page Tax Newsletter No. 11 / 2005 Str. Brezoianu, Nr. 36, Sector 1, Bucuresti Tel: +40 (0)21 313 70 31 Tel: +40 (0)745 20 27 39 Fax:+40 (0)21 313 70 68 Contents: ORDER regarding tax returns and use of Form «Payment Order to State Budget» ORDER regarding accounting standard forms and instructions for use ORDER regarding excise duties refund procedure LAW amending Company Law INSTRUCTION NBR reference interest rate for November 2005 LAW regarding private land ownership by foreigners CNAS and Ordinance 107/2005 on Health Insurance Contributions ORDINANCE regarding support to families with children ORDINANCE regarding unemployment and employment incentives LAW 333 DTT between Romania and Austria Proposed AMENDMENTS to 2006 FISCAL CODE DECEMBER 2005 AGENDA ORDER published on the Official Gazette 1055 on 26 November 2005 regarding tax returns and use of Form «Payment Order to State Budget» as a means of filing. This Order amends format and contents of the following returns: 100 «State budget liability return» 710 «Rectifying Statement» 300 «VAT Statement» 301 «VAT Special Statement» Tax payers can use to declare their liabilities (tax and social contributions) to the State the form Payment Order to the State Budget (OPT), if all the following conditions for each State liability are fulfilled: An amount is due for the respective period; In the reporting period, the amount due is equal to the outstanding amount as it is not influenced by deductible amounts for which an obligation to file exists ; The amount to pay for the period is fully settled in due time as per law. In case the tax payer uses OPT as a means of filing without complying with the above mentioned conditions, the means of payment will be not considered means of filing. However, paid amounts will settle tax liabilities according to Tax procedure Code (GO92/2003 art.2). The provisions of OMFP 246/2005 will apply to fill in and file the form «Payment Order to State Budget». Taxpayers who use as a means of filing under the above mentioned conditions, the form «Payment Order to State Budget» will not file form 100 «State budget liability return» for the respective liabilities. For filing State liabilities for the periods when the above mentioned conditions are not fulfilled, form 100 will be used. In case a tax payer has used several means for filing State liabilities, the first filed will be registered: Form 100 or OPT. Any further amendment to declared amounts is made by filing a Rectifying Statement (form 710) under the provisions of the law. ORDER no. 1714 / 2005 for the application of Government Decision 831/1997 related to financial and accounting standard forms and to instructions for their use Starting 1 st January 2006, tax receipts issued by tax cash tellers will be the sole forms in use for recording expenses into the Petty Cash Register. By exception, receipts issued when purchasing petrol for cars for the purpose of operations will be used to book such expenses if they are stamped and the name of the purchased mentioned as well as the car registration number in conformity with Government Decision 28/1999 related to forms for VAT recognition; To record expenses in their books, enterprises will request from their suppliers of goods and services to provide them with tax invoices in conformity with the provisions of Tax Code art. 155 point 9; When goods and services are paid in petty cash or bank card at the time the tax invoice is issued, it is not necessary to fill in the purchaser IBAN and bank data; It is mandatory to fill identification data of the person who makes the delivery only in case the person who issues the tax invoice also makes the delivery of the supplier goods;
In case, a goods delivery note is drafted at the time of the delivery, the tax invoice is to be issued in the prescribed number of days, identification data of the person who makes the delivery and information upon the delivery are to be filled in only onto the goods delivery note; In case, the goods delivery note bears the mention «Follow Invoice», it is not necessary to fill in «Unit price» and «Amount», captions which are mandatory on the invoice. In such a case, other information will be mentioned onto the goods delivery note such as item code, weight, volume or other to permit goods identification; A number of forms are not any longer forms under special regime; For retailers, recording sales on a Monetary is not longer mandatory; For wholesale enterprises selling also on retail, it is not longer mandatory to operate under separate gestiuni, staff and accounts. ORDER no. 1530 dated 11 October 2005 (Official Gazette 951) regarding the excise duties refund procedure based on the excise exemption returns The main provisions are: Excise exemption returns will be subject to a risk analysis which should be finalized within 15 days. Depending on the results of the analysis, the taxpayer will be categorized high or low tax risk. Taxpayers that are in one of the situations below are considered as taxpayers represent high tax risk and can benefit from an excise refund only after a tax inspection has been performed: ο if offences have been registered in their fiscal record; ο are newly-authorized; ο have no employee; ο have no immovable or movable property; ο if tax inspectors or the local offices of the Finance Guard have notified the relevant authorities that there is a high tax risk related to them. Taxpayers with low risk will receive the refund and tax inspection will be performed afterwards. Subsequent inspection will be conducted within maximum 2 years from the approval date of the refund. page 2 Law no. 302 dated 24 October 2005 (Official Gazette 953) amending Company Law 31 / 1990 The most important amendment brought to the