Parliament adopts law introducing new tax cuts and exemptions for some island-based businesses

The draft legislative bill that provides for tax exemptions and VAT cuts for casinos, hotels, restaurants, clubs or stores located on islands and areas resulting from natural shifts in land or hydrotechnical landscaping, initiated by PSD senator Serban Nicolae, has been approved by the Chamber of Deputies and will be sent to President Iohannis to sign.

The project had been tacitly adopted by the Senate at the end of 2017 despite receiving negative opinions by two committees due to its link to the Belina island, which is subject to a criminal investigation involving two former ministers.

The National Liberal Party said it would challenge the bill in the Constitutional Court as they claim it was directly beneficial for PSD president Liviu Dragnea.

The bill changes the fiscal facility system for the above-mentioned businesses based on the argument that it would create an incentive for the development of economic activities for special lands, which would in turn attract more tourists and investors to areas that are not currently productive.

The final form of the law says that targeted land includes islands, sand banks and other dry land with economic exploitation potential, resulted through natural changes of the land or through hydrotechnical landscaping works, owned publicly or privately by the state.

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The initial project did not exclusively refer to land that was publicly or privately owned by the state, and USR MP Claudiu Nasui said that the new form could eliminate the fiscal benefits for land owned by private individuals, but the Finance Ministry noted that such land can only be held in concession by private individuals, so the rule was maintained.

All these lands will be exempt from the land tax and will pay a 5 percent VAT on the following goods and services:

• Water and sewage supply services
• Transport of persons and luggage
• Providing services for cleaning streets, waste management (other than those provided by public authorities)
• Delivery of natural gas, electricity or energy for urban heating (but only after an opinion is issued by the European Commission).

For constructions and economic activities carried out on these lands, local taxes could be cut by 50 percent through a local council decision.

Bars, clubs and casinos, including companies that obtain revenues from such activities based on an association contract, for whom the profit tax is below 5 percent of these revenues, will be exempt from paying this tax.