Emergency Ordinance No. 115/2023, published on 15 December 2023 in Romania Official’s Journal No. 1139 on certain fiscal budgetary measures in the field of public expenditure, for fiscal consolidation

Recently, Emergency Ordinance No. 115/2023 was published on the Romania Official’s Journal amending and updating Law 227/2015 of the Fiscal code, as well as Law 296/2023 that introduced the minimum turnover tax.

Among the most notable updated brought by this Emergency Ordinance we mention:

1. Amendments to the Fiscal Code

-  Corporate income tax

Tax losses

• The annual tax loss realized starting with 2024/ amended tax year starting in 2024, is recovered at a rate of 70% of taxable profits obtained in the next 5 consecutive years.
• Annual tax losses related to the years prior to 2024, remaining to be recovered on 31 December 2023, will be recovered within a limit of 70% of the related taxable profits, during the remaining period of recovery from the 7 additional consecutive years to the year of recording the respective losses.

Limitation of deductibility of interest and other costs economically equivalent to interest

• A new limitation of the deductible threshold for the exceeding borrowing costs of EUR 500,000 for transactions/operations with related parties that do not finance the acquisition/production of certain assets in progress is introduced (according to Law no. 296/2023, to be established by Minister of Finance Order). This threshold will not apply to credit institutions.
• The deductible threshold represented by the RON equivalent of EUR 1,000,000 for the total exceeding borrowing costs resulting from transactions/operations performed with affiliated persons, as well as with unaffiliated persons, which can be deducted in a tax period, does not change.

Provisions

• The limit for bad debt provisions is reduced from 50% to 30%. This limit of 30% is applied to adjustments for impairment of receivables representing amounts owed by internal and external customers for products, semi-finished products, materials, goods sold, works performed and services rendered, for receivables registered starting with 1 January 2024.
• Clarifications are brought with respect to the fiscal provisions that regulate the deduction of provisions by non-banking financial institutions, having the obligation to apply accounting regulations in line with International Financial Reporting Standards starting on 1 January 2023.
• Clarifications are brought on the fiscal provisions of depreciation adjustments and specific provisions, constituted by non-banking financial institutions and Romanian branches of non-banking financial institutions - foreign legal entities registered in the General Register, by payment institutions Romanian legal entities that grant credits related to payment services, by institutions issuing electronic money, by Romanian legal entities that grant credits related to payment services, and also by credit institutions.

Sponsorship/Private scholarships

• Private scholarships are removed from the category of sponsorships and are no longer eligible for tax credit.
• In order to determine the fiscal result, taxpayers who incur expenses related to private scholarships, are going to sum up these expenses within the limit of 1,500 lei / each scholarship granted, with social expenses, and the resulting amount will be deducted within the limit of 5%, applied to the value of expenses with staff salaries.
• The possibility of redirecting the CIT, for the performance of sponsorships and/or acts of patronage or the awarding of private scholarships, is amended, in the sense that this will be possible until the submission of the annual CIT (and not within 6 months as it is currently provided). 

Social Expenses

• Nurseries and kindergarten related expenses are introduced under the operating expenses of the units administered by taxpayers, which are deductible within the limits provided by the Fiscal code.
• The amounts paid by taxpayers for placing their employees' children in early education units will be considered social expenses, but no more than 1,500 lei/month, for each child, under certain conditions.

-  In the field of microenterprise income tax

• The definition of microenterprise is amended as follows:
  • regarding the condition of ownership by associates/shareholders of three micro-enterprises, it is mentioned that the 25% ownership can be either direct or indirect, and it applies to only one company;
  • for qualification under the definition of a micro-enterprise, the timely submission of annual financial statements is also introduced as a requirement;
  • in terms of the 500,000 euro income threshold, clarifications are made to indicate that this limit is calculated considering the income combined with the income of the related enterprises according to Law no. 346/2004;
• Entities applying the microenterprise tax regime, are no longer eligible for the tax credit related to sponsorships and the acquisition of fiscal electronic cash registers, starting from 2024.

