Entry into effect of the Multilateral Instrument (MLI)
In accordance with the reservation made by Romania based on art. 35 (7) of the MLI, Romania submitted to the OECD secretariat on March 6, 2023 the notification regarding the fulfillment of the necessary internal procedures in order to produce effects by the MLI for the implementation within the Double tax treaties of the BEPS measures currently with 51 out of 89 treaty partners.
Therefore, the MLI will start to produce effects for transactions that will take place on or after 1 January 2024 for the withholding tax provisions and beginning with fiscal periods beginning on or after 1 January 2024, for the other tax provisions of the treaties.
OUG 16/2022 introduced rules which transposed the provisions of the seventh update to Council Directive 2011/16/EU on administrative cooperation in the field of taxation into Maltese law (“DAC 7”).
DAC 7 extends the EU tax transparency rules to digital “platforms” and introduces an obligation on “reporting platform operators” to collect, verify and report specific information with respect to “reportable sellers” that have undertaken “relevant activities” through their platforms.
DAC 7 also introduces new automatic exchange of information between the EU tax authorities regarding the taxable events and income generated through these platforms.
Furthermore, DAC 7 includes a legal framework to enable joint audits. In a joint audit, two or more countries join to form a single audit team to conduct a taxpayer examination. Joint audits should result in quicker issue resolution, more streamlined fact finding and more effective compliance.
Order 2048/2022 requires qualifying Romanian-based multinational enterprises and multinational enterprises with subsidiaries or branches in Romania, irrespective of whether these are EU or non-EU headquartered groups, to publicly disclose certain information on a country-by-country basis. The threshold of the annual consolidated revenue is RON 3.7 billion (equivalent of EUR 747.474,740) in each of the last two consecutive financial years.
The Public CbCR is effective starting 1 January 2023 and applies to financial years beginning on or after 1 January 2023 (which is earlier than the 22 June 2024 deadline set by the EU Directive). Following these amendments, Romania became the first EU Member State to officially introduce public CbC reporting obligations, with a deadline for the CbC preparation and public disclosure significantly earlier than that set by the EU Directive.
Changes of the Romanian Fiscal Procedure Code
GEO no. 20/2023 for amending and completing the Tax Procedure Code
The Government of Romania has adopted Emergency Ordinance no. 20/2023 (GEO no. 20/2023) amending and supplementing the rules for staggered payment of tax obligations in classic form, as well as those for staggered payment in simplified form regulated in Title VII of the Fiscal Procedure Code. The changes are correlated with the legal provisions regarding the procedure for maintaining or changing the restructuring of budget obligations regulated by Government Ordinance no. 6/2019.
- Fiscal/budgetary obligations to be recovered representing state aid or de minimis granted from state sources or resources or those managed by the state and excise duties provided for in Title VIII of the Fiscal Code are excluded from the scope of staggered payment;
- Debtors who do not own property to use as guarantees in the amount provided for in art. 193 alin. (13)−(15) of the Fiscal Procedure Code and cannot constitute any kind of guarantee, or when the amount of the established guarantees is less than 50% of the amount of the outstanding tax obligations that are the subject to the payment facilities. However, if they meet all the other conditions for granting the deferral, they can request a deferral and present substantiating information regarding a temporary lack of cash availability and the financial capacity to pay during the period of deferred payment. The late-payment penalties contained in the tax attestation certificate are not deferred for payment and are included in the installments;
- The request for scheduling may be accompanied by a proposed schedule for payment.
