Law no. 227/2015 on the New Tax Code was published on September 3rd 2015 and shall enter into force starting next year. To that effect, we hereby present the main amendments:

GENERAL PROVISIONS

• New principles have been inserted such as:

• The fairness of the taxation or fair taxation - a principle that ensures that the tax burden has been established on the basis of the contributory power of each taxpayer (i.e. the size of the income or the property);
• The predictability principle requires that any amendment or addition take effect from the first day of the following year. If new taxes, charges or compulsory contributions are added, existing ones are increased, the existing tax incentives are eliminated or decreased, these shall enter into force as of the 1st of January of each year and shall remain unchanged at least during that year.

• As regards the definitions, new explanations have been added, as follows:

• The centre of vital interests – the State with which the individual’s personal and economic relationships are closer;
• The location of effective management - the place where the strategic economic decisions needed for managing the business of the foreign legal person are made as a whole and/or the place of operation of the Executive Director or other officers managing and controlling the Company’s business;
• The exemption method – this refers to the tax exemption for the income or profit earned in another State under Double Taxation Treaties;
• Transactions in financial instruments – any transfer, exercise or execution of a financial instrument, as defined by the relevant legislation, in the State which has issued it, regardless of the trading market/place where the transaction takes place;
• The arm’s length principle – when the conditions made or imposed between two related enterprises in their commercial and financial relations differ from those which would have been made between independent enterprises, then any profits accrued may be adjusted to reflect the market value (a definition taken from Article 9 of the OECD Model Convention on double taxation);
• Stock option plan – a programme initiated within a company the securities of which are admitted to trading on a regulated market or are traded as part of an alternative trading system, which grants the employees, directors and/or executives thereof or the legal persons affiliated to it the right to purchase, for a preferential price, or to receive free of charge a specific number of securities issued by that entity;
• International transport – any transport of passengers or goods by an enterprise in international traffic, as well as the ancillary activities, which are closely related to that operation, which are not separate freestanding activities. Any cases where the transport is operated solely between places located in Romania shall not be international transport;
• Withholding tax also called withholding by stoppage –at– source – a method of collection of the taxes and compulsory social contributions whereby income payers are legally required to calculate, withhold, declare and pay them.

• As regards the definitions, amendments and/or additions have been made to the existing regulations, e.g.:

• Afiliates;
• Association without legal personality (replaced by a fiscally transparent entity with or without legal personality);
• Dividend:
  1. The amounts paid for goods and services by the Company to the shareholders/members above market price and the amounts paid for goods and services used for the personal benefit of the shareholders/members are eliminated;
  2. The following are also considered dividends: gains derived by individuals from the holding of units in collective investment undertakings and income in cash and in kind distributed by agricultural companies, with legal personality, to the participants thereof.
• Royalties – for example the payment of royalties is also perceived as including the right to perform audio or video recordings (i.e. show, broadcasts, sporting events etc.) and the right to broadcast or rebroadcast them to the public, regardless of the technical means of transmission;
• The tax value.

• The definition of the permanent establishment also includes the reference to the Comments under Article 5 “Permanent Establishment” of the OECD Model Convention on Double Taxation;

• The anti-abuse clause of Article 11 has been supplemented and amended with the definition of artificial cross-border transactions, which are excluded from the application of the provisions of Double Taxation Treaties;

• An obligation is added for the tax authorities to adjust the price of a transaction conducted between related parties in terms of the main trend of the market (median value) in case the transactions violate the arm’s length principle;;

• The definition of the methods for determining the market value is eliminated in the case of transactions carried out between related parties and the reference to the use of the provisions from the Transfer Pricing Guidelines issued by OECD, with the subsequent amendments/modifications and additions, is added to the reference legal text;

• A new anti-abuse clause is added, which considers the right of the authorities to cancel the VAT deducted in the event that this right has been exercised abusively, given the cumulative fulfilment of two conditions:

• Obtaining tax benefits;
• The requirement to objectively prove that the main aim of the transactions is to obtain a tax advantage

