Romania

Corporate - Significant developments

Last reviewed - 04 August 2022

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 Ordinance (GO) no. 11/2021 amending the Tax Procedure Code and regulating some financial-fiscal measures

Starting from 1 February 2022, a special value-added tax (VAT) reimbursement procedure was introduced for the VAT refund applications submitted within the legal deadline. Specifically, requests for VAT refunds will be resolved 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 offences entered in the tax 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 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, provided certain conditions are met.

Government Emergency Ordinance (GEO) no. 70/2020 on some tax measures, extension of deadlines, establishment of tax facilities, and amendment of normative acts coming into force on 14 May 2020

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.

GEO no. 8/2021 amending the Law no. 227/2015 on the Fiscal Code

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 (EC), European Union (EU) organisation and agencies established under the EU law, and for the supplies of goods/services made to these institutions, under certain conditions, have been implemented.

GEO no. 226/2020 on some tax 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 with the pharmaceutical company Gilead for the delivery of Veklury, the trade name of Remdesivir, are VAT exempt.

GEO no. 30/2021 regarding some tax 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 regularisation statement, namely Form 711 'Statement of regularisation for early education expenditures'.

The deadline for filing the regularisation 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 regularisation return at each income tax return period, but no later than 25 August 2021 or the 25th day 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 regularisation return by 25 March 2022 inclusive or by 25 June 2022 inclusive, as appropriate.

GEO no. 19/2021 regarding some fiscal measures, as well as for the modification and completion of some normative acts in the tax area

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 favourable treatment applied at the level of the individuals regarding the amounts paid by the employer for the early education of employees' children.

The new deadline is 30 June 2022 for taxpayers to submit a request for annulment of ancillary obligations in order to apply for the amnesty provided by 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 30 June 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 30 June 2022 or within 90 days as of the date the tax assessment decision is communicated if that deadline is after 30 June 2022.

Any ancillary tax obligations that may have been annulled according to this 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 as follows:

  • For the ancillary tax liabilities related to the main tax liabilities outstanding before 31 March 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 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 March 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 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.

GEO no. 85/2022 regarding the modification and completion of some normative acts in the tax and customs field

GEO 85/2022 extended the mechanism for restructuring the tax liabilities introduced by GO no. 6/2019 by including the possibility to request the restructuring of the principal budget liabilities overdue as of 31 December 2021 and unpaid by the issue date of the tax certificate and relevant accessory liabilities. The interested taxpayers can notify the tax authorities by January 2023 about the intention to benefit from the mechanism, and the restructuring applications can be submitted by July 2023.

The tax liabilities covered by GEO 85/2022 and considered overdue as of 31 December 2021 are the following:

  • Principal budget liabilities imposed by tax assessment decisions communicated after 1 January 2022, related to the tax periods until 31 December 2021.
  • Principal or ancillary tax liabilities assessed by authorities other than tax authorities, as well as penalties of any kind, sent for recovery to the central tax authorities after 1 January 2022 until the date of issuance of the tax clearance certificate.
  • Principal and ancillary liabilities overdue on 31 December 2021 and unpaid by the issue date of the tax certificate, existing in the records of the local tax authorities. The application procedure will be approved by decision of the deliberative authorities at the level of the tax administrative units.

Also, through GEO 85/2022, the application of the reverse charge mechanism will continue until 31 December 2026 in the case of the following operations carried out between taxable persons registered for VAT purposes in Romania by the deadline (that would have expired on 30 June 2022 inclusive):

  • Delivery of cereals and technical plants, including oilseeds and sugar beet, that are not, in principle, intended as such for final consumers.
  • Transfer of transferable greenhouse gas emission certificates.
  • Delivery of electricity to a taxable person trader, established in Romania.
  • Transfer of green certificates.
  • Deliveries of mobile phones (i.e. devices manufactured or adapted for use in connection with an authorised network and operating on certain frequencies), whether or not they have any other use.
  • Deliveries of integrated circuit devices, such as microprocessors and central processing units, before their integration into end-user products.
  • Providing game consoles, tablet PCs, and laptops.
  • Delivery of natural gas to a taxable person trader, established in Romania.

