Worldwide Tax Summaries--ROMANIA(1999-2000)(part1)

Worldwide Tax Summaries--ROMANIA(1999-2000)(part1)

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SIGNIFICANT DEVELOPMENTS
The current Profits Tax Ordinance has received additional amendments effective through 1999, and the Budget Law, effective January 1,1999, made some other changes

There is now a five-year loss carryforward rule.

TAXES ON CORPORATE INCOME
All legal entities doing business in Romania are liable for payment of corporate income taxes. The corporate income tax rate is 38%, applicable to both Romanian incorporated companies and foreign legal entities operating in Romania (branches and other permanent establishments).

CORPORATE RESIDENCE
A company is considered resident if it has its domicile or central administration in Romania.

OTHER TAXES
Value-added tax/VAT is imposed on goods sold and services rendered in Romania; the normal rate is 22%. There is a reduced VAT rate of 11% for certain basic foods and medicines (domestic heating and power are exempt).Border tax/A border tax of 0.5% is applied on the customs value, with the exceptions of imports from the EU, EFTA, CEFTA, P-16, and SGPC member countries, as well as from Turkey as of January 1,1998.

Local tax/A local tax of 0.5%-1.0% of the value is levied on buildings on an annual basis. There is also tax on land.

Health tax/Companies that obtain revenues from advertising cigarettes, tobacco and alcoholic beverages are subject to a 10% health tax, while retailers of the same products must pay a 1% tax. The tax basis is the total revenues generated from advertising or selling this category of product.

Customs surcharges/Beginning January 1,1999, imported goods are subject to a customs surcharge of 4%.

Authorization fee/Taxpayers involved in the production, importation,wholesaling,or retailing of cigarettes, tobacco, tobacco, coffee, and alcoholic beverages are subject to an annual authorization fee of from US$90 to US$32,000.

Social security tax/Employers must pay soCIAl security contributions, calculated on the gross salary costs as follows.

. 30%-SoCIAl security fund.
. 7%-Health fund.
. 5%-Unemployment fund.
. 1%-Risk fund.
. 1%-Commission for Labor Office.
For difficult working conditions the soCIAl security fund contribution can be increased up to 40%.

BRANCH INCOME
A company with its head office outside Romania may set up a branch. A branch office has rights similar to those of a Romanian limited liability company. A branch may carry out trading activities, but these must be conducted in lei, for the local market. The effective branch profits tax rate is 38%.

REPRESENTATIVE OFFICE
Companies that have their trading head office abroad and want to establish a representative office in Romania will be subject to all provisions concerning incorporation required by the home country. However, the company does not have a Romanian legal status and as such could not engage in any contract work. Also, a representative office is not entitled to reclaim VAT.

CommerCIAl representative office must be licensed by the  Ministry of Trade and Tourism. The cost of an operating license for a representative office is US$1,200 per annum plus an additional 10% for each additional company it represents.

Representative offices must also pay a tax of between US$5,000 and US$ 60,000, based on the number of employees.

INCOME DETERMINATION
Taxable profit is calculated as the difference between income and related expenses (deductions) plus nondeductible expenses.

Inventory valuation/Most assets and liabilities are valued at acquisition cost or at the technical cost of production. The acceptable methods for inventory valuation are standard cost, average (weighted) cost and FIFO. Wholesalers value inventories at the proposed selling price.

Buildings, speCIAl constructions and land can be revalued by using either the coefficients provided by law or the market value of the assets. The revaluation can made annually if the inflation rate is higher than 5% per year.

Conformity between book valuation and tax reporting valuation required.

Capital gains/Capital gains for corporations are taxed as ordinary income.

Intercompany dividends/Dividends received from Romanian subsidiaries and other domestic corporations within Romania are not included in the taxable income of the recipient. However, a withholding tax of 10% applies.

Foreign income/Resident corporations are taxed on all income, including revenue from sources outside the Romanian territory, unless those revenues are subject to tax in the foreign state and a bilateral agreement between Romania and the said state stipulates otherwise.

Stock dividends/The payment of stock dividends(bonus shares) is not provided for in current legislation.

DEDUCTIONS
Companies may deduct all expenses incurred in realizing revenues except for certain costs such as following.

1. Taxes on income and taxes on foreign revenues paid by foreign entities operating in Romania.

2. DepreCIAtion, amortization and depletion above the rates provided by law (see below).

3. Fees and penalties due or paid to Romanian and foreign authorities.

4. Expenses for entertaining (protocol expenses) in excess of 1% net profit.

5. Amounts used for the creation or increase of reserves in excess of those allowed by law.

6. Sponsorship expenses that exceed 5%, 8% or 10% of net income, depending on the field of activity.

Deduction of reserves for debts and other provisions is severely limited.

Depreciation and amortization/Tax depreciation of tangible assets is calculated on the same basis as accounting depreciation. For tax depreciation the laws provide a special utilization coefficient for every field of activity, which may lead to a portion of tax depreCIAtion being nondeductible. There is an exhaustive list of items and rules, which is updated occasionally. These rates are generally lower than those applicable in the United states or the United Kingdom.

Intangible fixed assets are generally depreCIAted over a period of up to five years, using the straight-line method.

Net operating losses/There is now a five-year loss carryforward rule. Losses incurred on foreign-source income may be deducted only from foreign revenues, on a source-by-source basis.

Taxes/Taxes on income are not deductible. Taxes for the use of state property lands and taxes on the means of transportation of the company that are included in expenses are deductible in full.

