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25 March 2013

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Tax Code amendments – Corporate taxation

On 23 January 2013, the Official Gazette No. 54 published Ordinance No. 8 that amends the Tax Code. The amendments will enter into force on 1 February 2013. The most important measures regarding corporate taxation are summarized below.

An anti-avoidance rule is added, according to which the provisions of a tax treaty are not applicable if they are used solely for obtaining tax benefits. Current substance-over-form provisions in the Tax Code entitle tax authorities to look through any transaction and assess tax according to the real substance of the transaction.

The supplementary deduction for research and development expenses is increased from 20% to 50%.

It is stipulated that all expenses proved to be connected to corruption acts are not deductible for corporate income tax purposes.

A definition of the term credit/loan (necessary for the interest deductibility rules) is introduced. The term is now defined as a contract between parties which generates interest expenses and the obligation to reimburse the borrowed capital.

Deduction of depreciation expenses related to means of transport for passengers, having maximum nine seats, including the driver's seat, is limited to RON 1,500 per month for each vehicle. Previously, there was no limitation for such deductions.

A provision is introduced clarifying that a foreign tax credit may only be used in the year in which the foreign tax is paid.

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