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New Year, New Code of Procedures and New Tax Code!
This is the time when we all are making plans for the New Year Eve, but did we properly budgeted expenditures for 2016?
And to do this, I propose you to review together the main changes of the new Tax Code and also the new provisions of the Ordinance 50/27.10.2015.
From a first look it's noted that in 2016 the most vulnerable are individuals who are self-employed or freelancers, and the Fiscal Procedure Code is not meant to solve what really hurts, namely: the introduction of rules and procedural limitations about duration and conduct unannounced checks and anti-fraud, or the removal of the effects on third parties resulting from the declaration as being inactive of a taxpayer.
Analyzing the below we see that the general trend is for increasing the tax burden on individuals, especially the tax burden to the independent professions, the PFA's, which will probably offset the VAT reduction budget. Regarding companies, there are certain tax reductions compared to 2015, and the penalties imposed in the majority of businesses - large and medium taxpayers excluded - those apllicable to the individuals (interest and penalties for late payment of debts).
The main changes in the Tax Code:
- First we have to underline the VAT reduction, from a rate of 24% to rate of 20%, together with a decrease of VAT for books delivery, textbooks, newspapers, magazines at the rate of 5% quota which is also applied to acces to sports competitions, cultural events, sale of social houses etc. The reduced rate of 9% is maintained for: drugs, accomodation in the hotel, food, restaurant and catering and the supply of drinking water and water for irrigation in agriculture. There will be extend VAT simplification measures, without actual payment of VAT for: buildings, parts of buildings and land (measure excluded in 2008 and resumed in 2016); supplies of mobile phones; supplies of game consoles, tablet PC's and laptops.
- The dividend tax will be reduced from 16% to 5%. The tax rate of 5% applies to income from dividends distributed starting with 1st of January 2016. Pay attention to the fact that starting with 1st of January 2017 will be due additional 5.5% share (percentage health) on the dividend.
- Among the aspects concerning the taxation for PFA's and comparing the payment obligations of PFA we observe the mandatory introduction of individual contribution on pensions of 10.5% of the net income of a person. This contribution is capped at an annual ceiling higher than 5 times the average wage x 12 months and is payable even if the PFA is an employee at an employer. To receive a full pension, optionally, a person can pay the contribution of 15.8%, that geing the employer's contribution.
- The base for calculating contributions to pension is "decided" by the individual but is limited both superior - can not be greater than 5 times the average wage (1.268 RON/month in progress) and lower - can not be less than 35% of the average wage (89 RON/month in progress).
- The percentage contribution to health (5.5% of the gross minimum wage meaning a minimum of 66 RON/ month in progress) and the tax rate remain unchanged. Interpreting the above, an individual with no income will have to pay a minimum of 155 RON montly.
- We find tax increases such as the increase in local taxes due from individuals for their houses, pointing out substantial tax increases for homes used as offices for self-employment. Taxes vary significantly depending on classification on their buildings: residential (0.08% - 0.2% on the taxable value of the building), non-residential (0.2% - 1.3% on the value of the building) or mixed (tax is calculated by adding the tax calculated for the area used for residential purposes and tax purposes determined for area used for non-residential purposes).
In case the building is non-residential:
a. and belongs to a legal person, it wasn't purchased in the last 5 years, nor it was reviewed the tax will be 2% on the taxable value determined as if the building were residential;
b. and belongs to a legal person, and the building owner has not updated the taxable value of the building in the last 3 years preceding the reference year, building tax rate is 5%;
The declaration for these documents will be deposited until 31.03.2016.
- on the status of micro enterprises, will be introduced progressive rates of income tax: 1% for entreprises that have more than two employees; 2% for entreprises that have an employee; 3% for enterprises that don't have employees.
Also the ceiling on micro enterprises will change, the ceiling will increase from 65.000 euro to 100.000 euro but it will be maintained the condition of no more than 20% of revenue to be resulted from consulting and management services. Overcoming these levels involses the shift to income tax from that quarter, and not the beginning of the fiscal year, as it was done previously. However, carrying out activities for the exploration, development, exploitation of the depletion of oil and natural gas deposits can not be mirco-enterprises;
The communication with the tax authority will be resumed, meaning that the legal entitites that are established during a fiscal year shall communicate to the component of the competent tax the application of the regime of micro, within 30 days of the establishment, the indication of the application for registration to the Register of Commerce is no longer enough; and the change in corporate tax regime on income tax shall be communicated to the tax authority by 31st of March of the following year ( the previous deadline was January 31st).
Analyzing the Fiscal Procedure Code, below are the changes:
- introducing the principle of interpretation of tax regulations in dubio against fiscum, which means that when the law is unclear will be interpreted in favor of the taxpayer, but is set as the last rule of interpretation;
- automatic reimbursement of value added tax of up to 45.000 lei for carrying out the inspection later;
- regulation of the taxpayer's support possibility to have an oral administrative appeal;
- the reduction of interest rate (reduced to 0.2 %) and interest on arrears (reduced to 0.01%) each with 0.01%;
- in the situation where the main tax obligations are determined by tax auditors due to failure to file the tax return, the penalty will only be applied by declaring, without having to impose the sanction for failure to submit the declaration contravention;
- reduction of fines applicable to legal persons, classified according to: taxpayers increase/medium/low;
- tax certificate is issued within 3 working days from the date of application, compared to 5 working days like it was before;
- the taxpayer will have a period of 45 days to formulate the tax appeal - more generous to the current regulation - 30 days, allowing a better preparation of fiscal and legal argumentation.
- concealing a percentage fee of 0.08%/day, with no differentiation between concealing and a subdeclaration. This penalty does not remove the default interest calculation, only the interest on arrears. Thus, the establishments of additional amounts accesories payment by the tax decision again reaches 0.1 per day of delay (36% per year);
- expanding the settlement of the taxpayer's application: the legal deadline to be reimburse VAT was increased from 45 days to 90 days in a VAT settlement with an anticipated checking. This period may be extended by a further six months if there is infomation required by the tax authorities from another states. It can reach a legal term of 9 months, with no possibility for the taxpayer to demand interest on late payment of VAT;
- artificial extension of the cases in which taxpayers may declare inactivity;
- the imposibility for the of claims overpaid (for the withholding) if the payer has filed for insolvency.