New fiscal measures in response to the coronavirus crisis

by Florin Gherghel, Tax Manager Ensight Finance

Emergency Ordinance no. 181 / 2020 was published in Official Gazette no. 988 as of 26 October 2020 regarding some fiscal measures and prolongation of some deadlines. We mention below the main aspects.

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 December 25, 2020 (the previous term was October 25).

The above due and unpaid taxes will not be considered outstanding taxes and their enforcement will be suspended / will not start until December 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 December 25, 2020, the validity of these reschedulements is maintained also until December 25, 2020.

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

b) Extension of VAT refund without control

The VAT can be refunded until January 25, 2021 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) Payment reschedulement of taxes

A payment reschedulment of taxes is possible to be approved for a maximum period of 12 months for the main and ancillary fiscal obligations whose maturity / payment term has expired after the date of declaration of the state of emergency (March 16, 2020) and are not paid until the issuing date of the tax attestation certificate.

The payment reschedulment is not granted for fiscal obligations in the total amount of less than 500 RON in case of individuals and 5,000 lei RON in case of legal entities.

In order to benefit from the payment reschedulment, the debtor must cumulatively meet the following conditions:

  • to submit an application to the tax authorities until December 15, 2020 inclusive;
  • not to be in bankruptcy / dissolution procedure;
  • not to register outstanding fiscal obligations on the date of declaring the state of emergency and not paid until the date of issuing the fiscal attestation certificate;
  • not to be liable according to the legislation regarding insolvency and / or joint liability;
  • to have submitted all tax returns, according to the fiscal evidence, at the date of issuing the fiscal attestation certificate.

After receiving the request, the fiscal body issues, ex officio, the fiscal attestation certificate and communicates it to the debtor.

There are several conditions for maintaining the validity of the payment reschedulment, amongst which we mention: (i) declaring and paying the fiscal obligations with payment terms starting with the date of communication of the rescheduling decision, including until the 25th of the next month following the due date provided by law; (ii) payment of the differences of taxes resulting from rectifying declarations within maximum 30 days from the date of filing the declaration; (iii) compliance with the amount and payment terms in the rescheduling schedule, including if the rescheduling rate is paid by the next payment deadline in the rescheduling schedule.

During the period for which payment reschedulements were granted, starting with December 26, 2020, interest is due and calculated (0.01% for each day of delay) for the tax obligations scheduled for payment, namely for each rate in the payment schedule for payment starting with the date of issuing the decision of payment rescheduling and until the payment term in the schedule or until the date of payment of the installment.

The delay penalty of 0.01% will also be due for each day of delay.

Additionally, a penalty of 5% will be due for the payment rescheduling rate paid late until the next payment term in the rescheduling schedule, as well as for the differences of unpaid fiscal obligations after solving the VAT returns with reimbursement option.

The penalty of 5% is computed at: (i) the amount remaining unpaid from the rescheduling rate, representing main fiscal obligations and / or ancillary fiscal obligations rescheduled for payment; (ii) the differences of fiscal obligations remaining unpaid after the settlement of the returns with the negative amount of VAT with the option of reimbursement.

d) Reduction of the specific tax for HoReCa

HoReCa entities liable to specific tax due for HoReCA activities in 2020, do not owe specific tax for the period between October 26, 2020 (the date of entry into force of these provisions) and December 31, 2020 inclusive.

Thus, the specific tax established for 2020 will be recalculated accordingly.

e) Reduction of local taxes

Local authorities may adopt reductions of building tax for 2020 until December 2, 2020, the main measure being the reduction of the annual building tax by 50% for non-residential buildings, if, during the period for which the state of emergency / alert was established, the owners or users of the buildings were obliged, according to the law, to totally interrupt their economic activity or hold the certificate for emergency situations issued by the Ministry of Economy certifying the partial interruption of the economic activity.

In case such measures are adopted, the owners of the buildings are obliged to submit to the local fiscal authority a request for granting the reduction until December 21, 2020 inclusive, together with a declaration on their own responsibility, which must contain specific information.

f) Prolongation of restructuring of unpaid taxes

The possibility of restructuring of taxes (GO 6/2019) is extended and the obligation to notify the fiscal authorities regarding the restructuring intention can be submitted between November 1, 2020 and March 31, 2021. The restructuring request can be submitted until June 30, 2021.

g) Non-taxation for the employee of the COVID tests supported by the employer

No salary tax and social contributions are computed for the value of medical tests for diagnosing COVID-19 infection, supported by the employer, on his own initiative, for his employees, during the state of emergency or alert.

Reductions of taxes in case of capital increases

by Florin Gherghel, Tax Manager Ensight Finance

Emergency Ordinance 153/2020 was published in the Official Gazette 817 of September 4, 2020 regarding tax incentives for maintenance / increase of equity

Thus, from January 1, 2021 until the end of 2025, reductions of taxes are granted for entities that increase their equity.

Corporate income tax payers (regardless of the declaration and payment system), micro-enterprise tax payers, as well as payers of specific tax for certain activities (HoReCa), benefit from reductions of the annual corporate income tax / micro-enterprise tax / specific tax for certain activities, as follows:

a) 2% – if the equity, in the year for which the tax is owed, is positive. If there is a legal obligation to set up the share capital, the accounting equity must also meet the condition of being at the level of a value at least equal to half of the subscribed share capital.

 

b) If an annual increase of the adjusted equity of the year, for which the tax is owed, is registered in comparison with the adjusted equity registered in the previous year and simultaneously the condition provided at let. a) is fulfilled, the reductions have the following values:

Reduction percentage of tax Ranges of annual increase of adjusted equity
5% Up to 5% inclusive
6% Over 5% and up to 10% inclusive
7% Over 10% and up to 15% inclusive
8% Over 15% and up to 20% inclusive
9% Over 20% and up to 25% inclusive
10% Over 25%

 

c) 3%, if an increase above the level mentioned in the table below is registered for the adjusted equity of the year for which the tax is owed in comparison with the adjusted equity registered in 2020 and simultaneously the condition provided in let. a) is fulfilled. This reduction applies starting with year 2022, respectively, starting with the modified fiscal year starting in 2022. The percentage increase of the adjusted equity of the year for which the tax is owed in comparison with the adjusted equity registered in 2020 has the following values:

The year for which the tax is owed Minimum percentage of increase of adjusted equity
2022 5%
2023 10%
2024 15%
2025 20%

 

If two or three of the reductions provided above are applicable, the corresponding percentages are added together, and the resulting value of the reduction is applied to the tax.

 

The adjusted equity mainly includes the following elements:

  • paid-in subscribed capital;
  • a capital premium;
  • a legal, statutory or contractual reserve and other reserves constituted by the net profit as a result of the decision of the shareholders / associates or according to the legal provisions;
  • the net carried forward result – credit balance, representing the positive difference between credit and debit balances.

 

For the period 2021 – 2025, the deadlines for submitting the declarations and for paying the tax have been modified as follows:

a) the payers of the corporate income tax submit the annual declaration regarding the profit tax and pay the profit tax afferent to the respective fiscal year until June 25 inclusive of the following year;

b) the payers of the micro-enterprise tax submit the declaration related to the fourth quarter and pay the tax related to this quarter until June 25 inclusive of the following year;

c) the payers of specific tax for certain activities submit the declaration related to the second semester and pay the tax related to this semester until June 25 inclusive of the following year.

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.