In the Official Gazette no. 1269 as of December 21st, 2020, Law no. 296/2020 amending and supplementing Law no. 227/2015 on the Tax Code has been published - the Parliament of Romania.

We present herein below the main amendments.

1. 1. Corporate tax


• ◘    Tax consolidation in terms of corporate tax:


•     ○    The tax consolidation system is optional, with a period of application of 5 tax years, calculated starting with the first year of application of the tax consolidation system and until the dissolution thereof;


•     ○    In order to set up the fiscal group, members must cumulatively meet the following conditions:


•         •    direct / indirect holding of at least 75% of the value / number of shares / voting rights for an uninterrupted period of one year, prior to the beginning of the tax consolidation period,


•         •    the members of the group are corporate tax payers applying the same declaration and payment system,


•         •    the members of the group have the same tax year,


•         •    the members of the group are not part of another fiscal in terms of corporate tax,


•         •    the members of the group may not be taxpayers on the revenues of micro-enterprises, (6) the members of the group do not apply the special scheme for the taxpayers performing nightclub activities,


•         •    the members of the group are not subject to the dissolution/ winding-up procedure;


•     ○    The application is submitted at least 60 days prior to the beginning of the period for which the tax consolidation application is requested. The tax consolidation system in the field of corporate tax is applied starting with the tax year following the submission of the application. Therefore, the first tax year of the tax consolidation system is 2022.


•     ○    Each member of the group makes its own corporate tax calculation and sends it to the taxpayer in charge by the 25th day of the month following the end of first to the third quarters, and for the completion of the annual calculation, by the deadline for filing the corporate tax return.


•     ○    The completion and payment of the corporate tax related to such tax year is made by the legal entity in charge by the deadline for the submission of the corporate tax return.


•     ○    The obligation to prepare the transfer pricing file shall also remain the responsibility of each member of the fiscal.


• ◘    Reinvested Profit. Amendments are brought in terms of the application of the exemption facility for the reinvested profit. According to the amendments, the exemption is applied within the limit of the cumulative corporate tax calculated from the beginning of the year to the quarter of the commissioning of the assets or until the end of such year for the companies applying the annual corporate tax declaration and payment system (previously, within the limit of the corporate tax owed over such tax period). The reinvested profit facility cannot be applied either for the cash registers for which the taxpayers have already applied the facilities introduced by Law no. 153/2020.


• ◘    The expenses representing the depreciation of the electronic cash registers for which the provisions introduced by Law no. 153/2020 are applied are non-deductible expenses upon the tax earning calculation.


• ◘    The expenses incurred by the employer related to the telework activity for the employees operating in this regime shall be deemed deductible upon the tax earning calculation.


• ◘    Expenses on benefits granted to employees in equity instruments with share settlement shall be deemed as non-deductible expenses, as they represent items similar to the expenses upon the actual granting of benefits.


• ◘    The 30% deductibility limit in case of adjustments for the impairment of uncollected receivables is removed starting with 1st of January 2022.


• ◘    New provisions are introduced on the tax treatment of leases for taxpayers applying the international financial reporting standards.


• ◘    The tax loss recorded by a taxpayer paying micro absorbed tax (from the period of application of the corporate tax) can be taken over by the absorbing taxpayer as a result of some operations of merger, split, detachment, within the limit of the 7 years. Provisions are also introduced on the applicability of these rules also by the taxpayers having taken over, in a previous period when they were micro taxpayers, unexpired tax loss from corporate tax/micro taxpayers.



2. 2. Amendments of the concept of actual place of effective leadership




The definition of the actual management location is amended in the sense that a foreign legal entity shall be deemed as having the actual management location in Romania and therefore, taxpayer in terms of the corporate tax, if it performs operations corresponding to economic, real and substantial purposes and where at least one of the following conditions is met:




• ◘    The economic-strategic decisions necessary for the management of the activity of the foreign legal entity as a whole are made in Romania by the executive managers/ members of the board of directors; or


• ◘    At least 50% of the executive managers / members of the board of directors of the foreign legal entity are residents.




In this respect, a specific procedure has been introduced to determine the tax residence based on the actual management location. The legal entity shall submit to the relevant central tax authority "The questionnaire for the establishment of the tax residence of the foreign legal entity according to the actual management location in Romania" accompanied by a series of supporting documents. The tax authority shall analyze the documentation and shall establish whether the foreign legal entity retains the residence of the foreign state or becomes a foreign legal entity resident in Romania.