THE CORPORATE TAX:

• Foreign legal entities with their place of effective management in Romania are also included in the category of taxpayers and fiscally transparent entities with legal personality are eliminated;

• Special tax rules are established in relation to the definition of non-taxable income for certain categories of taxpayers such as: religious cults, private higher education institutions, both accredited and authorised, homeowners’ associations, non-profit organisations etc.;

• In the legal text, clarifications are added on the taxable period, for taxpayers who are established during a tax year and for when the activity ceases during a tax year;

• The term regarding the obligation to communicate the option for the amended tax year (which is different from the calendar year) shall be amended from 30 to 15 days;

• The companies operating in the field of sports betting shall be eliminated from the category of taxpayers who pay corporate income tax, at a rate of 5%;

• The notion of « tax profit (loss)» is added, the same as the possibility for taxpayers to correct, in terms of tax, any errors in the accounts:

• By adjusting the tax profit (loss) of the year to which it relates (an amending declaration is submitted), if they are rectified according to the accounting regulation on account of the profit (loss) carried forward;or
• They are taken into account in determining the profit (loss) of the current year, if they are rectified according to the accounting regulation on account of the profit and loss account.

• The provisions on the tax incentive granted for Research & Development activities shall be supplemented, in the sense that the deductions shall not be re-calculated in case of not achieving the objectives of the Research & Development project;

• The facility on the reinvested profit has also been extended for the assets of class 2.2.9 of the Catalogue on the classification and durations of operating norms of fixed means, as well as software (i.e. computers, peripheral equipment, cash registers, control and billing devices, etc.);

• The category of non-taxable income shall be amended and supplemented, including primarily:

• Dividends received from a Romanian legal person, regardless of the percentage of ownership and the holding period;
• The income recorded as a result of the re-invoicing of non-deductible expenses;
• The amounts received as a result of refunding the share of any shareholders’/members’ contributions, when decreasing the share capital;
• The income recorded through a permanent establishment, of a foreign state, if the Double Taxation Treaty with that state provides for the application of the exemption method.

• An addition has been made to the transposition of the EU Directive on the common system of taxation for dividends received from EU Member States with anti-abuse provisions on the exclusion from the scope of the Directive of any transactions seeking to obtain a tax advantage;

• The general rule of deductibility shall be amended in the sense that any costs incurred for the purposes of pursuing the business shall be considered deductible expenses;

• The principle that salaries and similar expenses shall be considered deductible expenses shall be added;

• The provisions relating to limited deductibility expenses shall be amended and supplemented, including primarily the following:

• The calculation of the deductible entertainment expenses and the legal reserve shall be simplified, by reference to the accounting profit (loss), without adjustments of the non-taxable income and expenses related thereto, and the 2% rate shall remain unchanged;
• Social charges are deductible up to the limit of 5%, compared to the previous 2%, applied to the amount of the expenses on personnel salaries;
• Stipulations are made that the category of social charges also includes social expenditure incurred under the collective bargaining agreement or internal regulations
• The limit for one of the conditions of the tax credit for sponsorship expenses shall increase from 0.3% to 0.5% of the turnover;
• The contributions to voluntary pension schemes (EUR 400/year/employee) and the voluntary health insurance premiums (EUR 250/year/employee) are eliminated from the category of limited expenses, such limits being subject to review for each employee;
• Clarifications are made on the foreign exchange differences recorded as a result of the implementation of leases, in the context of the 50% limit, which applies to the unfavourable foreign exchange difference (incomes minus expenses);

• The category of non-deductible expenses shall be amended and supplemented, including primarily the following:

• The corporate tax rules shall be correlated with the VAT rules in the case of missing or degraded inventories and assets, which are non-attributable (i.e. they are considered deductible if they have been degraded in terms of quality and proof can be presented of the destruction, they have an exceeded shelf life/expiration date);
• The expenses related to management, consultancy or other assistance services shall be non-deductible if two conditions are met cumulatively:
  1. They are provided by entities located in States with which Romania has no instruments on the exchange of information;
  2. The transactions are considered artificial.

