Category: Uncategorized

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.

by Florin Gherghel, Tax Manager Ensight Finance

Personal Income Tax

• Residents and non-residents are taxed on income depending on their fiscal residency status and the source of the income.
• Income is taxed at a flat rate of 10%.
• The tax year is the calendar year.
• Individuals hired based on an employment contract by companies whose main activity is software development can be exempted from tax on income provided that the conditions set forth in specific legislation in force are met.
• The Romanian employer is obliged to calculate, withhold, declare and pay to the state budget the tax on income on a monthly basis, by the 25th of the following month. In the case of foreigners seconded to Romania, the individuals are obliged to declare and pay each month the tax on income to the state budget, by the 25th of the following month.

 

Social Security

• Social security contributions are due, both by the individual and the company. The employer is obliged, based on the gross salary of the employee, to calculate, declare and pay monthly contributions, by the 25th of the following month.
• In the case of secondment agreements or pluriactivity, the individuals can be exempted from paying social security contributions provided that they can submit an A1 form valid for the period of their assignment, certifying that respective individuals are subject to the social security system in their home country. If such a certificate cannot be submitted, social security contributions are due in Romania.

 

Employee

• The withholdings from the salary are as follows: health insurance contribution (10%) and social security contribution (25% for normal working conditions).

 

Employer

• An employer is required to pay the following contribution: labor insurance contributions (2.25%).
• Any employer with more than 50 employees must also pay a contribution for the non-employment of disabled persons calculated as 4% x number of employees x the minimum gross salary. Alternatively, the employer must pay a contribution of 4% x number of employees x 50% of the minimum gross salary, plus to acquire products from entities employing disable persons for the difference until the first mentioned amount.

 

Immigration

Visa

• EU/EEA/Swiss nationals do not need a visa to enter Romanian territory. However, if the stay exceeds 90 days within a 6-month period, the individual must obtain a registration certificate from the General Inspectorate for Immigration.
• Nationals of the USA, Japan, Canada and of the states listed in Annex II of EC Regulation 539/2001 are visa-exempt for a short stay only. For stays over 90 days, a long-stay visa must be obtained from the Romanian consulates abroad.
• No Romanian visa is required for: holders of valid Schengen visas for short- or long-term stays, holders of permanent residence permits issued by an EU member state, nationals of states with which Romania has signed agreements in this respect, as settled in these agreements.

 

Work permit

• EU/EEA/Swiss nationals do not need a work permit.
• A work permit is compulsory for non-EU/EEA/CH nationals working in Romania. The work authorization is granted at the employer’s request by the Romanian immigration authorities and is required when obtaining a long-term visa or residence permit for employment or assignment purposes. A foreigner who moves from one company to another must obtain a new work authorization.

 

Registration

• All foreigners exceeding 90 days of stay in Romania must register at the local immigration office regardless of whether or not they obtain revenue in Romania. The immigration office will grant an identification number which will be used when submitting the tax returns.
• In the case of secondment agreements, the individuals must register also as taxpayers with the relevant tax authorities.
• In 30 days after accomplishing 183 days of presence in Romania, the foreigner must complete and submit to the tax authorities a questionnaire for determining the fiscal residence status.

 

Employer’s Obligations

Start of employment

• Obtain a work permit and correct working visa type for the individual (if applicable).
• In the case of local labour agreements, the Romanian resident employer must declare the labour contract to the labour authorities not later than one day prior to the commencement date of the contract.
• In the case of secondment agreements, the Romanian entity to where the employee is assigned must submit a statement to the tax authorities regarding the secondment no later than 15 days from the commencement date of the contract.
• In the case of secondment agreements, the non-resident employer must submit a statement to the labor authorities within at least 5 days before the starting date of the assignment and no later than the first day of the contract.

 

During employment

• Calculate, withhold, declare and pay on a monthly basis the tax on income and social security contributions to the state budget, both for the employee and the employer.

 

Termination of employment

• Cancel the work authorization for the employee (if applicable).
• In the case of local labor agreements, declaring the termination of the contract to the labor authorities in the first non-working day.
• In the case of secondment agreements, the Romanian resident employer must submit a statement at the tax authorities regarding the termination of the secondment no later than 15 days from the closing date of the contract.

