Below we summarise the key amendments made to the Romanian Fiscal Code by Emergency Ordinance 84/2016 for amending and completing regulatory documents on financial and tax matters. The amendments come into force on 1 January 2017.
A) Fiscal Code
1. Inactive taxpayers
If a Romanian company is declared inactive under the Tax Procedure Code and performs business activities during the period of inactivity, it is required to meet all its declarative and tax payment obligations (i.e. to compute profit tax and collect VAT for all its business activities). However, such a company is not allowed to deduct expenses and input VAT associated with acquisitions for the purposes of profit tax and VAT.
From 1 January 2017, once the entity is re-registered for VAT purposes, it will be allowed to deduct expenses and VAT related to acquisitions. However, special provisions apply if the cancellation of the VAT code and subsequent registration occur in different fiscal years.
In addition, the reactivated entity must again issue invoices for deliveries made during the inactive period, so that its customers can deduct the expenses and VAT associated with the invoices issued by the formerly inactive entity. The provisions above also apply to entities which have their VAT registrations cancelled according to specific provisions of the Fiscal Code.
2. Extension of exemption for reinvested profit
Profit reinvested in specific assets such as technology, computers, cash registers, IT programmes and IT licences can be exempted from corporation tax. The tangible assets should be from specific groups on the fixed asset schedule. This exemption has been extended indefinitely; it was initially designed to end on 31 December 2016.
3. Decrease in share capital for companies registering for corporation tax on the date of incorporation
If a company to be incorporated has share capital of more than RON 45,000 (EUR 25,000, RON equivalent until 31 December 2016) when it is incorporated with the Trade Registry, the new company can choose to register either as a payer of corporation tax (16% tax rate applied to its profits plus fiscal adjustments) or as a payer of micro-enterprise tax (1%/2%/3% tax rate applied to its revenues, with specific exemptions).
If the share capital of the new company is below RON 45,000, it can register only as a payer of micro-enterprise tax (with specific exemptions).
The companies which currently have share capital of RON 45,000 and pay the micro-enterprise tax can choose to register as a payer of corporation tax from 1 January 2017.
Before the implementation of these new provisions, the minimum share capital for which a newly incorporated company could opt for registration as a corporation tax payer was EUR 25,000.
If tangible assets are used, for example for activities without a right of deduction, the adjustment of related deductible VAT has been modified in order to extend the adjustment quotas during the adjustment period. A special VAT regime has been introduced for Romanian individuals/freelancers performing mainly agricultural activities (e.g. no output VAT on deliveries, no VAT deduction for acquisitions, flat-rate compensation of 1% in 2017). The tax authorities will no longer cancel the VAT code of taxable persons who declared temporary inactivity and are registered with the Trade Registry.
5. Annulment of VAT registration for EU transactions
The requirement for companies to register, especially for VAT, if they engage in transactions with EU companies has been repealed. Thus the normal VAT registration will also be valid for intra-Community transactions.
6. Stock option plan
The conditions for stock option plans have been relaxed. Stock option plans will be available to all companies, not only those with securities admitted for trading on a regulated market or traded in an alternative trading system.
7. Annual tax return for declaring salary tax
Payers of salaries and salary-type incomes no longer have to submit annual tax returns showing the salary tax paid for each beneficiary.
B) Fiscal Procedure Code
New provisions regarding taxpayers’ payments to the State Budget have been introduced. There are also new provisions on the spontaneous exchange of information between tax authorities from EU member states.
In addition to the above, the VAT rate will decrease as of 1 January 2017, from 20% to 19%, and the administrative consequences (if this decrease materialises in 2017) will change. There are also new provisions on the method for calculating corporation tax at companies in the tourism, hotel, restaurants, bars and catering sectors.