A company ABC SRL registered for VAT purposes and profit tax payers, concludes a contract with a Hungarian company (VAT payer), for the provision of services, on the territory of our country, on some intermediate products to be included in final products.
Is this operation subject to non-resident tax?
Solution: According to the Fiscal Code, art. 223, letter k), the incomes from services provided on the Romanian territory are subject to the tax on the incomes obtained by non-residents from Romania
In addition, given that a non-resident provides services for ABC in Romania, this non-resident has the obligation to declare the service contract by submitting D017 “Declaration of registration of contracts / documents justifying the actual provision of services in Romania, initial / additional (related), concluded with foreign legal entities or non-resident individuals ”(obligation regulated by Order of the President of the National Agency for Fiscal Administration (OPANAF) no. 2994/2016).
Given that the provider will present a certificate of tax residence in Hungary, the ABC company will not withhold any tax because the Double Taxation Avoidance Agreement with Hungary provides at art. 7 the following:
1. The profits of an enterprise of a contracting state shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business in this way, the profits of the enterprise may be taxed in the other contracting state, but only so much of them as is attributable to that permanent establishment. “
Thus, if the ABC company receives the fiscal residence certificate, the provisions of the Convention apply (in which it is specified that no tax is withheld) and the provisions of the Fiscal Code do not apply (art. 223, letter k).
This judgement is based on art. 1, paragraph (3) of the Fiscal Code, which specifies that in the situation where any provision of the Fiscal Code contradicts a provision of a treaty to which Romania is a party, the provision of that treaty applies.