- The late-payment penalties in the tax attestation certificate are not deferred for payment and are included in the installment if the debtor provides guarantees of value greater than 50% of the amount of the outstanding tax obligations that are the subject to the payment facilities but insufficient compared to the guarantee amount provided for in art. 193 para. (13)-(15) of the Fiscal Procedure Code and the deferral was granted for a maximum period of five years;
- The ceilings of staggered tax obligations for payment, up to which there is no obligation to establish guarantees, have been eliminated;
- The conditions for maintaining the validity of payment installments have been supplemented with a new condition, namely the payment of excise duties not extinguished on the date of communication of the payment installment decision and which are not subject to payment installments, within no more than 30 days as of the date of communication of this decision due to them being excluded from the scope of granting the payment schedule;
- The number of allowed requests to change the payment schedule has been reduced from two requests to just one;
- The debtor can submit requests to change the schedule whenever necessary for the fiscal obligations established in fiscal administrative acts that have been suspended and for which the suspension of the execution of the fiscal administrative act ended after the date of communication of the decision to schedule payment. Requests can also be submitted for fiscal obligations established by other authorities whose administration was transferred to ANAF after the issuance of a decision to stagger payments, except situations where the debtor requested staggered payment of those amounts;
- The debtor will have the opportunity to request, only once in a calendar year or part of a calendar year, the maintenance of a schedule which is no longer valid if the request is approved by ANAF before the execution of the guarantee or before the extinguishment of all fiscal obligations subject to payment installments;
- Simplified form tax obligations representing excise duties, taxes and mandatory social contributions, through withholding or withholding at source, as defined by the Fiscal Code, and taxes related to activities in the field of gambling do not fall within the scope of deferred payment.
- The conditions for maintaining payment installments have been supplemented, in a simplified form, with two other conditions:
- the payment of excise duties and taxes related to activities in the field of gambling not extinguished on the date of communication of the decision to defer payment and which are not subject to payment deferral, within no more than 30 days as of the date of notification of this decision, because they were excluded from the scope of granting payment installments in a simplified form;
- payment of taxes and mandatory social contributions with withholding at source or withheld at source, not extinguished on the date of communication of the decision to defer payment and which are not subject to payment deferment, within no more than 60 days as of the date of notification of this decision, because they were excluded from the scope of granting payment installments in a simplified form;
- The interest due in the case of deferred payment, in simplified form, has been increased from 0.01% to 0.02% for each day of delay;
- The possibility of concurrent granting of both installment payment (classic) and installment payment in simplified form has been removed;
- These changes apply both to applications for staggered payment and to modify or maintain staggered payment submitted after the entry into force of GEO no. 20/2023;
- Debtors who have submitted a single application for modification or maintenance of the staggered payment, approved by ANAF, in the period between 1 January 2023 and the date of entry into force of GEO no. 20/2023, for the remaining period of 2023, can submit only one request to change or maintain the staggered payment;
- If the debtor submits the first request for modification or maintenance after the date of entry into force of GEO no. 20/2023, for the remaining period of the year 2023, they can only benefit from this modification or maintenance of the staggered payment;
- In the case of payment schedules that are ongoing or that have lost their validity as at the date of entry into force of GEO no. 20/2023, requests to modify or maintain the payment schedule that are unresolved at this date are resolved according to this ordinance. Thus, the debtor will be able to submit a single request to modify or maintain the payment schedule during 2023;
- In the case of the payment facilities granted in the procedure for the restructuring of budgetary obligations which are ongoing or which have lost their validity as at the date of entry into force of GEO no. 20/2023, the changes brought by it also apply to debtors who submit requests for modification/maintenance of the payment facility after this date;
- For debtors who submitted/submit requests to change/maintain the payment facility during 2023, the previously mentioned changes are applied as follows:
- if the debtor has submitted a single application for modification/maintenance of the payment facility, approved by the fiscal body, in the period between 1 January 2023 and the date of entry into force of GEO no. 20/2023, for the remaining period of 2023, can submit only one more request to modify/maintain the payment facility;
- in the event that the debtor has submitted two applications for modification/maintenance of payment scheduling, approved by the fiscal body, in the period between 1 January 2023 and the date of entry into force of GEO no. 20/2023, for the remaining period of 2023, they can no longer benefit from a new modification/maintenance of the staggered payment;
- if the debtor submits the first request for modification/maintenance after the date of entry into force of GEO no. 20/2023, for the remaining period of 2023, they can only benefit from this modification/maintenance of the payment facility.
