FiNNEWS Legislative, no. 11, 2017
- Tuesday, 7 November 2017
- Order establishing the criteria for registration for VAT purposes
- Changes applied to the procedures of registration/change of the tax domicile
- Changes regarding the calculation of land tax
- Amendment of the methodological rules regarding the use and filling-in of the payment order for the State Treasury
- Approval of the adjustment statement/refund application regarding withheld income tax
- Procedure for the ex-officio change of the total tax owed in terms of VAT
- Approval of the template and content of the forms used for declaring self-assessment or withholding taxes and duties
- Procedure and conditions for the approval of amount transfer from the VAT account
- Procedure for the cancelation of late payment penalties related to the main tax liabilities representing VAT
- Decision of the Council of the European Union on the increase of the VAT exemption ceiling
- Decision of the Court of Justice of the European Union on the deduction of VAT invoiced by inactive taxpayers
- Draft Ordinance containing amendments to the Tax Code as of January 1st, 2018
Order establishing the criteria for registration for VAT purposes
Order no. 2856 of October 2nd, 2017 establishing the criteria for the assessment of the tax risk in the case of registration and cancelation of registration for value-added tax purposes, for the approval of the Procedure regarding the assessment of the tax risk for taxable persons applying for registration for value-added tax purposes.
The Order addresses taxpayers with the headquarters of their economic activity in Romania who are registered for VAT purposes, as well as those who apply for registration for VAT purposes, under the following conditions:
• If they expect to achieve a turnover reaching or exceeding the exemption ceiling (threshold) of RON 220,000;
• If the turnover achieved or to be achieved is lower than the exemption ceiling, but the taxpayer opts for the normal taxation regime.
The Order stipulates that, as of October 2017, taxable persons with high tax risk will have their applications for registration for VAT purposes rejected.
The assessment system will be as follows:
• The company starts from 100 points;
• Each criterion is associated with a negative value;
• All negative values are summed up and subtracted from the initial value of 100 points. If the total score is below 51 points, the company has a high tax risk. It is worth noting that no values are associated with the criteria set out in the procedure. Therefore, the procedure remains non-transparent.
• If the company has a high tax risk, the taxpayer is invited to an audience at the National Agency for Tax Administration (ANAF), before the rejection of its registration/re-registration for VAT purposes.
The new criteria used to determine the level of tax risk when applying for registration for VAT purposes are as follows:
• Registered office;
• Tax inactivity;
• Temporary inactivity at the Trade Register;
• Rejection/cancelation of registration for VAT purposes;
• Outstanding tax liabilities;
• Contraventions and offenses;
• Tax residence;
• Bank account;
• Activity carried out;
• Third parties;
• Accounting services;
As regards taxpayers that are already registered for VAT purposes, the order lays down the criteria for assessing the tax risk both in view of the ex-officio cancelation of VAT registration for taxpayers with high tax risk and for taxpayers re-registration for VAT purposes which no longer poses high fiscal risk.
The analysis procedure involves the same valuation system as registration/re-registration for VAT purposes mentioned above and the criteria used are:
• Social headquarters;
• Accounting services;
• Inconsistencies between the information included in the taxpayer’s tax/informative/recapitulative statements in relation to its partners (suppliers/clients), including significant inconsistencies found following the analysis of information provided by third parties other than those relating to tax/informative/recapitulative statements;
• Tax residence.
Changes applied to the procedures of registration/change of the tax domicile
Order no. 2853 of September 29th, 2017 regarding the amendment and supplementation of ANAF President’s Order no. 3845/2015 for the approval of the procedures of registration/change of tax domicile, as well as for the approval of the template and content of certain forms.
The Order analyzes the provisions of the procedure for the change of the tax domicile, in the case of taxpayers who are natural persons that have a Personal Number (CNP) and in the case of legal entities, that have their tax domicile identical to the registered office, with the provisions amended by the Tax Procedure Code through Government Ordinance 30/2017. Thus, if a taxpayer changes its registered office, and its tax domicile is registered at the same address, it shall not file Statement 050, the transfer of the tax file being automatically done from one tax body to another.
