Emergency Ordinance no. 102/2013 amending Law 571/2003 regarding the Fiscal Code and certain fiscal-financial measures – published in Official Gazette no. 703/15 November 2013

Fiscal Code Amendments

The amendments to the Fiscal Code introduced by Emergency Ordinance no. 102/2013 are applicable starting from 1 January 2014.

The main amendments to the Fiscal Code include the following:

Tax on income of micro-enterprises

Requirements for application of micro-enterprises taxation regime

Micro-enterprises which during a fiscal year derive revenues of above EUR 65,000 or the share of revenues from consultancy and management activities in the total revenues is above 20% inclusively, are subject to corporate income tax starting with the quarter in which any of the mentioned thresholds is exceeded.

Taxable base

Certain amendments are brought regarding the computation of taxable base for legal entities which apply the micro-enterprises taxation regime.

Local taxes

Taxable value of buildings

The taxable value of buildings owned by legal entities applying the International Financial Reporting Standards, which opt for the cost-based model as a subsequent evaluation method, is determined based on an evaluation report issued by an authorized evaluator (such provision was previously applicable only for credit instutions).

Construction tax

Starting with 1 January 2014, a new tax on constructions other than buildings will be introduced.

The persons liable to pay construction tax are the Romanian legal entities (with certain exceptions), the permanent establishments in Romania of foreign legal entities and the legal entities set up in Romania according to the European legislation.

Constructions subject to construction tax are those included in the group 1 of the Catalogue regarding classification and normal useful lives of fixed assets (approved by Government Decision no. 2139/2004, as subsequently amended), with certain exceptions.

The tax is computed by applying a 1.5% rate to the value of the constructions existing in patrimony as of 31 December of the previous year, recorded in the accounting books, subtracting from that certain elements such as the value of buildings (including certain works) for which building tax is due.

Construction tax has to be computed and declared to the tax authorities up to 25 May of the year for which such tax is due, and paid in two equal installments, up to 25 May and 25 September of the respective year.

Value added tax (VAT)

VAT taxable base

The decision issued by the Court of Justice of the European Union in Case C-224/11 BGŻ Leasing sp. z o.o providing that the VAT taxable amount shall not include the insurance cost of goods subject to a lease agreement, including where the lessor insures the leased goods itself and re-invoices the exact cost of the insurance to the lessee was transposed into national legislation.

Please refer to our Tax Alert no. 2/January 2013 for further details on the Decision.

VAT refund to taxable persons which are neither established nor registered for VAT purposes in Romania

The condition regarding the payment of VAT requested for refund by taxable persons established in another Member State, which are not VAT registered and not obliged to be VAT registered in Romania was removed, provided that the other conditions provided by the law are fulfilled.

Similarly, this condition was also removed for taxable persons established outside the Community, which are not VAT registered and not obliged to be VAT registered in Romania requesting the refund of VAT on imports and purchases of goods/services performed in Romania.

VAT adjustment

Changes have been introduced in respect of VAT adjustment in the following situations:

- VAT adjustment is not required in case of stolen goods (including in case of capital goods), provided that the theft is demonstrated by the taxable person based on documents issued by judicial bodies;

- the specific provisions according to which no VAT adjustment is required for qualitatively damaged inventories that cannot be recovered, written-off fixed assets, other than capital goods, perishables within the limits provided by law as well as technological losses or, if the case, other own consumptions have been removed; and

- VAT adjustment is not required in respect of the acquisitions of capital goods subject to 50% limitation of the VAT deduction right.

VAT registration

Taxable persons having the seat of their economic activities in Romania are liable to register for VAT purposes for provision of financial services and insurance and/or reinsurance, if the buyer has established the seat of its economic activities outside the Community or if these operations are directly linked to goods which are to be exported outside the Community.

Excise duty

Level of excise duties

The excise duties for the following energy products are increased as follows:

- leaded petrol: EUR 637.91/ton, respectively EUR 491.19/1,000 liters;

- unleaded petrol: EUR 557.91/ton, respectively EUR 429.59/1,000 liters;

- diesel: EUR 473.85/ton, respectively EUR 400,395/1,000 liters; and

- kerosene: EUR 557.39/ton, respectively EUR 445.91/1,000 liters.

Exchange rate used to determine the level of excise duties

Amendments are brought to the methodology of converting into RON the EUR denominated excise duties, in the situation in which the exchange rate of the first working day of October of the previous year, published in the Official Journal of European Union, is lower than the exchange rate of the first working day of October of the year preceding the previous year, published in the Official Journal of European Union.

In this case, the RON level of excise duties is determined based

on the exchange rate of the first working day of October of the year preceding the previous year, published in the Official Journal of European Union, and is indexed with the annual average consumer price index communicated by the National Institute of Statistics for the month of September of the previous year.

For additional information, please contact: Venkatesh Srinivasan, Partner – Head of Tax and Legal

Ernst & Young SRL and E. Platis, C. Bazilescu LLLP

15-17 Dr. Ion Mihalache Street

Tower Building, 19th Floor

Sector 1, 011171, Bucharest, Romania

Tel: (40-21) 402 4000, Fax: (40-21) 310 7124

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