Foreign legal entities registered with the actual management location in Romania until December 31st, 2020 inclusively are bound to submit the questionnaire accompanied by the supporting documents to the relevant tax authority by June 30th, 2021, for the establishment of the tax residence according to the new criteria.




3. 3. Microenterprise income tax




Clarifications:




• ◘    Dividend incomes received from a Romanian legal entity are excluded from the tax base;


• ◘    Microenterprises shall apply the 1% or 3% rate depending on the number of employees, the exceptions being removed.



4. 4. Income tax




Amendments on the moment of the taxation of the individuals becoming tax residents in Romania




• ◘    A non-resident individual whose presence in Romania exceeds a period or several periods of 183 days over any interval of 12 consecutive months ending in the calendar year is subject to the income tax for the revenues obtained from any source, both in Romania and from outside Romania and shall owe tax from the first day of arrival in Romania


• ◘    An individual becoming a tax resident in Romania as a result of establishment of the center of vital interests in Romania shall owe tax starting with the first day on which they state that the center of vital interests is in Romania.




Salary and salary-assimilated revenues





In terms of income tax for salaries and assimilated to salaries, the following notable amendments are made:




• ◘    It is expressly stated that the benefits received by the employees from third parties as a result of a contractual relationship between the parties are taxable upon the income tax calculation, and the obligation to calculate, withhold, pay and declare the tax is incumbent as follows:


•     ○    upon the Romanian tax resident employer, when the advantages in cash and/or in kind are granted by other entities and the payment is made via the employer;


•     ○    upon the Romanian resident income payers, when the advantages in cash and/or in kind are granted by entities other than the employer, except for the situation of individuals earning in Romania income from salaries and assimilated to salaries as a result of employment contracts concluded with employers having their registered office, permanent establishment or representative office in Romania. In the latter case, the obligation is incumbent upon the individual taxpayer or the Romanian employer, by option.


• ◘    The following are included in the category of non-taxable incomes:


•     ○    The equivalent value of tourist and/or treatment services, transportation included, granted by the employer during the annual leave for employees and their family members are non-taxable, on a yearly basis, at the level of one average gross salary earning (value for 2020 RON 5,429);


•     ○    Adoption allowances;


•     ○    The amounts granted to the employees performing telework activities to support utility expenses at the location where the employees work, such as electricity, heating, water and data subscription, and the purchase of office furniture and equipment, within the limits set by the employer by the employment contract or the internal regulation, within the limit of a monthly ceiling of RON 400, corresponding to the number of days in the month in which the individual performs telework activity. The amounts shall be granted without the need to submit supporting documents;


•     ○    Benefits under the form of personal vehicles which are not used solely for the purpose of the economic activity, owned or used by legal entities applying the micro-enterprise tax regime or the activity-specific tax.


•     ○    Benefits in kind granted during the alert period to individuals by the employer/payer for the people working in preventive isolation or areas where people from outside do not have access;


•     ○    Coverage of the costs of the epidemiological testing and/or vaccination of the employees preventing the spread of diseases jeopardizing the employees’ health and the public one.




Revenues from the assignment of the use of property




• ◘    Amendments are brought in terms of the qualification of the revenues from the rental for tourist purposes of the personally owned rooms.


• ◘    The rental for tourism purposes by the owners of the rooms located in the personally owned dwellings, other than those representing tourist reception structures, according to the specific law, represents the offer of the possibility to stay for a minimum period of 24 hours and maximum 30 days in a calendar year for any person traveling for tourism outside their regular living environment.


• ◘    The revenues obtained from the renting for tourism purpose of a number of rooms comprised between one and 5 rooms inclusively, over a tax year, are determined based on the annual standard income. The standard is established depending on the locality where the property is located, respectively the location of the dwelling. Furthermore, these rules are adjusted according to criteria such as the existence of public transport, the construction materials used for dwelling unit, etc. The level of the annual standard income shall be established based on these criteria by order of the Minister of Economy, Energy and Business Environment - Tourism. The Ministry of Economy, Energy and Business Environment - Tourism shall annually send this information to the National Agency for Fiscal Administration.


• ◘    In case the number of 5 rooms for rent is exceeded over the tax year, starting with the following tax year, the determination of the net income is made in real system.


• ◘    At the same time, in terms of the establishment of the income tax from the assignment of the use of goods, if the rent is established in foreign currency, the annual gross income is determined based on the monthly rent multiplied by the average annual exchange rate communicated by the NBR for that year.




