On 1 January 2016, the New Fiscal Code entered into force in Romania and thus, new provisions have to be considered by all taxpayers. Furthermore, a Government Emergency Ordinance (i.e. GEO no. 50/2015) promulgated on 31 December 2015 brought additional amendments to the New Fiscal Code which are also applicable starting this year.
Amongst the amendments introduced by the new Fiscal Code, presented below are the most important changes on the following key areas.
Dividend taxation – the dividend tax rate has been reduced from 16% to 5% for beneficiaries (both legal entities and individuals).
However, Romanian corporations would include dividend income derived from abroad in their regular corporate income tax computation and any resulting taxable profits would be subjected to 16% tax (this applies in case no exemption may be availed of – e.g. under EU Parent-Subsidiary Directive).
- Decrease of the standard VAT rate from 24% to 20% as of 1 January 2016 and to 19% as of 1 January 2017
- Decrease from 9% to 5% of the reduced VAT rate applicable to the supply of scholar books, books, newspapers and magazines, as well as for the access to castles, museums, memorial houses, historical monuments, archaeological and architectural monuments, zoos, botanical gardens, fairs, exhibitions and cultural events, cinemas, others than the exempt ones
- Decrease of VAT rate from 24% to 9% for drinking water and water used for irrigation in agriculture
- Extension of the applicability of the reduced VAT rate of 5% for access to sporting events, others than the exempt ones
- Extension of the application of simplified measures (i.e. reverse charge mechanism) for the local supply of
- Constructions, parts of constructions and plots of land for which the taxation regime is applicable
- Investment gold and gold raw material or semi-products, under certain conditions
- Mobile phones, integrated circuit devices, game consoles, PC tablets and laptops and other similar components – only if the value of this type of goods supplied, without VAT, included in an invoice, is of at least RON 22,500 (approx. EUR 5,000)
- Increase from RON 380,000 to RON 450,000, of the value of residence buildings for which the reduced VAT rate of 5%, for the delivery of residence buildings as part of the social policy, is applicable
Tax on constructions
- The 1% tax on constructions will still be applicable until 31 December 2016 and it will be eliminated starting 1 January 2017
- Starting this year, the building tax calculation method is determined based on the destination/use of the buildings (i.e. residential vs. non-residential buildings), as follows:
- for non-residential buildings, the tax rate ranges between 0.2% and 1.3%
- for residential buildings, the tax rate ranges between 0.08% and 0.2%
- in case of non-residential buildings, owned by individuals, for which the value of the building cannot be determined (e.g. no valuation report is available for the last 5 years), the building tax is determined by applying a 2% tax rate to the taxable base determined according to the law for residential buildings
- In case the building owner, legal entity, did not update the taxable value of the building in the last 3 years, the building tax rate is 5%
- Local authorities may increase the local tax rates depending on certain criteria, but such increase shall not exceed with more than 50% the maximum levels established by the New Fiscal Code
- Owner’s liability to file a new statement for building tax purposes exists only in case of extension, improvement, partial demollition or other changes brought to an existing building, including total or partial change of usage, which determine the increase or decrease of building’s taxable value by more than 25%
The New Fiscal Code aims to be a measure that supports the economic growth and enhances economic stability in an international context. Although in certain areas it regulates a fiscal relaxation, there are also changes that provide for new fiscal requirements that have to be carrefully analysed by all taxpayers as to be able to assess how they may be impacted starting the current fiscal year.