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Draft law: Tax regime for foreign companies’ profits obtained in Romania is changing

de Vladimir Ionescu , 18.8.2019

The Ministry of Public Finance (MPF) will propose to the Government another emergency ordinance for amending the Tax Code and the Tax Procedure Code, after the series that started with famous OUG 114/2018.

Among the changes, those related to the tax regime of profits registered by foreign companies in Romania, even when they are not registered in Romania but operations are conducted locally.

As reasoning for the bill, Finance Minister Eugen Teodorovici invoked the dialogue with the business community that would have lasted “more than one year” and argues that “some amendments that are positive for the Romanian economy resulted after summarizing the proposals and analysing them”, according to an MFP press release.

The measures to be adopted and presented by a press release are:

In the Tax Code:

  • Fiscal consolidation of the corporate income tax due by corporate tax groups;
  • The development of the concept of “place of effective management” for non-resident legal persons registered in a state with which Romania has concluded double taxation agreements, according to the legislation of that state, but which are controlled and managed in Romania. These foreign legal entities with the location of effective management placed in Romania will owe tax on profit for the taxable profit obtained from any source, both from Romania and abroad;
  • For wage incomes, the exception from the scope of taxable income of the personal use of certain vehicles that are not exclusively used for the business purposes and are not part of the legal persons’ assets that apply the tax regime of micro-enterprises or the specific tax for certain activities;
  • Regulating the obligations for calculating, withholding, paying and stating the income tax and compulsory social contributions, related to the cash and in-kind benefits received by the employee from third parties.

In the tax procedure:

  • Provision for regulating the establishment and cancelling the attachments in the electronic environment, so that the attachment is cancelled at the assertion of the amount seized, and debtor’s accounts are released as soon as possible. With this measure, it is taken into account the development of an own MFP/ANAF information system, through which attachments and related activities for ending them to be managed, so that they do not require from banks an important development effort on their own information systems.
  • The suspension of the tax inspection in the case of the notification of judicial bodies, in order to implement Lungu Case, considering the fact that the ECHR criticized Romania in the light of the fact that, through the procedures in force, it allowed that for the same taxpayer and the same situation to start two procedures: an administrative and a criminal procedure.
  • The possibility to carry out the re-checked of the inspection also following the taxpayer’s request if the conditions provided by law are cumulatively met, for the purpose of implementing Zabrus Case (C-81/17), considering that the CJEU has noticed an imbalance in the respective case between taxpayer’s rights and tax authorities’ rights.
  • The nullity sanction on the tax administration act in case the tax body does not follow certain obligations provided by the law for its responsibility.
  • The change in the competence of solving the appeals from ANAF to MFP. The purpose of this measure is to increase taxpayers ‘confidence in the tax system by ensuring a higher level of independence and, implicitly, bases for increasing the impartiality in making decisions regarding taxpayers’ appeals against all acts issued by the tax administration. Basically, the structures for solving the appeals existing at ANAF’s level will be taken over within the MFP.
  • Regulating the possibility of re-examining the decision of solving the appeal in certain situations, expressly provided by law for the purpose of terminating judicial procedures that are costly for both taxpayers and the tax administration, relieving the courts of such litigation and avoiding the payment made by tax authorities for legal fees, interest or other amounts if it is considered that the document issued is not in accordance with the legal provisions. Effective application: as of November 1, 2019.
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