Tax alert 11 – Draft Law for the approval of Government Emergency Ordinance no. 25/2017

Tax alert 11 – Draft Law for the approval of Government Emergency Ordinance no. 25/2017

The draft law for the approval of Government Emergency Ordinance no.25/2017 was adopted in the Deputies’ Chambers and was sent for being enacted to the President of Romania.

Corporate income tax

Among the most important amendments envisaged, we would like to mention the amendment proposal of the provisions regarding the losses deductibility limitation from alienated receivables. In the law applicable as of 1 January 2018, the 30% deductibility limitation refers to the expenses regarding the value of sold receivables, while in the provisions proposed in this draft law make reference to the net loss representing the difference between the sale price and the value of the sold receivable.

Additionally, in the case of credit institutions, 70% of the difference between the value of the alienated receivable and the assignation price are elements similar to revenues, if those assigned receivables are partially or fully covered by expected loss adjustments as well as when the receivables are written down in off balance accounts and then assigned.

Income tax

According to the draft law, the following amendments are proposed regarding the rules for determining the annual net income from independent activities, based on accounting data:

– removal of the reference „according to Law no. 95/2006 regarding the health care reform” for the voluntary health insurance premiums and the introduction of medical services subscriptions, paid for the personal purpose of the taxpayer which fall within the category of deductible expenses within the limit of the equivalent in RON of EUR 400 per year for each person;

– introducing the medical services subscriptions costs as non-deductible expenses, other than those which are deductible expenses according to the Fiscal Code.

Also, the reference „according to Law no. 95/2006 on health care reform” for voluntary health insurance premiums and medical services subscriptions is excluded for salary income as well.

Social charges

Regarding the monthly base for which no social security contributions are due:
– the reference to Law no. 95/2006 on health care reform for voluntary health insurance premiums is removed;
– the medical services subscriptions are introduced.

Value added tax

The most important change in the VAT sphere, is represented by the increase of the threshold set for the special VAT exemption, this threshold being increased from 220,000 lei (as it is currently) to 300,000 lei. Thus, from the date when the law enters into force, the taxable persons who achieve an annual turnover lower than the EUR 88,500 threshold, the equivalent in RON being set as the exchange rate communicated by the National Bank of Romania at the date of accession and rounded up to the next thousand, respectively 300,000 lei, can apply the VAT exemption regime for taxable transactions in Romania, except for intra-Community supplies of new means of transport. Exceeding this threshold would entail registration for VAT purposes.

There are set the transitional rules for taxable persons established both before 2018 and in 2018 regarding the registration / de-registration obligations for VAT purposes.