- In the case of the payment facilities granted in the restructuring procedure of ongoing budgetary obligations or which have lost their validity as at the date of entry into force of GEO no. 20/2023, requests for modification/maintenance of payment facilities that are unresolved at this date are resolved according to the legislation in force on the date of submission of the request. In this case, after the approval of the request for modification/maintenance, the debtor can no longer submit a new request for modification/maintenance of the payment facility during 2023.
The most important changes brought by OG no. 16/2023 to the Fiscal Procedure Code:
- The Ordinance transposes reporting rules introduced by Council Directive (EU) 2021/514 amending Directive 2011/16/EU (DAC7)
- Platform operators in Member States and third countries are required to collect information on reportable sellers (e.g. name, address, VAT code, VAT number, if the seller has a permanent establishment) and report it to the tax authorities on an annual basis.
- Platform operators with DAC7 reporting obligations must register with the competent authority in Romania or any other member state to comply with the fiscal due diligence and reporting procedures.
- “Platform” is defined as a website or part of a website and applications, including mobile applications, that allow sellers to connect with other users to carry out a relevant activity.
- “Relevant activity” means an activity carried out in exchange for consideration and consists of any of the following:
- Rental of real estate, including residential and commercial, as well as any other real estate and parking spaces;
- Provision of services;
- Sale of goods;
- Renting means of transport. ·
- “Platform operator” means a company that makes all or part of the platform available to sellers under contracts.
- Reporting platform operator means any platform operator that:
- has its tax residence, place of incorporation, place of effective management or a permanent establishment in the EU, or
o facilitates the carrying out of a relevant activity that is not reported in a jurisdiction that has implemented rules equivalent to DAC7 and that exchanges information with the EU. ·
- No information is reported for the following types of sellers:
- Government entities or entities whose shares are regularly traded on a regulated market.
- Entities for which the platform operator facilitated more than 2,000 rentals during the year (e.g. hotel chains).
- Entities for which the platform operator facilitated fewer than 30 sales of goods and for which the total value did not exceed the equivalent in RON of EUR 2,000 during the year (e.g. occasional sellers).
- A platform operator with reporting obligation has to complete the fiscal due diligence procedure by 31 December of the period reporting. The procedure includes identification of sellers subject to examination, collection and verification of information (including leased real estate), determination of tax residency of sellers. For reportable sellers already registered on the platform on 1 January 2023, the tax due diligence procedure must be completed by 31 December of the second reporting period.
- The annual reporting obligation applies for digital platform operators starting with the activity in 2023, and the first reporting deadline is 31 January 2024.
- For non-compliance with DAC7 obligations, platform operators may face a fine of RON 5,000 to RON 100,000. The tax authorities can also order providers of electronic communications networks or services to cease providing access to the website or application of platform operators with reporting obligations.
- The Ordinance modifies the amicable procedure
- The amicable procedure regarding the elimination of double taxation in relation to the adjustment of profits has been amended. When they consider that the taxation does not comply with the provisions of the convention or the agreement to avoid double taxation concluded by Romania with another state, taxpayers can address the competent authority of any of the contracting states to file an objection. If this course of action is not provided for by convention or agreement, a taxpayer resident in Romania can request that the National Tax Administration Agency (ANAF) initiate the amicable procedure if that taxpayer considers that the measures taken by one or both contracting states result in taxation that does not comply with the provisions of the respective convention or agreement.
- If the provisions of the convention or the agreement to avoid double taxation concluded by Romania with another state do not establish the possibility to address the competent authority of any of the contracting states and ANAF considers that the taxpayer’s objection cannot be admitted or is unjustified, ANAF notifies the competent authority of the state with which Romania has concluded a convention or an agreement to avoid double taxation regarding this fact or implements a bilateral consultation process that allows the competent authority of the other state to present its views on the subject of the amicable procedure.
