Tax measures in response to COVID-19
The Romanian government has adopted a series of measures to support the economy and companies affected by the spread of the COVID-19 virus, including high-impact measures to ensure small and medium-sized enterprises' (SMEs’) liquidity during this period. Specifically, the following emergency ordinances have been issued:
Government Emergency Ordinance (GEO) no. 11/2021 amending the Tax Procedure Code and regulating some financial-fiscal measures
Starting with the 1st of February 2022, a special VAT reimbursement procedure was introduced for the VAT refund applications submitted within the legal deadline. Specifically, requests for VAT refunds will be solved with subsequent tax audit, which will be decided based on a risk analysis.
This procedure shall not apply to the following VAT refund requests:
A special VAT reimbursement procedure was introduced for the VAT refund applications submitted within the legal deadline, including VAT refund claims pending and for which the VAT refund decision has not been issued by the date of entry into force of this GEO no. 48/2020, with certain exceptions. Specifically, requests for VAT refunds will be solved with subsequent tax audit, which will be decided based on a risk analysis.
This procedure shall not apply to the following VAT refund requests:
- For VAT refund requests submitted by large and medium-sized taxpayers:
- having deeds sanctioned as crimes entered in the fiscal record
- where the National Agency for Fiscal Administration (NAFA) finds a risk of undue reimbursement, or
- where a voluntary liquidation procedure/insolvency procedure has been initiated, except for those for which a reorganisation plan was confirmed, under the conditions of the special law.
- Claims submitted by taxpayers other than large and medium-sized taxpayers in any of the above situations or:
- submitting a request for VAT refund after registration for VAT purposes, or
- where the balance of the VAT amount claimed for reimbursement comes from more than 12 monthly reporting periods, i.e. four quarterly reporting periods.
- Starting 30 September 2021, a simplified payment rescheduling procedure applying for the main tax liabilities and ancillary tax liabilities outstanding for no longer than 12 months prior to the date of application and unpaid until the date of issuance of the tax attestation certificate was regulated. Under this procedure, payment rescheduling is granted by the tax authorities, for a period of no more than 12 months and without requesting guarantees, by issuing a decision to reschedule the payment of tax obligations, if certain conditions are met.
Government Emergency Ordinance (GEO) no. 70/2020 on some fiscal measures, extension of deadlines, establishment of tax facilities, and amendment of normative acts coming into force on 14 May 2020
Value-added tax (VAT)
Supplies to legally constituted associations and foundations, carried out by 1 September 2020, of medicinal products, protective equipment, other medical devices or equipment, and sanitary materials that may be used in the prevention, treatment, and control of COVID-19 are exempt from VAT with the right to deduct. The goods subject to this exemption are listed in Annex 2 of GEO 70/2020.
Suppliers have to justify the VAT exemption with a statement of own responsibility from the beneficiary association/foundation concerning the destination of the goods.
Non-compliance by associations and foundations purchasing goods exempt from VAT with the requirement to provide a statement regarding their destination constitutes an infringement and is punishable by a fine equal to the amount of VAT for which the exemption was granted when purchasing the goods. This provision entered into force on 24 May 2020, i.e. ten days after GEO 70/2020 was published.
Government Emergency Ordinance (GEO) no. 8/2021 amending the Law no. 227/2015 on the Fiscal Code
Value-added tax (VAT)
The provisions of Council Directive (EU) 2021/1159 of 13 July 2021 amending Directive 2006/112 / EC - regarding temporary VAT exemptions for imports and certain supplies of goods or services in response to the COVID-19 pandemic has been implemented.
Specifically, VAT exemptions for the imports of goods made by the European Commission, EU bodies and agencies established under the European Union law and for the supplies of goods/services made to these institutions under certain conditions have been implemented.
Government Emergency Ordinance (GEO) no. 226/2020 on some fiscal measures, amendment of normative acts, and extension of deadlines
Until 31 December 2022, the supplies of medical devices for the in vitro diagnosis of COVID-19, of vaccines against COVID-19, as well as the related vaccination and testing services, other than those exempted from VAT according to art. 292 of Law no. 227/2015 on the Fiscal Code, as further amended and supplemented, are VAT exempt.
Intra-Community acquisitions of Remdesivir, made until 31 December 2022, under the framework contract signed on 7 October 2020 by the European Commission (EC) with the pharmaceutical company Gilead for the delivery of Veklury, the trade name of Remdesivir, are VAT exempt.
Government Emergency Ordinance no. 30/2021 regarding some fiscal measures
GEO 30/2021 regulates the procedure for deducting from taxes the expenses of early education incurred between November 2020 and March 2021 that exceed the profit tax due.
The order of the taxes from which the deduction will be made is:
- the payroll tax withheld by the taxpayer for the employees,
- the value added tax due or the excise duties due.
The deduction will be based on a regularization statement, namely Form 711 “Statement of regularization for early education expenditures”.
