In the Official Journal no. 310 from 29 May 2013, it was published the Law no. 168 approving the Government Ordinance no. 8/2013 amending the Fiscal Code. The Law approves the amendments to the Fiscal Code bringing however significant changes. We will further present the most important changes brought by the law:
Foreign legal entities performing economic activities in Romania through several permanent establishments must register one of them as their permanent establishment designated to fulfill the tax obligations for all the other permanent establishments.
If one of the permanent establishment is also a fixed establishment from a VAT perspective, then it will also be the permanent establishment designated for corporate income tax purposes.
The revenues and expenses of all the permanent establishments belonging to the same foreign legal entity will be cumulated at the level of the designated permanent establishment.
The profit tax rate will be applied to the taxable profit at the level of the designated permanent establishment, calculated based on revenues and expenses allocated to each permanent establishment using transfer pricing rules.
Permanent establishments belonging to the same foreign legal entity are required to close their taxable period by 30 June 2013. Profit tax for the period 1 January – 30 June 2013 has to be calculated, paid and declared by 25 July 2013.
Tax losses incurred by 30 June 2013 by permanent establishments of the same foreign legal entity are transferred to the designated permanent establishment and recovered as follows:
- The tax losses incurred during the period 1 January – 30 June 2013 are included in the calculation of the taxable profit / tax loss for the period 1 July – 31 December 2013, before recovering the tax losses carried forward from previous years. The period 1 July – 31 December 2013 is not considered a fiscal year within the meaning of the seven consecutive years;
- The tax losses from years prior to 2013 which are still not covered as at 30 June 2013 will be recovered during the period remaining from the initial five or seven years. The year 2013 is considered a single fiscal year within the meaning of the five or seven consecutive years.
It is canceled the provision according to which the deductibility of daily allowances granted to employees who travel in Romania or abroad is capped at 2.5 times the threshold set for public institutions.
The Law allows for full deductibility of depreciation for the following categories of means of transport (canceling the limitation of tax depreciation of RON 1,500/month for these categories of vehicles): vehicles used exclusively for emergency, protection and courier services, vehicles used by sales and acquisitions agents, vehicles used for paid passenger transport, as well as those rented or granted to third parties under operational leasing contracts.
For taxpayers applying the IFRS accounting regulations, in case of fixed assets used for the exploration and production of oil and gas resources, as well as other natural substances, the undepreciated fiscal value of these assets remaining at the moment of write-off / IFRS restatement will be deducted during the remaining period using the same fiscal depreciation method used before their write-off / IFRS restatement.
New provisions are added to establish the tax exemption level of daily allowances received by employees working for foreign employers during their assignment and detachment to Romania for business purposes. This is established at the same level as for public institutions in the country of residence of the foreign employer which Romanian public servants would receive if seconded to that foreign country.
It is canceled the option of newly incorporated Romanian legal entities to apply the micro-enterprise tax for those entities which, upon registration with the Trade registry, are due to perform banking, insurance, gambling, consultancy and management activities. Also, it is allowed to newly incorporated Romanian legal entities that have an issued share capital of at least EUR 25,000 to apply corporate income tax if they maintain the initial level of their share capital for an indefinite period.
The Fiscal Code provisions were correlated with the existing provisions of the Norms for the application of the Fiscal Code regarding the payments for certian types of services rendered abroad that are subject to taxation in Romania.
Clarifications were also brought regarding the application of the 50% withholding tax rate for income paid in a state with which Romania does not have a legal instrument in place for the exchange of information. Specifically, the 50% rate will apply only in situations where the income is paid as part of an artificial transaction.
The application of the simplification measures for the domestic supply of cereals and industrial crops is extended to 31 May 2014.
The provisions of the Law are applicable starting 1 June 2013, except for those related to permanent establishments, which will enter into force starting 1 July 2013.