Changes to Fiscal Code Applicable Starting January 1st 2013

1. Legal Background

The Emergency Order of the Cabinet no. 15 of August 23rd 2012 for the changing and supplementing the Law no. 571/2003 regarding the Fiscal Code, published in the Official Monitory no. 621/Aug. 29th 2012 introduces the “VAT at collection” system, starting January 1st 2013.

2. Companies that have to apply the VAT at collection system

• The VAT at collection system will be applied mandatorily by the taxable persons registered for VAT purposes, who have the headquarters of their activities in Romania and who have a turnover in the previous calendar year that does not surpass the level of 2.250.000 lei.

The turnover used for the calculus of the 2.250.000 lei level consists of:

• The total value of the goods deliveries and of the rendering of taxable services;
• The total value of the goods deliveries and of the rendering of exempted services with deduction right;
• The total value of the operations resulted from activities for which the place of delivery/rendering is considered to be abroad.

The turnover used for the calculus of the level includes also the invoiced advance payments for partial/complete deliveries of goods/services.

• In 2013, taxable persons whose turnover in the period October 1st 2011 – September 30th 2012 determined according to the above mentioned elements does not surpass the level of 2.250.000 lei applies the VAT at collection system starting with January 1st 2013.

• The taxable persons that register for VAT during a calendar year (but after the date of January 1st 2013) apply the VAT at collection system starting with the day of registering for VAT purposes.

Applying the VAT at collection system is mandatory for companies that register a turnover lower than the established level, but who do not belong to a unique fiscal group according to the stipulations of art. 127 (8). It is considered as unique fiscal group a group of taxable persons established in Romania who, being independent from legal stanspoint, maintain close mutual relations from the organizational, financial and economical standpoint, and who are administered by the same fiscal authority. The creation and the registration of the unique fiscal group are conditioned by the previous approval of the competent fiscal authority.

3. How to Apply the VAT at Collection System

•  The VAT collection (the exigibility of the tax) for goods deliveries or service rendering performed by taxable persons who apply the VAT at collection system occurs at the day of the collection of the partial or total value of the goods deliveries or services rendering.

• The companies that are obliged to apply the VAT at collection system who has not collected the complete or partial value of the goods delivery or of the service rendering in 90 calendar days since the day the invoice was issued collects VAT in the 90th calendar day since the day of the invoice.

• If during a calendar year a company surpasses the level of 2.250.000 lei, the VAT at collection system is to be applied only until the end of the fiscal period following the period when the level was surpassed (the month / the quarter following the surpass).

Example:

• A company using the calendar month as fiscal period has surpassed the level in May 2013. It will apply the VAT at collection system only until June 30th 2012.
• A company using the calendar quarter as fiscal period has surpassed the level in May 2013. It will apply the VAT at collection system only until September 30th 2013.

• Starting with the year 2013, the companies that in the previous year have not applied the VAT at collection system, but whose turnover for that year is lower than the established level, apply VAT at collection system starting with the first day of the second fiscal period of the year following the year when the level was not surpassed.

Example:

• A company that has not applied the system and who has until December 31st 2013 a turnover lower than the level of 2.250.000 lei and who has the calendar month as fiscal period applies the VAT at collection system starting February 1st 2014.

• If the taxable person is registered ex officio in the Register of the persons applying the VAT at collection system, this will apply the system from the day of the issuance of the registration decision.

4. Types of operations who fall into the VAT at collection system

• The system is applicable only to the operations having Romania as the place of delivery/rendering.
• The companies who are obliged to apply the VAT at collection system do not apply the system for a range of exempted operations.

This exempted operations fall into the general regulations regarding the VAT exigibility (applicable until now).

The main exceptions for applying the system are:

• The goods delivery /service rendering exempted by the VAT;
• Deliveries or services rendering for which the beneficiary is obliged to pay the tax (for example: intra-community goods acquisitions or external aquisitions of services);
• Deliveries of goods for which are to be applied the simplification measures according to art. 160 (deliveries of waste, wood, cereals and technical crops, the transfer of certificates of gas emissions with greenhouse effects);
• Goods deliveries/services rendering whose value is collected, partially or completely, in cash from the beneficiaries: legal persons, individuals registeres for VAT purposes, authorized individuals, free lancers and associations without a legal personality;
• Goods deliveries /services rendering whose beneficiary is an affiliated person to the supplier /executant.

According to the stipulations of the Fiscal Code, a person is affiliated with antoher person if the relation between them is defined by at least one of the following situations:

• The individual is affiliated with another individual, if they are spouses or relatives of the third degree included;

• The individual is affiliated with a legal person if the individual owns, directly or indirectly, including the owns of the affiliated persons, at least 25% of the value/number of the participation titles or of the voting rights owned by the legal person or if he or she exerts control over the legal person;

• The legal person is affiliated with another legal person if alt least:
  • the first legal person owns, directly or indirectly, including the owns of the affiliated persons, at least 25% of the value/number of the participation titles or of the voting rights owned by the legal person or if it exerts control over the legal person;
  • The second legal person owns, directly or indirectly, including the owns of the affiliated persons, at least 25% of the value/number of the participation titles or of the voting rights in the first legal person;
  • A third legal person owns, directly or indirectly, including owns of the affiliated persons, at least 25% of the value/number of the participation titles or of the voting rights both in the first and in the second legal person.