Revenues from other sources




The value of vouchers under the form of gift vouchers granted based on the nominal records of other categories of beneficiaries (other than those within a salary-generating relationship) for marketing campaigns, market research, promotion on the existing or new markets, for protocol, for advertising and publicity is expressly added to revenues from other sources. Nominal records must include at least information on the surname, first name, personal identification number / tax identification number of the beneficiary and the value of the vouchers granted to each beneficiary, on a monthly basis.




Revenues obtained abroad



• ◘    Revenues generated abroad are subject to taxation by the application of the tax rates to the computing basis, determined according to the rules of each income category, depending on the nature thereof. As an exception, where the annual net revenue in Romania is determined based on the standard income, for revenues obtained from abroad of the nature of those obtained in Romania, the annual net revenue obtained abroad is determined in compliance with the rules stipulated for the real system or in reference to the gross revenue obtained from the foreign state, as applicable.



5. 5. New deadlines



• ◘    The deadline for submitting the Single Return is officially extended from March 15th to May 25th of the following year.


• ◘    The deadline for the submission of Form 205 -Information return on withholding tax, gambling income and investment gains/loss on income beneficiaries - is amended from January 31st of the following year to the last day of February of the following year.


• ◘    The deadline for submitting Form 230 "Application for the destination of the amount representing up to 3.5% of the annual tax due" is amended to May 25th, inclusively.



6. 6. Social contributions



• ◘    Firstly, in the area of social security contributions, the amendments aim at aligning the newly introduced provisions in terms of income tax. Specifically, the newly introduced non-taxable benefits detailed herein above have the same tax treatment in terms of social contributions.


• ◘    New rules are established on the obligation to declare and pay social security contributions for the benefits received by the employees from third parties, in full observance of the European social security law and social security agreements.


• ◘    A new provision is introduced concerning the individuals obtaining from several payers revenues from intellectual property rights or based on sports activity contracts below the level of 12 minimum gross national salaries, but cumulatively exceeding the level of 12 minimum gross national salaries, having submitted the single return on the income tax and social security contributions owed by individuals and, during the year, they conclude with an income payer a contract the value whereof is above the ceiling of 12 minimum gross national salaries. For these taxpayers, the withholding of the contribution shall not be applied, but the self-taxation system shall be applied, and the contribution shall be established via the Single Return.


• ◘    Individuals earning income from independent activities and copyright for which they owe the social security / health contribution and who, over the tax year, fall into the category of people exempted from paying the contribution are bound to declare and submit the single return within 30 days of the date of the event; they shall also recalculate and pay the contribution owed corresponding to the recalculated ceiling.



7. 7. Tax on the income obtained in Romania by non-residents




Tax rates





In the case of the individuals resident in a European Union Member State or in a state with which Romania has concluded a double taxation agreement, a 10% tax shall be retained for income obtained from Romania such as: interest income, royalties, commissions, sports and entertainment activities performed in Romania, management or consultancy services, services provided in Romania. The same tax rate shall be applied in the case of revenue obtained by artists or sportsmen, individuals resident in another European Union member state or in a state with which Romania has concluded a double taxation agreement.





Non-taxable income obtained in Romania by non-residents





The following are added to the list of non-taxable revenues:




• ◘    Transfers of ownership over securities upon the transfer, as an effect of the loan of securities;


• ◘    Transfers of ownership over securities upon the establishment of collaterals related to the loan of securities.




Corroboration of the provisions of the Tax Code with those of the double taxation conventions and of the European Union law




• ◘    Clarifications are provided in terms the form of the residence certificate, more precisely it shall be submitted in original or authenticated copy, accompanied by a certified translation into Romanian. If the relevant foreign authority issues the tax residence certificate in electronic or online format, this represents the original of the tax residence certificate taken into account for the application of the convention.




The deadlines for submitting the information and the informative return on total gains/losses by intermediaries, whereby non-resident individuals obtain revenues from the transfer of securities issued by Romanian residents are extended from January 31st inclusively to the last day of February inclusively of the year current for the previous year. The same deadline shall also be applied in the case of the annual withholding tax return.




8. 8. Value added tax




Clarifications:




• ◘    The transfer of ownership over an immovable property from a taxable person to a public institution, for the purpose of settling an outstanding tax liability, does not represent a delivery of goods;


• ◘    The turnover ceiling for the applicability of the VAT cash-accounting system is increased, reaching the value of RON 4,500,000 starting with 1st of January 2022.