Changes of the Romanian Fiscal Code

GO no. 16/2022 for amending and completing the Fiscal Code

  • Tax exemption for reinvested profit is to be extended to cover investments in assets used in refurbishment, production, and processing activities. Changes come into force on 1 January 2023.
  • Tax on dividends will be increased from 5% to 8% on dividends distributed between/paid to Romanian legal entities and for those distributed between/paid to privately managed pension funds and optional pension funds. The 8% rate will apply to dividends distributed starting 1 January 2023.
  • Micro-company tax becomes optional, and the tax rate on micro-company revenues remains only 1% (the 3% rate is thus repealed). If a micro-company achieves revenues of more than 500,000 euros (EUR) or its revenues from consulting and management are 20% or more of the total revenues during a tax year, it owes corporate income tax (CIT) as of the quarter in which they exceeded those limits. Micro-company tax changes enter into force on 1 January 2023. 
  • The withholding tax (WHT) rate for dividends obtained by a non-resident is to be increased from 5% to 8% on dividends distributed after 1 January 2023.
  • Local taxes and fees changes enter into force on 1 January 2023. For buildings that include residential and non-residential spaces, the taxes and fees are determined by measuring which of those spaces is larger and applying the tax applicable to that type of space to the value of the entire building. Tax of at least 0.1% (for residential buildings) or at least 0.5% (for non-residential buildings) applies to the value of the building. The previous regulation provided for 0.08% to 0.2% for residential buildings and 0.2% to 1.3% for non-residential buildings, applied to the taxable value of the building.
  • The following VAT changes enter into force on 1 January 2023:
    • The applicable VAT rate in the hotels, restaurants, and catering (HORECA) sector is to be increased from 5% to 9%. Thus, accommodation in the hotel sector or sectors with similar functions, including the rental of land set up for camping, and restaurant and catering services, will be subject to the 9% rate.
    • The application of the reduced VAT rate of 9% is regulated for both chemical and non-chemical fertilisers and pesticides used in the agricultural sector. For deliveries of chemical fertilisers and pesticides, the reduced VAT rate of 9% applies until 31 December 2031 inclusive.
    • The standard VAT rate of 19% will be applied to the supply of alcoholic and non-alcoholic beverages containing added sugar or other sweeteners or flavourings falling under CN codes 2202 10 00 and 2202 99.
    • For firewood deliveries, a reduced VAT rate of 5% applies until 31 December 2029 inclusive.

Specific tax for certain activities

During 2020 and 2021, through the support measures adopted by the government for the HORECA 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: 180 days.

GO no. 16/2022 provides that Law no. 170/2016 regarding the specific tax will be repealed as of 1 January 2023. 

Starting 1 January 2023, Romanian legal entities carrying out activities corresponding to the CAEN codes for HORECA (namely 5510, 5520, 5530, 5590, 5610, 5621, 5629 and 5630) can opt for the payment of micro-company tax (without having to fulfil the above conditions) or for the payment of CIT.

Corporate taxation

GO no. 153/2020 mentions that, during its application period (2021 - 2025), the deadline for submitting returns and paying CIT for the respective tax year is 25 June of the following year, or the twenty-fifth day of the sixth month following the end of the amended tax year. The same date applies to (i) 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 (ii) 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 from January 2022, if the 0.75% turnover limit minus the sponsorship amounts carried forward from previous periods has not been used in full, the taxpayers can redirect that unused value for sponsorships, patronage, and private scholarships within six months as of the date of submission of the annual CIT.

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 31 December 2026.

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).

A reduced rate VAT of 5% is applicable to the supplies of thermal energy to the following categories of users: population; hospitals, public and private schools; NGOs, churches; social services providers (either public of private).

The supplies of firewood, such as tree trunks, logs, brushwood, branches, etc., performed to companies, schools, hospitals, medical offices, and social assistance units are subject to the reduced 5% VAT rate.

The supplies of school books, books, newspapers, and magazines in hardcopies or/and electronic version, with the exception of those that have as a whole or predominantly a video or audio content and those exclusively designed for marketing purposes, are subject to the reduced 5% VAT rate.

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 in Romania that are authorised as AEO or are authorised for entry into the declarant records simplified customs procedure or 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.