The amendaments brought by Emerency Ordinance No. 115/2023 in the field of corporate income tax, respectively the income of microenterprises are valid starting with 1 January 2024, except for some new provisions (e.g. specific provisions, private scholarships) that come into force starting with 15 December 2023.

-  In the field of income tax and mandatory social charges

• Clarifications are provided regarding the application of the monthly ceiling of RON 10.000 specified for the incentives related to the income tax  and social charges for software development, constructions, agriculture and food industry income as well as in case an employee receives income in the same month from several employers, consecutively;
• Clarifications are brought regarding the threshold of 3 base salaries/ remunerations paid to employees/ administrators applicable to delegation and secondment allowances, in the country and abroad, granted as of December 2023;
• Regarding the non-taxable salary income within the monthly limit of maximum 33% of the basic salary, amendments are provided:
  • the amount of 400 lei that could be granted for the telecommuting regime is eliminated (as well as the provision regarding the tax free treatment);
  • the value of sports subscriptions is reduced from 400 euros to 100 euros/year (the limit is also applied for the deduction for subscriptions borne by employees);
  • the favorable difference between the negotiated preferential interest and the market interest, for loans and deposits is included;
  • the amounts borne by the employer for the early education of the employees’ children, within the limit of 1,500 lei/month for each child is included.
• Clarifications are brought regarding the month in which the amounts representing tourist services and/or treatment, contributions to voluntary pension funds, voluntary health insurance, sports subscriptions, those for the early education of employees' children and the difference between the preferential negotiated interest rate the market interest rate, for loans and deposits are reported;
• For rental income of personal patromony, the option to determine the net income in the real system is removed, and for the determination of the net income a share of 20% representing expenses is included;
• New rules are introduced regarding witholding of  rental income paid by legal entities or other entities that keep accounting records;
• With respect to the fiscal loss for certain types of income (from independent activities, intellectual property, the amount from the transfer of securities) the same provisions are applied as in case of profits tax with respect to the limit and the number of years for recovering;
• The option for taxpayers to decide on the destination of an amount representing up to 3.5% of the income tax for supporting non-profit entities or granting private scholarships remains valid only for salary and assimilated salary income (starting with income earned as of 2024);
• Clarifications are brought regarding the employee’s option to pay / stop paying the contribution to the privately administered pension fund for salary income earned by employees in the software development, construction, agriculture, and food industry – the procedure for exercising the option can be established by the employer via the internal regulation/ any other document;
• In general, the provisions regarding the social charges due for salary income are aligned with the income tax provisions mentioned above.
• Additional clarifications are pvided regarding the minimum wage used in determining the annual computatio base for the helath fund contribution as well as the obligation to file the annual tax return when the minimum salary is amended during the year.

Most of the amendements or clarifications will enter into force starting with January 2024/ income related to the year 2024, with few exeptions.

-  VAT

• The VAT deduction right related to the purchase, rental or leasing of buildings/living spaces, regardless of their destination, located in residential areas or in housing blocks, and the tax corresponding to expenses related to these buildings/living spaces is limited to 50%, if they are not used exclusively for the business purpose. This provision enters into force starting from the 1st of the month following the date from which Romania is authorized to apply a special measure derogating from the provisions of the VAT Directive.
• As of 1st of January 2024, persons who have obtained an authorized economic operator certificate ("AEO") cannot access the import VAT deferment facility solely based on AEO. This facility will apply in case of submitting a customs declaration by using centralized customs clearance (procedure for which holding the AEO certificate is mandatory) or the simplified procedure of entry in declarant's records.
• In order to obtain the certificate for VAT deferment in customs, for economic operators who in the last 6 months have made imports with a cumulative value of at least 50 million lei, an own responsibility statements is required, stating that the company does not have outstanding budget obligations.
• The definition of "added sugar", applicable in the context of non-harmonized excise duty for drinks with added sugar and of the standard VAT rate related to foods containing sugar, is rephrased, in the sense of clarifying that for determining the added sugar content are taken into account products assimilated to sugar (e.g. cane sugar, granulated sugar, fruit syrup, date nectar, jam sugars) when they are added as ingredients.
• In addition to cakes and biscuits, it is exempt from food with added sugar for which VAT 19% applies, starting from January 1, 2024, milk powder for newborns, infants and young children.

