Amendments to the tax legislation. Certain amendments to the tax legislation enter into force in 2018:
Corporate income tax
- Deductibility of financing costs: financing costs (e.g. interest, interest capitalised in the value of assets, notional interest under derivative financial instruments, financing commissions, foreign exchange gains etc.) may be deducted up to a limit of Euro 200 thousand, while excess amounts may be deducted up to the limit of 10 % of the borrower’s gross profit adjusted for certain items (minus non-taxable income, add back financing costs and tax depreciation). If the calculation basis for the 10 % deductibility limit is negative or zero, the financing costs are non-deductible in the current period but may be carried forward over an indefinite period.These restrictions do not apply to taxpayers that are not part of a group and have no affiliates or permanent establishments.As of the date of this brochure, taxpayers are waiting for the introduction of more favourable limitations.
- VAT registration threshold: the European Union Council approved the increase of the VAT exemption threshold from EUR 65,000 to EUR 88,500 (equivalent in local currency: from RON 220 thousand to RON 300 thousand). This new threshold is to be applied for the period up to 31st December 2020, after it will be approved by law.
– Split VAT mechanism: as from 2018, the following VAT registered entities are required to open and use at least one bank account
dedicated to the collection and payment of VAT:
– Entities which, at the end of 2017, recorded overdue VAT liabilities higher than: (i) EUR 3,000 for large taxpayers, (ii) EUR 2,000
for medium size taxpayers and (iii) EUR 1,000 for small taxpayers, that were not paid until 31st January 2018;
– As of 1st January 2018, record VAT liabilities overdue by more than 60 days (above thresholds apply);
– Are under insolvency procedures.
Other VAT taxable persons may opt to apply the VAT split mechanism (they may benefit from 5 % reduction of the corporate income tax / micro-enterprise income tax due for the related period). VAT payments to suppliers enrolled in Split VAT should be made to their VAT dedicated account.
Tax on income derived by microenterprises
- The income threshold beneath which a legal person is required to apply the micro-enterprises tax regime has been increased from EUR 500,000 to EUR 1,000,000 for all companies, irrespective of their type of business (exception: companies under liquidation). As at the date of this brochure, taxpayers await the enactment of the possibility to opt for profit tax (under certain conditions).
Social contributions and personal income tax
- As of 1st January 2018, pension insurance contribution (25 %) and health insurance contribution (10 %) will be deducted from the gross salary. The employer will no longer bear social insurance costs, except for a 2.25 % work insurance contribution applied on the gross salary.
- Freelancers will generally be liable to pay contributions (pension fund – 25 % and health insurance – 10 %) on the monthly gross minimum salary (around Euro 415 in 2018). Investment income is to be subject to 10 % health insurance contribution on the monthly minimum gross salary.
- Personal income tax rate drops from 16 % to 10 % (exception: dividend income which remains subject to 5 % tax rate).
TPA offers an overview of the most important tax innovations in the following CEE and SEE countries in which we operate: Austria, Albania, Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Serbia, Slovakia and Slovenia. Investing in CEE/SEE 2018