Income Tax – changes
- Extension of the reinvested profit tax exemption facility to investments in assets used in production and processing activities, assets representing refurbishment.
The provisions of Article 22, paragraph (4) of the Tax Code establish rules for the application of the reinvested profit tax exemption facility for situations in which micro-enterprises become liable to corporate income tax during the year, in the cases provided for in Article 52 of the Tax Code.
We remind you that the profit invested in technological equipment, assets used in production and processing activities, assets representing the refurbishment, electronic computers and peripheral equipment, machines and household, control and billing appliances, in software, as well as for the right to use software, produced and/or purchased, including under financial leasing contracts, and put into operation, used for the purpose of carrying out the economic activity, is exempt from tax.
Tangible assets, with the exception of assets used in the production and processing activity, assets representing the refurbishment, for which the tax exemption applies are those provided for in subgroup 2.1, respectively in class 2.2.9 of the Catalogue on the classification and normal operating life of fixed assets, approved by Government Decision.
- Increase of the dividend tax rate from 5% to 8% for dividends distributed/paid between Romanian legal entities, as well as for dividends distributed/paid to non-residents (applies to dividends distributed after 1 January 2023).
We underline the fact that, in the case of dividends distributed on the basis of interim financial statements prepared during the year 2022, the tax rate on dividends is 5%, without recalculation of the tax on those dividends, after their regularization on the basis of the annual financial statements for the financial year 2022, approved according to the law.
- During the period from 1 January 2023 to 31 December 2023 inclusive, the application of the provisions of Article 25 paragraph (4) letter i1) and i2), Article 76 paragraph (4) letter x) and Article 142 letter z) of Law no. 227/2015, as amended and supplemented, is suspended.
During the suspension period, the expenses for the proper functioning of the nurseries and kindergartens administered by the taxpayers are considered as expenses with limited deductibility of the kind provided for in article 25 paragraph (3) letter b) of Law no.227/2015, as amended and supplemented, and are subject to the 5% limit established for them, applied to the amount of expenses with staff salaries, according to Law no.53/2003 – Labour Code, republished, as amended and supplemented.
2. Value Added Tax – amendments
- From 1 January 2023, non-alcoholic beverages falling under CN codes 2202 10 00 and 2202 99, i.e. non-alcoholic beverages containing added sugar or other sweetening matter or flavoured, will be excluded from the reduced VAT rate of 9% (the standard VAT rate will apply).
- In the case of restaurant and catering services, as well as for hotel accommodation activities, the VAT rate has been increased from 5% to 9%, starting from 1 January 2023.
- In the period from 1 January 2023 to 31 December 2031 inclusive, a reduced VAT rate of 9% will apply to the supply of chemical fertilizers and chemical pesticides of the type normally used in agricultural production, as provided for by joint order of the Minister of Finance and the Minister of Agriculture and Rural Development.
- As of 1 January 2023, a limit of 600,000 lei, excluding VAT, has been established for the supply of housing as part of social policy to individuals, with a VAT rate of 5%, in accordance with the law (previously the limit was 450,000 and 700,000 lei respectively).
- It is important to emphasize that individuals who have concluded legal acts between living persons concerning the advance payment for the purchase of housing at the reduced VAT rate of 5%, prior to 1 January 2023, benefit from the application of the reduced VAT rate in 2023 under the legal conditions in force at the date of conclusion of these acts.
- In the case of supplies of firewood to natural persons, legal persons or other entities, regardless of their legal form of organisation, including schools, hospitals, medical dispensaries and social welfare units, in the form of logs, billets, twigs, branches or similar forms, falling within CN codes 4401 11 00 and 4401 12 00, the reduced VAT rate of 5% will apply until 31 December 2029 inclusive.
- From 1 January 2023 to 31 December 2023 inclusive, the application of the provisions of Article 324 paragraph (4) – (6) of Law No. 227/2015 is suspended, i.e. the period of suspension of reporting obligations (information returns code 392A, 392B and 393) is extended.
- From 16 January 2023, the VAT rate is reduced from 19% to 5% for:
- the supply and installation of photovoltaic panels, solar thermal panels, high efficiency low emission heating systems that fall within the reference values for PM emissions set out in Annex V to Commission Regulation (EU) 2015/1.189 of 28 April 2015 implementing Directive 2009/125/EC of the European Parliament and of the Council with regard to ecodesign requirements for solid fuel boilers and in Annex V to Regulation (EU) 2015/1. 185 of 24 April 2015 implementing Directive 2009/125/EC of the European Parliament and of the Council with regard to ecodesign requirements for solid fuel-fired space heating appliances and which have been awarded a European Union energy label for demonstrating compliance with the criterion referred to in Article 7(2) of Regulation (EU) 2017/1. 369 of the European Parliament and of the Council of 4 July 2017 establishing a framework for energy labelling and repealing Directive 2010/30/EU, intended for residential housing, including installation kits, components and complete solutions respectively, as appropriate;
- the supply and installation of photovoltaic panels, solar thermal panels, high efficiency low emission heating systems that fall within the reference values for PM emissions set out in Annex V to Commission Regulation (EU) 2015/1.189 and in Annex V to Commission Regulation (EU) 2015/1.185 and which have been awarded a European Union energy label to demonstrate compliance with the criterion mentioned in Article 7(2) of Regulation (EU) 2017/1. 369 of the European Parliament and of the Council, including installation kits, components or complete solutions, as appropriate, for central or local public administration buildings, buildings of entities under their coordination/subordination, with the exception of commercial companies.
Legal basis:
-Government Ordinance no.16/2022 for amending and supplementing Law no.227/2015 on the tax code, repeal of some normative acts and other financial-fiscal measures;
-Government Emergency Ordinance no.168/2022 on some fiscal-budgetary measures, extension of some deadlines, as well as for the modification and completion of some normative acts;
-Law no.370/2022 on the approval of Government Ordinance no.16/2022 for the amendment and completion of Law no.227/2015 on the Fiscal Code, the repeal of some normative acts and other financial-fiscal measures;
-Law no.34/2023 for the modification and completion of Law no. 227/2015 on the Fiscal Code;
-Law no.39/2023 for the completion of article 291 paragraph (3) of Law no. 227/2015 on the Fiscal Code.