Category: Uncategorized

by Florin Gherghel, Tax Manager Ensight Finance

 

We mention SAF-T reporting obligations to be applicable as of January 1st, 2023 for middle-sized tax payers, classified as such as of 31 December 2021 (large taxpayers as of 31 December 2021 already submit SAF-T, whereas small taxpayers as of 31 December 2021 will submit SAF-T from 1 January 2025).

 

The Standard Audit File for Tax (SAF-T) is a new reporting obligation of the taxpayers, containing information on taxpayers’ accounting and tax data. The main role of the SAF-T is to standardize the recurrent transfer of information between tax authorities and taxpayers in order to reduce the time spent on tax inspections at companies’ premises. SAF-T involves the regular reporting of a set of information, in a predefined format, which facilitates the review by tax authorities of taxpayers’ operations.

 

The structure of SAF-T in Romania is very complex, containing over 390 mandatory tax and accounting items to be reported by taxpayers, including information on all customers, suppliers of the company, assets and stocks of the company, all purchase and sales invoices, all payments and receipts made by the company, all accounting entries made in connection with transactions carried out by the company, etc. Practically all financial and accounting information of the company will be submitted to the tax authorities.

 

Due to the complexity of the D406 return, the Romanian tax authorities offer taxpayers a grace period. This means that non-compliance with the obligations derived from the SAF-T i.e. non-filing or incomplete filing will not be penalized for the time being with fines. However, all SAF-T returns for the months January-June 2023 will have to be reported by the end of July 2023 at the latest. If the grace period passes and taxpayers required to file SAF-T have not filed SAF-T return at all or have submitted incomplete data, they will be fined as follows:

• fine from 1,000 lei to 5,000 lei in case of failure to submit this declaration within the legal deadlines, respectively
• a fine of 500 lei to 1,500 lei for submitting incorrect or incomplete declarations.

 

Thus, preparation for SAF-T is very important, as all accounting and tax information will have to be reported monthly/quarterly, annually or upon request.

by Florin Gherghel, Tax Manager Ensight Finance

 

Ordinance no. 16/2022, published in the Official Gazette no. 716/15 July 2022, brings a series of important amendments to the Fiscal Code. We present below the significant changes.

 

1. Corporate income tax

 

a) Exemption of reinvested profits

Starting January 1, 2023, other assets are eligible for the exemption from corporate income tax regarding the reinvested profit. Investments in assets used in the production and processing activity, the assets representing refurbishment will be exempted from corporate income tax (these assets will be established by order of the Minister of Finance).

b) Dividend tax regarding dividends distributed to a Romanian company

The dividend tax is computed by applying an 8% tax rate on the gross dividend paid to a Romanian legal entity (instead of the current 5%).

These provisions apply to dividends distributed after January 1, 2023.

 

2. Micro-enterprise tax

 

Starting January 1, 2023, the regime of the income tax of micro-enterprises is significantly modified.

The conditions that must be met cumulatively by a company in order to be a taxpayer on the tax of micro-enterprises (these must be met on December 31 of the previous fiscal year) are amended as follows:

• revenues must not exceed the RON equivalent of 500,000 EUR (instead of the current 1,000,000 EUR);
• its share capital is held by persons other than the state and the administrative-territorial units (condition currently in force);
• it is not in dissolution, followed by liquidation, registered in the trade register or in the courts, according to the law (condition currently in force);
• the company generates revenues, other than those from consulting and / or management, in proportion of over 80% of the total revenues (new condition);
• the company has at least one employee (new condition – respectively, the differentiated tax rate is no longer applied in relation to the existence or not of the employee);
• the company has associates / shareholders who hold over 25% of the value / number of participation titles or voting rights to at most three Romanian legal entities that apply to apply the income tax regime of micro-enterprises, including the analyzed company (if they are more than three Romanian companies, the three legal entities paying the micro-enterprise tax will be established, and the rest of the legal entities will become corporate income tax payers) – new condition.

Given the above conditions, the tax rate becomes 1% in all cases. The tax regime becomes optional upon the registration of the company. The option can be exercised after registration if certain conditions are observed.

