Anti-crisis tax measures taken by Romania

Anti-crisis measures were intially entirely favourable to the business environment: We count the following as favourable changes: In 2009, capital gains from transactions on the Romanian capital markets are non-taxable. Also, starting with 2009: - distributed dividends are exempt from taxation if they are invested in a Romanian company to preserve and increase the number of employees and boost activity. - capital gains obtained by foreign investment funds from transactions in the shares of Romanian companies are non-taxable. - employers that obtained profit or income in the previous fiscal year can grant tax deductible holiday vouchers to employees, up to the limit of six national minimum wages, per employee, in a fiscal year. During the period 1 May 2009 to 31 A reduced VAT rate of 5% applies on the supply of welfare policy housing, including old peoples homes, retirement homes, orphanages and rehabilitation centres for children with disabilities. The reduced rate also applies to other buildings and parts of buildings under certain conditions (i.e. maximum usable area of 120 square metres and value not exceeding RON 380,000, exclusive of VAT). The pollution tax to be paid for newly registered vehicles was reduced by a third. Subsequent shortfalls in budget income collection (starting with November-December 2008) has led the newly installed Government to introduce: We count the following as unfavourable changes: Starting with 1 May 2009 all companies taxable in Romania will pay the higher between the 16% CIT and a minimum tax. The annual minimum tax ranges from EUR 500 to EUR 10,000 depending on the businesses' turnover in the prior year. For 2009, the due tax is pro-rated. From 1 May 2009 to 31 December 2009 VAT and expenses regarding fuel for vehicles (with maximum 9 passenger seats) are non-deductible for profit tax purposes. Some exceptions are provided for certain uses of vehicles, including transport of employees to and from work and leasing activities. During the period 1 May 2009 to 31 December 2010, companies cannot deduct VAT on acquisitions of fuel and vehicles exclusively used for passenger transport, weighing under 3,500 kg and with fewer than nine passenger seats (including the driver's seat). The same exceptions apply as mentioned under Corporate Income Tax mentioned above. In addition, however, VAT is deductible on the acquisitions of fuel and of the following categories of vehicles: cars used for providing services for consideration, including rental to others, the transfer of usage rights under a financial or operational leasing contract, vehicles used for commercial purposes (i.e. for the purpose of resale). Also note that subsequent sale of vehicles for which no VAT deduction was allowed at the time of acquisition is VAT exempt. By year-end, the government has passed Law 329/2009 on the reorganisation of public authorities and institutions, streamlining public expenses, supporting the business environment and complying with the framework agreements concluded with the European Commission and the International Monetary Fund. The Law adds a new article to the Fiscal Code providing a tax exemption for certain reinvested profits, introduced as a measure to support business in a time of financial difficulties and to promote commercial activities.

The incentive is available from 1 October 2009 until 31 December 2010 and applies to reinvested profits used for the production and / or acquisition of new (meaning not previously used) technological equipment used in the business. Some important considerations related to deciding whether or not to apply this incentive: the amount for which the incentive is applied is deducted from the fiscal value of the equipment produced/acquired, meaning the tax deduction for depreciating the equipment will be reduced in the future (thus in effect this incentive represents only a deferral of tax). the reinvested profit is allocated for the creation of a reserve, and release of such reserve in the future might have unintended tax consequences. if as a result of applying the exemption the income tax due falls below the minimum tax, the minimum tax will be payable. the assets created/acquired in relation to the incentive must be kept for at least half their normal useful life. If the assets are disposed of prior to this, profit tax is recalculated and delay penalties are due from the date the exemption was granted (assets transferred in the reorganisation process, under certain conditions, and assets disposed of due to liquidation / insolvency are exempt from this penalty).