• The provisions on the losses recorded on the deregistration of receivables shall be amended in terms of granting deductibility if they are covered by insurance contracts;
• In case of expenses related to the adjustments for the impairment of receivables, the condition of their inclusion under taxable income shall be eliminated;

• The adjustments for the impairment of fixed means shall be deductible in the following situations:

1. They are destroyed as a result of natural disasters or other Force Majeure events;
2. Insurance contracts have been concluded.

• Amendments and additions shall be inserted in terms of the expenses on the interests and exchange differences, including in particular:

• The calculation of the indebtedness in the borrowed capital shall also include loans which have a repayment term of over a year and do not provide for the calculation of the interest;
• Loans lasting less than one year, which are extended so that the current periods added to the prior periods should exceed one year, shall also be included. In this case, the corporate tax shall also be recalculated for the periods prior to the extension;
• The annual interest rate for foreign currency loans shall be set at 4%;
• It is stated that the interests included in the amount of qualifying assets, and recorded under the accounting regulations, shall not fall within the scope of indebtedness calculation rules.

• The expenditure related to the purchase of customer contracts, recognised as intangible assets, under the accounting regulations, shall be considered fiscally depreciable assets and shall depreciate over the duration of such contracts;

• Additions have been inserted on the tax depreciation of subsequent expenses included in the amount of tangible and intangible assets, in the sense that, if the recognition in the asset value is recorded after the expiration of the duration of use, a new depreciation period is established by an in-house technical committee or an independent technical expert;

• Provisions shall be added on the tax loss, as well as the obligations to report and pay the corporate tax in case of taxpayers winding up with liquidation. Thus, the period between the first day of the year following the one when the liquidation operation starts and the liquidation proceeding closing date is considered a tax year;

• The provisions of the domestic laws applicable to reorganisation operations (i.e. mergers, divisions, transfers of assets) are harmonised with the European legislation applicable to such situations. In this context, we would like to mention mainly the following amendments:

• The tax neutrality is eliminated in case of contributions with assets to the share capital of a company;
• In case of a partial division, the tax neutrality only applies for the transfer of a branch of activity, leaving up to the transferring company at least one branch of activity.

• The situation of corporate tax calculation is regulated for when, before the end of a tax year, one does not determine whether the activities of a non-resident in Romania will last long enough to become a permanent establishment, meaning that the income and expenses shall be considered during the next tax year, if the duration exceeds the six-month term or the term stipulated in the Double Taxation Treaty;

• In the case of income derived by foreign legal entities from the assignment of shareholdings held in a Romanian legal entity, the buyer’s obligation to withhold the tax is eliminated if it is a Romanian legal entity or a permanent establishment in Romania;

•Amendments and additions shall be inserted in terms of avoiding double taxation, namely the application of the tax credit and the exemption method for income derived from abroad by a permanent establishment of a Romanian legal entity, under the Double Taxation Treaty;

•In the case of taxpayers enforcing the system of reporting and payment of the annual corporate tax, with quarterly advance payments, the advance payments related to the fourth quarter shall be reported and paid by the 25th of December or by the 25th of the last month of the amended tax year, respectively.

THE TAX ON DIVIDENDS

• As of 1 January 2017, the dividend tax rate shall be reduced from 16% to 5%.

THE TAX ON THE INCOME OF MICROENTERPRISES

• Clarifications shall be inserted on the exchange rate used to determine whether the EUR 65,000 ceiling has been exceeded, meaning that the exchange rate prevailing at the end of the tax year during which the income has been recorded shall be used;

• The companies with activities in the oil and natural gas industries shall be eliminated from the scope of the tax on the income of microenterprises;

• The tax rate of 1%, valid for the first 24 months, shall be added for newly established companies if:

• They have at least one employee;;
• They have been established for a period exceeding 48 months;
• Their shareholders/members have not held shareholding in other companies.

