. Facilities for payment of corporate income tax / micro-enterprise tax

The companies paying corporate income tax / micro-enterprise tax that pay the due quarterly tax until the due dates, July 25, 2020 inclusive (for the second quarter), respectively October 25, 2020 inclusive (for the third quarter), benefit from a 10% bonus computed on due quarterly tax.

Corporate income tax payers with a fiscal year different from the calendar year benefit also from this facility, for the payment of the due corporate income tax until the due terms, computed accordingly.

d. VAT exemption for supply of medical products

Deliveries of individual protective masks and medical ventilators for intensive therapy until October 1 2020 (necessary for the establishment of rescEU – capacity reserve of the European Union), made to the public institutions responsible for the establishment of this reserve, are exempt from VAT with the right of deduction.

The supplier justifies the VAT exemption with the declaration on responsibility regarding the destination of the goods, made available by the beneficiary institution, signed by its legal representative, at the latest at the time of delivery.

Imports and intra-community acquisitions of individual protective masks and medical ventilators for intensive therapy, carried out by the responsible public institutions (for the establishment of rescEU – European Union capacity reserve), until 1 October 2020 are exempt from VAT.

The VAT exemption for the import of goods is applied on the basis of the declaration on the own responsibility of the beneficiary institution, signed by its legal representative, which is submitted to the competent customs authorities at the time of import.

e. Reduction of HoReCA specific tax

HoReCa entities liable to specific tax due for HoReCA activities for 2020 do not owe specific tax for a period of 90 days computed from June 25 (the date of entry into force of the emergency ordinance).

Thus, the specific tax due for 2020 is recomputed accordingly, by dividing the annual specific tax by 365 calendar days and multiplying the resulting value by the difference between the number of 365 calendar days and the number of 90 calendar days.

The declaration and payment of the specific tax related to the first semester of 2020 is made until October 25, 2020 inclusive (the payment deadline was July 25).

In the case of entities that did not owe the specific tax for the period in which they interrupted their activity totally or partially, during the state of emergency (holding the certificate for emergency situations and not being insolvent), they will decrease this period in which they interrupted the activity for the computation of the specific annual tax.

DAC 6 – postponement of reporting obligations

by Florin Gherghel, Tax Manager Ensight Finance

New reporting obligations to the tax authorities should have entered into force from July 1, 2020 regarding the cross-border arrangements with potential risk of avoidance of tax obligations, according to the EU DAC 6 Directive.

The European Directive regarding the postponement of reporting deadlines was implemented in Romania through the Emergency Ordinance 107/2020, published in the Official Gazette no. 579 / 01.07.2020.

Thus, intermediaries or companies must report the reportable cross-border arrangements for the period July 1, 2020 – December 31, 2020 in 30 days starting with January 1, 2021 (the previous deadline was July 1, 2021), practically the arrangements must be reported in January 2021.

Reportable cross-border arrangements for the period from 25 June 2018 to 30 June 2020 must be reported by 28 February 2021 (the previous deadline was 31 August 2020).

We are still waiting for the tax authorities to publish the guide for the application of these provisions, as there are many question marks regarding the reportable transactions.

We remind you the significant fines for non-compliance: (i) failure to report or reporting with delay by intermediaries or relevant taxpayers is sanctioned with a fine between RON 20,000 and RON 100,000; (ii) the non-fulfillment by the intermediary of the obligation to notify another intermediary or of the relevant taxpayer, in case the intermediary is subject to the professional privilege, is sanctioned with a fine between RON 5,000 and RON 30,000.

Support for employees and employers during the pandemic

Article written by Florin Gherghel, Tax Manager Ensight Finance

Emergency Ordinance no. 92 / 2020 was published in Official Gazette no. 459 as of 29 May 2020 regarding support for employees and employers

a) Support for employees with suspended agreements

We informed you end of March that indemnities are granted during the temporary suspension of individual employment agreements through the initiative of the employer (due to pandemic effects), in amount of 75% of the salary, but not more of 75% of the average gross salary, if certain conditions were fulfilled. The government has decided to continue this support.

Thus, starting with June 1, 2020, the employers with employees in the above category receive, for a period of three months, the cash equivalent of a part of the salary, representing 41.5% of the gross salary, but not more than 41.5% of the average gross salary. The amount received is supported by the unemployment insurance budget.

The employers having employees with suspended individual employment agreements, according to the Labor Code in cases of temporary interruption / reduction of activity, without termination of employment, are also eligible for the above amounts, if their employees have not benefited from the above 75% indemnity during the state of emergency or state of alert.

The eligible employers are obliged to maintain the employment agreements until December 31, 2020, except for seasonal workers. This obligation does not apply if the termination of the employment agreements occurs for reasons not attributable to the employer.

The following employers are not eligible: employers in bankruptcy, dissolution, liquidation or with activities suspended or restricted for reasons other than those generated by coronavirus pandemic.

The above amounts are not cumulated with the subsidies received from employment agencies for employment of specific graduates, specific young persons or specific unemployed persons.

The above support is applicable only for individuals who had their individual employment suspended for at least 15 days during the state of emergency or state of alert and received either the 75% technical unemployment indemnities mentioned in the first paragraph above or the indemnity of 75% of the salary paid by the employer during the reduction and / or temporary interruption of activity.

The employers with several objects of activity, at least one being subject to legal restrictions, may opt either to receive the above indemnity of 41.5% or to receive the technical unemployment indemnities of 75% of the medium gross salary for the fields of activity in which the restrictions are legally maintained.

In order to receive the above amounts, the employers support the whole value of the salaries of eligible employees and subsequently, starting with the first day until the 25th of day the following month, they submit, electronically, to the relevant employment agencies, a request signed and dated by the legal representative of the company, together with a statement on his / her own responsibility and with the list of persons benefiting from these amounts, documents assumed by the legal representative of the employer. Application norms regarding the template of these documents will be issued.

The payment of the above amounts is made within maximum 10 days from the date when the employers fulfilled their declaratory and payment tax obligations related to respective salaries. The employment agencies check the fulfillment of the conditions and pay the above amounts.

b) Hiring support

The employers who, between June 1, 2020 and December 31, 2020, hire full-time, for an indefinite period, persons over 50 years of age whose employment relationships have ceased for reasons not attributable to them during the state of emergency or state of alert (registered as unemployed persons in the records of employment agencies), receive monthly, for a period of 12 months, 50% of the employee’s salary, but not more than 2,500 RON for each employed person.

The employers who hire full-time not later than December 31, 2020, for an indefinite period, persons aged between 16 and 29 years, registered as unemployed persons in the records of employment agencies, receive monthly, for a period of 12 months, 50% of the employee’s salary, but not more than 2,500 RON for each employed person.

The above employers are obliged to maintain the employment agreements for a period of at least 12 months from the 12-month term in which they receive the above amounts.

The following employers are not eligible: the employers in bankruptcy, dissolution, liquidation, or the employers with suspended activities / restricted activities for reasons other than those generated by coronavirus pandemic.

The above amounts are not cumulated, for the same employee, with the subsidies received from employment agencies for employment of specific graduates, specific young persons or specific unemployed persons.

The employers receive the amounts by submitting electronically the request to the relevant employment agencies. Application norms will be issued regarding the procedure.

c) Extension of the technical unemployment indemnity

The period of receiving the indemnity of 75% of the average gross salary is extended after May 31, 2020 for the fields of activity in which the restrictions are legally maintained until these restrictions are lifted.