Romania

Tax measures 

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 Organisation for Economic Co-operation and Development (OECD) secretariat on 6 March 2023 the notification regarding the fulfilment of the necessary internal procedures in order to produce effects by the MLI for the implementation within the double tax treaties (DTTs) of the base erosion and profit shifting (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 (WHT) provisions and beginning with fiscal periods beginning on or after 1 January 2024 for the other tax provisions of the treaties.

DAC7

OUG 16/2022 introduced rules that transposed the provisions of the seventh update to Council Directive 2011/16/EU on administrative cooperation in the field of taxation into law (DAC7). 

DAC7 extends the European Union (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. 

DAC7 also introduces new automatic exchange of information between the EU tax authorities regarding the taxable events and income generated through these platforms. 

Furthermore, DAC7 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.

Public country-by-country (CbC) reporting

Order 2048/2022 requires qualifying Romanian-based multinational enterprises (MNEs) and MNEs 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 3.7 billion Romanian leu (RON) in each of the last two consecutive financial years.

The public CbC report 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.

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 from 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. 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, was 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, were 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

RO e-Transport

RO e-Transport obligations have been initially implemented as of 1 July 2022 and are mandatory for certain categories classified by the authorities as high fiscal risk goods (e.g. fruits and vegetables, alcoholic/non-alcoholic beverages, etc.) which are transported on Romanian territory.

Moreover, as of 15 December 2023, RO e-Transport obligations were extended also to international road transport.

Thus, the identification of transports and the generation of the unique UIT codes in the RO e-Transport system is mandatory both for road transports on the national territory of goods with high fiscal risk and for international road transports of goods.

The obligation to report in the RO e-Transport system the data related to the international transport of goods and to obtain the UIT codes is with the following users:

1. a) the recipient listed in the import customs declaration or the sender listed in the export customs declaration for goods that are the subject of the import or export operations, as the cases may be;
2. b) the beneficiary in Romania, in cases of intra-Community purchases of goods;
3. c) the supplier in Romania, for the intra-community supplies of goods;
4. d) the depositary, in cases of goods that are subject to transit intra-community transactions, both for goods unloaded on Romanian territory for storage purposes or for the arrangement of a new shipment from one or more consignments of goods, as well as for goods loaded after storage or after the arrangement of a new transport on the national territory for one or more batches of goods.

The road transport operator is obliged to equip the transport vehicle with telecommunication terminal devices. The driver of the means of transport is obliged to switch on the positioning device before starting a transport on the national territory and to keep it in operation until it arrives at the declared place of delivery on the national territory or after leaving the national territory.

Sanctions for non-compliance with the high fiscal risk goods apply as of 1 January 2023, while the sanctions for the new measures introduced with respect to international road transport will apply as of 1 July 2024.

RO e-Seal 

A new national system, RO e-Seal, was introduced based on the use of electronic devices and an IT application that allows the relevant authorities (such as the National Fiscal Administration Agency and the Romanian Customs Authority) to determine the potential points of diversion for the road transport of goods regardless of whether they are in transit or have as their final destination an economic operator on the national territory. 

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 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. 88/2023 for changing and amending the Fiscal Code has provided new exemptions for VAT in the medical field.

The provisions entered into force within 60 days as of the date of publication of the law in the Official Gazette.

According to Law no. 88/2023, the following activities are exempt from VAT with the right of deduction:

• Construction, rehabilitation, and modernisation services for hospital units in the state public network, as well as construction, rehabilitation, and modernisation services for hospital units provided to non-profit entities if they are intended for hospital units owned and operated by the non-profit entity or those in the state public network.
• Supplies of medical equipment, apparatus, devices, articles, accessories and protective equipment, materials and consumables for medical purposes normally intended for use in the healthcare field or by disabled persons, essential goods for assisting with and overcoming disabilities, as well as the adaptation, repair, rental, and leasing of such goods, to hospital units in the state public network and to non-profit entities if they are intended for hospital units owned and operated by the non-profit entity or those in the state public network.

The VAT exemption for the above supplies of goods and services applies as follows:

• Directly, by invoicing without VAT by goods/service providers if the beneficiary is a hospital unit in the state public network or a central or local public institution/authority that finances that network, according to the law.
• By refunding the VAT related to the purchases of goods or services made by non-profit entities, according to a procedure established by order of the Minister of Public Finance.

The following supplies of goods to which the reduced VAT rate of 9% was previously applied will also be exempt from VAT with the right of deduction:

• The delivery of prostheses and their accessories, apart from dental prostheses exempt from tax according to art. 292 para. (1) lit. b) from the Fiscal Code.
• Delivery of orthopaedic products.

The order of the Minister of Finance and the methodological rules regarding the application of exemptions will be issued within 60 days as of the publication of Law no. 88/2023 in the Official Gazette.

Law no. 216/2023: Reduced VAT rates in the wood industry and the energy industry

Law no. 216/2023 regarding the reduced rate of 5% VAT for supplies of wood in various forms and for heat pumps introduced a series of changes regarding the application of reduced VAT rates in the wood industry and the energy industry.

Reduced VAT rates in the wood industry

Law no. 216/2023 extended the application of the reduced VAT rate of 5% for the supply of sawdust, waste, and agglomerated wood scraps in the form of wood pellets, wood briquettes, or similar forms, classified under CN codes 4401 31 00 and 4401 32 00, and for the supply for use as heating fuel of sawdust, waste, and non-agglomerated wood scraps, classified under CN codes 4401 41 00 and 4401 49 00. 

The reduced rate will be applied to supplies performed towards individuals, legal persons, and other entities, regardless of the legal form of organisation, based on a statement of own responsibility made available to the supplier, certifying their quality as end users.

Reduced VAT rates in the energy industry

It has been clarified that the reduced VAT rate of 5% for the supply and installation of photovoltaic panels intended for homes and buildings of the central or local public administration and the buildings of the entities under their control (except for commercial companies) applies to all components required to be purchased separately for this purpose. The reduced rate of VAT also applies to heat pumps.

A new provision has been introduced that extends the applicability of the reduced 5% VAT rate to cover:

• the supply and/or installation of components to repair and/or expand these systems, and
• the supply of systems as a component part of construction supplies, as well as for the supply and installation of systems as extra options in such supplies, to the recipients mentioned above.

To benefit from the above reduced VAT rates, legal entity buyers are required to sign a statement of own responsibility, as per annex no. 1 to Law no. 216/2023.

Corporate taxation

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: hospitals, public and private schools, NGOs, churches, and social services providers (either public or private).

The supplies of firewood, such as tree trunks, logs, brushwood, branches, as well as sawdust, wood waste, and agglomerated wood scraps in the form of wood pellets, wood briquettes, or similar forms, performed to individuals, to companies, schools, hospitals, medical offices, and social assistance units are subject to the reduced 5% VAT rate based on a declaration on own responsibility issued by the final consumers towards the suppliers.

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 from 16 January 2023, a reduced VAT rate of 5% is applicable for the supply and installation of photovoltaic panels, solar thermal panels, heat pumps, and low-emission heating systems, including for installation kits, components, respectively complete solutions intended for homes, central and local administration buildings, and 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 RON 1,000 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 for entry into the declarant records simplified customs procedure or
• declares the goods by using the centralized clearance simplified customs procedure or  
• that have a certificate for deferral of VAT payment and cumulatively meet the following conditions:
  • 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 harmonized 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.