• The provisions on the lowered tax rate shall not apply if, over a period of 48 months from the date of registration, the microenterprise is in one of the following situations:

• Voluntary liquidation;
• Winding up without liquidation;
• Temporary inactivity;
• Affidavit on not performing activities at the registered office/secondary offices
• Share capital increase through contributions made by new shareholders/members;
• Its shareholders/members sell/assign/change the shareholdings held.

• The condition relating to the employee shall be considered fulfilled if the employment is carried out within 60 days, inclusive, of the date of the registration;

• The calculation of the corporate tax at the time of the transition from the micro-enterprise regime to the corporate tax regime shall be amended, in the sense that only the income and expenses recorded in the quarter in which the transition is made from the micro-enterprise regime to the corporate tax regime shall be considered;

• New deductions from the taxable base shall be added in relation to the calculation of the tax on the income of micro-enterprises, such as:

• Income derived in a foreign state with which Romania has concluded a Double Taxation Treaty, if such income has been taxed in the foreign state;
• Income from provisions and adjustments for impairment or loss of value, which have been non-deductible expenses in calculating the taxable profit.

• The following shall be added to the taxable base in relation to the calculation of the tax on the income of microenterprises:

• The reserves, except those representing tax facilities, whether reduced or cancelled, representing the legal reserve, reserves from the revaluation of fixed means, including land, which were deducted in the calculation of the taxable profit and were not taxed during the period when the microenterprises were also corporate tax payers;
• The reserves representing tax facilities, established during the period in which the microenterprises were also corporate tax payers, which are used to increase the share capital, for any distribution whatsoever to the participants, for hedging of the losses or for any other reason.

• The term for notifying the tax authorities on the application of the system of taxation on the income of microenterprises shall be amended, the new deadline being set for the 31st of March, inclusive, of the year for which the tax is paid on the income of microenterprises;

• Provisions shall be inserted in the legal text on the term for submitting the declaration on the tax on the income of microenterprises and its payment:

• For companies that are wound up with liquidation by the submission of the financial statements;
• For companies that are wound up without liquidation by the closing of the taxable period.

THE TAX ON NON-RESIDENTS’ INCOME

• The income derived from the provision of services (expressly listed), regardless of where they are provided, has been removed from the scope of non-residents’ tax and the previous provisions shall be resumed on the specific taxation of management or consultancy services in any field;

• Express provisions shall be added on the withholding of the tax on income derived from activities carried out by artists and athletes;

• The interest on debt instruments/securities issued by Romanian entities shall also be included in the exempted income if the debt instruments/securities are issued under a prospectus approved by the competent regulatory authority and the interest is paid to a person who is not a related party of the issuer of such debt instruments/securities;

• New chapters shall be added in relation to the tax treatment applicable to joint ventures/fiscally transparent entities without legal personality, incorporated under the laws of Romania and operating in Romania and joint ventures/fiscally transparent entities without legal personality established under the laws of a foreign state and operating/deriving income in/from Romania;

• A provision has been inserted that the informative declaration on the tax on non-residents’ income shall be submitted in electronic format. The term remains unchanged, i.e. until the last day of February, inclusive.

THE INCOME TAX

• The declaration of the income of non-resident individuals, who meet the conditions for tax residence, shall be amended i.e. they shall be required to report their income, as derived from any source, both in Romania and abroad, starting from the date when they become residents of Romania;

• Provisions shall be added on the administrative obligations of individuals with respect to the establishment of their residence in Romania and the change of residence (Questionnaire establishing the residence on arriving in, and departing from Romania, respectively);

• The list of non-taxable income has been amended and supplemented;

• The income from production activities has also been included in the definition of independent activities;

• The category of gross income and the category of deductible expenses have been amended and supplemented in case of determining the annual net income from independent activities;

• The category of expenses with limited deductibility has been amended and supplemented for independent activities such as:

• The percentage for sponsorship expenses increases from 2% to 5% of the base for calculation of the tax, under the law;
• The limit on the voluntary health insurance premium increases from EUR 250 to EUR 400;
• The contributions to the professional associations are deductible up to EUR 4,000/year compared to the previous provision, which stipulated a percentage of 2% of the base of calculation of the tax, under the law.