- The above rules apply to applications submitted as of the date from which the provisions of the Multilateral Convention for the Implementation of Measures Related to the Prevention of Erosion of the Taxable Base and the Transfer of Profits, opened for signature and signed by Romania in Paris on 7 June, are applicable within the tax treaties 2017, ratified by Law no. 5/2022, or after that date for conventions or agreements to avoid double taxation concluded by Romania with other states which provide for the possibility that a taxpayer can present its case to the competent authority of any of the contracting states. Requests for the initiation of the amicable procedure submitted before the date of entry into force of the ordinance are resolved in accordance with the provisions in force on the date of submission of the request for the initiation of the amicable procedure.
- ANAF also carries out the amicable procedure if the competent authority of the state with which Romania has concluded a convention or an agreement to avoid double taxation requests it.
- The manner of conducting the amicable procedure will be approved by order of the president of ANAF.
3 i) The Ordinance introduces changes regarding financial institutions’ reporting obligations
- It has been established that ANAF can carry out checks and inspections to verify reporting financial institutions’ compliance with the reporting and fiscal due diligence procedures provided for in annexes nos. 1 and 2 and the compliance procedures provided in annex no. 1 to the FATCA Agreement, as well as to monitor the reporting financial institutions if undocumented accounts are reported. The administrative and implementation procedures of these provisions are to be approved by order of the ANAF president.
- Financial institutions with this reporting obligation have 45 days as of the ANAF request, within the retention period, to provide the information and documents relating to the measures and evidence on which they relied for the application of fiscal due diligence procedures and of reporting, of special fiscal due diligence procedures, as well as of additional reporting and fiscal due diligence procedures for the exchange of information related to financial accounts and for compliance with the rules provided by the FATCA Agreement.
- The regime of contraventions and sanctions for non-fulfilment or improper or timely fulfillment of reporting obligations has also been amended. These changes are to apply as of 2 March 2023;
- o Non-reporting is regulated separately and sanctioned with a fine of between RON 20,000 and RON 100,000. This fine is also applied for the failure to fulfill the obligations to keep all the records obtained by applying the fiscal due diligence and reporting procedures, the special fiscal due diligence procedures, the additional reporting and fiscal due diligence procedures for the exchange of information and any evidence upon which they were based, including records obtained under the FATCA Agreement, and the obligation to provide at ANAF request the information and documents related to the previously mentioned measures and evidence.
- o Late reporting and incorrect or incomplete reporting is sanctioned with a fine of between RON 2,000 and RON 5,000 for each account that is the subject of reporting. Reporting financial institutions’ failure to apply the fiscal due diligence procedures, reporting procedures, special fiscal due diligence procedures, the additional reporting and fiscal due diligence procedures or the compliance procedures provided for by the FATCA Agreement is sanctioned with a fine of RON 5,000 to RON 10,000 for each account that is the subject of reporting.
ii) The Ordinance introduces changes regarding the exchange of information
- New definitions have been introduced:
- o Joint control represents an administrative investigation carried out by ANAF jointly with one or more competent authorities from other member states and related to one or more persons of interest to ANAF or for the competent authorities of the respective member states.
- o Breach of data security is one that leads to the disclosure or inappropriate use of data, including, but not limited to, personal data transmitted, stored or otherwise processed, as a result of illegal or negligent acts. It may also concern data confidentiality, availability and integrity.
- The standard of “foreseeable relevance” has been introduced into the framework for the exchange of information on request. This relates to the exchange of tax information according to which the tax authority of a member state addresses a request for information to another member state’s tax authority. The requestor has to specify the fiscal purpose for which the information is requested and what information is needed to apply the provisions on fees and taxes.
- The scope of the automatic exchange of information has been widened to include royalties in the specific categories of income and capital that can be subject to reporting. - ANAF will make annual statistics on the volume of automatic exchanges of information available to the European Commission.
