19-Dec-2017: The main amendments on Romanian Fiscal Code, to enter into force starting with January 2018

Corporate income tax

  • The current provisions regarding the limited deductibility of interest and net foreign exchange losses are replaced by the provisions of EU Directive 2016/1164 laying down rules against tax avoidance practices that directly affect the functioning of the internal market, which will be applicable to companies that are part of a group.
  • The excess indebtedness costs, computed as the difference between the interest revenues and other economically equivalent revenues and indebtedness costs and other economically equivalent costs, including foreign exchange losses, which exceed the EUR 200,000 annual threshold, are deductible for corporate income tax purposes up to 10% of the gross accounting profit, minus non-taxable revenues, plus excess indebtedness and tax depreciation; if this computation base is less than or equal to 0, the non-deductible costs can be indefinitely carried forward and can be deducted when this base becomes positive.
  • Companies that are not part of a group and which have interest expenses and net foreign exchange losses available to be carried forward as at 31 December 2017 can fully deduct said amounts in 2018.
  • An exit tax is introduced to regulate the tax regime for transfers of assets, of tax residence or of the businesses from Romania to other countries.
  • Additionally, a general anti-abuse rule is introduced, according to which tax authorities can ignore a series of arrangements which have been put into place with the sole aim of obtaining a tax advantage.
  • The concept of controlled foreign companies is introduced, according to which certain non-distributed revenues of said entities located in jurisdictions having low tax rates are included in the taxable base of the parent company in Romania.

Tax on micro-company income

  • The income threshold under which companies are required to apply the micro-company regime is increased from EUR 500,000 to EUR 1,000,000.
  • Companies carrying out banking, insurance and reinsurance, capital markets, gambling or upstream oil and gas activities and companies rendering management and consultancy services, regardless of the revenue share derived from said services, are no longer excluded from the application of the micro-company tax.
  • Newly set-up companies having a share capital of at least lei 45,000 or micro-companies which perform a share capital increase to this minimum will no longer have the option to apply the corporate income tax regime.

Income tax

  • The standard income tax rate is reduced from 16% to 10%.
  • It is expressly provided that contributions paid to special social security systems by individuals carrying out independent activities are deductible for income tax purposes.
  • Income tax rates applied to income from intellectual property rights decrease from 10% to 7% for determining the advance payments and from 16% to 10% for determining the final income tax due.
  • The monthly gross salary based on which the personal deduction is granted increases from lei 1,500 per month to lei 1,950 per month; the personal deductions are increased as well; also, regressive personal deductions are provided within the Fiscal Code for gross salary income between lei 1,951 and lei 3,600.

Mandatory social contributions

The social contributions system is changed as follows:

  • The social security contribution is due only by the employee at a rate of 25% from the calculation base (except for cases involving particular or special work conditions, for which the employers also owe social security of 4% or 8% of the calculation base, as the case may be).
  • The health insurance contribution is due only by the employee and has a rate of 10% of the calculation base.
  • A separate contribution of 2.25% is also due by the employer and replaces the unemployment insurance contribution, the contribution for accidents at work and professional diseases, the contribution for medical leave and indemnities and the contribution to the salary guarantee fund.
  • The liability to compute, withhold and pay the social charges remains with the employer.
  • Individuals carrying out independent activities can choose to pay the social security contribution by reference to the minimum monthly gross salary. The health insurance contribution is due also by reference to the minimum monthly gross salary.

Value added tax – VAT

  • A new rule is introduced according to which the right to deduct VAT is refused to a taxable person if it can be proven that said person knew or should have known that the respective transactions were part of a fraudulent chain of transactions.
  • In January 2018, a system of separate Value Added Tax accounts (so called “Split VAT”) will come into force in Romania. The Split VAT system requires the use of separate VAT accounts for all payments and revenues associated with Value Added Tax (input and output VAT). This means, among other things, that invoices for goods and services have to be paid to two separate accounts: the net amount to the business bank account, the VAT element to a separate VAT account. The split-VAT scheme is mandatory for:
    • Companies in insolvency procedure;
    • Companies with delay in payment of due VAT to state budget, if the delay is higher than 60 days and the amount is at least 15000 ron (large taxpayers) / 10000 ron (medium taxpayers) / 5000 ron (small taxpayers).

o   Taxpayers can adopt the system on a voluntary basis, and will receive a tax incentives of 5% reduction of the corporate tax (or corporate tax for micro-business)

4-Sep-17: Bader Consulting awarded Best Business Achiever 2017

During annual meeting of AITC members, held in Bucharest on September 1-2, our company was awarded with title 2017 Best Business Achiever. It is a honor for us, and we would like to thank to all our clients and collaborators for making this award realizable!

New: Bader Consulting to host annual AITC meeting in Romania

The annual general meeting  of members of the Association of International Tax Consultants (AITC) will be hosted in Romania and will take place on 1 and 2 September 2017, in Bucharest. Members of the Association from Cyprus, Denmark, Switzerland, France, Germany, Italy, Malta, Great Britain, Netherland, Poland, Romania and the USA will be present.
The International Association of Tax Consultants (AITC) is an association of private companies from around the world, consisting of lawyers and economists specialised in tax consultancy. It was founded in 2001 and is based in Switzerland. More details about this association can be found by visiting www.aitc-pro.com . From Romania, the only firm registered in this association is Bader Consulting, which is also the organiser of this event.

New! 15-Jan-2016

As of 01/01/2016, important updates are introduced on Romanian Tax Code, on majority of national and local taxes. The most important updates, by type of tax, are as follows:

  1. Profit tax
    1. General profit tax rate confirmed for 16%.
    2. New allowance for reinvested profit in IT equipment (previously only for machinery)
    3. Maximum interest rate on inter-company loans allowed for deductibility for profit tax calculation is now 4% (previously 6%)
  2. Dividend tax
    1. As of 01/01/2016, new general dividend tax rate is 5% (previously 16%)
    2. Tax on dividends of 0% if a beneficiary hold a minimum 10% of share capital of dividend payer, for at least 1 year at date of payment of dividends.
  3.  VAT
    1. New: General VAT rate reduced at 20% (previously 24%)
    2. Reduced rate of 9% for food industry, accommodation in hotels, catering and restaurants, human and animal care, including drugs
    3. Reduced rate of 5% for books, expositions, museums
    4. New: reverse charge mechanism introduced for real estate industry – land, buildings, part of buildings.
    5. New: Reverse charge mechanism also available for deliveries of mobile phones, laptops, PCs, tablets, gaming console
  4. Local tax
    1. Local tax for buildings is now calculated on economical usage of building – residential or commercial (previously calculated based on ownership).

Please contact us for more details!

Fiscal facilities granted to individual investors – business angels

Law no. 120/2015 regarding fiscal facilities granted to individual investors – “business angels” – has been published. It introduces several fiscal facilities for individuals investing in micro-enterprises and small-sized enterprises, and presents the requirements that need to be fulfilled in order for the facilities to apply.

Details:

Individual investors – “business angels” can benefit from the following fiscal facilities upon investing in micro-enterprises and small-sized enterprises:

  • Exemption from tax on dividends for the first three years from the purchase of the shares. The exemption is granted up to the equivalent of the invested amount.
  • Exemption from tax on capital gains from sale of shares, if the sale takes place at least three years after the purchase of the shares.