The changes recently proposed by the Ministry of Public Finance (MPF) in relation to the Tax Code and the Tax Procedure Code were passed by the Romanian Government on November 16th, 2016; the Emergency Ordinance is to be published in the Official Gazette, but the Executive has not yet released any statement as to whether the proposed version of the legislative project has been adjusted. The project was initiated by MPF earlier this month, and its beneficiaries are both companies and individuals. The new provisions should be applied from January 1st, 2017.
As of January, 1st 2016, when the new Tax Procedure Code entered into force, ANAF began a campaign to notify companies that have not renewed their registered offices, threatening with declaring them inactive for tax purposes if their situation is not solved within 30 days after receiving the notice.
There are two ways to avoid this situation:
An employer can stipulate at least four specific clauses in an individual employment contract, according to the Romanian Labour Code: the non-compete clause, the confidentiality clause, the mobility clause and the vocational training clause.
As of August 1st, 2016, a new category of employees is exempt from income tax on wages and other wage-related income. It consists of employees who carry out applied research and development activities and/or technological development activities, and the conditions for inclusion in this category are established by Order No. 4947/899/2018/1840/906/2016 issued on September 9th, 2016.
According to the New Romanian Tax Code, as of January 1st, 2016, income obtained from activities performed based on civil-law contracts/agreements, concluded in accordance with the Civil Code, as well as based on agent contracts, are excluded from the category of income from independent activities for which the income tax representing anticipated payments is withheld at source.
Under such conditions, the sole legal basis for income obtained under civil-law contracts/agreements to be integrated may be article 114 para. (2) g) of the Tax Code, which defines income from other sources as the income obtained by taxpayers that are not registered from a tax point of view and perform an occasional activity, although the law is not very clear in this respect.
After controversial debates, Law No. 77/2016 on discharge of mortgage-backed debts through title transfer over an immovable property ("Law on Debt Discharge") was finally published in the Romanian Official Gazette No. 330 dated April 28th, 2016, and entered into force on May 13th, 2016. "Debt discharge" (darea în plată) allows for the full discharge of any loans contracted by a natural person and secured by a mortgage arrangement, including any accessories in connection therewith.
A. Distraint and sale of shares
Pursuant to changes set forth in Law no. 152/2015 amending and supplementing specific normative acts on registrations in the Trade Registry, now the creditors of a shareholder have the possibility to put distraint on and sell the shares of their debtor. Therefore, the opposability of the garnishment and the distraint shall be registered with the Trade Registry, at the request of the foreclosure body.
Previously, such possibility was duly regulated for joint stock companies only. In case of a limited liability company, the creditors were able to exercise their rights over the part of benefits due to the shareholder debtor either after the closing of the financial year, or after the liquidation process, in case the company is dissolved. Therefore, the only possibility to foreclose the shares granted to the shareholder’s creditors was the garnishment of the shares that were due following the liquidation process. In other words, the creditors of the shareholder debtor used to enforce the garnishment over a receivable affected by the prior condition of the dissolution and liquidation of the limited liability company.
The Panama Papers are an unprecedented release of 2.6 terabytes of information (11.5 million files) from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca. The records were gradually obtained from an anonymous source by the German newspaper, Süddeutsche Zeitung, and shared by the International Consortium of Investigative Journalists (ICIJ) with a large network of international partners, including the Guardian and the BBC.
A. Legal changes effective since 2015
The most recent legislative changes to companies registered with the Romanian Trade Registry refer to the improvement and simplification of the dissolution, liquidation and de-registration procedures in relation to the Trade Registry:
Upon request of any interested person or of the National Trade Registry Office, the court shall decide on the dissolution of a company in new cases, as follows:
USA Congress enacted the FATCA legislation (which stands for Foreign Account Tax Compliance Act) in 2010 to mitigate tax evasion by US taxpayers directly owning unreported offshore accounts in non-US financial institutions or indirectly owning such accounts through foreign entities owned by them.
PFAs and dwelling-located companies have to register as such, and provide documents to have their local taxes established
Companies and self-employed persons with home offices have to submit declarations to local tax authorities, by March 31st, accompanied by documents showing the use of the building, according to the Tax Code. Depending on the latter and on registration of utilities, taxes shall apply as for dwellings - increased by no more than 30% - or non-residential buildings - at least twice the current taxes.
The Limited Liability Company –”Societate cu Răspundere Limitată” (SRL) – is the most commonly incorporated type of company in Romania. There are no limitations in regard to the nationality and residence of directors and shareholders. SRL is also the cheapest way to open a company, as the share capital for establishment is just RON 200. The number of shareholders is limited to 50, but a natural or legal person may be a sole shareholder.
Depending on the country, a company may be incorporated in as little as 4 days and up to a maximum of 30 days. In order to expand a business to the EU, or move a company from one member country to another one, it is important to know the necessary formalities that must be undertaken.
In the summer of 2013, the Organisation for Economic Co-operation and Development (OECD) released an action plan called "Base Erosion and Tax Shifting (BEPS)", which aimed to reduce the tendency of multinational corporations to shift profits to low-tax jurisdictions. The plan outlined the legislative changes to be introduced in three directions: international direct taxation consistency, tax realignment (considering the economic substance) and transparency - meaning legal clarity and predictability. BEPS measures contained in the report will change the way business is to be conducted, moving forward on a global scale, as well as the business environment and tax related corporate best practices in Romania.