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7 September 2021

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Romania Publishes Ordinance for Tax Code Amendments

Romania has published Ordinance No. 8 of 30 August 2021 in the Official Gazette, which contains various amendments to the Tax Code. Unless otherwise specified, the amendments generally entered into force on 3 September 2021. As previously reported, some of the main corporate tax amendments include:

  • The addition of a provision to clarify that for foreign legal persons with a place of effective management in Romania, the taxable period (tax liability) begins from the date of registration with the central tax authority;
  • The amendment of the conditions for the exemption for dividends under the domestic implementation of the EU Parent-Subsidiary Directive to fully comply with the Directive, providing that the subject to tax condition includes corporate income tax (profit-based tax) or another tax substituting the corporate income tax (current condition wording only mentions corporate income tax);
  • An increase in the deductibility limit for provisions for bad and doubtful debts from 30% to 50% with effect from 1 January 2022 (a previously approved increase to 100% is repealed);
  • The adjustment of provisions for the implementation of the EU Anti-Tax Avoidance Directive (ATAD) in regard to the payment of exit tax in equal installments over five years, including additional provisions in relation to scheduling installments, guarantee requirements if there is a real and demonstrable risk of non-recovery, triggering of immediate payment in certain cases, and other matters; and
  • The amendment of the tax regime for dividends paid to foreign legal entities in EEA states, namely Iceland, Liechtenstein, and Norway, so that the same treatment (exemption) applies as for dividends paid between resident companies, which is meant to avoid infringement procedures.

In addition to the above, certain VAT amendments are made including in relation to VAT registration and access to the EU One Stop Shop (OSS) for e-commerce. The amendments resolve infringement issues that were notified by the European Commission in July 2021 by amending prior registration rules that effectively excluded certain taxable persons from OSS. This includes new rules to allow small taxable persons with their registered office in Romania to apply the OSS regime without waiving the application of the special exemption regime for small enterprises, as well as new rules allowing (requiring) taxable persons to register for VAT when opting to apply the OSS regime in cases where the standard VAT registration conditions are not otherwise met.

The Ordinance also transposes an update to the EU VAT Directive adopted in July 2021 to provide that purchases of goods and services by an EU body on behalf of Member States to respond to the emergency posed by the COVID-19 pandemic are temporarily added to the list of exempted transactions in the VAT Directive, effective 1 January 2021. Previously, this exemption was limited to purchases made by an EU body for the official use of that EU body.

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