The administrative competence passes to the new tax body starting from the day following the expiration of the 15-working-day period from the date of entry in the trade register of the mentions regarding the change of the registered office.
If the tax domicile is different from the registered office (for example, if the tax domicile is registered at the place where the main activity is actually carried out) and it changes, the taxpayer is still obliged to file Statement 050.
Changes regarding the calculation of land tax
Law 196 of September 29th, 2017, amending Art. 465 of Law no. 227/2015 regarding the Tax Code.
The law clarifies the calculation of the land tax/fee for lands located in the built-up area, depending on the category of use registered in the rural land register.
The law will enter into force on January 1st, 2018.
Amendment of the methodological rules regarding the use and filling-in of the payment order for the State Treasury
Order no. 2541 of September 28th, 2017, regarding the amendment and supplementation of the Order of the Minister of Public Finance (OMFP) no. 246/2005 for the approval of the methodological rules regarding the use and filling-in of the payment order for the State Treasury (OPT).
The Order amends OMFP 246/2005 which regulates the payment order for the State Treasury.
The concept of multiple electronic payment order (MEPO/OPME) is also introduced, referring to a payment instrument for the performance of payments from the State Treasury, which are subject to the provisions of the Regulation of the National Bank of Romania no. 2/2016 regarding credit transfer and direct debit transactions.
The Multiple Electronic Payment Order (OPERA) is used by taxable persons registered for VAT purposes who apply the VAT split payment system, in order to make payments into the cash account opened with the State Treasury units, only into accounts whose IBAN codes contain the "VAT" character string.
Approval of the adjustment statement/refund application regarding withheld income tax
Order 2779 of September 28th, 2017, for the approval of the template and content of Form 110 "Adjustment Statement/Refund Application regarding Withheld Income Tax".
The Order approves the template, content and instructions for filling in Form 110 "Adjustment Statement/Refund Application regarding Withheld Income Tax".
The statement is filled in and submitted by income taxpayers who have withheld income tax in a higher amount than that which was legally due and perform the adjustment of the amounts returned to the beneficiaries of income with tax liabilities of the same type owed for the tax period during which the refund was performed.
The form shall be filed both if, for the tax period in which the amounts were refunded to the beneficiaries of income, the tax owed was higher than the refunded amount, and in the case where the amount refunded to the beneficiaries of the income is higher than the tax owed, thus resulting payment differences or differences to be recovered from the state budget.
If, following the adjustment, there are differences to be recovered from the state budget, the form plays the role of a refund application, in which case the box provided for this purpose should be ticked.
The adjustment statement/refund application regarding the withheld income tax should be filed with the tax body in charge of the administration of the tax receivables owed by the payer.
The form shall be filed for the tax period in which the payment of the amounts of the income beneficiary was performed by the payer, within the prescription period of the right to claim the refund of those amounts.
In the case of income beneficiaries who are non-residents and who submit the tax residence certificate after the withholding of the tax by the income payer, the adjustment statement/refund application regarding the withheld income tax is filed within the prescription period, including in cases where the reserve of subsequent verification was removed, as a result of the performance of a tax inspection.
The form should be submitted to the competent tax body in PDF format, with attached XML file, on CD, accompanied by the format on paper, signed under the law, or transmitted by remote transmission electronic means.
If the payers rectify the statement submitted, the corrective statement should be drawn up according to the same template form, by correctly entering all the information in the statement and by ticking an "X" in the special spot provided for this purpose.
Procedure for the ex-officio change of the total tax owed in terms of VAT
Order no. 2899 of October 4th, 2017, regarding the amendment of ANAF President’s Order no. 2012/2016 for the approval of the procedure for the ex-officio change of the total tax owed (tax vector) in terms of VAT, as well as of the template and content of certain forms.