• The flat rate used to establish the annual net income from intellectual property rights is increased to 40%, compared to the current 20% and 25%;

• The income under civil contracts/agreements, the income from the activity of accounting and technical, judicial and extrajudicial expert assessment, and the income from agent contracts shall be eliminated from the category of income for which there is a requirement of withholding tax representing advance payments;

• The deductibility is added for the flat rate and compulsory social contributions withheld on calculating the withholding tax when paying the intellectual property income, in case of optionally applying the tax rate of 16%;

• Amendments and additions are inserted on the taxation of salaries and similar income, including in particular:

• The income derived by resident or non-resident individuals as a result of secondment shall also be considered salary income;
• The following shall be included under income similar to salaries: profit sharing for managers under management contracts; employee sharing of the profits; rights due to the managers, under a management contract;
• The widening of the scope of the non-taxation of amounts received as a result of a delegation/secondment to another locality and for the directors established by the Articles of Incorporation, the management or mandate contract/officers carrying out the activity under the mandate contract under the law/managers under the management contract;
• The scope of non-taxable income shall also be extended to the employees with: gift vouchers and gifts up to RON 150/person; the equivalent value of the tourist and/or treatment services during the leave; the food provided to the employees, when, under the special laws, it is forbidden to bring food on the premises; the personal use of vehicles falling within the 50% limit;
• The voluntary health insurance premium is increased from EUR 250/year/employee to EUR 400/year/employee, this being taxable income, which is calculated as a deduction from the tax base, similar to voluntary pensions;
• The allowances/per diem payments exceeding the legal ceiling shall be considered income related to the month of approval of the travel expense claim;
• The personal deduction shall increase from RON 1,000 to RON.1.500;
• For the taxpayer’s minor children, who are dependents, the amount representing the personal deduction shall be assigned to each taxpayer on whom they are dependent.

• In the case of income from property rental, including rural lease, the flat rate for the expenses shall increase from 25% to 40%;

• The category of investment income shall also be supplemented with income from the transfer of financial gold;

• The rules on the taxation of investment income shall be amended and supplemented;

• The non-taxable ceiling shall increase, for pension income, from RON 1,000 to RON 1,050, and, then, over the next three years, it shall increase by RON 50/year until it reaches the ceiling of RON 1,200;

• The rules on determining the tax on income from prizes and gambling shall be amended and supplemented;

• In case of income from the transfer of real estate from the personal property, the notaries shall notify the tax authorities of any transaction in which the reported value is lower than the minimum value set by the market study conducted by the Chambers of Notaries Public;

• The provisions on income falling within the scope of income from other sources, for which the tax is withheld and represents the final tax, have been supplemented and amended;

• The term for tax loss recovery has been increased from 5 to 7 years for income derived from independent activities, property rental and agricultural activities, forestry and fish farming;

• The terms during which the taxpayer is required to notify the tax authority of the commencement or cessation of an activity increase from 15 to 30 days (Form 220);

• The provisions concerning the taxation of associated individuals in an entity – joint venture without legal personality have been supplemented and amended;

• The provisions on avoiding double taxation for resident individuals deriving income from abroad have been supplemented and amended.

SOCIAL CONTRIBUTIONS

• The provisions on the taxation of salaries and similar income have been correlated with those concerning the application of compulsory social contributions given: the income making up the tax base, the exceptions/exemptions, the ceilings for the contributions to the voluntary pensions and voluntary health insurance premiums, etc.;

• The following are also considered taxpayers:

• Romanian citizens, the citizens of other states or stateless persons, for the period in which, under the law, their domicile or residence is in Romania;
• Romanian citizens, the citizens of other states and stateless persons who do not have their domicile or residence in Romania, according to the governing European legislation on social security, as well as the agreements on social security systems to which Romania is a party.