• ◘    The right to adjust the tax base is granted in the case of uncollected receivables from individuals within 12 months from the payment deadline set by the parties, or failing this, from the invoice issue date (except for the affiliates).



The period during which the adjustment can be made is of 5 years from:



• ◘    January 1st of the year following the one in which the payment term established by the parties occurred or, failing that,


• ◘    of the year following the one in which the invoice was issued.



At the same time, the conditions to be met for granting the possibility of adjustment are:



• ◘    evidence is provided that commercial measures have been taken for the recovery of the receivables of up to RON 1,000 inclusively, respectively


• ◘    evidence is provided that commercial measures have been taken for the recovery of receivables over RON 1,000.


• ◘    The value ceiling for the application of the 5% VAT rate for the supply of dwellings with a useful area of up to 120 sq.m. is amended in the sense of the indication of the amount in Euro (i.e. EUR 140,000, VAT exclusive) and not in RON (initially RON 450,000 lei, VAT exclusive). The exchange rate used for the conversion of the amount in RON shall be the one communicated by the National Bank of Romania, valid on January 1st of each year;


• ◘    The right to deduct VAT for the purchases of alcoholic drinks and tobacco products is granted if these goods are offered free of charge for advertising purposes or to stimulate sales;


• ◘    The right to deduct VAT is granted, including for operations carried out over periods already subject to tax inspection, but which are within the limitation period, if the deduction could not be granted over the tax period or in case of late receipt of the procurement documents from the providers.



At the same time, if the provider issues correction invoices on its own initiative (previously it was regulated only the case of invoices issued following the tax inspection), the beneficiary of those operations is entitled to deduct the tax entered in the correction invoice issued by the provider, even if the limitation period of the right to establish tax liabilities has lapsed. The right to deduct may be exercised within maximum one year of the date of receipt of the correction invoice.



• ◘    Amendments also occur in the case of the establishment of the VAT position by the tax return, thus, the decisions on the payable VAT established by the tax inspection authorities the enforcement whereas has been suspended by the law courts, are not added to the negative amount resulting in the periods over which the enforcement of the decision is suspended, but shall be included in the return of the tax period in which the suspension of the enforcement of the decision ceased. Similarly, the amounts that are not deemed overdue under the Tax Procedure Code are not added to the amount of the payable VAT until the tax period in which they become overdue;


• ◘    Taxable entities not established and not registered for VAT purposes in Romania making in Romania exempt imports of goods followed by intra-community deliveries of goods, shall have the possibility to designate a tax representative;


• ◘    In order not to actually pay customs VAT for imports, the certificate of licensed economic operator (AEO) or the home customs clearance certificate shall suffice, it is no longer necessary to obtain the VAT payment deferment certificate for customs, except for the cases below.



The certificate of VAT payment deferral at customs is obtained if the following are met:



• ◘    They made imports in the cumulative value of at least RON 50 million over the last 6 months prior to the month of application for the certificate;


• ◘    They have no outstanding tax liabilities;


• ◘    They have no debts registered with the customs authority;


• ◘    They have been registered for VAT purposes for at least 6 months prior to the submission of the application for the certificate;


• ◘    They are not in a state of insolvency, reorganization procedure or judicial liquidation.


• ◘    The VAT payment measure is extended by the reverse charge mechanism in the case of imports of goods to which simplification measures are applicable (waste, residues and other recyclable materials, wood and wood materials, cereals and technical plants, mobile phones, integrated circuit devices and consoles games, tablet PCs and laptops);


• ◘    In order to apply the reverse charge for electricity supplies, it is allowed to submit the own liability statement for negligible own consumption, including for periods prior to the year of the submission thereof;


• ◘    Natural gas deliveries to taxable traders are subject to the simplification measure by reverse charge, in case of own consumption of maximum 1%. This measure is applicable until June 30th, 2022.



The taxable trader buying natural gas must also send to the seller an own liability statement indicating the fact that the main activity thereof, in terms of natural gas purchases, is represented by the resale thereof and its own estimated consumption from the purchased natural gas is negligible, which is valid until December 31st of the law enforcement year. Definitely, the ANRE-specific licenses are necessary.




9. 9. Local taxes



The definition of buildings has been extended to include the foundation of wind turbines.




The deadline for updating the valuation report for determining the taxable value of buildings owned by legal entities is extended from 3 to 5 years. If the valuation report is submitted after the first tax payment deadline, it shall only be taken into account starting with the year following the submission.