Law 30/2019 approves Government Emergency Ordinance (GEO) 25/2018, with some amendments, introducing changes in the Tax Code and the Tax Procedure Code applicable starting from 2019.
Thus, from January 2019, businesses will be able to deduct finance costs within the limit of EUR 1 million plus 30% of EBIDTA, and the excess costs of debt are carried over even for companies that reorganize by merger or division. In line with the position of the Court of Justice of the European Union, VAT may be adjusted in the event of the beneficiary's bankruptcy. The purchase of several buildings with a reduced rate of 5% VAT by the same person will be permitted, and the limitation of the land area under this treatment is lifted. The tax treatment for gains resulting from transactions involving crypto-currencies is clarified.
From 1 April 2019, new rules apply to sponsorship expenses and related tax credit for companies and individuals granting sponsorship.
Important provisions have been introduced related to tax procedure. Taxpayers will be allocated to three main risk classes. The central tax authorities may carry out their own automatic registration of taxpayers under the electronic communication system by electronic means of distance filing. A mediation procedure will be established for relations with the tax authorities, which may be initiated by taxpayers who have received orders for payment, with a view to identifying optimal solutions for extinguishing tax liabilities, including by means of payment rescheduling.
The main legislative amendments made by Law 30/2019 on taxation
Law 30/2019 was published In the Official Journal of Romania No 44 of 17 January 2019, and approves GEO no. 25/2018 as well as making further amendments to the Fiscal Code (Law No 227/2015):
Corporate tax and tax on micro-enterprises
The entity/religious unit register for which tax deductions are granted has been introduced. This register is managed by N.A.F.A. (A.N.A.F. in Romanian) and an entity wishing to be listed in the register must meet the following conditions at the time of application:
(a) It must carry out work in the field for which it has been constituted, as stated in an affidavit.
(b) It must have fulfilled all the reporting tax obligations provided by law.
(c) It must have no residual tax liabilities to the consolidated general budget, more than 90 days old.
(d) It must have filed its annual statutory accounts, as set out in law.
(e) It must not have been declared dormant, in accordance with Article 92 of the Tax Procedure Code.
With these changes, N.A.F.A. plans to be able to monitor the sponsorships granted by taxpayers much better and tighten the conditions for granting the sponsorship tax credit.
The change in the timing of exercising the right to adjust the tax base in the event of a beneficiary's bankruptcy was a measure long awaited by taxpayers, and it is in line with the position of the Court of Justice of the European Union, recently expressed in a decision issued on this subject.
Changes to the rules on purchase of immovable property with the reduced 5% VAT rate will encourage the development of the real estate market by lifting the limitation on the ownership of such property by individuals.
Corporate income tax
Income from the transfer of crypto-currency is classified as income from other sources, and is taxable at a rate of 10% of the gain made, i.e. the positive difference between selling price and purchase price, including transaction costs. Gains of below 200 RON per transaction will not be taxed, provided the total earnings do not exceed 600 RON per year. It is the individual’s responsibility to calculate and declare this income.
Taxpayers may direct up to 3.5% of their income tax for the benefit of non-profit units/religious units if they comply with certain conditions, thereby removing differentiation in the percentage of tax that can be distributed according to the type of non-profit entities. (Formerly only accredited social service providers could receive up to 3.5% of the tax, compared to 2%, as received by other non-profit-making entities/religious organisations). This also applies to income from abroad for which tax is due in Romania (after deduction of tax credit).
Changes to fiscal procedure
Law 30/2019 will enter into force three days after the date of publication in the Official Journal of Romania, with the exception of certain articles for which a special period of entry into force has been provided. For example, the date of entry into force is 1 April for the provisions on the tax regime applicable to sponsorship and private scholarships granted by payers of corporate income tax and micro-enterprise tax, as well as by individuals who support non-profit organizations with up to 3.5% of their income tax. However, the entry into force is 1 January 2019 for the new rules on deductibility of excess debt expenses and VAT (see Article VI of Law 30/2019).