GEO no. 188/2022 for amending and completing the Tax Procedure Code
GEO 188/2022 modified and completed the rules for carrying out tax inspections, those for communication between ANAF and taxpayers/payers and those related to the voluntary compliance of taxpayers. The most important amendments performed to the Fiscal Procedure Code by GEO no. 188/2022 are:
- Risk analysis procedure: The risk analysis is carried out periodically, and the tax authorities establish the tax risk class/subclass of the taxpayer. The fiscal risk class/subclass is communicated to the taxpayer, at his request, by any means of communication, except when restricting access to this information is justified. Within the general criteria for establishing the degree of risk, economic criteria will also be taken into account. The deadline for the implementation of the IT application for risk analysis is 31 December 2025, and the assignment of taxpayers to risk classes/subclasses will be possible after this date, so with applicability from 1 January 2026;
- The tax authorities have the obligation to prioritize the information and documents already available regarding the taxpayer's activity (for example, SAF-T, RO-eTransport, Ro-eInvoice, financial statements). The request for additional documents/information will be addressed in writing and will only concern that information that is not held by the tax authority. It must specify the nature of the information required to determine the fiscal status and the supporting documents.
- The central tax authorities are obliged to submit to the local tax authorities information regarding the sources of income of individual persons. The local tax authorities and the central tax authorities conclude the protocol named ”Protocol of accession to the services of the PatrimVen IT system”, which is transmitted through the own IT system of the Ministry of Finance/ANAF;
- The selection of taxpayers/payers for the tax audit action is carried out at the level of the ANAF central apparatus, depending on the level of risk established on the basis of the risk analysis. By way of exception, taxpayers/payers may be randomly selected for tax audit in a calendar year, and the percentage may not exceed 10% of the total of taxpayers/payers selected for tax audit in that year. The procedure will be established by order of the ANAF president (enters into force on 1 January 2026);
- The compliance notice issued by the central tax authorities in the case of tax audit of taxpayers/presumptive payers to be selected for tax audit was introduced. The tax inspection team sends them, in writing, the notification of compliance with regard to the tax risks identified for the purpose of their reanalysis of the tax situation and the submission or correction of tax returns;
- The taxpayer/payer is informed that within 30 days from the date of communication of the notification, he has the possibility to submit or correct the tax returns. Until this term expires, the tax authorities do not take any action in order to be selected for the tax inspection. Even if he submits or corrects the tax returns, the taxpayer/payer can be selected for the tax inspection, but only after the deadline. The model of the compliance notification, the periodicity of issuing notifications and the notification procedure will be approved by order of the ANAF president;
- Anti-tax fraud control teams carry out operative control activities, without prior information of the taxpayer. Anti-fraud control can be exercised without the existence of a risk analysis in the following situations: (i) when violations of tax legislation are found that require immediate intervention; (ii) when specific control actions are carried out, in order to prevent and combat fraud and/or tax evasion. During the anti-fraud control, the taxpayer has the right to benefit from specialized assistance, to be informed during the control on the findings made, to be affected as little as possible during the control, to receive written proof in case of detention of some documents;
- Verification of the personal tax situation of individual persons: The central tax authorities carry out the following preliminary activities: (i) risk analysis in order to establish the risk related to natural persons of non-compliance with the declaration of taxable income. The risk represents the significant difference between the income estimated in the risk analysis and the income declared by the natural person and/or by the payers for the same taxable period. Significant difference means greater than 10% of the declared income, but not less than 50,000 lei; (ii) the notification, in writing, of the individual persons identified with fiscal risk, before the selection for the verification of the personal fiscal situation, that they have the possibility to reanalyze the personal fiscal situation and to submit or correct the fiscal declarations within 30 days ; (iii) the selection of individual persons to be subjected to the verification of the personal fiscal situation, depending on the established risk level. The level of risk is determined based on the risk analysis;
- Documentary verification is carried out within the limitation period for the right to establish tax claims. One or more operations carried out in a certain period within one or more taxable periods can be subject to verification. If the tax authority finds differences with respect to the tax receivables, income or taxable assets and/or information related to them declared by the taxpayer/payer, it shall notify the taxpayer/payer of the findings. Along with the notification, the tax authorities request the documents and written explanations that the taxpayer/payer must present in order to clarify the fiscal situation, within 30 days from the communication of the notification. The deadline can be extended at the request of the taxpayer/payer, for well-justified reasons. The imposition decision is issued within no more than 25 working days from the date of the person's hearing. The decision issued without hearing the person is null and void, unless the taxpayer/payer notifies the tax authority that he waives the hearing.