Company Law is the increase of the minimum share capital of joint-stock companies and of partnerships limited by shares to the equivalent in RON of EUR 25,000, calculated at the National Bank of Romania exchange rate valid on the subscription date. The prior minimum share capital was RON 2,500; Existing companies should proceed to this share capital increase within one year as from the coming into force of the amendment act, that is, until October 30 th 2006, under sanction of dissolution of the legal person upon request of the National Office of the Trade Registry. Other amendments to the Company Law by Law no. 302/2005 refer to a better organization of the dissolution procedure. WINTER CELEBRATIONS Legal holidays Legal holidays are: ο 1 st December; ο Christmas Day and 26 th December; ο 1 st and 2 nd January. Paid vacation When legal holidays overlap with days of paid vacation, these days will not be entered into account when computing the number of days of paid vacation. In case employees work on a legal holiday for professional reasons, the time spent at work will be compensated with time off which will be taken by mutual agreement with the employer (according to Internal Regulations) or will be paid double. During the paid vacation, the employee receives an allowance which cannot be less than the monthly base salary and recurrent indemnities and bonuses granted for the respective period as per labour contract. This allowance is computed as the daily average of remuneration computed as above during the three months previous to the month when days off are taken by the number of days of paid holidays. The allowance is paid by the employer at least 5 working days before the employee leaves for vacation (Government Emergency Ordinance 65 dated 29 June 2005 to amend Law 53/2003 Labour Code). Taking days off Minimum number of days of paid vacation is 21 working days per year. Employees who joined during a year have a prorated number of days of paid holidays computed from the day they were recruited until 31 December. The sole case allowed by law when an employee can pay the employee the number of days the employee was entitled and did not take, is in case of cessation of labour contract. An employee who, under exceptional circumstances, has not
taken all the days he was entitled is obliged to take the remaining days before the end of the following year. Gratifications Gratifications can take several forms: Bonuses in addition to December gross salary liable to withheld employee contributions and income tax. For the employer, bonuses and related employer contributions are tax allowed expenses; Allowance in amount of RON 150 by under age child. This amount can be given also as Gift Voucher and represents an expense that can be included in Welfare expenses which are tax deductible in the limit of 2% annual payroll together with other categories of welfare expenses under Tax Code; Christmas presents, other than the ones mentioned in the previous article are considered benefits in kind and taxable for the employee. For the employer, these expenses are tax allowed as long as they are taxable for the employee; Gifts purchased by the employee and offered to the employee at the time of the traditional Christmas Tree can be recorded as protocol expenses. To be mentioned that protocol expenses are tax allowed in the limit of 2% of an amount computed as follows: total taxable income total deductible expenses (except corporate tax and protocol expenses for the year). INSTRUCTION no. 36 of the National Bank of Romania (NBR) issued on 1 st November 2005 regarding the reference interest rate for November 2005 For November 2005, the NBR sets the reference interest rate at 7.5% per annum. Law no. 312 / 2005 (Official Gazette 1008) regarding private land ownership by foreign and stateless citizens and by foreign legal persons Any citizen of a Member State, the stateless persons having the residence in a Member State or in Romania and the foreign companies registered in a Member State may obtain land ownership in the same conditions as for the Romanian citizens or companies ; The foreign citizen, the stateless person or the companies having the residence in any other countries than the Member States, may obtain the land ownership based on the stipulations in the international treaties, based on reciprocal conditions, but no more favourable conditions than for the Member States; The Member States any State member of European Union or E.F.T.A. The current law is to be come into force when Romania will join E.U. Reminder Micro enterprises page 3 If a micro enterprise does not fulfil during the year any of the requested conditions (i.e. starting with 1 st August 2005 and until 31 December 2005, the company does not have any employee), the company has to file the return 010 (changing the fiscal regime to corporate tax) with the Fiscal Authorities during January 2006. The Romanian legislation requests filing of the above return within 30 days from the date of change of the fiscal regime (which in the above case is considered to be 1 st January 2006). CNAS and Ordinance 107/2005 on Health Insurance Contributions The National Health Insurance Agency (CNAS) has stated the following regarding Ordinance 107/ 25 July 2005 on health insurance contributions: Foreigners Seconded to Romania CNAS maintains that: A foreigner is considered to be in Romania on a temporary basis until he obtains a stay permit. During this period, his contribution is optional. Once a stay permit is obtained, the foreigner is considered to have his residency in Romania and his contribution to the health fund becomes mandatory. This is to be calculated as 6.5% of the taxable income in Romania. Freelancers CNAS has stated that