Tax reductions in case of capital increase of the company

We remind you that, for companies that increase their capital between 2021 and 2025, there is the possibility, according to a normative act issued last year, to benefit from business tax reductions.

Thus, according to EMERGENCY ORDINANCE 153/2020 (published in the Official Gazette no. 817 / 04.09.2020), corporate tax payers, micro tax payers and specific tax payers, except for banks and insurers, may benefit from certain discounts of tax if they increase their own capital, in the period 2021 – 2025, according to the rules contained in Law no. 31/1990.

More precisely, according to Law no. 31/1990, the share capital can be increased:

  • through cash contributions;
  • through contributions in kind;
  • by incorporating reserves, benefits or issue premiums;
  • by converting certain, liquid and due receivables on the company into shares;
  • by converting bonds into shares;
  • by public subscription;
  • through the public offer of securities; or
  • by giving the shareholders the possibility to trade their preference rights on the capital market

It is important to specify that, according to the law, contributions in receivables for the increase of the share capital are not allowed.

Also, work benefits or services cannot be a contribution to the increase of the share capital. In order to increase the share capital, it is necessary, depending on the situation, a decision of the General Assembly of the Associates or the decision of the sole shareholder (in the case of an LLC with a sole shareholder).

The authentic form of the amending act adopted by the associates is mandatory, according to Law no. 31/1990, when it has as object either the increase of the share capital by subscribing as a contribution in kind of a building, or the modification of the legal form of the company in a company in collective name or limited partnership or the increase of the share capital by public subscription.

According to article 115 of Law 31/1990, the decision to increase the share capital is taken by a majority of at least two thirds of the voting rights held by the present or represented shareholders, with the mention that, in the constitutive act, quorum requirements may be stipulated and mostly older.

According to Law no. 31/1990, the share capital can be increased, both in the case of limited liability companies (SRL) and joint stock companies, by issuing new shares or by increasing the nominal value of existing shares in exchange for new cash or cash contributions. the nature.

Also, the new shares are released by incorporating the reserves, except for the legal reserves, as well as of the benefits or of the issue premiums, or by compensating some liquid and due receivables on the company with its shares.

Favorable differences in the revaluation of assets are included in reserves, without increasing the share capital.

Moreover, in the case of a joint stock company, the increase of the share capital by increasing the nominal value of the shares can be decided only with the vote of all shareholders, unless it is achieved by incorporating reserves, benefits or issue premiums.

In case of public subscription, the issue prospectus, bearing the authentic signatures of 2 of the members of the board of directors, respectively of the members of the board of directors, is submitted to the trade register and must include:

  • date and number of the company’s registration in the trade register;
  • name and headquarters of the company;
  • subscribed and paid-in share capital;
  • the name and surname of the administrators, respectively of the members of the board of directors and the supervisory board, of the auditors or, as the case may be, of the financial auditor, and their domicile;
  • the last approved financial situation, the auditors ‘report or the financial auditors’ report;
  • dividends paid in the last 5 years or since the incorporation, if, since this date, less than 5 years have passed;
  • bonds issued by the company;
  • the decision of the general meeting regarding the new issue of shares, their total value, their number and nominal value, their type, relations regarding contributions, other than cash, and the advantages granted to them, as well as the date from which the dividends will be paid .

In case of increase of the share capital through the public offer, the administrators, respectively the members of the directorate, are jointly and severally liable for the accuracy of those shown in the issue prospectus, in the publications made by the company or in the requests addressed to the trade register office, in accordance with the provisions of the legislation on the capital market.

Fiscal facilities for entities with positive equity:

Thus, taxpayers paying profit tax, income tax on micro-enterprises or tax specific to certain activities benefit from the following tax reductions:

  1. 2%, if the accounting equity, presented in the annual financial statements, respectively in the annual accounting reports for the permanent headquarters of the legal entities resident in states belonging to the European Economic Area, in the year for which it owes the tax, is positive. For the taxpayers who, according to the legal provisions, have the obligation to establish the share capital, the accounting own capital must fulfill at the same time the condition of being at the level of a value at least equal to half of the subscribed share capital;
  2. if it registers an annual increase of the adjusted equity of the year for which it owes the tax compared to the adjusted equity registered in the previous year and at the same time fulfills the condition provided in point I, the reductions have the following values:

Tax reduction rate – Adjusted annual equity growth intervals:

5% -up to   5% inclusive

6% -over    5% and up to 10% inclusive

7% – over 10% and up to 15% inclusive

8% – over 15% and up to 20% inclusive

9% – over 20% and up to 25% inclusive

0% – over 25%

III. 3%, if it registers an increase over the regulated level of the adjusted equity of the year for which it owes the tax compared to the adjusted equity registered in 2020 and if at the same time it fulfills the condition provided in point I.

