The Romanian Fiscal Code was amended twice last month: firstly by Government Emergency Ordinance no. 114/2018, published in Official Gazette no. 1116 as of 29 December 2018, and secondly by Law no. 30/2019 for the approval of Government Emergency Ordinance no. 25/2018, published in Official Gazette no. 44 as of 17 January 2019. In our article we present the most important changes to the Romanian Fiscal Code.
Starting from January 2019, Government Emergency Ordinance no. 114/2018 introduces several amendments to the Romanian Fiscal Code. The most important ones concern construction companies and the treatment of value tickets.
Changes regarding taxation of construction companies
According to the new law, the following fiscal incentives are valid for the period 2019-2028 for employees of construction companies:
- salary tax exemption;
- reduced social contribution from 25% to 21.25% (the published legislation does not explicitly mention the reduction, so a correction can be expected);
- exemption from health contribution – employees are insured for health services without payment of the contribution;
- employers are exempt from paying the social contribution for particular or special working conditions;
- work insurance contribution reduced from 2.25% to 0.3375%.
The conditions to be fulfilled by these employees / employers to apply the incentives are:
- the employers carry out activities in the construction sector which include the construction activity defined by NACE code 41.42.43, section F, Construction and/or production of building materials, defined by the following NACE codes: 2312 – Shaping and processing of flat glass; 2331 – Manufacture of ceramic tiles and flags; 2332 – Manufacture of bricks, tiles and construction products, in baked clay; 2361 – Manufacture of concrete products for construction purposes; 2362 – Manufacture of plaster products for construction purposes; 2363 – Manufacture of ready-mixed concrete; 2364 – Manufacture of mortars; 2369 – Manufacture of other articles of concrete, plaster and cement; 2370 – Cutting, shaping and finishing of stone; 2223 – Manufacture of builders’ ware of plastics; 1623 – Manufacture of other builders‘ carpentry; 2512 – Manufacture of doors and windows of metal; 2511 – Manufacture of metal structures and parts of structures; 0811 – Quarrying of ornamental and building stone, limestone, gypsum, chalk and slate; 0812 – Operation of gravel and sand pits; 711 – Architectural and engineering activities and related technical consultancy;
- the employers generate the turnover from the above activities exceeding the limit of at least 80% of total turnover, calculated cumulatively from the beginning of the year, including the month in which the exemption applies;
- the monthly gross salaries are between RON 3,000 (roughly EUR 630) and RON 30,000 (roughly EUR 6,300) per month inclusive, and are obtained based on the individual labour agreement;
- the exemption is applicable on the basis of further instructions and Declaration 112 represents a declaration on one’s own responsibility to fulfil the above conditions.
Separately, for the period between 1 January and 31 December 2019, the minimum gross monthly salary for construction workers (for the above-mentioned areas of activity) is RON 3,000 (roughly EUR 630), regardless of the positions held by the respective employees (e.g. accountant or secretary), the new legislation making no restrictions in this regard.
Taxation of value tickets
The fiscal treatment of value tickets granted to employees has been unified, so gift tickets, meal tickets, holiday vouchers, nursery vouchers and cultural vouchers are subject to 10% income tax, but they are not included in the calculation of social contributions.
Extended validity for VAT simplification measures
VAT simplification measures can now be applied until 30 June 2022 for certain operations (such as cereal supplies), as the supplier issues the invoice without VAT and the buyer registers the VAT through the reverse charge mechanism.
Contribution of 2% from turnover
Separately from the above amendments to the Romanian Fiscal Code, electrical energy license holders must pay a contribution of 2% from their turnover.
Tax on financial assets
In addition to the fiscal modifications, the banking institutions must pay a tax on their financial assets if the quarterly ROBOR (Romanian inter-banking interest rate) exceeds 2%. The tax on the financial assets will be computed quarterly by applying a rate to the financial assets of the banking institution as follows: a rate of 0.1% if the quarterly ROBOR is between 2% and 2.5%; a rate of 0.2% if the quarterly ROBOR is between 2.5% and 3%; a rate of 0.3% if the quarterly ROBOR is between 3% and 3.5%; a rate of 0.4% if the quarterly ROBOR is between 3.5% and 4%; and a rate of 0.5% if the quarterly ROBOR is above 4%.
Other changes to the Romanian Fiscal Code: Law no. 30/2019
Apart from Government Emergency Ordinance no. 114/2018, Law no. 30/2019 for the approval of Government Emergency Ordinance no. 25/2018 introduced significant amendments to the Romanian Fiscal Code.
Interest deductibility limits
From 1 January 2019, the interest deductibility limits have been increased for corporate income tax purposes. Thus the excess costs of indebtedness (the difference between borrowing costs and interest revenues) are deductible if they are less than the RON equivalent of EUR 1,000,000 (instead of EUR 200,000, the old limit).
The amount exceeding the EUR 1,000,000 ceiling may be deducted up to 30% (instead of 10%) of the following calculation formula: revenues minus expenses minus non-taxable revenues plus profit tax, plus the excess costs of indebtedness, plus tax depreciation.
The non-deductible interest expenses can also be carried forward by companies involved in merger or spin-off processes, or the successors of these companies.
Sponsorship tax credit
From 1 April 2019, corporate income taxpayers or microenterprise taxpayers can only use the sponsorship tax credit for sponsorships of non-profit entities listed in a register of entities for which tax deductions are granted, a register maintained by ANAF (the national tax authority).
This register can only contain non-profit entities who operate in the area for which they have been set up, who have fulfilled their tax declaration obligations, who have no tax obligations past due by more than 90 days, who have filed their annual financial statements and who have not been declared inactive.
New tax on income from virtual currency transfers
From 20 January 2019, the taxation of income earned by individuals from transfers of virtual currencies was regulated by subjecting the profits from these transactions to a 10% income tax rate.
Changes to VAT
From 1 January 2019, where deliveries performed cannot be cashed due to the bankruptcy of the beneficiary or as a result of a reorganisation plan, the VAT base may be adjusted from the date of the court ruling or of the closing judgement regarding the beginning of the bankruptcy procedure.
As of the same date, the VAT rate of 5% can be applied for the delivery of dwellings if several dwellings are acquired by the same individual (so far, the 5% VAT rate was only possible for the first delivery to an individual).
If you would like to know more about the Romanian Fiscal Code or other taxation issues in Romania, please visit the homepage of Ensight, the exclusive representative of WTS Global in Romania.