contributions calculated based on income derived from authorised activities or liberal professions is payable irrespective of whether or not it is the only taxable income that is used for calculating the contribution. CNAS has recently posted on the Ministry of Health s website (www.ms.ro) a new draft law on health insurance aimed to clarify the above issues. Government Emergency Ordinance no. 148 dated 4 November 2005 (Official Gazette 1008) regarding support to families with children Starting with 1 st January 2006, the monthly allowance to raise a child up to the age of 2 is RON 800 and is granted 3 years if the child is disabled. Application is to be submitted at the City Hall. The right to receive this allowance is granted to a person who had taxable incomes for 12 months prior to the child birth. To assess this 12 months period of contribution as per Law 19/2000 regarding pension and social insurance, the periods spent abroad by the person with his/her spouse are taken into account. For the periods when the beneficiary of the allowance obtains taxable incomes, this allowance is suspended and an indemnity in amount of RON 300 is granted. Any of the parents is entitled to the above allowance/indemnity. Territorial directions of Ministry of Labour, Social Solidarity and Family are in charge of the calculation and payment of the allowance/indemnity, as well as personal health contribution. The length of time a person is granted the allowance/indemnity
page 4 is considered a period of contribution to the public regime as per Law 19/2000. The allowance/indemnity is not liable to any other social contribution but the Ordinance does not mention whether it is or not subject to income tax. The present provisions apply also to the individuals who receive, as at 31 December 2005, allowances to raise a child as per Law 19 / 2000. Starting 1 January 2007: The monthly allowance to raise a child will be RON 600; The monthly indemnity for the periods when the individual obtains taxable incomes will be RON 100; The State allowance for children up to the age of 2 and in case of a disabled child up to the age of 3 will be RON 200. Within 60 days from publication date at the Official Gazette, the Ministry of Labour, Social Solidarity and Family will draft norms for application. the assets through a public tender or an in-house specialized department Income Tax Salary Income Tax exemption on revenues derived from software creation would be subject to prior approval of Competition Office ; Salary obtained from main occupation by a disabled person would be tax exempt. Income derived from investment Dividends would be liable to a 16% tax rate starting 1 st January 2006 ; Starting 1 st January 2006, a 16% tax rate would apply on interests applicable to: ο term deposits; ο saving instruments; ο civil contracts; Government Emergency ORDINANCE no. 144 dated 18 October 2005 (Official Gazette 969/01.11.2005) amending Law 76/2002 regarding unemployment and employment incentives Starting with 1 sr January 2006, employer contributions for unemployment are 2.5% of monthly gross salary. New incentives are introduced for employers who hire persons who have just finished high school or university or unemployed over 45 or single persons who support alone a family. Employment Agency is in charge of computing unemployment allowances in function of contribution period, unemployed length at work and the number of months the unemployment allowance is to be granted (for more information, see APEX Newsletter no. 10 http://www.apex-team.ro/eng/newsletter.htm). Within 90 days from publication date at the Official Gazette, the Ministry of Labour, Social Solidarity and Family will amend consequently norms for application for Law 76/2002. LAW no. 333 dated 15 November 2005 (Official Gazette 1034) To ratify Treaty signed at Bucharest on 30 March 2005 between Romania and Austria to avoid double taxation and prevent tax avoidance on income and capital and its enclosed protocol. PROPOSED AMENDMENTS TO 2006 FISCAL CODE Corporate Tax Travel and accommodation expenses in Romania or abroad occurred by employee or Director would be tax allowed irrespective the enterprise is profitable or not ; Private education grants would be tax allowed as sponsoring and patronage; The draft of the Fiscal Code dated 21 November 2005 does not mention any more that the loss on disposal of fixed assets would become tax disallowed. Losses would become deductible without the necessity to sell ο overnight deposits/current accounts. Interests derived from above mentioned investments made before 1 st January 2006 would be taxed at the tax rate in force when made. Agricultural income A new category of agricultural income would be introduced: revenues derived from agricultural products obtained from crop as such from privately owned or rented agricultural lands, from enterprises specialized in collecting them, from enterprises which process them industrially or by the other enterprises which use them in their natural state. The related tax at a 2% rate would be withheld and final. Tax on income obtained by non residents Income derived by a non resident from unwinding a Romanian legal person would be taxable. This income would represent the difference between distributions in cash or in kind over contribution to share capital; Tax would be due by application of the following rates to the gross income: ο 16% on interests on term/overnight deposits, current accounts, deposit certificates and other saving instruments at banks or at other credit institutions authorised in Romania created/purchased after 1 st January 2006. For those prior, the tax rate in force when set up would apply; ο 20% on gambling; ο 16% on any other taxable income in Romania.
