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.

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