Emergency Ordinance no.1/2020 („the Ordinance”) entered into force on Thursday 9 January, introducing significant changes from a fiscal perspective and in other areas. One of the most important amendments is the elimination of the tax on financial assets starting 2020, which has a significant impact on the banking sector.
The Romanian Government initially took responsibility for these amendments at the end of 2019, including them in a draft law which was presented in Parliament, but taking into consideration the urgency of the provisions, it was eventually decided to adopt the legislation by means of an Emergency Ordinance.
The Ordinance was published in the Official Journal of Romania (no.11) on 9 January 2020 and entered into force on the same date. The most important changes are briefly described in this newsletter.
Elimination of the tax on financial assets
One of the most important changes introduced by the Ordinance is the elimination of the tax on financial assets starting 2020. The tax was introduced at the end of 2018 and had a significant impact on the banking sector. Although the Ordinance entered into force after 1 January 2020, it is clearly stated that no tax is due and calculated for the period between 1 January 2020 and the date the Ordinance enters into force.
Even though the tax has been eliminated, it will still produce effects in 2020 for 2019. The tax due for 2019 needs to be declared no later than 25 August 2020 and this is also the deadline for settling any differences for the tax computed and declared for the first six months of 2019.
The tax on financial assets is payable by banks and is calculated by applying a rate (of 0,4% or 0,2%, depending on the bank’s market share) to the balance of net financial assets of the credit institution. The tax may be reduced by 50% if the balance of loans granted is increased up to a certain target (loans granted to non-financial companies and individuals) and also by 50% if the interest margin is reduced up to an established target.
The information which should be used to determine the market share for calculating the tax on financial assets for 2019, is that which will be published on the National Bank of Romania’s website as at 30 June 2020.
Cash registers with electronic log for vending machines
The deadline for equipping vending machines operated via cash or card with cash registers with an electronic log has been postponed. The initial deadline for this requirement was 31 December 2019 and it has been postponed until 31 December 2020.
Excise duties amendments
The Ordinance postpones the deadline by which the Ministry of Public Finance must update the level of excise duties in force for the following year. The amendment was introduced as a result of recent changes (in December 2019) to excise duties (i.e. publishing the level of excise duties updated with the consumer price index on the Ministry of Public Finance’s website), which were made after the deadline imposed by the Fiscal Code (i.e. 20 October).
Thus, if the consumer price index increases, the Ministry of Public Finance will normally publish the updated level of excise duties by 20 October each year, but this deadline may be extended to 31 December.
In addition to the fiscal changes the Ordinance introduces, inter-alia, certain general regulatory amendments, briefly described below:
Moreover, the Ordinance brings forward deadlines for the application of certain requirements, introduced starting from 2019:
In addition, from 30 April 2020, the Ordinance eliminates the level of 6.9% for the rate of return of the invested capital, representing the average cost of invested capital in real terms, before tax, which was used for calculating the tariffs for the transport and distribution of natural gas and electricity.