Income from disposal of personal real estate properties Tax base would change : it would not be any more the difference between proceeds and property base, but the sale value itself, the way to determine it depending on how it is disposed of; Tax rate would be 2% (vs.10% previously planned) of the taxable income. Local taxes A disabled person would not be liable to tax on land, tax on building as well as to the fee to be registered as a free lancer. December 2005 -Agenda Everyday - do not forget: to fill in the petty cash register (or to print the electronic version) to fill in the purchase ledger and the sales ledger At month end - do not forget: to fill in the journal ledger to organize stock count of the assets if case the enterprise does not use permanent inventory system to issue the last invoices for the month of July (the rule of 5 days does not apply at month end neither for services) During the month - do not forget: That Monday 12 December is last day to submit: Return on collection of hotel tax That Monday 12 December is last day to pay: Hotel tax Tax on advertising services That Thursday 15 December is last day to pay: Tax on income from independent activities (instalment IV) Tax on rental income (instalment IV) Tax on agricultural revenue based on effective revenue (instalment IV) That Tuesday 27 December is last day to submit: State budget liability return for November 2005 (code 100) VAT return for November 2005 (code 300) Social security statement Unemployment fund statement page 5 Special VAT return for VAT non payers (code 301) Statement for income obtained by natural persons who perform an activity in Romania and by Romanian citizens who are employees of diplomatic missions and consular posts accredited in Romania (code 224) Environmental Fund Statement That Tuesday 27 December is last day to pay: Excises Tax on crude oil and natural gas from internal production Withholding tax on non residents income VAT Salary tax Tax on income from independent activities, withheld at source Tax on income from dividends Tax on income from interests Tax on income from investments Tax on income from pensions Tax on income from premium and gambling Tax on income from other sources Social security contribution Unemployment fund Health fund Work accidents and occupational diseases fund Contributions for non employment of disabled persons Environmental fund Gambling tax That Friday 30 December is last day to pay: The commission for holding and filling in the Labour books for the month of November Tax on dividends related to year 2004 and not withdrawn All forms mentioned above can be downloaded from the Ministry of Public Finance web-site: www.mfinante.ro
page 6 Str. Brezoianu, Nr. 36, Sector 1, Bucuresti Phone: + 40 (0)21 313 70 31 Phone: + 40 (0)745 20 27 39 Fax: +40 (0)21 313 70 68 E-mail: office@apex-team.ro Site: www.apex-team.ro ACCOUNTING AND PAYROLL EXPERT TEAM APEX team includes qualified professionals able to provide full range of accounting and payroll services. Our consultants are ready to share the knowledge and experience they have gained working in Romania as consultants in one of the Big 4 international companies, having as clients many international companies acting in a wide range of industries. The team includes chartered accountants (Romanian Chartered Accountants Body and also ACCA) specialized in assistance of the accounting function of companies, as well as a team specialized in payroll administration on behalf of the client. We provide full range of accounting services, payroll services, local tax compliance and tax advice, services tailored to your company needs: Start up services Organization of the accounting function Bookkeeping Recurrent accounting assistance Accounting and tax advice «on line» Payroll computation and additional services Assistance in implementation of information systems Training The above information is a short summary of recently published information and is not intended to be advice on any particular matter. APEX Team International disclaims liability to any person in respect of anything done in reliance of the contents of these publications. 2005 2005 APEX APEX Team Team International