GO 31/2022 for amending and completing the Tax Procedure Code
By Government Ordinance no. 31/2022 for the amendment and completion of the Fiscal Procedure Code, published in the Official Gazette no. 857 of 31 August 2022, a series of tax procedure changes were made, which entered into force starting on 3 September 2022, such as:
- The tax administrative act issued in electronic form is communicated by electronic means of remote transmission and it is considered communicated on the date of making it available to the taxpayer/payer, and not within 15 days of this date, as it was until now;
- The subject of the application for the issuance of an anticipated individual fiscal solution (SFIA) is limited to a single actual future fiscal situation and a single main fiscal obligation. If the payer wishes, he can submit several applications, but this will mean paying the fee for each application that will contain only one tax statement and one main tax liability (3000 euros for small and medium taxpayers and 5000 euros for large taxpayers and non-resident companies).
- Also, it clarified the role of a preliminary discussion to the submission of the SFIA application, in order to understand some general aspects related to the taxpayer/payer's preparation of an application for the issuance of an SFIA. The reserve for subsequent verification is canceled as a result of the tax audit or the verification of the personal fiscal situation only if they are completed with an tax audit report/verification report and the issuance of decisions;
- Analysis of the results of the anti-fraud control: The point of view of the taxpayer/payer drawn up as a result of such control is to be analyzed at the level of the General Tax Anti-Fraud Directorate and to the extent that this analysis shows that it is necessary to redo the control and/or the minutes /control act, as the case may be, the head of the structure orders the necessary measures according to the findings. Both the point of view of the taxpayer/payer and his analysis will be taken into account by the competent authorities;
- Publication of the lists of taxpayers who have no outstanding obligations: The central tax authorities, as well as the local ones, will be obliged to publish on their own website the list of taxpayers, legal entities that have declared and paid their tax payment obligations when due and who have no outstanding obligations . The list is published quarterly until the last day of the first month of the quarter following the reporting quarter;
- A new situation in which the prescription can be suspended: ”for the period between the date of the death of the individual person on which a tax audit action/verification of the personal tax situation was underway and the date the tax authorities became aware that there are or are not successors, as the case may be".
OUG 102/2022 for amending and completing the Fiscal Procedure Code
The main aspects recently regulated and with a major impact for reporting financial institutions in Romania are the following:
- The obligation of the reporting entity to keep in electronic and/or physical format all supporting records/documents obtained in the framework of fiscal due diligence procedures, as well as any evidence relied on in order to comply with the FATCA/CRS regulations for a period is introduced for ten years from the annual reporting deadline;
- The requirements regarding the fiscal due diligence procedures to be followed by the reporting financial institutions regarding each category of account holders are updated. In this sense, GEO 102/2022 introduces new obligations at the level of reportable financial institutions and brings practical clarifications on already existing obligations;
- Significant fines are introduced for financial institutions in case of non-compliance with FATCA/CRS obligations - these can reach considerable amounts as most of them are applicable for each reportable account, as follows:
- A fine from 2,000 lei to 5,000 lei for each account that is the subject of reporting in case of non-reporting, late reporting or incorrect or incomplete reporting by financial institutions reporting FATCA/CRS information;
- a fine from 5,000 lei to 10,000 lei for each account subject to reporting in case of non-application by the reporting financial institutions of the fiscal due diligence and reporting procedures, of the special fiscal due diligence procedures, as well as of the additional reporting and fiscal due diligence procedures in the matter of FATCA/CRS and compliance procedures;
- A fine from 20,000 lei to 100,000 lei in case of non-compliance with the reporting financial institution's obligation to keep all records obtained by applying fiscal due diligence and reporting procedures for a period of 10 years;
- A fine from 5,000 lei to 10,000 lei for each account that is the subject of reporting in case of failure to provide information and documents related to measures and evidence at the request of ANAF.