5. The Deduction Right

• The VAT deduction right for acquisitions made by a company which applies the VAT at collection system is delayed until the moment of the payment of the value of the invoices issued by the suppliers.

• If the companies that apply the system and who issue an invoice collect VAT after 90 days after its issuance at the latest, the situation is different with the deduction right of the receiver of the invoice, regardless if it is a company applying the system or a company who does not apply the system. The beneficiaries of the deliveries made by a company that applies the system will be able to deduct the VAT only in the moment of the payment of the invoice.

• If more partial payments are made for the same invoice, the VAT deduction right is determined in direct proportion with the paid value and the whole amount of the invoice (the VAT is deducted totally or partially).

• If the payment is not made in a period of 90 days, even if the supplier who applies the system is obliged to collect the VAT due to the invoice in the 90th day since the issuance of the invoice, the beneficiary of the deliveries/services rendering (regardless if they apply or not the system), will deduct VAT only at the moment when the payment is made.

• The deduction right of the VAT due to the acquisitions made by a company applying the VAT at collection system is delayed until the moment when the tax was paid to the supplier (the total or partiall payment of the invoice) or, even if a part of the operations performed by the company are excluded from the applying the VAT at collection system.

6. Other Dispositions

• The new legal provisions require that the companies applying the VAT at collection system must include on the invoices the mention “VAT at collection”.

• For collections after the date of January 1st 2013 due to invoices issued before December 31st 2012 and not collected until that date (the total/partiall value of the delivery/service) the new stipulations shall not be applied.

• For the year 2013 the companies with a turnover for the period October 1st 2011 – September 30th 2012 lower than the level of 2.250.000 lei must file until October 25th 2012 a notification to the territorial fiscal authority, notification that has to present the turnover obtained during that period.

• ANAF organizes the Register of the taxable persons who apply the VAT at collection system. The Register is public and it is published on the website of ANAF.

Changes Regarding the Profit Tax

1. Legal Background

The Cabinet Decision no. 50 of January 25th 2012 for modifying and supplementing Law no. 571/2003 regarding the Fiscal Code, published in the Official Monitory no. 78/ January 31st 2012 introduces from January 1st 2013 the system of stating and paying of the annual profit tax with anticipated quarterly payments.

2. Tax-Payers

• The tax-payers that can not apply the anticipated payments system in the account of profit tax are:

• Non-profit organisations;
• Tax-payers deriving the bulk of their income from growing cereals and technical crops;
• Foreign legal persons and non-resident individuals who perform their activity in an association with or without legal personality;
• the foreign legal persons deriving incomes from or in connection with real estate properties located in Romania or from the selling/transferring of participation titles owned in a Romanian legal person;
• The resident individuals associated with Romanian legal persons, for incomes derived both in Romania and abroad from associations without legal personality.

• Starting with January 1st 2013, the tax-payers, other the situations above mentioned, and the banking companies, may opt for declaring and paying the annual profit tax with anticipated quarterly payments.

• Newly established tax-payers, the tax-payers that register fiscal loss at the end of the previous year, those who were in a state of temporary inactivity registered with the Trade Register or those who paid the tax due to the incomes of microenterprises do not apply the anticipated payments system. All of these categories will apply the old system of stating, calculus and payments.

3. The Option Expressed by the Tax-Payer

• The option for the annual system of stating and paying of the profit tax is made at the beginning of the fiscal year for which the application is solicited for, until the date of January 31st (that day included) of that respective fiscal year.
• It is mandatory to keep the expressed option for at least two consecutive fiscal years.
• After the mandatory period of two years, the tax-payers may opt for renouncing the annual system of stating and paying the profit tax with with anticipated payments and they may return at the quarterly calculus system, implicitly the payment. The option is made at the beginning of the fiscal year for which the renouncement of the annual system of stating and declaring the profit tax is solicited for.

4. The Calculus Basis for Anticipated Payments

• The anticipated quarterly payments will represent a fourth of the profit tax owed for the previous year, actualized with the consumer price index, assessed on the occasion of drawing up the initial budget of the year the anticipated payments are made for. The consumer price index necessary for actualizing the anticipated payment is communicated, through Order of the Public Finance Minister, until the date of April 15th of the fiscal year the anticipated payments are made for.

• The profit tax due to the previous year, used as basis for the calculus of the anticipated quarterly payments, is the profit tax owed according to the statement regarding the profit tax, without taking into consideration the anticipated payments made during that year.

• If there are changes and corrections made of the profit tax due to the previous year during the year the anticipated payments are made for, the anticipated payments that are owed starting with the quarter when the change was made are determined on the basis of the recalculated profit tax.

• The tax-payers who apply the system of stating and paying the profit tax through anticipated payments and who register fiscal loss in the first year of the mandatory period of 2 years, in the second year make anticipated payments in the account of the profit tax, in an amount resulted from applying the tax ratio to the accounting profit of the period (quarter) for which the anticipated payments are made for.