07.05.2020
The state of emergency established and extended by the Decree of the President of Romania has led to exceptional measures, including economic, financial and fiscal measures.
A series of normative acts were adopted in order to adjust the financial and fiscal regime to the requirements imposed by the current social and economic context.
The following are the most important regulations with a direct impact in the field of reference:
Ordinance no. 29/2020 on some economic and fiscal-budgetary measures ("GEO no. 29/2020") entered into force on 21 March 2020.
1.1. Capping of budget receivables
For tax liabilities falling due, from 21 March 2020 and for the duration of the state of emergency, and within 30 days of the expiry of this period, no interest and late payment penalties shall be calculated or due in accordance with the Tax Procedure Code.
Pursuant to Article VII of GEO no. 29/2020, unpaid amounts will not be considered as outstanding tax liabilities even if the due date or deadline for payment has expired. Consequently, taxpayers will not owe penalties or interest for non-payment of tax obligations.
It should be noted here that this facility is only applicable during the state of emergency and within 30 days of the end of this period.
At the moment the state of emergency has been extended until 16 May 2020 by Decree No 240/2020 on the extension of the state of emergency in Romania.
1.2. Suspension of enforcement of budget claims by attachment
According to Article VII of the same act, enforcement of budget claims by attachment is suspended or not initiated during the state of emergency and within 30 days of its termination.
The measures of suspension of the execution by attachment on the amounts to be pursued representing revenues and cash assets shall be applied by the effect of the law by the credit institutions or the attached third parties, without further formalities by the tax authorities.
In other words, we are in the presence of a suspension by operation of law which will operate without further intervention by the tax authorities, being applied as such directly by the banking institutions.
For example, even if a garnishee order had already been issued, credit institutions will be obliged not to implement these measures during the state of emergency and within 30 days of its termination.
By way of exception, measures suspending enforcement do not apply to the recovery of budget claims established by final criminal judgments arising from criminal offences.
GEO no. 48/2020 on certain financial and fiscal measures (hereinafter "GEO no. 48/2020"), recently published in the Official Gazette, implements the same legislative strategy of postponing enforcement and capping the amounts owed by taxpayers.
2.1. Suspension of enforcement of budget claims
By means of GEO No 48/2020, the measures for enforcing budget claims by means of a summons and by auctioning assets have also been suspended, and not only attachments.
According to Art. XII para. (4) the measures for the enforcement of budget claims, by means of a summons and by auctioning goods, shall not be enforced during the state of emergency and within 30 days from the date of the end of the state of emergency.
These provisions have a major impact on the practice in the field, as the tax authorities will no longer be able to enforce budget claims until 30 days after the end of the state of emergency.
The legislator is thus supplementing the provisions of GEO no. 29/2020 by standardizing the rules on the enforcement of budget claims. This approach is natural and necessary, given that the limitation and prescription periods (for bringing legal proceedings) have also been suspended, or else the taxpayer would have been deprived of an effective remedy to challenge any measures ordered by the tax authorities.
It is important to point out that the limitation periods associated with the right of the tax authority to establish and enforce tax claims and to request enforcement, as well as the right of the taxpayer/payer to request a repayment of tax claims, are also suspended or do not begin to run until 30 days after the end of the state of emergency.
The above shall not apply to the recovery of budget claims established by final judgments in criminal matters.
2.2. Capping of interest on tax liabilities in instalments
In the same legal direction, GEO no. 48/2020 regulates that interest and penalties are not to be calculated and due according to the Fiscal Procedure Code for late payment of unpaid instalments in instalment schedules.
Therefore, tax liabilities subject to instalments and deferrals that are not paid will not incur interest and penalties.
Also, according to Article XII para. 2, by way of derogation from the provisions of the Tax Procedure Code, the conditions for maintaining payment instalments granted according to the law are suspended.
These legal provisions will only take effect during the period of the state of emergency and within 30 days from the date of termination of this period.
After the expiry of this period, by the first payment deadline, the competent tax authority shall, ex officio, proceed to the reworking of the instalment schedule, in compliance with the approved instalment period. The new instalment schedule will be communicated to the debtor by the decision of the tax authority.
The provisions of Article 157 para. (2) lit. (a) of the Fiscal Procedure Code shall also apply to these budgetary obligations.
Obligations subject to suspension measures, with the exception of those relating to instalments in the rescheduled instalment schedules, are deemed to have been met in the following situations:
(a) for the situation where the deadlines referred to in Article 194 para. (1), Art. 195 para. (10), and Art. 200 para. (2) of the Code of Fiscal Procedure have expired before the expiry of the 30-day period from the date of the institution of the state of emergency if these obligations are performed within 30 days from the end of this period;
b) for situations other than those referred to in point a), on the expiry of the period referred to in Article 194 para. (1), Art. 195 para. (10) and Article 200 para. (2) of the Fiscal Procedure Code.