- By derogation from the provisions of art. 13 paragraph (1) from GO no. 2/2001 regarding the legal regime of contraventions (the application of the contravention penalties is prescribed within 6 months from the date of commission of the act) the application of the sanction of the fine for the contraventions provided for in Title VI of the Fiscal Procedure Code is prescribed within 5 years from the date of commission the fact.
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 was 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 applies 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 (except tax consultancy) 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 has increased from 5% to 8% on dividends distributed after 1 January 2023.
- Local taxes and fees changes enter into force on 1 January 2025. 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.
Law no. 301/2022 - clarification brought to the notion of “habitable” housing at the time of delivery for the application of the 5% VAT rate
Law no. 301/2022 clarifies the definition of “habitable” housing at the time of delivery as used in the content of art. 291 within the Romanian Fiscal Code.
The normative act clarifies the conditions for the application of the reduced VAT rate that homes must meet on the date of delivery, namely:
- Their holders have free individual access to the living space, without disturbing the possession and exclusive use of the space owned by another person or family.
- Access is available to electricity and potable water as well as the controlled disposal of wastewater and household waste.
- The property must consist of at least a space for rest, a space for food preparation and a sanitary group, regardless of the existing facilities and the degree of finishing on the date of delivery.
The clarifications are intended to avoid abusive interpretations of the notion of “habitable” dwellings, which was not explicitly defined initially in the Fiscal Code.
GEO no. 168/2022 on some fiscal-budgetary measures, the extension of some deadlines, and changes and additions to some normative acts
Government Emergency Ordinance no. 168/2022 (GEO no. 168/2022) introduced changes and additions to the Fiscal Code, the Labour Code, Law no. 263/2010 regarding the unitary system of public pensions, Government Ordinance no. 11/2022 and other normative acts.
- Fiscal Code
Value added tax
The deadline for suspending the submission of informative declarations 392A, 392B and 393, which were introduced in the context of the need to calculate the VAT base for the European Union budget, has been extended to 31 December 2023. The measure was due to expire on 31 December 2022.
The mechanism for the centralized purchase of electricity will be established as of 1 January 2023. Through it, a single purchaser is designated to buy electricity from certain producers and sell that electricity at a single regulated price to electricity suppliers with contracts with end customers, electricity system transport operators and electricity distribution operators. A taxable person with the capacity of a sole purchaser within this mechanism is not currently the same as a taxable person trader for the purpose of applying the reverse charge mechanism.
For this reason, as of 1 January 2023, the scope of the VAT simplification measure provided for in art. 331 para. (2) lit. e) of the Fiscal Code includes the trader as a taxable person with the capacity of sole purchaser within the mechanism for the centralized purchase of electricity.
Law no. 39/2023 regarding the application of the 5% VAT rate for the supplies an installation of photovoltaic panels, solar thermal panels
As of 16th January 2023, the reduced VAT rate of 5% became applicable to the supply and installation of photovoltaic panels, solar thermal panels, low-emission heating systems that fall within the reference values established in Annex V to Regulation (EU) 2015/ 1,189, including for installation kits, components, respectively complete solutions intended for homes, central and local administration buildings, buildings of entities under their coordination/subordination, with the exception of commercial companies.
GO no. 153/2020 mentions that, during its application period (2021 - 2025), the deadline for submitting returns and paying CIT applicable for taxpayers applying the OMF 1802/2014 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 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 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.
Starting with 16th January 2023 a reduced VAT rate of 5% is applicable for the supply and installation of photovoltaic panels, solar thermal panels and low-emission heating systems, including for installation kits, components, respectively complete solutions intended for homes, central and local administration buildings, buildings of entities under their coordination/subordination, with the exception of commercial companies.
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.