Taxpayers faced new surprises from the tax authorities at the end of 2021, since new enactments were issued in an emergency procedure without the prior consultation of the business community. At least in theory, the goal of the central authorities is to simplify the tax obligations for companies, make them clearer and more predictable. In reality, taxpayers have to implement tax measures that will affect their business strategy and the budgets that most likely were already approved for 2022.
Amongst other, the Romanian Government issued GEO no. 130/2021 that amends and supplements both the Tax Code and other enactments, such as Law no. 241/2005 on preventing and combating tax evasion or Law no. 165/2018 on the granting of securities.
On a large scale, the ordinance adopted at the end of 2021 defers applicability of some legal acts with budgetary impact, such as granting facilities for early education and also introduces a long-awaited measure such as increasing the ceiling for the application of the reduced VAT rate of 5% for purchasing a residential property. Below, we go over the most important changes brought by GEO no. 130/2021.
Gift vouchers will only be granted to employees
The value of gifts in cash and/or in kind including gift vouchers that are non-taxable is increased from RON 150 to RON 300. However, gift vouchers can only be granted by a company to its own employees and not to other individuals as before, for marketing campaigns, market research, promotion in existing or new markets, protocol, advertising and publicity.
In the last years, many companies requested the tax authorities to clarify the tax treatment of gift vouchers granted to individuals that are not in an employment relationship with the payer of the income and GEO no. 130/2021 introduces new rules for gift vouchers. Taxpayers who used gift vouchers for marketing and promotional campaigns will have to use other methods for incentivising and rewarding potential individual customers.
Although the issue of gift vouchers seems now settled, there is no answer as to what happens with the past, particularly with the taxpayers who have already been subject to a tax audit. Thus, some are still waiting for tax decisions to be issued, others are already in the administrative and tax litigation phase. A “redemption” in the form of a tax amnesty is expected from the tax authorities, as this happened already in the past with the reclassification of self-employed activities and it is currently planned for the daily allowances of carriers, for which there is a bill adopted by the Senate and sent to the Chamber of Deputies for approval.
Reduced VAT for residential properties
GEO no. 130/2021 brings an important change to the reduced VAT rate for residential properties. We recall that the 5% VAT for residential properties of up to EUR 140,000 was not applied and was postponed for the beginning of this year. From 1 January 2022, a reduced VAT rate of 5% is introduced for the delivery of residential properties with a usable area of up to maximum 120 sq.m., the value of which, including the value of the land on which they are built, exceeds RON 450,000 but does not exceed RON 700,000, excluding VAT, purchased by natural persons individually or jointly with another natural person/other natural persons. The reduced rate applies only to residential properties which at the time of delivery can be inhabited as such and to a single residential property which meets the above requirements.
Other measures introduced by GEO no. 130/2021
Continuing the series of amendments, in order to mitigate the budgetary impact, the payment of certain amounts for early education of employees' children by employers is still suspended until 31 December 2022 inclusively.
With regard to the tax amnesty, the deadline for submitting applications for cancellation of accessory tax obligations relating to main tax obligations due before 31 March 2020 is extended from 31 January 2022 to 30 June 2022.
On a separate note, in order to increase the social security revenues, the authorities are reintroducing criminal sanctions for withholding and non-payment of withholding taxes and/or social security contributions, which could be sanctioned, under certain conditions, with imprisonment between one and five years. This provision also applies for taxpayers who do not collect or withhold these taxes. However, given the practical issues arising from the implementation of this new rules, the Government intended to further amend them through an emergency ordinance which is currently still under public debate. There is no doubt that the need to reduce tax evasion exists, but it remains to be seen how effective this approach will be, given the fact that the past legislation had similar provisions but they were removed as the desired outcome was not obtained.