Business Guide to Romania* - Bayern - Europa

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Chapter 8 - Taxation of Corporations statements of the year 2003 would be the last revaluation possible to be deducted through fiscal depreciation. No revaluation of fixed assets made and recorded after 1 January 2004 would be taken into account for computing fiscal depreciation. Companies need to be prepared to keep a separate record to reflect the distinct computation of the fiscal and the accounting depreciation. Territoriality A company is considered resident if it is registered in Romania or has the place of effective management in Romania. Representative Offices A Representative Office can only undertake auxiliary or preparatory activities. A Representative Office cannot trade in its own name and cannot engage in any commercial activity. There is a flat tax of EUR 4,000 per fiscal year on representative offices, payable in ROL using the exchange rate valid on the payment date. For representative offices of foreign companies in Romania, incorporated during the first half of the year (1 January- 30 June) the tax is due by 20 June and is proportional to the number of months of activity of the representative office during that semester. The tax due for the second half (the equivalent of EUR 2,000) must be paid by 20 December. In the situation in which a Representative Office is set up or closed down during the year, the tax due for the respective year is pro-rated for the months for which the Representative Office operated in the respective fiscal year. 8.2 Incentives Profit Tax Legislation ■ Accelerated depreciation (i.e. up to 50% of the acquisition value shown as deductible depreciation in the first year, the remainder being equally spread over the remaining useful life) can be used for technical equipment, computers and peripherals without the need for approval from the local tax authority. The incentive is also applicable for assets acquired under financial leasing agreements with ownership transfer clauses applicable at the end of the contract. 36 PricewaterhouseCoopers - Business Guide to Romania 2005 Direct Investments The law on direct investments with a significant impact on the economy, enacted in July 2001, grants specific incentives for cash investments of a minimum of USD 1 million or equivalent. The incentives currently in force are: ■ Customs duties exemption for specific tangible/intangible goods imported as part of the investment; ■ The investments benefit from a deduction of a 20% of their value. The deduction shall be calculated during the month when the investment is carried out, only from a fiscal point of view; ■ Utilisation of accelerated depreciation for fixed assets, except for buildings. To benefit from these incentives, the investment must be registered with the Romanian Agency for Foreign Investments before its commencement. This investment must be made against payments in ROL or in hard currency and must be effectively accomplished within, at most, 30 months from the date of registration. The profit tax incentives granted under this law are applicable until 31 December 2006. If an investment qualifies for incentives granted by several laws, the investor has to opt for one incentive regime. Free Trade Zones Taxpayers that operate under licenses in free trade zones and have made investments by 1 July 2002 in depreciable tangible assets used in the processing industry, amounting to at least USD 1 million, benefit from profit tax exemption until 31 December 2006. This incentive ceases to apply if changes occur in the shareholding structure of the taxpayer. A change is deemed to have occurred in the shareholding structure if more than 25% of the company's shares have changed hands during a calendar year. Until 31 December 2004, all other companies operating in the free trade zones were liable to pay profit tax of 5% on the taxable profits generated by activities performed in these areas. From 1 January 2005 the standard rate has been applied. Disadvantaged Areas Legal persons that have obtained a permanent investor certificate in a disadvantaged area prior to 1 July 2003 are
exempt from paying profit tax throughout the existence of the disadvantaged area. Industrial Parks For investments in made industrial parks before 31 December 2006, a supplementary deduction is allowed out of the taxable profit, capped at 20% of the value of investments in constructions or rehabilitation of constructions, internal infrastructure and infrastructure for connecting to the public utilities grid. The incentive is granted in the month when the investment is finalised. Taxpayers that benefit from the 20% deduction from the acquisition value of the assets cannot benefit from this incentive. No property tax is due for buildings and constructions located in the Industrial Park. Also, land within Industrial Parks is exempt from land tax. Oil and Gas Incentives Under the Petroleum Law, which was amended last year, there are specific incentives for companies