If you want to find more about tax, social security and immigration related matters you might consider for your cross-border work to and within Europe, please check the new edition of the Assignments to Europe brochure, prepared by WTS Global, the international network of tax consultancy firms we are partners with.

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by Florin Gherghel, Tax Manager Ensight Finance

Law 296 / 2020 regarding amendments of Fiscal Code was published in the Official Gazette no. 1269 as of 21 December 2020. We mention below the main amendments, most of them in force starting with 01.01.2021.

Corporate income tax

a) Place of effective management

A foreign legal entity is considered to have the place of effective management in Romania if it performs operations that correspond to economic, real and substantial purposes and if at least one of the following conditions is met:

1. the economic-strategic decisions necessary for the management of the activity of the foreign legal entity as a whole are taken in Romania by the executive directors / members of the board of directors; or
2. at least 50% of the executive directors / members of the board of directors of the foreign legal entity are Romanian residents.

If a foreign legal entity is considered to have the place of effective management in Romania and is considered Romanian resident, it will have, amongst others, to have accounting records in Romania, to register as a corporate income tax-payer, to maintain its residence in Romania for a period of at least one fiscal year.

b) Reinvested profit

The reinvested profit exempt from corporate income tax represents the cumulated gross accounting profit from the beginning of the year obtained until the quarter / year of commissioning of the eligible assets. The corporate income tax exemption related to the performed investments is granted within the limit of the cumulated corporate income tax computed from the beginning of the year until the quarter / year of putting the assets into operation.

c) Tele-work deductible expenses

The expenses incurred by the employer related to the telework activity of the employees who work in this regime, according to the law, are deductible expenses in the computation of the corporate income tax.

d) Non-deductible expenses with entities from non-cooperating jurisdictions

Expenses incurred as a result of transactions with a person located in a state included in the EU List of non-cooperating jurisdictions for tax purposes are non-deductible in the computation of the corporate income tax. The list can be accessed at the link below:

• https://eur-lex.europa.eu/legal-content/ro/TXT/PDF/?uri=uriserv:OJ.C_.2020.331.01.0003.01.ENG

 

e) Integral deductibility of provisions

Provisions that meet the mentioned conditions (e.g. the receivables are uncollected in a period exceeding 270 days from the due date) will be fully deductible in the computation of corporate income tax (now they are 30% deductible).

Note: by GEO 226 of December 31, 2020, this provision becomes applicable starting with January 1, 2022.

f) Fiscal consolidation for corporate income tax purposes

The fiscal group for corporate income tax purposes consists of at least two of the following entities:

• a Romanian legal person / legal person with its registered office in Romania established according to European legislation and one or more Romanian legal persons / legal persons with registered office in Romania established under European legislation in which it holds, directly or indirectly, at least 75% of the value / number of participation titles or their voting rights;
• at least two Romanian legal entities in which a Romanian natural person holds, directly or indirectly, at least 75% of the value / number of participation titles or voting rights;
• at least two Romanian legal persons held, directly or indirectly, in proportion of at least 75% of the value / number of participation titles or voting rights, by a legal / natural person, resident in a state with which Romania has concluded a double tax treaty or in a state with which an agreement on the exchange of information has been concluded;
• at least one Romanian legal person held, directly or indirectly, in proportion of at least 75% of the value / number of participation titles or voting rights, by a legal person resident in a state with which Romania has concluded a double tax treaty or in a state with which an agreement was concluded regarding the exchange of information and the permanent establishment / designated permanent establishment in Romania of this foreign legal entity.

The period of application of the fiscal consolidation system is of 5 fiscal years and is applied starting with the next fiscal year following the submission of the application (hence, it can be applied starting with 2022). The system is optional and is required to be communicated at least 60 days before the start of the period for which the fiscal consolidation is requested.

Certain cumulative conditions must be met, such as the fulfillment of the holding condition for an uninterrupted period of one year, prior to the beginning of the fiscal consolidation period.

A legal person will be appointed for computing the consolidated fiscal result of the fiscal group, submitting the corporate income tax return and paying the corporate income tax on behalf of the group.

Each member of the fiscal group determines the fiscal result individually, and the consolidated fiscal result of the fiscal group is determined quarterly / annually by summing the fiscal results determined individually by each member of the fiscal group. The corporate income tax is calculated by applying the rate of 16% on the positive consolidated fiscal result of the group.