In addition, taxpayers may request a change in the instalment payment schedule for tax liabilities in instalments, provided that the request is submitted within 30 days of the end of the 30-day period established following the end of the state of emergency, the provisions of Article 195 of the Code of Tax Procedure applying accordingly.
2.3. Extension of deadlines for the submission of tax returns
According to Article XIV of GEO no. 48/2020, the deadline for filing annual financial statements and those for the last quarter of 2019 is extended until 31 July 2020 inclusive.
2.4. Corporate tax exemptions for the HoReCa industry
Romanian legal entities operating in the HoReCa industry and which interrupt their activity totally or partially during the period of the declared state of emergency, do not owe specific tax for this period, under Law no. 170 of 7 October 2016.
The eligibility conditions that taxpayers must cumulatively meet in order to benefit from the tax exemption are as follows:
- carry out activity corresponding to specific CAEN codes;
- they interrupt the activity totally or partially and hold the certificate for emergency situations issued by the Ministry of Economy, Energy and Business Environment;
- they are not insolvent according to the information available on the website of the National Trade Register Office.
According to Article IX of GEO No. 48/2020, taxpayers recalculate, accordingly, the specific tax established according to Law No. 170/2016, for the year 2020, by dividing the annual specific tax by 365 calendar days and multiplying by the number of days corresponding to the period of the calendar year in which the activity was carried out. The period during which the taxpayer carried out the activity is determined by subtracting from the number of 365 calendar days the number of days corresponding to the period during which the taxpayer interrupted all or part of the activity during the declared state of emergency. However, the same article stipulates that the tax specific to the above-mentioned activities shall be declared and paid in accordance with Article 8 of Law 170/2016, i.e. every six months, up to and including the 25th of the following month. The amount to be paid is one half of the specific annual tax due.
2.5. VAT refund
Pursuant to Article XI para. (1) of GEO No. 48/2020, by derogation from the provisions of Article 169 of the Code of Tax Procedure, the value-added tax claimed for a refund by means of negative value-added tax statements with the option of refund, submitted within the legal deadline for submission, shall be refunded by the central tax authority, with subsequent tax inspection.
For the amounts thus refunded, the subsequent tax inspection is decided on the basis of a risk analysis.
Prior to the entry into force of this legal text, refunds of negative value-added tax returns with the option of refund are approved on the basis of risk analysis and with a tax inspection carried out before or after the refund is approved.
The above provisions do not apply to large and medium taxpayers in the following assumptions:
(i) the taxpayer has facts on his tax record that are punishable as offences;
(ii) the central tax authority, on the basis of the information in its possession, establishes that there is a risk of an undue refund;
(iii) voluntary liquidation proceedings have been initiated for the taxpayer in question or insolvency proceedings have been opened, with the exception of those for which a reorganization plan has been confirmed under the terms of the special law;
(iv) taxpayers in respect of whom a tax inspection has already begun;
As regards the other categories of taxpayers, the aforementioned provisions do not apply if any of the following situations apply:
(i) the taxpayer has a tax record that is punishable as an offence;
(ii) the central tax body, on the basis of the information in its possession, determines that there is a risk of an undue refund;
(iii) voluntary liquidation proceedings have been initiated for the taxpayer in question or insolvency proceedings have been opened, with the exception of those for which a reorganization plan has been confirmed under the terms of the special law;
(iv) taxpayers in respect of whom a tax inspection has already begun;
(v) the taxpayer submits the first negative VAT return with the option of refund after registration for VAT purposes;
(vi) the balance of the negative VAT amount claimed for refund originates from more than 12 monthly reporting periods or 4 quarterly reporting periods.
Emergency Ordinance no. 33/2020 on some fiscal measures and amendment of some normative acts (hereinafter "GEO no. 33/2020") was published in the Official Gazette No. 260 of 30 March 2020.
The reasons for the adoption of GEO no. 33/2020 are the following: (i) to regulate some procedural-fiscal measures to support taxpayers paying corporate income tax or income tax on microenterprises; (ii) to stimulate the payment of overdue tax obligations by granting rebates on the payment of pre-scheduled taxes in the form of rebates; (iii) to postpone the payment of VAT for imports made during the period for which a state of emergency was established under Decree no. 195/2020 and during the following 30 calendar days from the date of the end of the state of emergency in respect of a number of medicines, protective equipment, other medical devices or equipment and sanitary materials which may be used for the prevention, limitation, treatment and control of COVID-19.
3.1. Provisions of GEO No 33/2020 with implications for corporation tax
According to Art. 1 para. (1) of GEO no. 33/2020, taxpayers are liable for corporate income tax, regardless of the system of declaration and payment, who pay the tax due for the first quarter of 2020 or who make an advance payment for the same quarter by the deadline of 25 April 2020 inclusive, benefit from a rebate calculated on the corporate income tax due.
The bonus will be granted as follows:
- 5% for large taxpayers established according to OPANAF no. 3.609/2016;
- 10% for medium-sized taxpayers established according to OPANAF No 3.610/2016;
- 10% for other taxpayers who do not fall into the above situations.