The deadline for filing the regularization statement is 25 April 2021, except for the situations in which the deadlines for reporting the profit tax differ, as follows:
- if the deadline for submitting the return by which the deduction of early education expenses from the profit tax due is the same as the quarterly deadline for submitting the Declaration on the obligations to pay social security contributions, income tax and nominal records of insured persons, the amount exceeding the due profit tax is deducted from the payroll tax for the last month of the quarter;
- taxpayers who have opted for a financial year other than the calendar year will file the regularization return at each income tax return period, but no later than 25 August 2021 or the 25th of the sixth month inclusive from the end of the modified fiscal year, as the case may be;
- taxpayers who apply the annual income tax return and payment system will file the regularization return by 25 March 2022 inclusive or by 25 June 2022 inclusive, as appropriate.
Government Emergency Ordinance (GEO) no. 19/2021 regarding some fiscal measures, as well as for the modification and completion of some normative acts in the fiscal field
The application of the provisions regarding the non-deductibility and deduction from the profit tax due of early education expenses is suspended (starting with 1 April 2021 and until 31 December 2021), as well as the favorable treatment applied at the level of the individuals regarding the amounts paid by the employer for the early education of employees' children.
The deadlines regulated by Government Ordinance (GO) no. 6/2019 regarding fiscal measures were extended, respectively the possibility to restructure the main and ancillary outstanding budgetary obligations on 31 December 2020. The notification on the intention to restructure the budgetary obligations can be submitted by 30 September 2021 (the previous deadline was 31 March 2021), and the restructuring request can be submitted to the competent authority by 31 January 2022 (the previous deadline was 30 June 2021).
The new deadline is 30 September 2021 for taxpayers to apply for the simplified installment payment procedure provided by Government Emergency Ordinance(GEO) no. 181/2020 regarding some fiscal measures (the previous deadline was 31 March 2021).
The new deadline is 31 January 2022 for taxpayers to submit a request for annulment of ancillary obligations in order to apply the amnesty provided by Governmental Emergency Ordinance (GEO) no. 69/2020.
A new tax amnesty situation has been introduced regarding the tax obligations established on the basis of tax assessment decisions issued as a result of ongoing tax inspections. In such cases, ancillary tax obligations related to the main budgetary obligations administered by the central fiscal body assessed for periods prior to 31 March 2020 and stated in specific taxation decisions issued as a result of a tax inspection or verification of the personal tax situation ongoing as at the date of entry into force of GEO no. 19/2021 (29 March 2021), or which started later, but not later than 31 January 2022, regardless of when the tax inspection is completed, are to be cancelled if the following conditions are both met:
- The main budgetary obligations assessed through the tax assessment decisions are settled by any of the means provided by law and within the payment deadline established by the provisions of the Fiscal Procedure Code;
- The request for annulling the ancillary tax liabilities is submitted, under the sanction of forfeiture, by 31 January 2022 or within 90 days as of the tax assessment decision is communicated if that deadline is after 31 January 2022.
Any ancillary fiscal obligations that may have been annulled according to this new amnesty case and that were extinguished after the date of entry into force of GEO no. 19/2021 shall be reimbursed to the taxpayers according to the Fiscal Procedure Code.
The application of the tax amnesty established under GEO 69/2020 and GO 19/2021 was extended by GO 11/2021:
for the ancillary tax liabilities related to the main tax liabilities outstanding before 31.03.2020 additional assessed by the tax authorities through a tax audit/verification or the personal tax situation started after GEO 69/2020 entered into force and finalised before GEO 19/2021 subject to offsetting all the additional assessed liabilities within 30 days as from the date GO 11/2021 entered into force and the annulment claim is filed no later than 30 June 2022.
for the ancillary tax liabilities related to the main tax liabilities outstanding before 31.03.2020 additional assessed by the tax authorities through a tax assessment decision issued following a desk check verification and communicated after GEO 69/2020 entered into force but no later than 30 June 2022, subject to offsetting all the additional assessed liabilities within the legal deadline in case the tax assessment decision was communicated after GO 11/2021 entered into force or within 30 days as from the date GO 11/2021 entered into force in case the tax assessment decision was communicated prior to this moment and the annulment claim is filed no later than 30 June 2022.
Additionally, through GEO 130/2021, the deadlines of the tax amnesty procedures were prolonged up to 30 June 2022;
Specific tax for certain activities
During 2020 and 2021, through the support measures adopted by the government for the HORECA (hotels, restaurants, catering) sector, the most restricted sector in terms of economic activity, a series of emergency ordinances were issued by which the number of days for which specific tax was paid was reduced:
- in 2020: from 365 to 119, being exempted from payment 246 days;
- in 2021: by 180 days.
