A number of changes to the Romanian Fiscal Code and corresponding Methodological Norms for its application became effective starting with 1 January 2011.
The special fiscal regime applicable to micro-enterprises was reintroduced so that such enterprises now can choose to pay a 16% tax on profits or a 3% tax on revenue. The option may be exercised by 31 January of the following fiscal year by an enterprise, provided it meets the requirements to qualify as a micro-enterprise and it has not previously been subject to such regime. To qualify as a micro-enterprise, a company should have up to nine employees, its revenues for the previous year should not exceed EUR 100,000 and it must be privately owned. Companies engaged in banking, gambling and management consulting activities continue to pay tax at the standard 16% rate.
2010 tax year.
As a result of the minimum tax being abolished as from 1 October 2010 and dividing the year 2010 in two fiscal periods, new rules have been introduced for losses recorded in 2010. Tax losses recorded in the periods January-September 2010 and October-December 2010 may be carried forward for seven consecutive years, while the period October-December 2010 is actually considered a separate fiscal year in the meaning of seven consecutive years.
2010 CIT return.
In computing the corporate income tax/loss for the year 2010, and taking into account the abolition of the minimum tax as of 1 October 2010:
- Only taxpayers that owed minimum tax for 2010 should prepare and file two tax returns for 2010.
- When determining the fiscal result for each period (January-September 2010 and October-December 2010), expenses that are subject to limited deductibility should be computed with reference to the corresponding base determined for each period. The deductible legal reserve should be determined for each period separately.
- Tax losses recorded before 2010 and carried forward can be offset against profits of the following years, by considering 2010 as a single fiscal year. However, losses incurred in the period January-September 2010 can be carried forward and offset against profits in the following years, the period October-December 2010 being considered the first year in this respect.
A new provision is introduced with details on how a Romanian taxpayer (that carries out business activities through a PE in another country) can benefit from the “exemption method” under an applicable tax treaty concluded between Romania and the other state. Under the exemption method, the profits obtained by the PE abroad are exempt from tax in Romania, under the availability of a justifying document obtained from the relevant tax authorities and attesting the payment of the tax abroad. For applying such method, the income and expenses derived by the PE abroad are considered as non-taxable/non-deductible for profit tax purposes at the level of the Romanian taxpayer.
Dividend tax paid to the state budget with respect to dividends distributed but not effectively paid until the end of the year can be refunded if the recipient entity satisfies all the conditions provided by the Fiscal Code (eg regarding the participation percentage and holding period) at the time the net dividend is paid.
Withholding tax changes.
As from 1 January 2011, dividends paid to a legal person resident in an EU or EFTA member state are subject to a general tax rate of 16% (previously 10%), unless the rate is reduced under an EU Directive or the applicable tax treaty.
Changes to transfer pricing rules.
An internal circular issued by the National Agency for Fiscal Administration provides information on unscheduled tax audits on related party transactions in companies that reported losses during fiscal years 2008 and 2009. The tax authorities will examine whether the companies have carried out any intercompany transactions during the relevant period, and if so, will analyze the types and values of such transactions. If the company is found to be engaging in significant transactions with affiliated entities, the tax authorities will initiate partial or general tax audits in which they will request the submission of transfer pricing documentation.
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