-  Excise duties

• The update of the excise duty for gasoline and diesel products with the increase in consumer prices from the last 12 months, calculated in September 2023, compared to the period October 2014 - September 2015, is split in two stages as follows:
  • starting January 1, 2024, with 50% of the increase in consumer prices;
  • starting July 1, 2024, with 50% of the increase in consumer prices.

• The obligation according to which the delivery of the products from tax warehouses or from the location where they were received by the registered consignee, is carried out only when the supplier has the payment document certifying the transfer to the state budget of the value of the excise duties related to the following quantity to be invoiced, was extended from energy products to excisable products such as sparkling wines, apple / pear cider, hydromel.
• Both the certificate of certified consignor and the certificate of certified consignee will be valid from the date of issue and not starting from the 1st of the month following the one in which the registration application was approved.

• A new marker - ACCUTRACE™ PLUS, scientifically named Butoxybenzene, will be used to mark diesel fuel or energy products assimilated to them an excise duty level point of view. Until January 18, 2024, both markers can be used (both the current Solvent Yellow 124 marker and the new ACCUTRACE™ PLUS marker).

• The obligation to clearly highlight the excise duties on the invoice only applies to economic operators who produce and sell in Romania products subject to non-harmonized excise duties, in the situation where they have the obligation to issue the invoice according to art. 319.

• For non-alcoholic drinks with added sugar that will be subject to non-harmonized excise duties, in stock on January 1, 2024, the chargeable event and the chargeability occur on the date of their sale on the domestic market.

2. Amendments to Law nr. 296/2023

-  Minimum turnover tax (MTT)

• Taxpayers who substract the value of assets under construction/ownership according to indicators I and A, are required to keep these assets in their possession for at least half of their economic usage period, but no more than 5 years. If this condition is not met, for these amounts, the MTT is recalculated, and, where appropriate, accessory tax may be charged, starting from the quarter/year of their reduction.
• These provisions do not apply for assets that:
  • Are transferred as part of a reorganisation operation;
  • Are alienated in liquidation/bankruptcy procedures;
  • Are destroyed, lost, stolen or defective and replaced, provided that these situations are duly demonstrated or confirmed by the taxpayer. In the case of stolen assets, the taxpayer should demonstrate the theft based on documentation evidence issued by judicial bodies;
  • Are removed from the company’s ownership as a result of fulfilling certain obligations provided by law;

The amendaments brought by GEO no. 115/2023 on Law no. 296/2023 are valid starting with 1 January 2024.

