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NEWSLETTER no. 3 17 February 2012 ANIA

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ROMANIA Amendments to the Fiscal Code (I)

REFERENCES:

GO 125/2011

The Government Ordinance no. 125/2011 amending the Law 571/2003 regarding the Fiscal Code was published in the Romanian Official Gazette no. 938/30.12.2011. Considering the multitude and importance of the changes, hereinafter we present those related to profit tax, VAT and local taxes. We will inform you shortly about the amendments brought in the income tax and excise duties areas. GENERAL PROVISIONS Until January 1, 2012 the fiscal authorities did not consider the transactions performed with/by taxpayers declared inactive, except purchases/supplies of goods carried out within the enforcement procedure. Starting with January 1, 2012 these transactions are considered as follows: TRANSACTIONS
PERFORMED BY TAXPAYERS DECLARED INACTIVE

Inactive taxpayers, which undertake economic activities during the period of inactivity, are subject to the payment of taxes but do not have the right to deduct the expenses and the value added tax incurred for the acquisitions made in such period; Beneficiaries that purchase goods and/or services from inactive taxpayers do not have the right to deduct the expenses and the value added tax incurred for such acquisitions, except the acquisition of goods carried out within the enforcement procedure.

Specific provisions have been introduced for transactions performed with/by taxpayers for which the registration for VAT purposes was cancelled: Starting with January 1, 2012 taxpayers for which the registration for VAT purposes was cancelled do not have the right to deduct VAT incurred for acquisitions made in such period, but they are subject to the payment of output VAT. TRANSACTIONS Starting with January, 2012 beneficiaries that purchase goods and/or PERFORMED BY TAXPAYERS services from taxpayers for which the registration for VAT purposes FOR WHICH THE was cancelled do not have the right to deduct the value added tax REGISTRATION FOR VAT incurred for such acquisitions, except the acquisition of goods carried PURPOSES WAS CANCELLED out within the enforcement procedure. Thus, starting with January 1, 2012, NAFA organizes: Registry of taxpayers registered for VAT purposes; Registry of taxpayers for which the registration for VAT purposes was cancelled.
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PROFIT TAX Starting with January 1, 2012 fuel expenses for vehicles used exclusively for passenger transport (weighing less than 3.500 kg and having a maximum of 9 passenger seats) are 50% deductible, except for vehicles used solely for: intervention, repairs, safeguard and protection, courier services, transportation of staff to and from the work place, as well as vehicles used by sales agents and by employment recruitment agents; paid transportation services for people, including taxi activities; driver schools, rental to third parties, including leasing; for resale Between May 1, 2009 December 31, 2011 the above mentioned expenses were considered fully non-deductible when calculating taxable profit. VALUE ADDED TAX Starting with January 1, 2012 the term of new construction, in terms of value added tax, refers to any transformed part of a building, not just a transformed building. On the other hand, the provisions on what means a transformed building, respective a construction whose structure, nature or destination, were changed, have been removed. In addition, starting with January 1, 2012 new provisions were brought on the market value of a building, which is defined based on an expert report. Establishing whether the building is new is important for determining the applicable tax treatment to its sale.

FUEL EXPENSES

DEFINITION OF NEW
CONSTRUCTION

Similar to provisions on profit tax, starting with January 1, 2012 the value added tax related to purchase of vehicles and their use of fuel is 50% ACQUISITION OF VEHICLES deductible, for vehicles with the same characteristics described above. AND THEIR FUEL Such provision shall apply also when invoices were issued and/or advance payments were made for partial value of the vehicles before January 1, 2012, and their delivery occurs after January 1, 2012. Starting with January 1, 2012 the taxable person may request the cancellation of VAT registration between 1 and 10 of each month following the fiscal period applied. Please note that previously, such request could only be done annually, until January 20 following the year in which the threshold was not exceeded. OPTIONAL CANCELLATION On the application date, the condition according to which the threshold should OF VAT REGISTRATION OF not be exceeded for the current year, calculated in proportion to the period TAXABLE PERSONS since the beginning of the year, must be met. Cancellation will be effective from the decision communication date regarding cancellation of VAT registration and the fiscal authorities are required to solve the applications for cancellation of VAT registration not later than the end of the month in which the request was made. REGISTRATION OF TAXABLE
PERSONS FOR VAT PURPOSES

