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.

DAC 6 – new reporting obligations to combat aggressive tax planning schemes

Article written by Florin Gherghel, Tax Manager Ensight Finance

DAC 6 – reporting obligations

Order 1029 / 2020 was published in Official Gazette no. 407 as of 18 May 2020 regarding the tax return to be used for reporting cross-border arrangements.

Starting with July 1, 2020, the new obligations for reporting cross-border arrangements to the tax authorities come into force. These obligations are established by Ordinance 5/2020, which transposes, in the Fiscal Procedure Code, the European Directive 2018/822 regarding the automatic exchange of information in the fiscal field, the so-called DAC 6 Directive.

The aim of these reporting obligations is to combat aggressive tax planning schemes, as EU member states want to protect their tax system and to avoid the reduction of national tax revenues.

A reportable cross-border arrangement is an arrangement between entities from different states (specific conditions for the existence of an arrangement are mentioned), having a potential risk of tax avoidance, including at least one of the hallmarks / characteristics mentioned in the annex to the Ordinance 5/2020.

Some examples of reportable cross-border transactions would be: the transfer of taxable profits to tax havens where taxes do not exist or are very low, transactions with companies without economic substance (“mailboxes”) registered in low-tax jurisdictions, the acquisition of a loss-making company and the use of losses for the reduction of their own tax obligations, the conversion of income into capital or other income categories that are taxed at a lower level or are exempt from paying taxes, circular transactions through which money flows between companies in several jurisdictions with more favorable tax treatment, etc.

These arrangements must be reported by intermediaries (e.g. persons designing or providing assistance in designing a cross-border arrangement) or by relevant taxpayers (e.g. companies implementing a cross-border arrangement) within 30 days of becoming aware of the existence of a cross-border arrangement / making the arrangement available.

The reporting obligation falls primarily on the intermediaries involved (lawyers, tax consultants, experts). Intermediaries who, according to the law, are subject to an obligation of professional privilege, will report cross-border arrangements that are subject to reporting only with the written consent of the relevant taxpayer. In the absence of the written consent, an intermediary subject to an obligation of professional privilege must notify another intermediary to perform the reporting, and, in the absence of other intermediary, the reporting obligation rests with the relevant taxpayer.

Reportable cross-border arrangements for the period between 25 June 2018 and 1 July 2020 must be reported by 31 August 2020.

The tax authorities have not yet published the guide for the application of these provisions, as there are many question marks regarding the reportable transactions.

We also draw attention to the existence of significant fines for non-compliance with the above provisions: (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.

Order 1029/2020 published the tax return through which the information regarding cross-border arrangements will be reported online to the tax authorities.

Financial – fiscal measures issued through Emergency Ordinance no. 69 / 2020

Article written by Florin Gherghel, Tax Manager Ensight Finance

Fiscal amnesty

Emergency Ordinance no. 69 / 2020 was published in Official Gazette 393 as of 14 May 2020 regarding some financial – fiscal measures

One of the adopted measures is regarding the cancellation of the interest / penalties related to taxes overdue as of 31 March 2020 (due by companies, associations or individuals), as follows:

  • Interest, penalties related to overdue taxes as of March 31, 2020 are canceled if the following conditions are fulfilled cumulatively:
  1. all taxes overdue as of March 31, 2020, handled by the central fiscal body, shall be paid (e.g. by direct payment, compensation of taxes) until the submission date of the request for cancellation of interest / penalties;
  2. all taxes due between April 1, 2020 and the submission date of the cancelation request are paid until the date when the cancellation request is submitted;
  3. all tax returns are submitted until the submission of the cancellation request;
  4. the cancelation request is submitted after the conditions a) – c) above are fulfilled, but no later than 15 December 2020.
  • Interest, penalties related to additional taxes declared through rectifying tax returns, taxes having due date before March 31, 2020, are canceled if the following conditions are fulfilled cumulatively:
  1. the rectifying tax return is submitted starting with April 1, 2020 until the submission date of cancelation request (or within 10 days starting from May 14, the entry into force of the ordinance, if a tax audit starts within this timeframe);
  2. all these taxes are paid (e.g. by direct payment / compensation) until the submission date of cancelation request;
  3. conditions b) – d) from the first paragraph above are met (payment of current taxes, submission of tax returns, submission of cancellation request).
  • Interest, penalties related to taxes due before March 31, 2020 (paid with delay until this date), are canceled if the conditions b) – d) of the first paragraph above are met cumulatively (payment of current taxes, submission of tax returns, submission of cancelation request).
  • Interest, penalties related to taxes handled by the central fiscal body with due date prior to March 31, 2020 and instituted by tax decisions issued through a tax audit in force as of May 14, the entry into force of the emergency ordinance, are canceled if the following conditions are cumulatively met:
  1. all additional taxes instituted by the tax decision are paid (e.g. by direct payment / compensation) until the payment term provided in the tax decision;
  2. the cancellation request is submitted within 90 days from the communication of the tax decision.
  • The entities can notify the intention to benefit from cancellation of interest / penalties no later than December 15, 2020, the latest day when the cancelation request must be submitted and certain procedural aspects must be fulfilled (e.g. postponement of payment of accessories, non-start / suspension of execution forced).
  • The entities benefiting from payment-reschedule of taxes, as well as those who obtain such measures between May 14 (the entry into force of the emergency ordinance) and December 15, 2020, may benefit from cancellation of interest / penalties in compliance with certain conditions.
  • In case of taxes overdue as of March 31, 2020 due to local authorities, similar facilities as above may be granted by the local authorities.
  • Procedures for the application of the above provisions will be issued.

