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. 29 regarding some economic and fiscal-budgetary measures coming into force on 21 March 2020
The deadlines for paying the building tax, land tax, and tax on means of transport, as well as the deadline for granting the bonus with respect to the payment of these local taxes in one tranche, have been postponed from 31 March 2020 to 30 June 2020.
Taxes on corporate income
Taxpayers applying the annual corporate income tax (CIT) filing and payment system, with quarterly advance payments, will be able to make quarterly advance payments for 2020 in an amount resulting from the calculation of the current quarterly CIT (i.e. and not by taking into account the last year's CIT, as initially provided by the law).
A series of fiscal measures regarding state revenue collections have been approved for application to within 30 days as of the end of the state of emergency, as follows:
- For fiscal obligations due after the date of entry into force of this emergency ordinance and not paid within 30 days as of the end of the current COVID-19 state of emergency, interest and late-payment penalties will not be calculated and due, these fiscal obligations not being considered outstanding.
- Measures for enforcing budgetary receivables by means of seizure have been suspended or not implemented, except for enforced executions applied for the recovery of budgetary receivables established by judicial decisions in criminal matters.
Government Emergency Ordinance (GEO) no. 33 regarding some economic and fiscal-budgetary measures coming into force on 30 March 2020
Taxes on corporate income
A reduction (i.e. of 5% for large taxpayers and 10% for the other taxpayers) from the CIT due is granted to taxpayers that pay the CIT due for the first quarter of 2020 by the standard deadline of 25 April 2020. These reductions apply also to the CIT payers with a fiscal year different than the calendar year if they pay the quarterly CIT by the due date between 25 April 2020 and 25 June 2020.
Taxpayers that pay micro-company tax will be granted with a 10% reduction on the micro-company tax due for the first quarter of 2020 if this tax is paid by 25 April 2020.
Government Emergency Ordinance (GEO) no. 48/2020 regarding some financial-fiscal measures coming into force on 16 April 2020
Value-added tax (VAT)
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:
- Where the tax inspection had started prior to the date of entry into force of GEO no. 48/2020.
- 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.
The facility for the special VAT refund procedure carried out with subsequent performance of fiscal inspections established by GEO no. 48/2020 is extended until 31 January 2022, through Government Emergency Ordinance (GEO) no. 19/2021.
Government Emergency Ordinance (GEO) no. 69/2020 regarding several fiscal measures, extension of deadlines, tax facilities granted, and amendment of law items coming into force on 14 May 2020
Value-added tax (VAT)
The companies with the seat of their economic activity in Romania, established under the terms of Companies Law no. 31/1990, will be subject to a risk analysis conducted by the central fiscal body after their registration for VAT purposes.
The applications for registration for VAT purposes, filed and unprocessed until the date of entry into force of GEO 69/2020, will be processed without being subject to the analysis of the criteria for assessing the fiscal risk.
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. 99/2020 on some fiscal measures, amendment of normative acts, and extension of deadlines in force since 25 June 2020
Until 1 October 2020, the following operations with protective masks and medical fans are exempt from VAT with the right to deduct:
- Deliveries made to public institutions responsible for setting up the rescEU reserve. The supplier justifies the VAT exemption through a declaration of own responsibility regarding the destination of the delivered goods, by the time of delivery.
- Intra-Community imports and purchases by public institutions responsible for setting up the rescEU reserve. Exemption from VAT is justified on the basis of the beneficiary’s declaration of own responsibility, to be lodged with the customs authorities at the time of importation.
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.
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.
- 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.
- 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.
- The European Commission has decided that Romania’s VAT split-payment mechanism is contrary to both European Union (EU) VAT law and the principle of the freedom to provide services within the Union. The VAT split payment mechanism, the so-called 'VAT split', was abolished as of 1 February 2020.
- 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 lei-equivalent of 140,000 euros (EUR), excluding VAT. The reduced rate applies only to homes that can be inhabited at the time of sale.
- 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 1st of July 2021.