operating in the field of crude oil and gas exploration and extraction that have obtained the Petroleum Licence before September 2004. These incentives are applicable for the period in which the Petroleum License is in force. The Fiscal Code stipulates that taxpayers operating in the field of exploitation of natural deposits are obliged to establish provisions for rehabilitation of the exploitation area, up to 1% of the difference between revenues and expenses from exploitation, throughout the entire working period of the exploitation of natural deposits. For titleholders of petroleum agreements that conduct petroleum operations in marine perimeters with waters deeper than 100 metres, the provision for closure of oil rigs, as well as for environmental recovery, is 10% of the difference between revenues and expenses registered throughout the duration of the petroleum exploitation. In addition, under the Fiscal Code the tax depreciation of buildings and constructions related to petroleum operations whose useful life is limited to the duration of the reserves, and which cannot be used for any purpose after the reserves are depleted, should be calculated on the basis of units of production, based on the exploitable petroleum reserve. 8.3 Gross Income Accounting Period All entities doing business in Romania are required to keep their accounts by calendar year. The Government can approve a financial year that is different to the calendar year. The fiscal year is considered to be the calendar year. Business Profits The taxable profit of an enterprise is calculated as the difference between the revenues derived from any source and the expenses incurred in order to obtain these revenues, throughout the tax year, of which non-taxable revenues are deducted and to which non-deductible expenses are added. Other elements similar to revenues and expenses are considered when computing the taxable profit. The annual accounts are used as the basis for calculating taxable profit (further details on required adjustments are given below). Capital Gains Capital gains are taxed in the year in which they arise. Capital gains obtained by a Romanian resident company are included in ordinary profit and taxed at 16%. Capital gains obtained by non-residents from the sale of real estate located in Romania or on the sale of shares held in a Romanian company are also taxable in Romania at 16%. The 10% tax rate for the sale of real estate located in Romania and for capital gains on the sale of shares held in a Romanian company has been cancelled as of 1 May 2005. The provisions of Double Taxation Treaties prevail over the provisions of domestic legislation. Capital losses related to sale of shares are, in general, tax deductible. Interest, Royalties, and Service Fees Interest, royalties and service fees are included in a company's business profits for accounting purposes and are subject to corporate profit tax at the normal rate. Dividends Chapter 8 - Taxation of Corporations Dividends received by one Romanian company from another Romanian company are non-taxable revenues. PricewaterhouseCoopers - Business Guide to Romania 2005 37
Page 1 and 2: Business Guide to Romania* 2005 Edi
Page 3 and 4: Contents Chapter Page 1. Romania: a
Page 5 and 6: ■ Unions 30 6.2 Working Condition
Page 7 and 8: ■ VAT Compliance 48 10.2 Customs
Page 9 and 10: Chapter 1 Romania: a Profile ■ Ro
Page 11 and 12: upgrades made by Moody's and Fitch
Page 13 and 14: All visitors to Romania require pas
Page 15 and 16: nearly one-third of Romania's banki
Page 17 and 18: Mortgages are created under authent
Page 19 and 20: allowance of 20% of the value of th
Page 21 and 22: Chapter 4 Banking, Finance and Insu
Page 23 and 24: ■ Taking deposits; ■ Making loa
Page 25 and 26: tried to bring more transparency an
Page 27 and 28: Chapter 5 Corporate and Business La
Page 29 and 30: EUR 25,000 by 31 December 2005). Pa
Page 31 and 32: Chapter 6 Labour Relations and Soci
Page 33 and 34: employment contract with an occupat
Page 35 and 36: Chapter 7 Accounting and Audit Requ
Page 37: Chapter 8 Taxation of Corporations
Page 41 and 42: ■ Other salary and/or similar exp
Page 43 and 44: - revenues obtained from management
Page 45 and 46: Income Subject to 16% Flat Tax Rate
Page 47 and 48: ■ Income from sale of movable and
Page 49 and 50: similar function, cinema tickets, a
Page 51 and 52: guarantee import duties could be ob
Page 53 and 54: are transported between tax warehou
Page 55 and 56: also stipulates the elements that s
Page 57 and 58: elationships with key contacts, inc
Page 59: Appendices
Page 62 and 63: Appendix II Appendix II Major Banks
Page 64 and 65: Appendix III Restaurants Phone ■
Page 66 and 67: Appendix IV 481- 482 Internal Settl
Page 68 and 69: Appendix VI Appendix VI Accountants
Page 70 and 71: Appendix VII (b) Appendix VII (b) W
Page 72 and 73: Appendix IX Appendix IX Customs Dut
Page 74: Appendix XI Appendix XI Excise Tax

Business Guide to Romania* - Bayern - Europa

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