GROUP TAXATION
There is no concept of group taxation in current Romanian legislation, and each company in a group is taxed separately.

TAX INCENTIVES
Starting January 1,1999 both foreign and Romanian direct investors may benefit from the following tax incentives.

1. Tangible movable goods and intangible goods imported as in-kind contributions to the share capital of a company or an assoCIAtion in participation are exempt from import duties and VAT.

2. Specified technological equipment (a list is to be issued) is exempt from customs duty.

3. Accelerated depreciation may be used for depreciable assets; this involves an initial 50% claim followed by straight-line depreCIAtion and is not available for buildings. Prior approval of the tax authorities is not required.

Foreign investors who have invested at least US$5 million or US$ 50 million continue to benefit from additional incentives as follows.

1. US$ 5 million investment:
a. 15% corporate tax for seven years;
b. customs duties for raw materials, consumables and spare parts are reduced by 50% for five years.

2. US$ 50 million investment:
a. Corporate tax exemption for five years;
b. Exemption from customs duties and VAT for seven years for machinery,equipment and installations subscribed as capital in kind or paid from cash and for raw materials, consumables and spare parts.

Exporters/Corporate tax on profits derived from export operations is reduced by 50%. Reinvested profit is exempt from tax.

New investments/New investments between US$500,000 and US$ 50,000,000, in hard currency or the equivalent in domestic currency, benefit from a reduced corporate tax rate as follows.

   INVESTMENT VALUE                     TAX RATE
  FROM    NOT OVER                              REDUCED BY   PERIOD
   (US$ MILLIONS)                                 %   (YEARS)
0.5        1………………………………………………10        2
1          5………………………………………………15        3
5         20………………………………………………25        4
20        35………………………………………………50        5
35         50…………………………………………… 75        7
50……………………………………………………………100       10
However, the 1999 Budget Law (published in March 1999) has suspended this incentive for the 1999 year.

WITHHOLDING TAXES

There a withholding tax of 10% on dividends paid by companies.

According to Governmental Ordinance 83/1998, beginning in 1998,
nonresident legal and natural persons are subject to the following withholding taxes if there are no other provisions in international treaties.

1. 10% on interest.
2. 15% on commissions.
3. 15% on revenues from technical assistance and most other services rendered in Romania.
4. 15% on revenues from international transport activities.
5. 15% on royalties.
6. 20% on revenues from entertainment and sports activities and on amounts paid to writers, artists and scientists.
7. 10% on prizes granted in international contests and revenues obtained by nonresident gamblers.

Double taxation treaties
   The following double taxation treaties are currently in force.
Albania         Hungary         South Africa
Algeria         India            Spain
Armenia         Israel             Sri Lanka
Austria         Italy             Sudan
Bangladesh         Japan            Sweden
Belgium (new)        Jordan            Switzerland
Bulgaria         Korea, Rep. of         Syria
Canada             Kuwait            Thailand
China, P.R.        Malaysia        Tunisia
Costa Rica        Malta            Turkey
Croatia            Moldova            Lebanon
Cyprus             Morocco            LuxeMBOurg
Czech Republic            Norway            Yugoslavia (former)
Denmark            Netherlands        Ukraine
Ecuador         Nigeria                United Arab Emirates
Egypt             Pakistan        United Kingdom
Finland         Philippines        United States
France            Poland            Uzbekistan
Germany            Russia            Vietnam
Greece            Slovak Republic        Zambia
A number of additional treaties are awaiting ratification, and Romania is currently renegotiating the treaties with its major trading partners.

TAX ADMINISTRATION
Returns/All are taxed on a calendar-year basis. Taxpayers other than banks must file a quarterly return with the local tax office by the 25th of the month following the quarter-end. Banks must submit monthly returns. All taxpayers must submit an annual return to the tax authorities by April of the following year.

Payment to tax/The tax on corporate income must be paid by taxpayers other than banks at the time of submitting the return. Banks pay profits tax monthly the 25th of the following month.

CORPORATION TAX CALCULATION
(Example for illustrative purposes only) calendar year ended December 31,1998

                            (IN ROL THOUSANDS)
Net profit before tax………………………                      100,000
Less-Deductions:
   Dividends received from Romanian entities………………………10,000
   Deductible contribution to reserve fund (5% of profit) ……………………
……………………                                   ……5,000     15,000
                                                                 85,000
Add-Nondeductible expenses:
Fess and penalties………………………                           2,500
Protocol expenses over 1% of net profit…………                1,500
Sponsorship expenses over 8% of taxable income(Note 1) ………1,000   5,000
Taxable income before offset of losses brought forward………………90,000
Less-Loss brought forward………………………                     10,000
Taxable income……………………………………                       80,000
Tax on profit-38%…………………………………                      30,400
Less-Cumulated tax on profit paid from the beginning of the year ……………
…………………………………                                   (28,000)
Payable tax on profit………………………                          2,400
Notes:
1. Assuming sponsorship in the filed of education.
2. OffiCIAl exchange rate of the leu at December 31, 1998US$1=ROL10, 983.
The market exchange rate at that date was approximately US$1=ROL11, 200-ROL11, 500.        

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北京中立诚会计师事务所简介下载
地 址:北京朝阳区北苑路13号领地OFFICE大厦B座7层701室
电 话:(010)- 52086638 51095615
传 真:(010)- 52086636
邮 编:100107
E-mail:supercpa@163.com