Ordinance no. 2 / 2012 published in the Official Gazette no. 71 / 30 January 2012

The Ordinance brings a series of amendments and completions to Government Ordinance No. 92/2003 regarding the Fiscal Procedure Code, as subsequently amended and completed.

One of the most important information in the Ordinance, which, however, does not change the provisions of the Fiscal Procedure Code, is that all taxpayers (barring some exceptions) shall file their annual profits tax returns for 2011 by 25 March 2012.

According to the discussions had with the Ministry of Public Finances, it appears that the deadline for submission of the annual 2011 profits tax return will be 25 March 2011 even for those taxpayers who were going to submit the 2011 annual return by 25 February and therefore did not submit a return and respectively did not pay the profits tax liability (if any) for the fourth quarter of 2011. Thus, it could be that such taxpayers would be liable to declare and pay (if the case) the profits tax liability related to the fourth quarter of 2011 at the level declared/paid for the third quarter of 2011. It could also be that for the difference in time (i.e. between 25 January 2012 and the date when the fourth quarter 2011 profits tax liability is paid) the taxpayers will be liable to pay late payment interest and penalties.

Among the amendments to the Fiscal Procedure Code, we mention the following:

Advance individual tax ruling / Advance pricing agreement

The fee paid by the applicant taxpayer shall no longer be refunded in case the procedure for issue of the advance individual tax ruling / advance pricing agreement is interrupted, according to the law, but only if the tax agency rejects the issue / amendment.

It also provides that in order to resolve the application (through which the taxpayer also suggests the content of the advance individual tax ruling or of the advance pricing agreement) the tax authorities may go to the tax domicile of the taxpayer to analyze the relevant documents and request clarifications in this regard.

Moreover, taxpayers can express their point of view after the competent tax authority presents the draft of the advance tax ruling or advance pricing agreement within 60 working days from the date when the draft is communicated.

Transaction file

New provisions were introduced on establishing the economic content of a transaction according to Art. 11 (1) of the Fiscal Code (referring to the substance / economic purpose of transactions). According to these provisions, taxpayers are required to submit the transaction file within the terms established by the tax agency, in case the transaction is concluded with persons located in countries with which there is no legal instrument for the exchange of information.

Mutual agreement procedure to avoid double taxation

A new title was introduced, namely “Title VI1 – Mutual agreement procedure to avoid / eliminate double taxation”, which provides for the possibility of a taxpayer resident in Romania to request the National Agency for Fiscal Administration to initiate a mutual agreement procedure under the provisions of a double tax treaty, if the taxpayer considers that the taxation in the other country is not in line with the provisions of the treaty.

References are also made to Convention 90/436/EEC on the elimination of double taxation in connection with the adjustments of profits of associated enterprises, the revised Code of conduct for effective implementation of the Convention on the elimination of double taxation in connection with the adjustments of profits of associated enterprises and double tax treaties concluded by Romania with other states.

It also provides the procedure for elimination of double taxation between Romanian associated persons, stipulating that the adjustment of income or expenses of one of the associated persons made by the competent tax authority is opposable to the tax authority administering the other associated person. The adjustment is decided by issuing a tax decision / a decision not to change the taxable base and is opposable to the competent tax authority administering the taxes of the associated person only if this decision is final in terms of administrative and legal means of appeal.

Administrative cooperation in the field of taxation

A new title was introduced, namely “Title VII1 – Administrative cooperation in the field of taxation” which transposes Directive 2011/16/EU of 15 February 2011. The title will take effect from 1 January 2013 (except for the provisions concerning the spontaneous exchange of information applicable from 1 January 2015), and regulates the norms and procedures according to which Romania cooperates with other Member States to exchange information for specific taxes. This procedure applies to all taxes except VAT, customs duties, excise duties and mandatory social security contributions.

Assignment of tax identification code

The assignment of tax identification code can be done by the tax authorities, at the request of the income payer, also in the case of non-resident legal entities (apart from individuals who do not have a personal identification number) that obtain only income taxable through the withholding mechanism, provided that the tax withheld is final.

Tax clearance cerificate

Any person holding social parts in a company can apply for a tax clearance certificate of the respective company (previously, such certificates were issued only at the request of the taxpayer).

Forced execution

Certain new provisions were introduced with regard to seizure of bank accounts in case of forced execution procedure.

By Venkatesh Srinivasan, Partner – Head of Tax and Legal, Ernst & Young Romania

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