Example: Romanian legal entities may choose to apply the micro-enterprise tax starting with the fiscal year following the one in which they meet the micro-enterprise conditions and if they were not micro-enterprise tax payers after January 1, 2023.

Micro-enterprises cannot opt ​​for the payment of the corporate income tax during the fiscal year, the option being able to be exercised starting with the following fiscal year, with certain exceptions.

Special rules for leaving the income tax system of micro-enterprises during the year were also established.

Example: If during a fiscal year a micro-enterprise generates revenues higher than 500,000 EUR or the share of revenues from consulting and / or management in total revenues is over 20% inclusive, it owes corporate income tax starting with the quarter in which any of these limits are exceeded, without the possibility to opt to apply the micro-enterprise tax afterwards.

 

3. Withholding tax

 

The tax on dividends paid to non-residents becomes 8% applied to the gross dividend (instead of 5%), starting with dividends distributed after January 1, 2023. Nevertheless, the exemption / reductions based on European directives or double tax treaties can be applied (if the required conditions are fulfilled).

 

4. Salary / income tax

 

 a) Dividend tax

Starting with dividends distributed after January 1, 2023, the dividend income granted to individuals is subject to a tax rate of 8% of their gross amount.

b) Decrease of exempt incomes obtained by the employees from agriculture and constructions

Starting with the incomes related to August 2022, the conditions regarding the tax exemption for the employees from constructions and agriculture are modified, the most important being the reduction of the eligible gross monthly salary to 10,000 RON. The exemption is applied for the amounts from the gross monthly income of up to 10,000 RON inclusive. The part of the monthly gross income that exceeds 10,000 RON does not benefit from fiscal facilities.

From July 18, 2022, the computation method of the share of turnover actually realized from the construction activity carried out on the Romanian territory in the total turnover as well as the computation of the share of turnover from activities specific to the agricultural sector and food industry is modified.

c) Decrease of non-taxable incomes in the computation of salary tax & social contributions

Starting with January 2023, certain incomes that currently appear as limited non-taxable incomes were eliminated from the category of non-taxable incomes but were grouped in a new category of “cumulative non-taxable monthly incomes when computing the salary tax / social contributions, within the monthly threshold of maximum of 33% of the basic salary”, as follows:

• contributions to an optional pension fund, according to the related regulations, supported by the employer for its own employees, up to a limit of 400 EUR / year for each person (RON equivalent);
• the voluntary health insurance premiums, as well as the medical services provided in the form of a subscription, supported by the employer for his own employees, up to 400 EUR / year for each person (RON equivalent);
• the amounts granted to employees who carry out telework activities within a monthly ceiling of 400 RON corresponding to the number of days in the month in which the natural person carries out telework activities;
• the equivalent value of the food provided by the employer for his own employees (food prepared in own units or purchased from specialized units), within the maximum value of a daily meal ticket / person. This provision does not apply to employees who receive meal tickets;
• accommodation and the equivalent value of the rent for the accommodation / living spaces provided by the employers at the disposal of their own employees;
• additional benefits received by employees based on the mobility clause, other than those provided for the delegation / secondment allowance (with specific limits);
• the equivalent value of the tourist services and / or treatment granted by the employer during the holiday, within an annual ceiling, for each employee, representing the level of an average gross salary.

 

The order in which the above incomes are included in the monthly ceiling of maximum 33% of the basic salary corresponding to the respective job position is established by the employer. Amounts that exceed the mentioned monthly cumulative limit are considered salary benefits and taxed accordingly.

Also starting with the incomes related to January 2023, there are no more non-taxable incomes equivalent to the expenses incurred by the employer with performing medical tests to diagnose COVID-19 infection.

