Changes to the Fiscal Code, applicable from November 2018

The main change introduced by the Government through an emergency ordinance concerns value added tax, by extending the application of the reduced 5% VAT rate to sports and recreational activities, as well as to accommodation, restaurant and catering services.

The reduced rate will apply from 1 November 2018. The ordinance also sets out the payment deadlines for the amounts established by the tax assessment decisions for 2014 – 2017 to be issued by ANAF (National Agency for Fiscal Administration), as well as the granting of discounts for early payment.

What is changing?

Emergency Ordinance no. 89/2018 on certain fiscal and budgetary measures and on amending and supplementing certain normative acts (hereinafter “the Ordinance”) was published in Official Gazette no. 854 of 9 October 2018. The Ordinance makes several amendments to Law no. 227/2015 on the Fiscal Code.

The tax changes concern the reduction of the VAT rate for certain activities, the granting of discounts for early payment of the amounts established by annual tax assessment decisions for 2014 – 2017, and the clarification of the tax implications of changes in accounting policies resulting from the initial adoption of a new international financial reporting standard.

VAT rate reduced from 9% to 5% for certain activities and sectors

The VAT rate applicable to sports and recreational activities, as well as to accommodation, restaurant and catering services, will be reduced.

More precisely, from 1 November 2018 the reduced rate of 5% will also be extended to:

• Accommodation in the hotel sector or in sectors with a similar function, including the rental of land equipped for camping;
• Restaurant and catering services, excluding alcoholic beverages other than beer (which falls under NC code 22 03 00 10);
• The right to use sports facilities whose activities are classified under CAEN codes 9311 and 9313, for the purpose of practising sport and physical education.

Todos & Co. comment
Please note! A change in the VAT rate entails tax adjustments in the specific situations regulated by the Fiscal Code (for example, advances received).

Changes to the Fiscal Code, applicable from November 2018

The Ordinance provides clarifications on the finalisation of the social security contribution owed by individuals who estimate cumulative annual income below the minimum threshold set by law (i.e. 12 gross minimum wages per country), as well as by individuals who earn no income.

In addition, the Ordinance provides clarifications on:

• The payment deadlines for the amounts established by tax assessment decisions for 2014 – 2017
• The granting of discounts for early payment of the amounts established by annual tax assessment decisions for 2014 – 2017.

According to this Ordinance:

• The payment deadline for the amounts due under these annual tax assessment decisions, for the finalisation of the annual income tax on income earned by individuals in 2017 and for the finalisation of the individual social security contribution owed by individuals for 2016 – 2017, is 30 June 2019. For full early payment of these amounts by 15 December 2018, a 10% discount on these amounts will be granted.
• The payment deadline for the amounts due under annual tax assessment decisions issued and communicated by the competent tax authority after the entry into force of OUG 89/2018, for the finalisation of the individual social health insurance contribution owed by individuals for 2014-2017, is 30 June 2019. For full early payment of these amounts by 31 March 2019, a 10% discount on these amounts will be granted.
  The procedure for applying the above provisions is approved by order of the President of ANAF within 30 days of the publication of the Ordinance in the Official Gazette of Romania.

Tax rules for taxpayers applying IFRS as the basis of accounting

• The Ordinance amends the Fiscal Code as regards the tax rules for taxpayers applying IFRS as the basis of accounting. Thus, the principles currently applied are extended to cases of implementing IFRS as the basis of accounting and to cases of changes in accounting policies resulting from the initial adoption of a new international financial reporting standard. At the same time, the application of art. 21 let. b) point 3, on the recognition of items similar to expenses upon the initial adoption of IFRS as the basis of accounting or upon the implementation of new standards, is extended to items similar to expenses of the kind mentioned in art. 26 of the Fiscal Code – Provisions/impairment adjustments and reserves.
• The tax treatment of fair value differences recycled upon the sale/transfer of equity securities through other comprehensive income items is also clarified. Thus, the tax impact of these differences will be quantified upon disposal of the asset as items similar to income/expenses, as the case may be, if on the date of the sale/transfer the holding conditions mentioned in art. 23 let. i) are not met.
• Furthermore, the Ordinance clarifies the tax treatment of amounts arising from the cancellation of income that was previously taxable income. Thus, these will be treated as items similar to expenses upon the adoption of IFRS as the basis of accounting, or upon the change in accounting policies resulting from the initial adoption of new international financial reporting standards.