-  RO E-Factura system

• It is stated that, as of July 1, 2024, taxable persons established in Romania have the obligation to submit the electronic invoices through the RO E-Factura system within 5 calendar days from the date of issuing the invoice, but no later than 5 days as of the deadline for issuing invoices.
• For non-compliance with the above provision, contravention fines will be applied depending on the category of taxpayers, as follows:
  • from RON 5.000 to RON 10.000 for large taxpayers;
  • from RON 2.500 to RON 5.000 lei for medium-sized taxpayers;
  • from RON 1.000 to RON 2.500 for other legal entities and individuals;
• Between January 1, 2024, and June 30, 2024, are exempt from the obligation of issuing invoices through RO e-Factura system, the invoices issued for:
  • exports and intra-community supplies of goods;
  • supplies of goods and services rendered to taxable persons which are not established, nor VAT registered in Romania;
  • supplies of goods and services for which simplified invoices are issued (when the value of the invoices, including VAT, is not greater than EUR 100);
  • supplies of services for which invoice issuing is not subject to the invoicing rules applicable in Romania.
• Starting from July 1, 2024, simplified invoices will not be submitted through the RO e-Factura system.
• Starting with July 1, 2024, both the issuing and the receipt and registration of invoices by issuers, respectively recipients, taxable persons established in Romania, in a way other than through the RO E-Factura system, for B2B transactions, are sanctioned with a fine of 15% of the total amount of the invoice, both for the supplier and for the buyer.
• If the RO e-Factura system is not functional for at least 24 hours, the obligation to send invoices through the system in the case of B2B transactions between taxable persons established in Romania is suspended until the system is back in operation. Moreover, in this situation, the provisions of art. 319 of Law no. 227/2015 are applicable, with the condition of the subsequent transmission, in the RO e-Factura system, of the electronic invoices issued.
• The periods during which the RO E-Factura system will be offline, shall be published on the websites of the National Agency for Fiscal Administration and the Ministry of Finance.

-  RO E-transport system

• The obligation to report via RO e-Transport international road transport of goods (related to import/export/intra-community acquisitions / intra-community supplies) is established, as of 15 December 2023, regardless of the category of transported goods (i.e., not only for goods with high fiscal risk);
• The obligation to declare in the RO e-Transport System the data related to the international transport of goods rests with the following users:
  • to the recipient listed in the import customs declaration, respectively to the sender listed in the export customs declaration;
  • the beneficiary from Romania, in the case of intra-community purchases of goods;
  • the supplier from Romania, in the case of intra-community deliveries of goods;
  • the depositary, in the case of goods that are the subject of intra-community transactions in transit;
• Failure to comply with the obligations to declare international transports of goods in the RO e-Transport system is sanctioned with a fine from RON 20,000 to RON 100,000, in the case of legal entities, as well as confiscation of the value of undeclared goods.
• It is stated the obligation of the transport operator to equip the transport vehicles with telecommunication terminal devices that use satellite positioning and data transmission technologies, on which the software of the National Center for Financial Information is installed, as well as his obligation to ensure, throughout the route, the transfer of the current positioning data of the transport vehicles that are the subject of the declaration.
• Also, it is stated the obligation of the driver of the transport vehicle to start the positioning device before the start of the transport on the national territory, respectively to stop the positioning device only after delivering the goods to the declared place of delivery or after leaving the national territory;
• The sanctions for non-compliance with the new obligations regarding the international road transport of goods enter into force as of July 1, 2024.

Law no. 70/2015 for strengthening financial discipline regarding cash receipts and payments operations

• The threshold for payments from advances for settlement is increased, from RON 1,000 to RON 5,000.
• "Superstores" and "hyperstores" are defined and it is stipulated that, in their case, as well as in the case of cash and carry stores, the cash amounts in the cash register cannot exceed, at the end of each day, the threshold of RON 500,000 (compared to RON 50,000 as stipulated by Law no. 296/2023).
• The above-mentioned provisions entered into force on 15 December 2023.

Government emergency ordinance no. 28/1999 regarding the obligation of economic operators to use electronic fiscal marking machines

• The penalty for non-compliance by users of electronic fiscal cash registers with the deadlines provided by law, to use electronic fiscal cash registers, will apply, starting from October 1, 2024, for economic operators who deliver goods or provide services through vending machines. The sanction refers to the imposition of a fine from 8,000 lei to 10,000 lei, as well as (i) the confiscation of unjustified amounts; and (ii) the suspension of the activity of the economic operator at the unit for the sale of goods or the provision of services, until the provision of an electronic fiscal marking device and the presentation of proof of payment of the fine or half of its amount, as the case may be, to the ascertaining body.

The EY team is available for further details on the above.