• The income from independent activities, without any possibility of exemption, shall also be included in the category of income that is absolutely subject to social security contribution (CAS). The monthly base for calculating the social security contribution, for advance payments, is the equivalent of 35% of the gross average salary earnings, and, on the occasion of the adjustment, the balance shall also be paid up to the maximum monthly ceiling equivalent to five gross average salaries;

• For income from intellectual property rights for which the income tax is withheld, the monthly base for calculating the social security contribution is the balance between the gross income and the expense determined by applying the 40% rate to the gross income and may not be higher than the equivalent of five times the gross average salary earnings in force during the month for which the contribution is due;

• The social security contribution payment obligations are determined by applying the individual contribution rate (10.5%) to the calculation bases, but taxpayers may opt for the full rate of the social security contribution corresponding to normal working conditions, i.e. 26.3%;

• As of 1 January 2017, if the total monthly income is higher than an amount equivalent to five times the gross average salary earnings, the individual health insurance contribution (CASS) will be calculated subject to that limit;

• For individuals with income from pensions, the monthly base for the calculation of the individual health insurance contribution is only the portion of income that exceeds the value of a pension point established for that tax year, thus eliminating the previous limit of RON 740;

• For pension income earned as of 1 January 2017, in case the income considered to be the calculation base exceeds an amount equivalent to five times the gross average salary earnings, the individual health insurance contribution will be calculated subject to that limit;

• The income from intellectual property rights shall be included in the CASS calculation base, as of 1 January 2017, even if the beneficiary derives income from salaries, pensions or other independent activities. In 2016, those who derive income from intellectual property rights or dividends shall not owe health insurance contributions from such income if they derive income from salaries, income in the form of unemployment benefits, pension income lower than RON 740, income from self-employment, sole partnerships, liberal professions, income from agricultural activities;

• Dividend income shall be included in the CASS calculation base, as of 1 January 2017, even if the beneficiary derives income from salaries, pensions or independent activities, but by applying the capping of the monthly base to five gross average salary earnings;

• The individuals who do not derive income and do not fall within the categories of persons exempted from the payment of the health insurance contribution (CASS) shall owe monthly health insurance contributions and shall request their registration with the competent tax authorities;

• The annual adjustment of the health insurance contribution shall be performed, as of 1 January 2017, as follows: the annual health insurance contribution shall be calculated by applying the individual rate of 5.5% to the annual calculation base, determined as the sum of the monthly calculation bases for which health insurance contributions are due; the annual calculation base may not be lower than an amount equivalent to 12 national gross minimum salaries and may not be higher than an amount equivalent to five times the gross average salary earnings multiplied by 12 months;;

• As of 1 January 2017, both investment income and income from other sources shall be subject to the health insurance contribution. For 2016, they shall be exempted from paying the health insurance contribution for such income if they derive income for which they already owe this contribution.

THE VALUE ADDED TAX

• As of 01 January 2016, the standard VAT rate shall drop from 24% to 20%, and, as of 01 January 2017, it shall be reduced to 19%;

• NAFA (National Agency for Fiscal Administration), as well as other national authorities are recognised as required to take into account the jurisprudence of the Court of Justice of the European Union;

• The provisions on the simplification measures (“reverse charge”) have been extended and shall also apply for:

• Supplies of buildings, parts of buildings and land of any kind, for the delivery of which the tax system is applied by operation of law or by choice;
• Supplies of investment gold;
• Supplies of mobile phones, PC tablets, laptops, games consoles and integrated circuit devices.

• There will be an amendment of the definition of capital goods and, consequently, the VAT adjustment rules in their case, meaning that the category of capital goods category shall also include assets with a depreciation period lower than 5 years;

• The provisions regarding small undertakings that apply the exemption ceiling of RON 220,000 shall be amended and supplemented;

• The tax base for uncollected receivables shall also be adjusted in the case of implementing a reorganisation plan, as allowed and confirmed by a court decision, whereby the creditor’s receivable is modified or eliminated, not just following the closing of the bankruptcy proceedings;

• A provision shall be inserted according to which a procedure determined by implementing rules shall establish the taxable amount of food goods the shelf life of which has expired and which cannot be resold;