Starting with January 1, 2023, the personal deductions to which the employees are entitled will be modified for computing the salary tax.

d) Modification of the taxable base for computing rental income

Starting with 2023 rent revenues, the deduction of 40% is eliminated from the computation of the annual net income from the transfer of use of goods. Thus, in the case of rental incomes (other than specific incomes), the obtained gross income represents the taxable income.

e) Changing the taxation of gambling income

Starting with August 1, 2022, the tax due for gambling incomes, with a value higher than the non-taxable amount, is determined by applying a scale on each gross income received by a participant.

f) Modification of the taxable basis of real estate sale incomes

From January 1, 2023, the non-taxable amount of 450,000 RON on the sale of personal property is eliminated. Thus, the transfer of the ownership right over the constructions of any kind and the related land, as well as over the lands of any kind without constructions, is subject to a tax that is computed at the transaction value by applying the following tax rates: (i) 3% for real estate held for a period of up to 3 years inclusive; (ii) 1% for real estate owned for a period longer than 3 years.

g) Modification of the base of social contributions due by an authorized natural person (PFA)

Starting with the incomes incurred in 2023, the independent natural persons will owe pension contribution according to the realized incomes (the level of 12 or 24 minimum gross salaries). The annual basis for computing the social insurance contribution is represented by the income chosen by the taxpayer, which cannot be less than:

(i) the level of 12 minimum gross national salaries, in the case of realized incomes between 12 and 24 minimum gross salaries;

(ii) the level of 24 gross minimum salaries, in case of incomes realized over 24 gross minimum salaries.

The ceiling from which a natural person will owe a contribution for health has also changed (we mention only the change regarding PFA or people who obtain investment income). Thus, starting with the incomes incurred in 2023, PFA / persons who obtain income from investments owe the social health insurance contribution if they estimate for the current year incomes whose cumulative value is at least equal to 6 minimum gross national salaries. The annual basis for computing the social health insurance contribution is:

(i) the level of 6 minimum gross national salaries, in case of realized incomes between 6 and 12 minimum gross salaries;

(ii) the level of 12 minimum gross national salaries, in case of realized incomes between 12 and 24 minimum gross salaries;

(iii) the level of 24 minimum gross national salaries, in case of incomes achieved over than 24 minimum gross salaries.

 

5. VAT

 

From January 1, 2023, amongst the goods subject to 9% VAT rate, the list of food products / other similar goods, as well as of the products used in agriculture was modified.

Also, from 01.01.2023, the VAT rate increases to 9% (from 5%) for hotel accommodation, restaurant and catering services (with certain exceptions).

Similarly, from 01.01.2023, the delivery of homes with a VAT rate of 5% to individuals applies to homes with a usable area of up to 120 sqm, excluding household annexes, whose value, including the land on which they are built, does not exceed the amount of 600,000 RON, excluding VAT. Any natural person can purchase, starting with January 1, 2023, individually or jointly with another natural person / other natural persons, a single home whose value does not exceed the amount of 600,000 RON, excluding VAT, with a reduced rate of 5 % (there are transitional measures for 2022).

 

6. Excise duties

 

The quotas of excise duties are modified from 1 August 2022.

 

7. Local taxes (building tax)

 

For residential buildings, the building tax is computed by applying a rate of at least 0.1% on the value of the building. The tax rate is established by the decision of the local authorities. The value of the building, expressed in RON, is determined by summing up the value of the building, the annex buildings, as case be, and the value of the land areas covered by these buildings, included in the market studies regarding the indicative values of ​​ real estate in Romania, in the evidence of the National Union of Public Notaries in Romania.

For non-residential buildings, the building tax is computed by applying a rate of at least 0.5% on the value of the building. The tax rate is established by the decision of the local authorities. The value of the building, expressed in RON, is determined by summing up the value of the building, the annex buildings, as case be, and the value of the land areas covered by these buildings, included in the market studies regarding the indicative values ​​of real estate in Romania, in the evidence of the National Union of Public Notaries in Romania.

For the buildings that have both residential and non-residential use, the tax rate is determined according to the quota corresponding to the majority destination (> 50%) declared by the taxpayer. If the taxpayer does not declare the majority destination of the building, the tax rate for non-residential buildings is applied on the entire value of the building.

The new provisions no longer differentiate between natural and legal persons in the computation of building tax.

In the same time, evaluation reports will no longer be required by local authorities.