The deductions / exemptions determined by each member and communicated to the responsible legal entity are taken into account when computing the corporate income tax due by the fiscal group. These amounts are deducted up to the corporate income tax due by the fiscal group.

Each member of the fiscal group has the obligation to prepare the transfer pricing file which will include both the transactions carried out with the members of the fiscal group, as well as with the affiliated entities outside the fiscal group.

Special rules are provided both for entering / leaving the fiscal group and for cases in which the group no longer meets the mandatory conditions during the 5 years.

Withholding tax

g) Withholding tax rate

A 10% withholding tax rate has been introduced for certain incomes obtained from Romania by individuals resident in an EU state or in a state with which Romania has concluded a double tax treaty.

h) Online tax residence certificate

If the foreign tax authority issues the tax residence certificate in electronic or online format, such certificate represents the original of the tax residence certificate.

i) Withholding tax return

The income payers have the obligation to submit a declaration regarding the computation and withheld tax for each income beneficiary, until the last day of February inclusive of the current year for the previous year.

VAT

j) Increase of ceiling for VAT-cash accounting system

The ceiling for entities wishing to apply the VAT cash accounting system has increased to 4,500,000 RON (from 2,250,000 RON).

k) Adjustment of VAT taxable base in case of deliveries to individuals

The VAT taxable base can be adjusted if the invoices issued to individuals have not been fully or partially collected within 12 months, except for the case where the supplier and the beneficiary are affiliated parties.

The adjustment is allowed only if it is proved that commercial measures have been taken for the recovery of receivables up to 1,000 RON, including, respectively, that legal proceedings have been undertaken for the recovery of receivables higher than 1,000 RON.

l) Increase of ceiling for delivery of dwellings

The ceiling for the delivery of houses subject to 5% VAT rate was increased to 140,000 EUR (from 450,000 RON).

Note: by GEO 226 of December 31, 2020, this provision becomes applicable starting with January 1, 2022.

    m) Exemptions for certain imports

Amongst others, the VAT is not actually paid to the customs authorities for certain imports of goods subject to simplification measures (for example, imports of cereals), made by entities registered for VAT purposes (if certain conditions are met). The VAT will be paid through the reverse charge mechanism.

n) Import followed by an intra-community delivery of goods

The taxable person not established in Romania and not registered for VAT purposes in Romania who makes an import in Romania followed by an intra-community delivery of goods may appoint an authorized fiscal representative to fulfill the VAT obligations arising from these operations. The person who appoints an authorized fiscal representative is held individually and jointly and severally liable for the payment of the VAT, together with his authorized fiscal representative.

Income tax and social contributions

o) Tourist services and/or treatment services for employees

If the employer grants tourist and / or treatment services, including transport, during the holiday, for their own employees and their family members, as provided in the employment contract, the value of such services is non-taxable, insofar as the total value does not exceed in one fiscal year the level of an average gross salary. The amount that exceeds the average gross salary per year and employee will be taxed as salary income if it is borne by the employer (the same provisions are applicable to social contributions).

p) Private use of vehicles by employees of micro-enterprises

Advantages in the form of personal use of vehicles that are not used exclusively for economic activities (50% deduction), owned or used by legal entities applying the tax regime of micro-enterprises or tax specific to certain activities are non-taxable incomes for salary tax computation (the same provisions are applicable to social contributions).

q) Amounts granted to employees working in telework

Specific amounts granted to employees working in telework are considered non-taxable incomes when computing the salary tax. These amounts are granted to support utility expenses at the place where the employees carry out their activity (e.g. electricity, heating, water and data subscription), purchase of furniture and office equipment and they should be within the limits established by the employer through the employment contract or the internal regulations, within a monthly ceiling of 400 RON corresponding to the number of days in the month in which the individual carries out teleworking activity. The amounts will be granted without the need to present supporting documents. If the amount granted by the employer exceeds the ceiling of 400 lei / month / employee in telework, then the difference will be taxed as salary income (the same provisions are applicable to social contributions).

r) Submission deadlines for 205 and 207 tax returns

Income payers that have to withhold the due taxes have the obligation to submit 205 return to the tax authorities until the last day of February, including, of the current year for the previous year. Similar provisions are valid for 207 returns in case of non-residents.

s) Amendment of submission term of unique tax return

The unique tax return can be submitted by individuals / the income tax can be paid until May 25 of the following year (until now, it was March 15).