The order correlates the procedure for the ex-officio change of the total tax owed in terms of VAT with the provisions of the Tax Code, respectively, the amendment procedure in the case of registration of temporary inactivity with the Trade Register is abrogated. The cancelation of the VAT code for temporary inactivity at the Trade Register was already being carried out in case the taxpayer became fiscally inactive according to the Tax Procedure Code (one of the reasons for the registration in the Register of Inactive/Reactivated Taxpayers is the temporary inactivity already registered with the Trade Register).
Approval of the template and content of the forms used for declaring self-assessment or withholding taxes and duties
Order no. 2935 of October 11th, 2017, regarding the amendment and supplementation of ANAF President's Order no. 587/2016 for the approval of the template and content of the forms used for declaring self-assessment or withholding taxes and duties.
The Order amends Statement 100 regarding payment obligations to the state budget and, respectively, Corrective Statement 710 in order to allow the fulfillment of the declarative obligations for companies that have had their tax registration canceled. These obligations shall be fulfilled by the successors of the persons/entities who have ceased to exist by ticking the box "Statement submitted according to Art. 90 para. (4) of Law 207/2015 on the Tax Procedure Code" and the tax identification code of the successor shall be filled in.
Under the heading "Taxpayer’s/payer’s identification details", the details of the entity that has ceased to exist should be filled in.
The new statements shall be submitted starting with the obligations pertaining to the month of September 2017, the deadline for submitting the statement being October 25th, 2017.
Procedure and conditions for the approval of amount transfer from the VAT account
Order no. 2927 of October 10th, 2017, regarding the procedure and conditions for the approval of the transfer of amounts from the VAT account.
The Order regulates the conditions for performing the transfer of amounts from the VAT account, in the context of the application of the VAT split payment system. Thus, it is possible to request the transfer of the amounts from the VAT account, by submitting the application for the approval of the transfer of the amounts from the VAT account, code 310, in electronic format, to the registry or by post with acknowledgment of receipt.
Applications for approval of the transfer of amounts from the VAT account shall be resolved within 3 business days after the date of their registration and shall be mentioned in the records of the competent tax body in a separate sheet called "Transfer of amounts from the VAT account" in which the method of resolving the applications should be highlighted.
Decisions resolving the applications for approval of the transfer of amounts from the VAT account may be appealed against within 45 days of the date of communication.
The main situations in which transfers are required are as follows:
• An amount has previously been transferred from the current account into the VAT account for VAT payment and the refunding thereof is requested. Payment orders/statement of account and other supporting documents should be enclosed.
• VAT payments have been made in cash (higher than VAT collections on the same day) and the refunding of those amounts from the VAT account is requested. Tax invoices/tax receipts/import customs statement (DVI) + receipts / cash book + any other document should be enclosed.
• VAT payments have been made with the bank card and the refunding of those amounts from the VAT account is requested. Tax invoices/tax receipts/import customs statement (DVI) + payment orders/statement of account + any other document should be enclosed.
Procedure for the cancelation of late payment penalties related to the main tax liabilities representing VAT
Order no. 2800 of October 20th, 2017, for the approval of the procedure for the cancelation of late payment penalties for the main tax liabilities representing VAT, in the case of taxpayers who opt for a split VAT payment, as well as for the approval of the template and the content of certain forms.
The Order approves the procedure for the cancelation of late payment penalties related to the main tax liabilities representing VAT, in the case of the taxpayers who opt for split VAT payment.
In accordance with the provisions of Government Ordinance no. 23/2017 on VAT split payment, taxable persons registered for VAT purposes who opt for split payment between October 1st, 2017, and December 31st, 2017, benefit from the following facilities:
• Postponement of the payment of late penalties related to the main VAT tax liabilities outstanding on September 30th, 2017, included.
• Cancelation of late penalties related to the main VAT liabilities, outstanding on September 30th, 2017, included.
• A 5% reduction of the profit tax/micro-enterprise income tax for the fourth quarter of year 2017.