These provisions apply from January 1, 2023.

 

8. Specific tax on activities

 

Starting with January 1, 2023, the specific tax on certain activities (mainly due to hotels and restaurants) is eliminated. These entities can opt for the payment of the income tax of micro-enterprises or for the payment of corporate income tax.

 

9. The obligation to sue cards

 

From January 1, 2023, legal entities that carry out retail and wholesale activities, as well as those that carry out service activities, with an annual turnover of more than 10,000 EUR (RON equivalent), have the obligation to accept debit, credit or prepaid cards as means of payment, through a POS terminal and / or other similar solutions, including applications that facilitate the acceptance of electronic payments. This obligation arises starting with the quarter following the one in which the sales during the respective year exceeded the threshold of 10,000 EUR.

by Florin Gherghel, Tax Manager Ensight Finance

Based on the provisions of Government Emergency Ordinance no. 59/2021, the VAT regime for transactions with non-taxable persons was significantly changed in Romania. The system already exists in the Romanian Fiscal Code under the name “Mini One Stop Shop” (MOSS), but only for electronic services.

Starting with July 1, 2021, the system was expanded for several categories of transactions, becoming “One Stop Shop” (OSS).

These provisions aim to extend the simplification measures applicable to certain transactions with non-taxable persons (mainly natural persons) and applying VAT from the member state of the buyer (thus, it would be avoided the registration for VAT purposes in more EU states).

Starting with July 1, 2021, 3 special OSS regimes will be in force:

a) the special regime for certain services provided by taxable persons not established in European Union towards non-taxable persons;

b) the special regime for intra-community distance sales of goods between member states, for deliveries of domestic goods made by electronic interfaces facilitating such deliveries and for certain services provided by taxable persons established in EU towards non-taxable persons but not in the Member State of consumption;

c) the special regime for the distance sale of goods imported from outside EU.

A single ceiling of EUR 10,000 (RON 46,337 in Romania) has been set in all member states for intra-community deliveries of distance goods or, inter alia, for services provided electronically. Thus, in case of exceeding this threshold, the special regime is applied. However, it is possible to opt for the application of the special regime for at least two calendar years, even if the ceiling is not exceeded.

Basically, in the case of sales to individuals from other EU countries, a Romanian company will apply: (i) the Romanian VAT rate for sales under the ceiling; (ii) the VAT rate in the buyer’s state for sales over-the-ceiling.

 

1. The special regime for services provided by taxable persons not established in European Union

 

Any taxable person not established in European Union may use a special regime for all services provided to non-taxable persons who are established in EU. The special regime allows, inter alia, the registration in a single member state of a taxable person not established in EU for all services provided to non-taxable persons established in EU.

The entity will receive a special registration code for VAT purposes, and it is not necessary to appoint a tax representative.

By the end of the following month after the end of each calendar quarter, this entity must submit a special VAT return (in EUR), regardless of whether or not services have been provided under the special regime, which will contain: (i) the special registration code for VAT purposes; (ii) total value, excluding VAT, of the services under the special regime, the applicable VAT rates and the corresponding amount of VAT subdivided into quotas, due to each member state of consumption, (iii) the total amount of VAT due in EU.

The taxable person not established in EU must pay the total amount of VAT due in EU, in a special account, in EUR, until the date on which it has the obligation to submit the special declaration. It cannot deduct VAT through the special tax return, but it could request a VAT refund under certain conditions (amongst others, if there is a reciprocity agreement regarding the VAT refund between Romania and the respective country).

 

2. The special regime for the distance sales of intra-community goods, for the deliveries of internal goods made by the electronic interfaces that facilitate these deliveries and for the services provided by taxable persons established in EU

 

The special regime can be used:

a) by any taxable person who carries out intra-community sales of goods at a distance;

b) for deliveries of domestic goods (in the same state) made by electronic interfaces that facilitate deliveries of goods in EU by a non-EU taxable person to a non-taxable person;

c) by any taxable person established in EU who provides services to a non-taxable person, when the taxable person is not established in the member state of consumption.