This reduction applies starting with the year 2022, respectively starting with the modified fiscal year starting in 2022 and the minimum percentage increase of the adjusted equity compared to the adjusted equity registered in 2020 is 5% for 2022, 10% for the year 2023, 15% for 2024, 20% for 2025.

If two or three of the reductions provided for in points I to II are applicable to determine the amount of the reduction, the corresponding percentages shall be added together and the resulting amount shall be applied to the tax.

For the purposes of this article, adjusted equity comprises the following items:

  1. paid-in subscribed capital / endowment capital;
  2. the patrimony of the directorate;
  3. public patrimony;
  4. private patrimony;
  5. the patrimony of the national research-development institutes;
  6. capital premiums;
  7. legal, statutory or contractual reserve and other reserves constituted from the net profit as a result of the decision of the shareholders / associates or according to the legal provisions;
  8. the net carried forward result – credit balance, representing the positive difference between credit and debit balances.

The elements taken into account for determining the adjusted equity are those presented in the annual financial statements / annual accounting reports.

For the determination of the adjusted own capital according to letter a) by the permanent headquarters, the paid subscribed capital is replaced with the endowment capital provided by the foreign legal person for carrying out the activity in Romania.

If in the year for which the tax is due the following reorganization operations are carried out, according to the law, which produce effects in the respective year, the taxpayers establish the adjusted equity of the previous year, respectively of 2020, according to the following rules:

  1. taxpayers who, in case of merger, absorb one or more legal entities, add up the adjusted equity registered by them in the previous year, respectively 2020, with the adjusted equity for the same year registered by the other transferring companies;
  2. the taxpayers established by the merger of two or more legal entities sum up the adjusted equity registered in the previous year, respectively the year 2020, by the transferring companies;
  3. the taxpayers established by the division in any form of a legal entity divide the adjusted own capital registered in the previous year, respectively in 2020, by the transferring company proportionally with the value of the transferred assets, according to the division project prepared according to law;
  4. taxpayers who receive assets and liabilities through division operations in any form of a legal entity add up the adjusted equity registered by them in the previous year, respectively 2020, with the adjusted equity registered by the transferring company in the same year, recalculated proportionally to the value transferred assets, according to the division project prepared according to the law;
  5. the taxpayers who transfer, according to the law, a part of the patrimony to one or more beneficiary companies recalculate the adjusted own capital for the previous year, respectively the year 2020, proportional to the value of the assets maintained by the legal person transferring the assets, according to the division project

              In the case of taxpayers who in the year for which they owe the tax become permanent headquarters of foreign legal entities as a result of the operations provided in article 33 of the Fiscal Code, the adjusted equity of the previous year, respectively of 2020, is established according to the following rules:

  1. in case of merger by absorption, the adjusted own capital of the permanent establishment for the previous year, respectively the year 2020, is the one registered by the transferring company;
  2. in case of total division, partial division and transfer of assets, the permanent establishments determine the adjusted equity for the previous year, respectively 2020, based on the one registered by the transferring company, recalculated for each permanent establishment, proportional to the value of assets, according to law.The ceding companies that do not cease to exist as a result of performing such an operation establish the adjusted equity according to the rules provided at par.(8) letter e).

During the period of application of these reductions, the deadlines for submitting the declarations and for paying the tax are the following

  • for the taxpayers paying profit tax – the term for submitting the annual declaration regarding the profit tax and the payment of the profit tax related to the respective fiscal year is until June 25 inclusive of the following year, and for the taxpayers for which the fiscal year is different from the calendar yearuntil the 25th of the sixth month, including from the closing of the modified fiscal year;
  • for the taxpayers paying income tax on micro-enterprises, the deadline for submitting the declaration related to the fourth quarter and the payment of the tax related to this quarter is until June 25, inclusive of the following year;
  • for the taxpayers specific to some activities, the term for submitting the declaration related to the second semester and the payment of the tax related to this semester is until June 25, inclusive of the following year.

Attention! These facilities do not apply to taxpayers for whom the accounting regulations are issued by the National Bank of Romania, respectively by the Financial Supervisory Authority.

Legal basis:

Law 31/1990 1) companies – Republic, with subsequent amendments and completions;

EMERGENCY ORDINANCE 153/2020 for the establishment of fiscal measures to stimulate the maintenance / increase of equity, as well as for the completion of normative acts.