The bonus will also be granted to the following taxpayers:
- taxpayers who have opted for a financial year other than the calendar year, in accordance with the provisions of Article 16 para. (5) of the Tax Code. In their case, the due date to which the bonus will relate will not be strictly 25 April 2020, but 25 April to 25 June 2020;
- taxpayers covered by Law No. 170/2016 [1] for corporate income tax for the first quarter of 2020, determined for the activities carried out, other than those corresponding to the CAEN codes provided for by law and listed in the footer of this document;
Example: A taxpayer who operates a hotel complex consisting of a hotel, restaurant, bar, multi-purpose hall, gym/fitness room and, separately, in another location, operates independently, without any connection to hotel services, a swimming pool, pays specific tax on the income from the operation of the hotel complex and corporate income tax on the taxable profit from the operation of the independent swimming pool. The rebate will relate only to the income tax on the taxable profit from the operation of the independent swimming pool.
The taxpayers listed above will determine their corporation tax by deducting the allowance from the tax due. The rebate will be entered separately in the annual income tax return.
3.2 Provisions of GEO no. 33/2020 with impact on micro-enterprises income tax.
According to Art. 1 para. (4) of GEO no. 33/2020, taxpayers liable for income tax on microenterprises who pay the tax due for the first quarter of 2020 up to and including 25 April 2020, benefit from a 10% rebate calculated on the tax due for that quarter.
It is important to note that, in the case of the microenterprises income tax rebate, GEO no. 33/2020 stipulates that it is calculated "on the tax due for the quarter in question", whereas, in the case of the corporate income tax rebate, GEO no. 33/2020 stipulates that it is calculated "on the tax due".
Even if the legislator makes an implicit distinction between the two regulations, we consider that the distinction will not be likely to produce differences regarding the legal treatment applicable to the rebates, since both the corporate income tax and the income tax on microenterprises are due quarterly by the taxpayer - in this sense being the provisions of Art. 41 para. (1) of the Tax Code and Art. 56 para. (1) Tax Code. As such, the terms 'tax due for the quarter in question' and 'tax due' are in fact synonymous.
However, there may be a subsequent legislative intervention by the Romanian Government, manifested in the issuance of a new Emergency Ordinance, which would modify or clarify the issue discussed above.
Last but not least, it is important to note that the determination of the income tax on micro-enterprises will be made by deducting the bonus from the tax due.
3.3 Provisions of GEO no. 33/2020 with an impact on value-added tax
According to Art. 2 para. (1) of GEO no. 33/2020, VAT on the import of goods is not actually paid to the customs authorities by taxable persons registered for VAT purposes, who import, during the period for which the state of emergency has been established and within 30 calendar days from the date of the end of the state of emergency, medicines, protective equipment, other medical devices or equipment and sanitary materials, which can be used in the prevention, limitation, treatment and control of COVID-19.
The provisions also apply to taxable persons, importers of fully denatured ethyl alcohol used for the production of disinfectants, who hold an end-user authorization valid at the time of importation.
The customs authorities do not charge value-added tax on these imports.
The tax relating to the above imports is recorded by the importers in the tax declaration provided for in Article 323 of the Tax Code - both as collected tax and as deductible tax, within the limits and under the conditions laid down in Articles 297-301 of the Tax Code.
The Annex to GEO no. 33/2020, as amended by GEO no. 48/2020, lists all the goods covered by the above provisions.
3.4 Other provisions of GEO no. 33/2020
According to Article 3 of GEO no. 33/2020, "The certificate for emergency situations, issued according to the methodology approved by order of the Minister of Economy, Energy and Business Environment, shall establish, on the basis of affidavits, the reduction of income or receipts by at least 25% in March 2020 in relation to the average of January and February 2020 or the partial or total interruption of activity as a result of decisions issued by the competent public authorities during the period of the state of emergency decreed".
The legislator does not corroborate this provision with the other provisions of GEO no. 33/2020, so 2 (two) hypotheses are possible:
Art. 3 of GEO no. 33/2020 is an autonomous regulation, without any connection with the other provisions of the same normative act;
Art. 3 of GEO 33/2020 suggests that in order to benefit from the facilities concerning corporate tax/income tax on microenterprises/value-added tax, it is necessary to obtain the certificate for emergency situations in advance;
The legislator will certainly address this text of the law in a subsequent legislative intervention, as it is not, at this stage, in a clear or predictable form.
***
Cluj- Napoca, 7 May 2020
MAXIM / ASSOCIATES
[1]
Romanian legal persons carrying out activities corresponding to CAEN codes: 5510 - "Hotels and similar accommodation facilities", 5520 - "Holiday and short-stay accommodation facilities", 5530 - "Caravan parks, camping sites and trailer parks", 5590 - "Other accommodation services", 5610 - "Restaurants", 5621 - "Event catering activities", 5629 - "Other food service activities n.e.c.", 5630 - "Bars and other food service activities".
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