The Romanian government recently adopted additional tax measures in response to the COVID-19 pandemic, by publishing a new emergency ordinance – GEO 48/2020. Thus, this ordinance comes to supplement the tax measures already taken by the government at the beginning of the state of emergency period.

The legislative changes implemented through this Ordinance impact multiple areas such as:

  • VAT refund procedures during the state of emergency
  • the deadline for submitting the annual financial statements by companies
  • the specific tax due by certain Romanian companies (in HORECA industry)
  • special provisions regarding gambling operators
  • application of tax incentives for certain employees during technical unemployment period
  • the possibility for micro-enterprises to sponsor certain entities
  • provisions on regulating tax payment rescheduling and others

Here are detailed below the most important tax measures in these areas brought by the new Ordinance:

1. Companies will be refunded the value added tax (VAT) before being tax audited

During the state of emergency period and for 30 days thereafter, the authorities will process the VAT refund requests with a post-refund tax inspection. So, the VAT reimbursement tax audits will be delayed during this period, but the refunds will still be processed. However, certain exceptions will apply, as follows:

  • VAT refunds for which a tax audit was initiated before the entry into force of GEO 48/2020, or
  • VAT refunds claimed by large and medium taxpayers (classified as per the law) if:
    • these taxpayers have offenses recorded in their tax records;
    • tax authorities determine, on the basis of the information available, that there is a risk of an unjustified refund or;
    • the voluntary liquidation procedure or the insolvency procedure has been started (unless a reorganization plan has been confirmed);
  •  VAT refunds requested by other categories of taxpayers if:
    • these taxpayers have crimes recorded in their tax records;
    • tax authorities establish, on the basis of the information available, that there is a risk of an unjustified refund;
    • the voluntary winding-up or insolvency proceedings have been initiated (unless a reorganization plan has been confirmed);
    • taxpayers submit their first application for a VAT refund after registration for VAT purposes, or
    • the negative VAT balance results from a reporting period of more than 12 months or four quarters.

These provisions will also apply to VAT refunds for which no refund decision has been issued until the entry into force of GEO 48/2020.

2. Postponement of the deadline for submitting the annual financial statements

The deadline for submitting the annual financial statements and reporting the accounts by Romanian companies for year 2019 is postponed until 31 July 2020.

Thus, for the purpose of submitting the financial statements related to the financial year 2019, and for the annual accounting reports concluded on December 31, 2019, the deadlines established as per art. 36 para. (1) and (3) and art. 37 of the Accounting Law (Law no. 82/1991) are extended until July 31, 2020.

3. The special tax due by Romanian companies operating in HORECA industry is repealed

The new tax measures also target the HORECA industry, which is severely affected by the current situation. Thus, by the recently approved ordinance the Government decided that companies operating in the HORECA sector will not owe the special tax during the period when their activities are interrupted during the state of emergency.

This measure applies no matter if the activity of the companies concerned is only partially or completely interrupted. To benefit from this exemption taxpayers should apply for the Emergency Certificate. In addition, companies that have applied for insolvency or are already under insolvency status cannot benefit from this measure.

4. Gambling operators are exempt from paying certain taxes

The gambling operators defined under Government Ordinance 77/2009 may file requests for the re-authorization of the activity within a maximum period of 90 days from the date of termination of the state of emergency period due to COVID-19.

During the state of emergency period, the tax payment obligations related to the authorizations for the exploitation of traditional gambling provided by the Government Emergency Ordinance no. 77/2009 is suspended. For these activities the sanctions provided by GEO no. 77/2009 regarding the non-payment of taxes related to the gambling exploitation authorizations will not apply. Payment of taxes must be done within 30 working days from the end of the state of emergency.

Traditional gambling operators do not owe taxes for gambling licenses for the entire period of the state of emergency.

5. The tax incentives benefited by certain categories of employees are suspended during technical unemployment

Exemptions from payment of income tax or other types of salary taxes from which certain categories of employees benefit are suspended if those employees are under technical unemployment status. Such employees may be: software developers, employees carrying out research and development activities, employees in construction sector, or other categories defined under art. 60 of the Romanian Tax Code.

The specific tax exemptions they usually benefit of will no longer apply to technical unemployment allowances paid by employers during COVID-19 and borne from the state budget.

The same treatment applies to parental leave allowances for the supervision of children that certain employees receive during COVID-19 state of emergency period.

6. Exemption from taxation for benefits in kind granted to employees under isolation

Any benefits in kind granted to employees holding certain jobs considered essential by the employer are not taxable if certain conditions are met. More specifically, this treatment applies to situations where preventive isolation of employees at work is necessary.

The exemption also applies to employees in specially dedicated areas where no outsiders have access during the state of emergency. These benefits in kind are also not subject to mandatory social security contributions.

7. Possibility for companies that apply the micro-enterprise taxation regime to sponsor public institutions

Companies for which the micro-enterprise tax regime applies may sponsor public institutions or authorities. For these sponsorships, deductions of up to 20% of the tax due for the quarter in which the sponsorship expense was recorded apply. The deduction can be registered just on the basis of the sponsorship contract, given that public institutions and authorities are not required to register in the Register of non-profit or religious organizations for sponsorships.

8. Facilities granted for tax payment installments

Interest and late payment penalties for late payment of unpaid installment charts shall not be calculated and shall not be due until the 30-day period following the end of the state of emergency. The competent tax authority will “ex officio” restore the payment rescheduling, in compliance with the approved rescheduling period. The new schedule will be communicated to the debtor by decision of the tax authority.

Also, the conditions for maintaining the validity of the tax payment installments granted according to the law will be suspended, until the fulfillment of the term of 30 days from the end of the state of emergency. For tax obligations that are a condition for maintaining the validity of payment facilities, taxpayers may request a change in the payment schedule, provided that the application is submitted by the expiration of 30 days from the end of the state of emergency.

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