On the basis of the notification regarding the option of VAT split payment (D086), the tax body shall issue and communicate ex officio:
• To the taxpayer - the decision to postpone the payment of late penalties;
• To the credit institutions with which the debtor has open accounts - addresses of temporary, total or partial suspension of enforcement through garnishment.
The cancelation of late penalties related to the main tax liabilities representing VAT is performed ex officio, on the basis of the notification (D086) filed between October 1st, 2017, and December 31st, 2017. Thus, between January 1st, 2018, and January 31st, 2018, the tax body shall analyze whether the conditions provided for in Art. 24 of Government Ordinance no. 23/2017 have been met and, if so, it shall issue the decision to cancel the late payment penalties.
Decision of the Council of the European Union on the increase of the VAT exemption ceiling
On October 10th, 2017, the Council of the European Union adopted Implementing Decision (EU) 2017/1855 authorizing Romania to apply a special derogating measure regarding the ceiling/threshold above which taxable persons are required to register for VAT purposes.
Through the Decision issued, the Council admits Romania's request to increase the VAT exemption ceiling to EUR 88,500 (previously EUR 65,000), which, if calculated at the exchange rate valid on the date of Romania's accession to the European Union, is equivalent to approximately RON 300,000.
This exemption ceiling will be valid for the period January 01st, 2018, to December 31st, 2020.
Decision of the Court of Justice of the European Union on the deduction of VAT invoiced by inactive taxpayers
On October 19th, 2017, the Court of Justice of the European Union (CJEU) decided in the case C-101/16 Paper Consult SRL, to grant the right to VAT deduction to taxable persons who made purchases from taxpayers that had been declared inactive by the National Agency for Tax Administration (ANAF).
At the end of year 2010, Rom Packaging SRL ("Rom Packaging"), a company based in Romania, was declared inactive for failing to submit the tax statements required under the law and was deregistered from the Register of Taxable Persons Registered for VAT Purposes by ANAF.
On the basis of a contract of January 2011, Rom Packaging provided services for Paper Consult SRL ("Paper Consult"), a company based in Romania. The VAT related to the purchase of services was deducted by Paper Consult and paid by Rom Packaging to the state budget.
National provisions valid until December 31st, 2016 - Beneficiaries who purchased goods and/or services from inactive taxpayers were not entitled to deduct the VAT on those purchases, irrespective of whether that taxpayer was subsequently reactivated and re-registered for VAT purposes or not.
National provisions valid as of January 1st, 2017 – As of January 1st, 2017, the Tax Code allows for the deduction of VAT on purchases made from inactive taxpayers after they are reactivated and re-registered for VAT purposes.
The amendment was introduced following the initiation of an EU-Pilot procedure 8399/16 by the European Commission, which required the Romanian authorities to grant the right to VAT deduction. However, the provision is applicable in case of re-registration for VAT purposes after January 1st, 2017, because the law does not apply retroactively.
The CJEU has decided that Community law prohibits a national rule according to which:
• a taxable person cannot deduct VAT because
• a supplier that has provided it with a service has been declared inactive by the tax authority, the state of inactivity being public and accessible on the Internet to any taxable person,
• in cases where the denial of the right to deduct VAT is systematic and final, making it impossible to provide evidence that there was no tax evasion or loss of budget revenue.
The arguments of the CJEU were as follows:
1. It is not contrary to European Union law to require an operator to adopt all reasonable measures in order to ensure that the operation it carries out does not result in its participation in tax evasion. A measure such as checking the list of inactive taxpayers published on ANAF website may be reasonably required from an economic operator, such check being easy to perform.
2. Romanian tax legislation regarding inactive taxpayers/taxpayers whose VAT code has been canceled does not transfer the control measures which are incumbent on ANAF to the taxable person, but informs the latter about the outcome of an administrative inquiry from which it results that the taxpayer declared inactive can no longer be controlled by ANAF. By requiring the taxable person to carry out such a verification, tax legislation aims to ensure the correct collection of the VAT and to avoid evasion.