Special provisions were introduced as of January 1, 2012, regarding taxable persons which are not established in Romania, nor are they registered for VAT purposes in Romania. Such persons may opt to register for VAT purposes in Romania if they perform imports of goods in Romania. The amendments brought starting with January 1, 2012 introduce specific situations when the tax authorities will cancel ex officio the registration for VAT purposes of taxable persons, as follows: - if either the taxable person or the shareholders/administrators of the taxable person have any offences or other deeds registered in their fiscal record. Once the VAT registration is cancelled, the tax authorities may, upon the request of the taxable person, re-register it for VAT purposes, provided the situation that led to the cancellation ceased to exist. Such persons are considered registered as of the date when the taxpayer is notified on the VAT registration decision; - if it did not submit any VAT returns during a semester, as of the first day of the second month following that semester, except for taxable persons which are declared dormant or in temporary inactivity. This provision applies only for taxable persons for whom the taxable period is the month or the quarter. Once the VAT registration is cancelled, the tax authorities may re-register the

CANCELLATION OF REGISTRATION FOR VAT PURPOSES

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taxable person, following its request, only after a 3 months period from the cancellation date. Such persons are considered re-registered as of the date when the VAT registration decision is notified to the taxable person. This decision is issued based on the presentation by the taxable person of the VAT returns that it failed to submit in due time and on a justified request stating that the person commits to observe the legal deadline for submitting the VAT returns. If, after the re-registration, the offence is repeated, the taxable person will no longer be able to register for VAT purposes; - if the tax returns filed for 6 consecutive months during a calendar semester for taxable persons for which the fiscal period is the calendar month, and for two consecutive fiscal periods during a calendar semester for taxable persons for which the taxable person is the calendar quarter, do not report any acquisition of goods/services, nor any supply of goods/services during these reporting periods, as of the first day of the second month following that calendar semester. Once the VAT registration is cancelled, the tax authorities may re-register the taxable person for VAT purposes, based on an affidavit presented by the taxable person stating that it will perform economic activities during the month following the one when the VAT registration was requested, at the latest. If the taxable person does not file an application for the reregistration for VAT purposes within 180 days from the cancellation date, the tax authorities will not approve any subsequent VAT registration applications. Starting with January 1, 2012, the approval or rejection of the application for registration in the Registry of intra-community operators will be notified at the same time as the registration for VAT purposes or, as the case may be, at the same time as the rejection of the VAT registration application is notified. Also starting with January 1, 2012, the tax authorities will de-register ex officio from the Registry of intra-community operators, taxable persons and nontaxable legal entities registered for VAT purposes, whose VAT number has been cancelled ex officio. As of January 1, 2012, the application for registration in the Registry of intracommunity operators should be accompanied by the criminal record of the companys shareholders, only for those shareholders holding a minimum of 5% of the share capital of the company.

REGISTRY OF INTRACOMMUNITY OPERATORS

Starting with January 1, 2012, the category of waste for which the reverse charge mechanism is applied has been extended in order to include goods such SIMPLIFICATION MEASURES as: ferrous and non-ferrous scrap, residues of ferrous and non-ferrous metals, their alloys, cables and other materials. LOCAL TAXES Specific provisions were introduced starting with January 1, 2012, related to tax on means of transport. Thus, until its first registration in Romania, the TAX ON MEANS OF mean of transport shall be considered stock. After their first registration, the TRANSPORT means of transport are no longer considered stock and in this case the tax on means of transport is due. Starting with January 1, 2012, the provisions stating that the tax rate is established by the local council between 1% and 3% has been removed and new specific provisions regarding the payment of the tax have been introduced. The tax is to be paid annually, in two equal instalments, until 31 March and 31 September, or entirely until 31 March if the amount is up to 50 ron. Disclaimer
The information in this newsletter is intended to give you an overview of legislative news; the newsletter does not contain a complete analysis of each topic. For more information about the subjects presented, please contact us. We do not accept any responsibility for decisions or omissions followed by the use of the content of this newsletter. All Boscolo&Partners newsletters are available at the following address: http://www.boscoloromania.ro.

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