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System for Prepayment of Corporate Income Tax Postponed Again Until 2010
The prepayment system for corporate income tax liabilities, envisaged to be implemented as of 1 January 2010, was recently postponed again until 1 January 2012. Taxand Romania reviews the impact of the delay for taxpayers and their cash flows.
In the context of the current economic environment, at the end of March 2010 the Romanian Government reverted to the old system of corporate income tax payments based on actual calculation of profits on a quarterly basis, for specified entities. Thus, by means of Emergency Government Ordinance, the quarterly prepayment system for corporate income tax liabilities owed by non-banking institutions, which was to be implemented, starting 2010, was again postponed until 1 January 2012.
This year Romanian corporate income tax payers (including permanent establishments of non-resident legal entities) will use the same corporate income tax calculation method as in 2009; specifically, corporate income tax liability is to be computed on a quarterly basis taking into account the actual profit and loss statement; the corporate income tax liability cannot be less than the minimum corporate income tax for the quarter, based on applicable grid.
Quarterly corporate income tax liabilities are computed, declared, and paid by the 25th of the month following the reporting quarter. For the fourth quarter of the year there should be no effective computation of the corporate income tax liability, the amount to be declared and paid being equal with the payment for the third quarter. At the end of the tax year (i.e. 31 December) for which the corporate income tax is due, an annual corporate income tax return must be submitted by the 25th of April of the following year, and the differences between final amounts of tax computed and cumulated quarterly payments should be settled within the same deadline. By way of derogation to the above rule, if a taxpayer files its financial statements by the 25th of February of the following year, it shall prepare and submit the final corporate income tax return within the same deadline, without declaring and paying the quarterly payment for the fourth quarter.
From an administrative perspective, the postponement of the prepayment system will maintain the pressure of having to perform actual figure calculations at the end of each calendar quarter.
The postponement of the prepayment system should provide a cash flow benefit to taxpayers recording lower profits in 2010 as compared to 2009.
The impact of the prepayment system on the cash flows of Romanian companies, as well as permanent establishments of foreign companies operating in Romania, should be taken into account for budget planning purposes. The administrative burden of having actual calculations should also be kept in mind.
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