Category: Uncategorized

Reductions of taxes in case of capital increases

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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

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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

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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

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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.