Fiscal Code rings the changes

The deductibility of expenses related to vehicles, as well as the increase of the VAT registration threshold to EUR 65,000 for individuals established in Romania and the deductibility of provisions for receivables are the main changes that have come into force in the Fiscal Code as of July 1.

The VAT deduction right related to the purchase, intra-community acquisition, import, rental or leasing of road vehicles, as well as VAT related to the acquisition of road vehicles that are used for purposes other than economic activities, has been limited to 50 percent, according to Mihaela Mitroi, partner, fiscal consultancy, at professional services firm PwC Romania. She added that an exemption from this provision has been made to vehicles used for emergency services or passenger transport.

This also applies to acquisitions for which payment is made in advance before July 1 but the delivery of goods and services takes place thereafter. Expenses incurred through such vehicles are 50 percent deductible for profit and income (from independent activities) tax purposes.

Another major amendment is the increase of the threshold for the application of the special exemption regime for small companies from EUR 35,000 to EUR 65,000, or from RON 119,000 to RON 220,000, according to Bogdan Voinescu, tax partner at Musat & Asociatii Tax Advisory.

“At least theoretically, this new provision will have a positive impact on taxpayers whose annual turnover is less than EUR 65,000, given that they would not be required to submit VAT declarations or acquisitions/sales ledgers and would not be subject to tax audits in this respect,” said Voinescu. However, this doesn’t allow the deduction of the input VAT related to acquisitions made for business purposes.

“This change was aimed at reducing the number of people registered for VAT purposes to improve the tax administration and fight tax evasion,” said Mitroi of PwC. A measure long supported by business organizations was the introduction of provisions related to the assignment of receivables.

“Provisions/adjustments for the depreciation of receivables that were acquired from credit institutions for the purpose of being collected, are deductible for the difference between the receivables’ value and the amount due to the assignee, if they are assigned and registered in the books of the assignee after July 1, are not transferred between related parties and were included in the taxable income of the assignee,” said Mitroi.

Alin Chitu, tax senior manager at Tuca Zbarcea & Asociatii Tax, said this facility would apply to assignments registered in 2013, but added that the limiting of adjusting deductibility only for credit institutions makes it discriminatory.

Ovidiu Posirca