Furthermore, the CJEU verified whether Romanian tax legislation does not go beyond what is necessary in order to achieve its objective, that is, whether it is proportionate to the objective pursued.
3. Although failure to submit tax statements as provided by the law may be considered as a sign of fraud, it does not prove beyond any doubt the existence of a VAT-related fraud.
4. According to the legislation in force at the time of the transaction between Rom Packaging and Paper Consult, even if the taxpayer had adjusted its situation and obtained its deregistration from the list of inactive taxpayers, the VAT invoiced by it could no longer have been deducted by the person purchasing the good or the service in question.
5. As of January 1st, 2017, Romanian tax legislation has been amended. Thus, in the event of the reactivation of a taxpayer who has been declared inactive, the tax effects of the inactivation are canceled for both the taxpayer concerned and its trading partners, who recover their right to deduct the VAT related to transactions concluded during the inactivity period.
6. Moreover, in the case analyzed by the CJEU, it results that Rom Packaging had paid to the state budget the VAT collected from Paper Consult. In that case, the tax legislation in force at the time of the transaction did not provide for an adjustment in favor of Paper Consult, despite the proof of VAT payment by Rom Packaging, the annulment of the right to deduct VAT being definitive.
7. Accordingly, the impossibility of the taxable person (Paper Consult) to demonstrate that the transactions concluded with the operator that had been declared inactive (Rom Packaging) met the conditions laid down by the VAT Directive and, in particular, the fact that the VAT had been paid to the state exceeds what is necessary in order to achieve the legitimate objective pursued by that directive.
In addition, the CJEU did not admit the request of the Romanian authorities and decided that the effects of this judgment should not be limited in time. Thus, the decision is also effective in respect of the past, i.e. of operations performed before the date of the pronouncement.
Draft Ordinance containing amendments to the Tax Code as of January 1st, 2018
Main proposed changes to the Tax Code as of January 1st, 2018:
A. Profit tax
The main amendment concerns the transposition of Directive 2016/1164/EU establishing rules against tax evasion practices which directly affect the operation of the internal market, published in the Official Journal of the EU no. 193 of July 19th, 2016. The new rules should apply as of January 1st, 2018 (the transposition deadline provided for by the directive is January 1st, 2019).
Rule on the limitation of interest deductibility:
Thin capitalization rules shall be repealed and the new rule for the limitation of interest deductibility laid down in Directive 2016/1164/EU shall apply.
"Exceeding borrowing costs" (including the difference between interest/currency income and similar expenses) may be deducted within the limit of 10% of the Reference Value.
Excessive borrowing costs may be carried forward (without time limitation), including interest expenses and net foreign exchange losses carried forward until December 31st, 2017. If the reference value is negative or 0, excessive borrowing costs cannot be deducted, but they can be carried forward.
Taxation of the cross-border transfer of business goods (exit tax)
Exit taxation is introduced for assets transferred by resident companies and/or permanent establishments as a result of business transfer, of residence changes or of the transfer/liquidation of permanent establishments.
The earnings/loss related to the transfer of assets will be calculated as the difference between the market value and the tax value of the assets.
The profit tax rate (16%) will apply separately to the earnings, but the loss could be offset by gains from similar exit transactions (the carry-over period is 7 years).
In the case of exit taxation, the possibility of applying payment rescheduling is specifically provided for, in accordance with the Tax Procedure Code.
The tax value of assets transferred to Romania from other EU Member States (the source state) will be the one used in order to calculate the tax of exit from the source state, unless that value differs from market value.
B. Micro-enterprise income tax (turnover tax)
Definition of the micro-enterprise
The definition of a "micro-enterprise" should include all private companies which have a turnover below the threshold of EUR 1 million and are active (other than those in bankruptcy or in liquidation). The definition excludes state entities and certain legal entities that are transparent for tax purposes (professional companies) provided by the law.