Member state of consumption means one of the following: (i) in case of provision of services, the member state in which the supply of services takes place; (ii) in the case of the intra-community sale of goods at a distance, the member state in which the dispatch or transport of the goods to the customer ends; (iii) in the case of supply of goods by a taxable person who facilitates such supplies, when the dispatch or transport of the delivered goods begins and ends in the same member state.

If a taxable person, by using an electronic interface such as an online marketplace, a platform, a portal, facilitates the delivery of goods in EU by a taxable person not established in EU to a non-taxable person, it is considered that the taxable person, who facilitated the delivery, received and delivered the respective goods itself.

The special regime can be used by any taxable person who has the headquarters of the economic activity in Romania or, in case it does not have the headquarters of the economic activity in European Union, if it has a fixed establishment in Romania.

Only the VAT registration code assigned by the member state of registration will be used (for example, the VAT code assigned by the Romanian tax authorities).

By the end of the following month after the end of each calendar quarter, the taxable person must submit a special VAT return (in EUR), regardless of whether or not deliveries of goods have been made or whether or services have been provided or not through the special regime.

The special VAT return must contain, in particular, the following information: (i) the special registration code for VAT purposes; (ii) the total amount, excluding VAT, the applicable VAT rates and the total amount of the corresponding VAT subdivided into quotas, due to each member state of consumption; (iii) the total amount of VAT due in the member states of consumption.

The taxable person must pay the full amount of VAT due in the member states of consumption, referring to the corresponding VAT return, in a special account, in EUR, until the date on which it is required to submit the special return.

The EU taxable person not established in Romania who uses this special regime may benefit from the VAT refund related to the imports and acquisitions of goods / services made in Romania for carrying out its taxable activities subject to this regime, in accordance with the European VAT refund directive.

 

3. Special regime for the distance sale of goods imported from outside EU

 

This regime relates to distance sale of goods imported from non-EU territories for goods in batches with a maximum value of 150 EUR, except for products subject to excise duty.

The special regime can be applied by the following taxable persons who carry out distance sales of goods imported from non-EU countries:

a) any taxable person established in EU who carries out distance sales of goods imported from third countries or from third territories;

b) any taxable person, whether or not established in EU, who carries out distance sales of goods imported from outside EU and who is represented by an intermediary established in EU;

c) any taxable person established in a third country with which European Union has concluded a mutual assistance agreement and which carries out distance sales of goods from that third country.

If a taxable person, by using an electronic interface such as an online market, a platform, a portal, facilitates the distance sale of goods imported from outside EU in batches with an value of maximum 150 EUR, it is considered that this taxable person received and delivered the respective goods itself.

If Romania is the VAT registration member state, the taxable person using this special regime or its intermediary must submit a special VAT return (in EUR) for each month, regardless of whether or not distance sales of imported goods have been made from third territories or third countries during the reporting fiscal period. The special VAT return should be submitted until the end of the next month after the end of the fiscal period covered by the return.

The special VAT return contains the registration code for VAT purposes and, as case may be, for each member state of consumption in which VAT is due, the total value, excluding VAT, of distance sales of goods imported from non-EU countries, VAT rates applicable, the total amount of the corresponding VAT subdivided into quotas and the total amount of VAT due.

The taxable person using this special regime or its intermediary must pay VAT, referring to the corresponding VAT return, in a special account, in EUR, until the date on which it has the obligation to submit the special return.

If Romania is a member state of consumption, the taxable person not established in Romania who uses this special regime may benefit from the refund of VAT on imports and purchases of goods / services made in Romania under certain conditions.

 

4. Special evidence

 

If a taxable person, by using an electronic interface such as an online marketplace, a platform, a portal, facilitates the delivery of goods or services towards an EU non-taxable person, the taxable person who facilitates the delivery or supply is obliged to keep records in this regard. The respective registers contain information that would allow the fiscal authorities to verify if the VAT has been highlighted correctly, in the situation when the respective deliveries or services are taxable in Romania. The records must be kept for a period of 10 years from the end of the year in which the operation was performed.