Amendments to the Fiscal Code applicable from 2018 | KPMG | RO
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Amendments to the Fiscal Code applicable from November 2018

Amendments to the Fiscal Code applicable from 2018

The main amendment introduced by the Government through an Emergency Ordinance extends the application of the reduced VAT rate of 5% to sporting and recreational activities as well as to accommodation, restaurant and catering services.

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The main amendment introduced by the Government through an Emergency Ordinance extends the application of the reduced VAT rate of 5% to sporting and recreational activities as well as to accommodation, restaurant and catering services. The reduced rate will be applied as from 1 November 2018. The Ordinance also specifies the payment deadlines for the amounts established by tax decisions for the period 2014 - 2017 to be issued by A.N.A.F., as well as the granting of bonuses for early payment.

What's Changing?

Emergency Ordinance no. 89/2018 (hereinafter referred to as "the Ordinance") has been published in the Official Journal of Romania (no. 854; 9 October 2018), and makes changes to the Fiscal Code (Law no. 227/2015).

The changes reduce the VAT rate for certain activities, grant bonuses for early payment of amounts set by annual tax decisions for the 2014-2017 period, and clarify the tax implications of changing accounting policies as a result of the initial adoption of a new international financial reporting standard.

VAT rate reduced from 9 to 5 percent for certain activities and sectors

The VAT rate will be reduced for sports and leisure activities, as well as for accommodation, restaurant and catering services.

Specifically, starting from 1 November 2018, the 5% reduced rate will also be extended to:

  • Accommodation in the hotel sector or similar-function sectors, including rental of camping grounds.
  • Restaurant and catering services, excluding alcoholic beverages other than beer (falling within CN code 22 03 00 10).
  • The right to use sports facilities whose activities fall under CAEN codes 9311 and 9313 for the purpose of practicing sport and physical training.

KPMG comment

Changing the VAT rate entails tax adjustments for specific situations covered by the Fiscal Code (e.g. advances received).

Bonuses for early payment of amounts set by annual taxation decisions for 2014-2017 and other changes:

  • The Ordinance clarifies the rules for payment of social security contributions by individuals who estimate cumulative annual incomes below the minimum threshold set by law (i.e. 12 gross minimum salaries) as well as by individuals who do not earn any income.
  • 30 June 2019 is set as the deadline for the payment of amounts established by annual tax decisions for the final annual tax on income from individuals in 2017 and for the full payment of social security contributions payable by individuals for the period 2016-2017. A 10% bonus of these amounts will be granted for full payment of these amounts, by 15 December 2018.
  • 30 June 2019 is set as the payment deadline for payment amounts established by annual tax decisions issued and communicated by the appropriate tax authority after the date of entry into force of GEO 89/2018 for the full payment of social health insurance contribution payable by individuals for the period 2014 -2017. For full payment of these amounts by 31 March 2019, a 10% bonus will be granted.
  • The procedure for the application of the above provisions will be approved by order of the president of A.N.A.F. within 30 days of the date of publication of the Ordinance in the Official Journal of Romania.

Rules for taxpayers applying IFRS as a basis for accounting

The Ordinance amends the Fiscal Code on rules for taxpayers applying IFRS as a basis for accounting. This extends the principles currently applied to the implementation of IFRS as a basis for accounting and changes to accounting policies due to the initial adoption of a new international financial reporting standard. At the same time, it clarifies the application of art. 21 lit. b) section 3, on recognizing items of a similar nature at the time of initial adoption of IFRS as a basis for accounting or when implementing new standards, and for items similar to those referred to in art. 26 of the Fiscal Code - Provisions / adjustments for depreciation and reserves.

  • It also clarifies the tax treatment of fair value differences recycled at the time of sale / disposal of the units by other items of the overall result. Thus, the tax impact of these differences will be measured at the time of disposal of the asset as items similar to income / expenses, as appropriate, if at the date of sale / assignment the holding conditions referred to in art. 23, lit. i) are met.
  • Furthermore, the Ordinance clarifies the tax treatment of amounts arising from the cancellation of income that was previously accounted for as taxable income. Consequently, they will be treated as items similar to expenses when adopting IFRS as the basis for accounting, i.e. when changes in accounting policies are determined by the initial adoption of new international financial reporting standards.

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