The possibility to opt between the profit tax and the turnover tax is removed. The micro-enterprise will pay the profit tax starting from the quarter in which the turnover exceeds the threshold of 1 million euros (profit tax will be calculated as applied to the profit recorded starting from the quarter in which the threshold is exceeded).
Tax rates will be 3% for micro-enterprises without employees and 1% for micro-enterprises with at least one employee (full-time employed).
C. Income Tax
Taxable income will also include:
(i) income achieved from the transfer of more than 2 vehicles from personal property during one fiscal year;
(ii) earnings resulting from the trading, in one’s own name, of financial instruments, including derivative ones.
The new rate of income tax will be 10% (instead of 16%), unless the Tax Code provides for other rates (for example, the dividend tax remains at a 5% rate).
Advance payments for copyright tax will be withheld by using a tax rate of 7% (previously 10%). The standard rate of 10% will apply for the calculation of the final income tax.
The tax on income from self-employed activities should be recalculated by the tax authorities after payment of the social and health insurance contributions (CAS/CASS).
The rate of tax on income from salary will be 10%.
The standard personal allowance for employees with a gross monthly salary below RON 1.950 will be increased from RON 300 to RON 510. The amount of personal deduction is degressive and will decrease from RON 510 (for a salary of RON 1,950) to zero (for a salary of RON 3,600 and above). In the case of families with children, personal allowance increases accordingly.
D. Compulsory social contributions
As of January 1st, 2018, there will be only three social contributions:
• Contribution to the pension fund (CAS);
• Contribution to the health insurance fund (CASS);
• Employment insurance contributions (CAM).
Contribution to the Pension Fund (CAS)
The CAS contribution owed by employees and insured persons is determined by applying the 25% rate to the calculation basis. Additional CAS is owed by employers in the case of special/different working conditions (4% or 8%, according to the law).
The CAS calculation basis consists of salary income, except for persons insured under special pension schemes under the law. The employer must retain the CAS amounting to 25% of the gross salary income.
Individuals (natural persons) who achieve earnings from self-employed activities will apply the CAS rate (25%) to the calculation basis which is the declared (elected) income, but cannot be lower than the minimum gross monthly salary. The Contribution to the pension fund (CAS) is paid quarterly on the basis of the tax notice of assessment issued by the tax authorities.
If the cumulative business revenue of the previous year is less than 12 times the gross minimum salary, the individual is not obliged to pay CAS. Persons who earn salary income will be exempt from CAS for the income from self-employed activities.
Contribution to the Health Insurance Fund (CASS)
The CASS rate will be 10% and will apply to income achieved after January 1st, 2018.
The social health insurance (CASS) contribution is not owed for certain categories of income paid from public sources (e.g. unemployed persons, teaching staff, pensioners/retirees). Income from business, rent, investment, agriculture and other sources is not subject to CASS if the individual also earns salary income.
Employment Insurance Contribution (CAM)
The employment insurance contribution (CAM) is intended to replace the unemployment contribution (0.5% owed by the employee and 0.5% owed by the employer), the contribution for medical leave (0.85% owed by the employer), the contribution to the salary guarantee fund (0.25%) and the contribution to accident and occupational disease insurance (various percentages).
CAM contribution is owed by Romanian and foreign employers and is calculated by reference to the calculation basis which is equal to the sum of the salaries paid to their employees. CAM rate will be 2.25%.
Value Added Tax
Exercise of the right to deduct VAT. The deduction of the VAT related to entries may be denied by the tax authorities only if they demonstrate (beyond any doubt) that the taxable person knows or ought to have known that the transaction is part of a chain of fraudulent transactions.
Goods used for the transport and storage of unlabelled excise goods identified outside warehouses will be seized.
The tax on vehicles used for the carriage of goods (weighing more than 12 tonnes) is adjusted in accordance with EU regulations (increase by approximately 7%).
For offenses related to local taxes, taxpayers may pay within 48 hours half of the minimum fine provided by the law. This provision will apply to fines for contraventions established after January 1st, 2018.