 

Bonuses for individuals / local tax reductions

Emergency Ordinance no. 69 / 2020 was published in Official Gazette 393 as of 14 May 2020 regarding some financial – fiscal measures

The main amendments, in addition to the above fiscal amnesty, are:

  • The submission deadline of the unique tax return and the payment of declared amounts is postponed until June 30, 2020.
  • The following bonuses are granted to individuals if they submit the unique tax return until June 30, 2020 for the incomes realized in 2019 (the bonus is granted for income tax, social insurance contribution and social health insurance contribution due for 2019):
  1. a bonus of 5% of these amounts is granted, if the income tax, the social insurance contribution and of the social health insurance contribution due for 2019 are paid / compensated until June 30, 2020;
  2. a bonus of 5% of these amounts is granted for the submission of the unique tax return electronically (this bonus is granted only if the above condition is met).
  • The local authorities may reduce the building tax until August 14, 2020, the reduction being applicable for the duration of the state of emergency in 2020 due to coronavirus pandemic:
  1. a maximum reduction of 50% of the annual building tax applicable to non-residential buildings used for the economic activity of the owners or being available to other natural or legal persons (e.g. by renting) – if the owners or the users of the buildings were obliged during the state of emergency period, according to the law, to completely interrupt their economic activity or to possess the emergency certificate issued by the Ministry of Economy certifying the partial interruption of economic activity (a request must be submitted must be submitted by September 15, 2020, together with specific declarations on own responsibility or certificates for emergency situations);
  2. exemption from payment of monthly tax on buildings due by those using a building in the public / private ownership of the state or of the administrative-territorial units – if the users of the buildings were obliged, according to law, to ceases their economic activity completely during the state of emergency period (similarly, a request must be submitted by September 15, 2020).
  • The owners of the above non-residential buildings were in the same time in the following cases until May 14, 2020 (the end of state of emergency):
  1. they waived at least 50% of the right to cash rent, according to the contractual provisions, for the period in which the state of emergency was established;
  2. at least 50% of the total areas eligible for economic activities were not used, because the holders of the right to use the respective buildings were obliged, according to the law, to totally and / or partially interrupt their economic activity.

 

VAT exemption

Emergency Ordinance no. 70 / 2020 was published in Official Gazette 394 as of 14 May 2020 regarding measures in pandemic context

The main fiscal measure is:

  • Certain deliveries to associations and foundations made until September 1, 2020 are exempt from VAT with the deduction right: deliveries of medicines, protective equipment, other medical devices or equipment and sanitary materials used to combat COVID-19, as specified in the annex to the ordinance (the supplier justifies the VAT exemption with a declaration on own responsibility regarding the destination of the goods, made available by the beneficiary association / foundation, until the time of delivery).

 

Bonuses regarding corporate income tax / micro-enterprise tax

Law 54 / 2020 was published in Official Gazette 396 as of 15 May 2020 regarding approval of Emergency Ordinance 33/ 2020 regarding some fiscal measures

The amendment is:

The payers of corporate income tax and the payers of the micro-enterprise tax, which pay the due tax until the payments dates for second quarter (25.07.2020) and third quarter (25.10.2020), are entitled to a bonus of 10% computed on the corporate income tax due (the law should be corrected in order to mention that the bonus is calculated on the due tax and not for the due corporate income tax).