- The Ordinance no. 153/2020 mentions that, during its application period (2021 - 2025), the deadline for submitting returns and paying CIT for the respective fiscal year is 25 June of the following year, or the twenty-fifth day of the sixth month following the end of the amended fiscal year. The same date applies to (1) the deadline for submitting the declaration for the fourth quarter and the payment of the tax for that quarter in the case of microenterprises and (2) the deadline for submitting the declaration for the second half and the payment of activity-specific taxes.
- Starting from 14 May 2020, expenses resulting from assignments of government securities, bonds, and other debt instruments that give the holder a contractual right to receive cash are deductible when calculating the CIT result.
- On 31 January 2020, the Ordinance for implementing mandatory disclosure rules pursuant to Council Directive (EU) 2018/822 (DAC6) was published in the Official Gazette. The Romanian version of the law is closely aligned with the DAC6 Directive’s scope, hallmarks, and reporting requirements.
- The provisions of ATAD II have been implemented in the Romanian tax legislation. The Ordinance implementing ATAD II (published in the Official Gazette on 31 January 2020) is in line with ATAD II provisions.
- Starting from July 2019, the threshold turnover of the fiscal credit that may be granted through sponsorship is computed considering a rate of 0.75% from turnover instead of 0.5%.
- Starting with Q3 of 2018, companies may opt for quarterly distribution of profits to shareholders. Reconciliation of such amounts is performed subsequent to the approval of the annual financial statements. Those who opt for the quarterly distribution of dividends are required to prepare interim financial statements. Any differences resulting from the reconciliation are payable within 60 days of the date of approval of the annual financial statements. Failure to meet that deadline results in penalty interest being due.
Value-added tax (VAT)
- The period of application of the reverse-charge mechanism in connection with certain transactions under VAT law, such as the supply of grain delivery, green certificates transfer, or mobile phone provision, has been extended to 30 June 2022.
- A reduced VAT rate of 5% for sports and leisure activities, accommodation, restaurant, and catering was introduced as of November 2018.
- Romania transposed the EU provisions regarding the VAT treatment applicable to transactions with vouchers into the national legislation as of 17 April 2019.
- Effective from 13 January 2019, a reduced VAT rate of 5% has been introduced for the supply of various transport services for tourism or leisure purposes.
- Effective as of 1 June 2019, a reduced VAT rate of 5% applies for the supply of high-quality food products, i.e. products sourced from mountain areas, organic and traditional products, certified by the Ministry of Agriculture and Rural Development (MARD).
- As of 1 January 2021, the Fiscal Code is amended as follows:
- The possibility to exercise the right to deduct VAT is granted to the beneficiary if the supplier issues correction invoices on one's own initiative or after a tax inspection, even if the limitation period for the right to establish tax obligations has expired. Thus, the right of deduction can be exercised within a maximum of one year from the date of receipt of the correction invoice, under the sanction of forfeiture of the right.
- The national legislation on the adjustment of the VAT base has been amended to align it with the fundamental principles of the VAT Directive and recent European case law. According to the current legal and fiscal framework, it is not possible to adjust the tax base in the case of uncollected receivables from individual debtors. Thus, the amendment provides that if the total or partial value of the goods delivered or services provided was not collected from the beneficiaries-individuals within 12 months from the payment deadline set by the parties, or, failing that, from the invoice date of issue, the taxable VAT base may be adjusted.
The adjustment is allowed only if it is proved that commercial measures have been taken for the recovery of claims up to 1,000 Romanian lei (RON) and that legal proceedings have been undertaken for the recovery of claims higher than RON 1,000.
- Persons not registered for VAT purposes in Romania that import into Romania goods that have been transported from a third territory or a third country may designate an authorised tax representative to fulfil the VAT obligations.
- The turnover threshold for the application of the cash accounting VAT scheme has been increased from RON 2,250,000 to RON 4,500,000.
- VAT is not paid in customs for imports by taxable persons registered for VAT purposes that have a certificate for deferral of VAT payment and cumulatively meet the following conditions that they:
- have no outstanding budgetary obligations
- have made, in the last six months prior to the month in which it requests the issuance of the certificate, imports from territories and third countries with a cumulative value of at least RON 50 million, except for products subject to harmonised excise duties
- have no debts to the customs authority
- were registered for VAT purposes at least six months before submitting the application for the certificate, and
- are not in a state of insolvency, in the reorganisation or judicial liquidation procedure.
- As of 1 January 2022, a reduced VAT rate of 5% will be applied for the supply of homes purchased by individuals with usable areas of up to 120 square metres, excluding annexes, whose value, including the land on which they are built, do not exceed the threshold of RON 700,000, excluding VAT. The reduced rate applies only to homes that can be inhabited at the time of sale. For the sales between RON 450,000 and RON 700,000, the reduced VAT rate is applicable only if the buyer has not benefited before of the reduced rate for an acquisition within this value range.
- The draft legislation for transposing the EU VAT e-commerce package has been released in Romania. Such provisions are envisaged to enter into force by as of July 2021.