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New building tax to affect energy industry

Romania
19 Jan 2015

The Romanian Ministry of Finance has issued a decision based on which wind turbines are now classified as buildings from a tax perspective. This means operators in this industry will be subject to annual building tax. Taxand Romania discusses how this will affect the players in this field. 

Romanian local taxes have been amended through a decision issued by the Ministry of Finance (via the Central Fiscal Committee) according to which the tower of a wind turbine is classified as a building from a building tax perspective. This means all wind turbines will be subject to annual building tax (the standard yearly tax rate may go up to 1.5% of the inventory value).

According to the Ministry of Finance the decision is aimed at clarifying the existing provisions of the Romanian Tax Code implemented in 2004. However one may argue that the Ministry of Finance has changed the rules during the game, as there were certain official positions expressed by the Ministry of Finance in the past which stipulated that wind turbines do not meet the tax definition of buildings. 

Nonetheless, the risk is that the local authorities (based on this decision issued by the Ministry of Finance) would be inclined to impose building tax on wind turbine towers as well as late payment interest and penalties for the last 5 years which may reach a rather large amount for the players in this industry. 

This, of course, has the potential to create issues for corporations with wind turbines in Romania. Several meetings have been held with representatives of the Ministry of Finance on this subject with the aim of changing their view to agree that wind turbines should qualify as constructions (and therefore be subject to 1.5% construction tax, starting 2014 and not to tax them as buildings). The 1.5% construction tax have been reduced to 1% starting 1 January 2015. 


Your Taxand contacts for further queries are:
Angela Rosca
T. +40 21 316 06 45
E. angela.rosca@taxhouse.ro

Adrian Deaconu
T. +40 21 316 06 45
E. adrian.deaconu@taxhouse.ro

Oana Zaharia
T. +40 21 316 06 45
E. oana.zaharia@taxhouse.ro

Taxand's Take

Considering the consequences of this decision, it is very important for multinationals with wind farms in Romania to be aware of this exposure and think of available solutions in order to defend themselves against possible disputes with the tax authorities, who may seek to impose the 1.5% building tax retrospectively for the last 5 years.  

Taxand's Take Author

Angela Rosca
Romania

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