Articles

New fiscal amendments

11 April 2005 (Invest Romania)

Previously announced, new amendments to the Fiscal Code have been brought at the end of March, through GEO no. 24/2005, published in the Official Gazette no. 263/2005. Although the enactment entered into force on April 1st, 2005, the majority of its provisions are set to become effective at later dates, e.g. May 1st or June 1st, 2005.

The main amendments to the Fiscal Code refer to the increase of certain taxes, relating to the profit tax or capital gains tax, the setting of special rules pertaining to incomes from sale of real estate, changes concerning the VAT, as well as the increase of the main excise duties.

The profit tax

According to the new enactment, the incomes from sale of real estate located in Romania or equity interest held in Romanian companies shall be subject to a 16% tax rate, starting with May 1st, 2005.

Income tax

As regards gains obtained from sale of shares, the tax rate applied as of May 1st, 2005 shall be 10% in case of shares held for less than 1 year prior to the sale, respectively 1% if the sale took place after more than 1 year as of their acquisition.

The tax rate on interest gains shall increase to 10% as of May 1st, 2005. Nevertheless, the gains from interest on demand deposits/current accounts shall be deemed non-taxable provided that the corresponding interest rate ranges within the average one-month interest rate used in transactions between financial entities (i.e. BUBID), valid on the first business day of the computation month.

At the same time, the withholding tax due by non-residents for interest on deposit accounts, deposit certificates and other saving instruments issued by banks and other credit institutions authorized and located in Romania shall double as of May 1st, 2005, from 5% to a 10% rate.

The enactment introduces a new tax, on the currency transactions gains and any other similar operations, at a 10% rate.

Other new provisions refer to the setting of new fiscal rules regarding incomes from sale of real estate. In this respect, GEO no. 24/2005 provides that, with some exceptions, the tax on gains from such transactions, set at 10% (16% as of January 1st, 2006) shall be calculated, withheld and paid to the state budget by the public notaries upon authentication of inter vivos transactions.

In case the ownership transfer is not performed through the notary public, the tax payer shall be compelled to declare the gain derived from the operation to the competent fiscal authorities (based on the real estate location), within 3 days as of the date of the transaction.

The VAT

As per the new enactment, some operations shall no longer be VAT exempted starting June 1st, 2005.

Such operations include: the sale of licenses for films or programs, broadcasting rights, import of carrier media, such as films, magnetic tapes and disks containing recordings of films or programs intended for radio or television activities, save for advertising purposes, and, generally, operations falling within the area of the show tax.

Increases of the level of the excise duties

As a general principle, GEO no. 24/2005 increases the level of excise duties for: alcohol, tobacco, mineral oil, cars and luxury products. Furthermore, starting April 1st, 2005, electricity, crude oil and natural gas used for commercial purposes shall be subject to excise duties.

It is worth mentioning that the following products shall no longer be exempted from excise duties: mineral oils used in household heating, or alcohol based products used, for example, in the cosmetics industry or in certain manufacturing operations.