Last week, we reported about the fiscal changes, some of which are far-reaching, which came into force on 1st January 2019 by means of a highly debated and heavily criticized Emergency Ordinanace (“EO 114”).

This EO contains, besides the tax-related aspects, a series of changes with significant effects and greater relevance to the economy. We will describe below further interesting changes which have come into force.

The Energy Industry

Those owning a licence to supply energy (electricity and natural gas) must pay, from 1st January, a tax of 2% of the turnover achieved from activities subject to energy regulatory authority (ANRE) regulations.

Additionally, the price for selling natural gas to suppliers and end customers has been capped at 68 RON/MWh from 1st April 2019 to 28th February 2022. This limitation applies to gas producers undertaking both extraction and sales activities in Romania.

Electronic Communication and Telecommunication

Granting certain licences for using radio frequencies depends on the payment of a licence fee. Depending on the required frequency band, this fee will amount to between 2% and 4% of the previous year’s turnover, multiplied by the number of years for which the licence is granted.

The extension of the validity period becomes dependent on the payment of a licence fee, as well. This will be calculated in a similar way, at a rate of 4%.

Operators of public communication networks or communications services open to the public must also pay a control fee to the National Regulatory and Supervisory Authority (ANCOM).The calculation of the fee changes from 1st January, it amounts to 3% of the previous year’s turnover.

Private pension insurance

In Romania, seven private pension funds belong to the so-called “second pillar” of the Romanian pension system. Stock companies managing these funds are now bound to increase the share capital. The increase is significant (established as a percentage of contributions; until now it was a fixed amount) and it is due in two stages, 50% before 30th June 2019 and 50% before 31st December. Commissions on these funds will be reduced. Participation in the fund will now be optional and the employees in construction will be exempt from such contributions.

Promotion schemes

For construction of kindergartens with a sporty profile, investors are granted financing of up to 500,000 Euro after the finalization of the investment. State-subsidised loan securities of up to 50% are granted in case loans are taken out for such projects.

For projects in developing and modernising health resorts, state aids of 50% of the investment are granted. However, the grant may not exceed 200,000 Euro.

Minimum salary – another new provision for the construction industry

As is generally known, regulations allowed for[1] two different minimum salary levels, of 2,080 RON, and 2,350 RON – depending on the education and employment period necessary for the position. We have already published details on this topic.

EO 114 has now established a minimum salary of 3,000 RON for the construction industry.

Further intended changes

In addition to EO 114, other changes have been adopted by the Parliament. These changes are now with the president to be assessed and approved. They have not yet been published and refer to:

  • The establishment of a register for non- governmental organizations (NGOs)
  • The increase of the threshold value for the deductibility of loan interest
  • The classification of companies based on their tax risk
  • The implementation of a mediation procedure for tax administration
  • The taxation of crypto-currencies.

We will come back to you with more details as soon as they’ve been published.

Conclusion

EO 114 has been heavily criticized, especially since there was practically no public consultation. These dramatic measures were regulated on 29th December 2018 with effect from 1st January 2019, but the urgency (allowing the government to regulate such measures without the usual legislative procedure) is questionable, and according to the press, no impact study has been done. Given these facts, but also the effects of the new legislation, one can totally understand this critique.