New fiscal measures have been adopted by the Romanian Government in the context of the COVID-19 pandemic, by emergency ordinance. There are two main measures: the granting of bonuses for the payment of annual income tax by 30 June 2020, and a tax amnesty on interest and penalties for taxpayers who pay the main outstanding debts owed as at 31 March 2020 by 15 December 2020. The purpose of these facilities is to prevent accumulation of new debts to the state, avoiding the opening of new insolvency proceedings due to measures enacted during the state of emergency, avoiding technical problems due of the large number of declarations being submitted as well as increasing the degree of compliance by taxpayers.
The legislation adopted
In the Official Journal of Romania no. 393 of 14 May 2020 Government Emergency Ordinance (GEO) no. 69/2020 was published, to amend the Fiscal Code (Law no. 227/2015) and introduce new fiscal measures.
Credits for taxes and contributions paid by 30 June 2020
The ordinance provides bonuses of up to 10% for individuals who submit online by 30 June the single declaration on income tax and social contributions due by individuals for income earned in 2019 as follow:
- A bonus of up to 5% of the income tax, social security contributions and social health insurance contributions due is awarded if all these obligations are paid in full (payment or compensation) by 30 June 2020 inclusive.
- An additional bonus of 5% is awarded, for submission of the single declaration no later than 30 June (inclusive), by electronic means. This will be granted only if the above conditions are met.
Tax amnesty for interest and penalties
Taxpayers which had outstanding budgetary obligations on 31 March 2020, can opt for the cancellation of the related interest and penalties if they pay the main amount by 15 December and submit a request to this effect. At the same time, on the date of submission of the application, all the declarations related to the tax they owe will have to be submitted and all the main obligations due as at 31 March 2020 as well as interest and penalties with later payment deadlines must be paid.
The legislation targets all taxpayers which have outstanding debts as at 31 March 2020: whether individuals or companies, including entities with no legal status, individuals who carry out economic activities or exercise free professions, public institutions etc.
The Ordinance regulates 4 situations:
- The case of taxpayers which on 31 March owed both tax and penalties/interest
To benefit from the cancellation of the interest and penalties related to outstanding tax obligations, taxpayers must pay by 15 December 2020 outstanding tax owed as at 31 March 2020, submit all tax returns related to the tax they are liable to and submit the application to cancel the interest and penalties
- The case of corrective declarations relating to payments due before 31 March 2020
To benefit from the cancellation of interest and penalties related to the obligations additionally declared by an amending declaration submitted after 1 April 2020, all main tax obligations must be paid, and all declarations related to the taxpayer’s total liabilities must be submitted, as well as the request for cancellation of interest and penalties, no later than 15 December 2020.
Thus, taxpayers wishing to correct the amounts initially declared may submit an amending declaration for the additional obligations and may benefit from the cancellation of interest and penalties related to the amounts declared in addition. This also applies to correction of errors relating to Value Added Tax.
- The case of taxpayers which on 31 March owe only interest and penalties, and have paid their main tax obligations
To benefit from the cancellation of interest and penalties related to the tax obligations with maturity before 31 March 2020, taxpayers must submit all declarations related to their total tax liabilities, pay all current tax obligations and submit the application to cancel the interest and penalties no later than 15 December 2020.
- The case of taxation decisions issued as a result of tax inspections in progress on the date of entry into force of the ordinance
Taxpayers can benefit from the cancellation of the interest and penalties related to the obligations additionally established by tax inspectors if they pay the main obligations within the term established in the taxation decision and if the request for cancellation of interest and penalties is submitted within 90 days of the communication of the tax inspectors’ decision.
The Ordinance stipulates that a taxpayer may cumulate the amnesty for all the above situations, if by the date of filing the application for cancellation of the interest and penalties, it meets all the eligibility conditions. Taxpayers intending to benefit from the cancellation of interest and penalties may notify the tax authorities up to the date of filing the request for cancellation. The taxpayer will receive a decision from the tax authorities to accept or reject the application for cancellation of interest and penalties.
Taxpayers which benefit from payment rescheduling may also benefit from the cancellation of interest and penalties, if the payment rescheduling is completed by 15 December 2020 inclusive. Interest and penalties included in any payment installment made after the entry into force of the Ordinance will be returned to them.
Facilities for bonuses and incentives granted to employees during the state of emergency
Amounts representing incentives and bonuses granted to employees who are at risk of infection with the SARS-CoV-2 virus as a result of carrying out work that involves direct contact with people, are exempt from the payment of social security contributions, social health insurance contributions and employment insurance.
The employer will decide which employees will benefit from these payments, as well as the activities carried out by them that involve direct contact with people and must submit the document justifying the application of the exemption from the payment of social contributions.
The exemption from the payment of social contributions applies for the amounts granted from the date of entry into force of the emergency ordinance (i.e. 14 May 2020), related to work carried out during the state of emergency, and paid by 30 June 2020 inclusive.
Our understanding is that the provisions on the exemption from the payment of social contributions apply only to the amounts granted to employees for activity carried out during the state of emergency and for which the payment will be made between 17 May 2020 and 30 June 2020, inclusive. Income tax of 10% is still payable.
Other measures provided by the ordinance
- Taxpayers established in Romania requesting VAT registrations will no longer be subject to risk analysis carried out by the tax authorities beforehand in order to decide whether the taxpayers will receive their registrations or not. Also, all taxpayers established in Romania which submitted VAT registration requests prior to 14 May 2020 and which did not receive a decision in this regard from the tax authorities until that date will receive a VAT registration number without being subject to a risk analysis. However, these taxpayers will subsequently be subject to risk analyses and, if the tax risk is deemed as being high, the VAT registration number will be cancelled.
- The deadline for submitting Form 230 for the redirection of 2% or 3.5% of the annual income tax on salaries and pensions / annual tax due to an NGO or religious organisation has also been extended to 30 June 2020.
- Up to 14 August local authorities can reduce annual taxes on non-residential buildings by 50%, if during the state of emergency the owners or users of the buildings were forced to completely cease their activity or hold an emergency certificate certifying the partial cessation of economic activity.
- During the period of job suspension for individuals who carry out an activity on the basis of an individual employment contract, legal entities that have the status of employers (or are equivalent to employers) must pay the monthly social health contribution due on the minimum gross salary.
- Starting from 2021, it will be possible to grant bonuses of up to 10% of the annual income tax and of the social health insurance contribution. The amount, the payment deadline and the conditions for granting the bonuses will be established by the annual state budget law, and the application procedure by order of the Minister of Public Finance.
The ordinance also refers to the tax obligations due after 21 March which, according to GEO 29/2020 are not considered outstanding. Thus, the new Ordinance stipulates that, for the purposes of this legislation, these will be considered overdue on 31 March 2020. Therefore, in the case of errors in the calculation of the profit tax for 2019, when submitting the amending declaration, taxpayers can benefit from the cancellation of interest and penalties related to the payment differences.
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