Document/Tax Code: implementing rules, additions, clarifications

On Thursday, the Government amended and supplemented the methodological norms for implementing the Tax Code, mainly on the corporate income tax, micro-enterprise income tax, income tax, compulsory social contributions and value added tax.

The amendments, according to the Government, bring clarifications and examples for the implementation of the measures introduced by the Government Emergency Ordinance 84/2016 on amending and supplementing some legislation in the financial-fiscal field and by Government Emergency Ordinance 3/2017 for amending and supplementing Law 227/2015 on the Tax Code.

The legislative act comprises 41 pages of amendments/clarifications, and the Government provided the following example by a press release:

On the corporate tax

• It clarifies the application of the tax exemption for the reinvested profits in the context of applying this measure for an indefinite period and the application of this facility has been extended also to the licenses for the use of the software products.
• The rules include examples of allocating the non-deductible expenses corresponding to the non-taxable income, calculating the share of non-taxable income in the total income, and determining the management and administration costs for the non-taxable income.

On the income tax for micro-enterprises

• Clarifications on how micro-enterprises apply Law 170/2016 on the tax specific to certain activities. It clarifies the taxation system on the income of microenterprises, in the case of Romanian corporate taxpayers that registered at 31 December 2016 incomes between 100,001 – 500,000 euro, the equivalent in lei, following the change of the threshold to 500,000 euro for the incomes reported in the previous year;
• Also, clearer provisions are introduced for the maintenance after 1 February 2017 of the corporate tax payer status for the micro-enterprises which have opted to apply the provisions of Title II of the Tax Code;
• The rules also contain provisions detailing how the taxpayers that became micro-enterprises as of 1 February 2017, and opt for paying corporate tax, calculate, declare and pay the corporate tax.

Income tax

• Explanations have been introduced for the way of applying in the course of one year the exemption from the payment of the tax on the salary and similar income in the case of individual persons carrying out activities under an employment contract signed for 12 months with Romanian legal entities that carry out seasonal activities such as those stipulated in art. 1 of Law 170/2016 on the specific tax on certain activities;
• A non-taxable threshold of 450,000 lei is set for the income obtained from the transfer of the ownership right related to the personal property;
• It provides for the deduction of the medical services provided by way of a subscription and the voluntary health insurance premiums, within the same annual threshold of 400 euros, equivalent in lei.

Compulsory social contributions

• Legislative correlations have been made regarding the elimination of the threshold equal to 5 times the gross average wage, in the case of salaries and similar income, investment and other sources of income.

On VAT

• The introduction of procedural provisions on the deduction of VAT by taxable entities who re-register for VAT purposes after having had the registration code cancelled and on issuing invoices for the goods and services delivered during that period, so that their beneficiaries to be allowed to exercise their right to deduct VAT on the purchases made from those entities during the period when they did not have a VAT code;
• Amendment of the rules for adjusting the VAT tax base in the case that the tax for the goods or services delivered has not been collected because of the reorganization or bankruptcy of the beneficiary so that the adjustment to be allowed within 5 years from the 1^st of January of the year that follows the moment of the court decision that confirms the reorganization plan, or the court decision for closing the insolvency proceedings, under the forfeiture penalty;
• Establishing procedural rules on applying the new special flat-rate system for farmers, introduced by the Government Emergency Ordinance 84/2016.