The GEO no 102/15.11.2013 amended the Romanian Fiscal Code with regards to the following chapters:
- Corporate income tax
- Income tax
- Income tax on micro-enterprises
- Withholding tax
- Value added tax
- Excise duty
- Construction tax
- Mining royalties
Among the provisions that impact the corporate income tax we would like to underline the introduction of the following fiscal measures, regarding the holding type companies:
- Income generated from the sale/transfer of securities held in a legal entity will be tax exempt;
- Income on dividends received from a legal entity will be tax exempt;
- Income generated by liquidation of a Romanian legal entity will be tax exempt
In order to benefit from the above mentioned exemptions, the companies’ part of the holdings must be resident in Romania or in a state member of a DTT Convention with Romania and must comply with the minimum ownership and timeframe conditions (10% of the capital equity for an uninterrupted period of 1 year)
In regard to the exemption of income on dividends distributed by a legal entity located in an EU member state to a legal entity located in Romania (based on the EU Parent-Subsidiary Directive implemented in the Fiscal Code) the minimum uninterrupted holding period is also 1 year.
The possibility and the conditions for carrying forward the deductibility right of expenses with interest and net loss from FX differences from the transferring legal entity to the beneficiary legal entity, for the entities that are part of mergers or splits have also been regulated. These are to be spread between the transferring legal entity and the beneficiaries, pro-rata with the assets and liabilities transferred to the beneficiary legal entities, or with those held by the transferring legal entity respectively.
In the income tax chapter, among other specifications, it is mentioned that those individuals who are resident in an EU or EEA state and obtain taxable income from Romania, will benefit from the fiscal deductions foreseen by the law for the resident taxpayers. The deductions will be granted if the following conditions are met:
- The individuals submit justifying documents;
- The amounts have not been deducted in the residence member state
In regard to the withholding tax chapter, the conditions for tax exemption granted for dividends paid by the Romanian companies to non-resident companies were modified as follows:
- The minimum holding period of 10% of the share capital for a Romanian legal entity has been decreased from 2 years to 1 year.
- The exemption is no longer applied on payments transferred to legal non-resident entities in one of the European Free Trade Association member
Among the changes that have been specified in the value added tax chapter we would like to highlight the following one:
- For VAT purposes the taxable entities that process financial-banking and insurance activities will be registered in case the buyer of the client is located outside EU or in the case these operation are directly linked with goods that will be exported into a country outside EU.
Impact on investors: The Fiscal Code regulation updates brought by the GEO 102/15.11.2013 will enter into force as of 1 January 2014.