• The lowered 5% VAT rate shall also be applied in the case of supplies of textbooks, books, newspapers and some magazines, as well as services consisting of the admission to castles, museums etc. for which the lowered 9% VAT rate was previously used;

• Sports events are included in the category of transactions for which the lowered 5% VAT rate is applied;

• When applying the lowered 5% VAT rate, for social housing, the ceiling shall be modified from RON 380,000 to RON 450,000;

• There will be clarifications in the case of the sale of new constructions;

• A series of provisions shall be inserted for a number of situations, which may be encountered by entities applying pro-rata, new rules shall be added and the categories of persons who must apply pro-rata shall be extended;

• Clearer provisions shall be introduced in terms of the time when a deletion from ROI (Register of Intra-Community Operators) is performed;

• The exercise of the right to deduct the VAT, within 1 year of the receipt of the correction invoice by the beneficiary of the operations, shall be introduced if the tax authorities have established the VAT collected from the suppliers during the tax inspection;

• A number of provisions regarding the VAT shall be introduced in the case of taxable persons in the insolvency proceedings (e.g. the VAT balance to be refunded shall not be taken over in the first VAT return submitted);

• The provisions regarding individual and joint liability for the payment of the tax shall be eliminated;

• The possibility to cancel the application for VAT reimbursement shall be added and this shall be possible based on a notice filed with the tax authorities;

• When the tax base adjustment is required and the supplier does not issue the correction bill, the beneficiary shall issue a self-billed invoice in order to adjust the deductible tax, no later than the 15th of the month following the events concerned;

• The term up to which the VAT is not paid at customs in the case of persons who have obtained certificates from the competent authorities shall be eliminated, according to OMPF (Order of the Minister of Public Finance) no. 500/2007 approving the Regulations on the procedure for granting the certificate of deferral of the VAT payment at customs and for issuing the warranty for imports of goods;

• A provision shall be eliminated: according to this provision, as of 01 January 2017, the actual payment of the VAT to the customs authorities by taxable persons registered for VAT purposes shall not be made, which means that VAT on imports shall continue to be paid to the customs authorities;

• The VAT regime applicable to mergers and divisions between taxable persons shall be simplified, in that these shall qualify as non-taxable transfers without requiring the fulfilment of other conditions.

LOCAL TAXES

• The hotel tax shall be eliminated;

• New buildings shall be added to the category of buildings exempted from tax;

• Local councils may decide to grant tax exemptions or reductions;

• The provisions according to which individuals who own two or more buildings owe an increased tax on buildings shall be eliminated;

• Buildings shall be divided into residential, non-residential and mixed-use buildings;

• In the case of residential buildings owned by both individuals and legal entities, the tax on buildings shall be calculated by applying a rate ranging between 0.08% and 0.2% to the taxable value of the building;

• In the case of non-residential buildings owned by both individuals and legal entities, the tax on buildings shall be calculated by applying a rate ranging between 0.2 and 1.3% to the value of the building;

• For non-residential buildings owned by individuals, the taxable amount shall be determined by a valuation report if it has not been built or acquired over the past five years;

• If the value of a non-residential building owned by an individual cannot be calculated, the tax shall be determined by applying the 2% rate to the taxable value determined as if the building were a residential one;

• For mixed-use buildings owned by individuals, the tax shall be calculated by summing up the tax calculated for the area used for residential purposes with the tax determined for the area used for non-residential purposes;

• In the case of individuals, if at the address of the mixed-use building, a tax domicile is registered, where no economic activity takes place, the tax shall be calculated according to the rules applicable to residential buildings;

• If the areas used for residential purposes and the areas used for non-residential purposes cannot be clearly differentiated and, at the address of the building in question, an individual has registered a company, it shall have a non-residential tax regime only if the utility costs are deducted;

• For non-residential buildings owned by both individuals and legal entities that are used for activities in agriculture, the tax on buildings shall be calculated by applying a rate of 0.4% to the taxable value of the building;

