The Chamber of Deputies, the decision-making forum, adopted on April 20 the legislative proposal to simplify the taxation of investors in the capital market, the Bucharest Stock Exchange announced.

The bill provides for withholding tax on capital gains for individual investors to be retained at source, with two tax levels, i.e. 1% for holdings over one year and 3% for holdings of less than one year, while losses won't be compensated. The obligation to calculate, withhold at source, declare and pay the tax will fall on the intermediaries and fund managers.

The law would enter into force on January 1, 2023, after being promulgated by the president of Romania and published in the Official Journal of Romania.

"We are happy with the support we receive from the Romanian State institutions in our efforts, our common goal being to develop the Romanian economy," said Radu Hanga, the president of the Bucharest Stock Exchange.

"The law will make it much easier for potential investors to access the capital market. Because this is our goal: to encourage the population to be more present in the capital market and, thus, to facilitate the access of Romanian companies to financing," said Adrian Tanase, Bucharest Stock Exchange CEO. 

But the law hasn't received unanimous approval. Why would individual investors at BVB receive facilities when others, such as the entrepreneurs or the investors in open-end funds don't, business lawyer Gabriel Biris wonders, Ziarul Financiar reported.

Individual investors placing their money in an equity fund will still have to fill in annual statements (when cashing units) and pay the 10% income tax on earnings, as well as social security contributions above a certain volume of capital gains.

Another question not outlined by Biris but equally relevant is what value-added generates, for the economy, the type of investors that benefit from this so-called simplification. Certainly, the beneficiaries of the law are not those placing their savings to diversify their incomes after retirement.

Finally, Biris points out to one provision of the new legislation that was insufficiently explained: the investors will no longer be allowed to deduct their losses from the profits registered. Still, they will pay the tax on the gross capital gain for each stock, which is going to make a big difference in a bearish or mixed market such as the one expected for the future. 

(Photo: Vinnstock/ Dreamstime)

iulian@romania-insider.com