Tax and business updates published on March 30th

 

 

Article written by Florin Gherghel, Tax Manager Ensight Finance

You may find below the most important provisions of two ordinances published on March 30th in the Official Gazette regarding, amongst others, the payment of unemployment allowances and bonuses for paying in due time of corporate income tax and micro-enterprise tax.

 

Emergency Ordinance no. 32 / 2020 was published in Official Gazette 260 as of 30 March 2020 regarding amendment of Emergency Ordinance OUG 30/2020 concerning some economic and fiscal measures

The main amendments are:

  • The unemployment allowance of 75% of the salary, but not more than 75% of the gross medium salary at national level, is maintained during the temporary suspension of the individual employment agreements through the initiative of the employer due to coronavirus effects. The facility is supported by the unemployment insurance budget.
  • The employees of the employers who, during the state of emergency, reduce / interrupt temporarily the activity, totally or partially, due to the coronavirus effects, are eligible to the unemployment allowance, based on a declaration on the employer’s own responsibility.
  • Thus, the obligation to hold the certificate of emergency situations was eliminated, as well as the restrictions for companies that do not have the means to pay the salaries of employees (including the payment of allowances for up to 75% of employees and the reduction of cash receipts by at least 25%).
  • If an employee has several individual employment agreements, one of which being full-time contract active during the state of emergency, does not benefit from the above allowance.
  • If the employer can pay, the above allowance may be supplemented by the employer with amounts representing the difference up to at least 75% of the salary of the employee.
  • The above period, in which the individual employment agreements of the employees are suspended and the employers do not owe the work insurance contribution, constitute a contribution period without payment of the contribution for the social health insurance system.
  • In order to receive the necessary amounts for the payment of the above allowances, the employers submit, by e-mail, to the unemployment agencies, to which they are registered, a signed / dated request. The request must be signed and assumed by the legal representative of the employers and the employer must submit as well a declaration on their own responsibility and the list of persons who will benefit from this allowance. The models will be approved by the Ministry of Labor and Social Protection.
  • These documents are submitted in the current month for the payment of the previous month’s allowance.
  • The payment of the above allowances is made within maximum 15 days from the submission of the above documents and the payment of the allowance is made to the employee in maximum 3 working days from the receipt of the amounts by the employer.

 

Emergency Ordinance no. 33 / 2020 was published in Official Gazette 260 as of 30 March 2020 regarding some fiscal measures

The main measures are:

  • The entities paying corporate income tax, regardless of the way of declaration and payment, are entitled to a discount bonus for the payment in due time of the corporate income tax due for the first quarter of 2020, namely until the deadline of April 25, 2020. The bonus is computed on the due corporate income tax, as follows:
  1. 5% for large taxpayers;
  2. 10% for medium taxpayers;
  3. 10% for other taxpayers who are not medium and large taxpayers.
  • The companies with an accounting / fiscal year different from the calendar year are entitled to the discount bonus if they pay the quarterly corporate income tax in due time between April 25 – June 25, 2020 (when the respective corporate income tax is due).
  • The companies paying specific tax for certain activities (HoReCa) also benefit from the discount bonus for the corporate income tax due for the first quarter of 2020, computed for the carried activities, other than those corresponding to NACE codes provided by law.
  • Similarly, micro-enterprises benefit from a 10% discount bonus for the payment until April 25th 2020 inclusive of the micro-enterprise tax due for the first quarter of 2020 (the bonus is computed for the due micro-enterprise tax).
  • The bonus is deducted from the due tax the for the above cases.
  • Corporate income taxpayers insert the bonus separately in the annual corporate income tax return.
  • No VAT is effectively paid in customs by entities registered for VAT purposes for specific imports from outside EU during the period of state of emergency and in the next 30 calendar days from the closing date of the state of emergency. The VAT exempt imports are of medicines, protection equipment, other medical devices / equipment, sanitary materials that can be used for the fight against COVID-19 pandemic (the exact list of goods is provided in the annex to the emergency ordinance)
  • The customs authorities do not request the payment of VAT for the above imports and the VAT is mentioned in the VAT returns both as collected and deductible VAT.

 

Emergency Ordinance no. 35 / 2020 was published in Official Gazette 260 as of 30 March 2020 regarding postponement of validity of holiday vouchers

 

Emergency Ordinance no. 37 / 2020 was published in Official Gazette 261 as of 30 March 2020 regarding facilities for loans granted by credit institutions and non-bank financial institutions to certain categories of borrowers