• If the building owner is a legal entity and has not updated the taxable value of the building in the last three years preceding the reference year, the rate of the tax/tax on building is 5%;

• A provision shall be eliminated: according to this provision, in the case of a building, which has undergone works of reconstruction, consolidation, modernisation, modification or extension by the Lessee, from a fiscal standpoint, the Lessee is required to notify to the Lessor of the value of the executed works for the submission of a new tax declaration, within 30 days from the date of completion of the works in question;

• The tax on buildings and land owned by individuals and legal entities, which are used for providing seasonal tourist services, for a period of no more than 6 months during a calendar year, shall be reduced by 50%. The discount applies in the tax year following the one in which this condition is met;

• The tax on buildings, the tax on land and the tax on means of transport shall be due for the full tax year by the person who owns the asset as at the 31st of December of the previous tax year, but these taxes shall not be calculated in relation to fractions of a year;

• The tax on buildings and the tax on land shall be payable annually, in two equal instalments, by the 31st of March, and the 30th of September, inclusive, but the tax on buildings/land shall be paid monthly, by the 25th of the month following each month of the validity period of the contract under which the right of concession, lease, management or use is transferred;

• The provision according to which no tax is due on the land related to a building or the land area covered by a building shall be eliminated;

• Electrically driven motor vehicles and means of transport used exclusively for emergency interventions shall be exempted from the payment of the tax on means of transport;

• In the case of hybrid means of transport, the tax shall be reduced by a minimum of 50%, according to the decision of the local council;

• Local councils may decide to exempt or reduce the tax on agricultural means of transport actually used in agriculture;

• The provisions regarding the tax rate for the tax on shows and its maturity shall be amended;

• Local public authorities may increase local taxes by up to 50% compared to the maximum levels set in the Tax Code, compared to 20% as specified in the previous legislation;

• For agricultural land which has not been cultivated for two consecutive years, the local council may increase the tax on land by up to 500% as of the third year;

• The local council may raise the tax on buildings and land by up to 500% for unkempt buildings and land, located in the built-up area, and the classification criteria shall be adopted by a decision of the local councils;

• As of 01 January 2017, in the case of any tax or any local tax, the amounts in question shall be indexed annually with the inflation rate, by the 30th of April, and not once every three years, as was the case previously – no Government Decision shall be issued in this regard.

EXCISE DUTIES AND OTHER SPECIAL TAXES

• Tax authorities and other authorities shall take into account the jurisprudence of the Court of Justice of the European Union in the field of VAT and excise duties;

• The pursuit of other new production activities in the tax warehouse shall be permitted;

• A legal basis for establishing special guarantee conditions in the case of an authorised warehouse keeper who is also a registered shipper shall be introduced;

• The excise duty level shall be lowered for the major energy products (diesel, unleaded petrol, leaded petrol);

• The amendment of the excise duty as of 2016 for beer (to RON 3.3/hl/1 degree Pluto), sparkling wine (RON 47.38/hl of product), sparkling fermented beverages (RON 47.38/hl of product), still fermented beverages (RON 396.84/hl of product), intermediate products (RON 396.84/hl), ethyl alcohol (RON 3 306.98/hl of pure alcohol), RON 430.71/1000 cigarettes;

• Domestic crude oil, as well as other products such as coffee, jewellery, hunting weapons shall be eliminated from the scope of taxation;

• Substances used in electronic cigarettes and heated tobacco products shall be added to the category of non-harmonised excise duties;

• Excise duties on excisable products returning to the tax warehouse may also be refunded in situations other than those mentioned in the current Tax Code;

• The excise duties on products not made in tax warehouses and exported/delivered to another Member State may be repaid;

• From the definition of intermediate products, the additional condition shall be eliminated, which states that the share of absolute alcohol of the final product need not be at least 50% of the still fermented base;

• The possibility of retail sale of beer in a authorised tax warehouse, exclusively for beer brewing, shall be eliminated;

• In the case of individual packaging of alcoholic beverages, it shall be compulsory to also mention the identification data of the manufacturer.