Opinion by Maria Pascu, Senior Direct Taxes Manager, and Anca Preda, Senior Direct Taxes Consultant, Deloitte Romania
The negative effects of the declaration of the global pandemic and of the establishment of the state of emergency have already begun to be strongly felt at the level of Romanian companies. In such times, reaction time is essential, and one of the most convenient levers is the tax facility. Next, we will review the main fiscal measures adopted so far by the Government in the field of corporate tax, with an impact for companies.
Recent fiscal measures adopted by the Government in the context of COVID-19
Companies that applied the prepayment system so far may move to the real corporate tax calculation system in 2020
This measure supports companies that record a sharp decline in profits this year and do not have the necessary financial resources to support quarterly payments on account of income tax, at the level of results obtained in 2019. Basically, these companies will pay tax on profit depending on the actual results of each quarter of 2020 or will not pay at all if they record a loss within a quarter.
Postponement of payment of taxes vs. payment incentive
Initially, a de facto postponement of the 2019 income tax payment was granted (due in March 2020). Because the facility was granted in a non-discriminatory and unconditional manner, it was later returned with a bonus measure (5% for large companies, 10% for smaller ones) for those who pay their taxes for the first quarter of 2020 on time, the legal payment term being April 27. Currently, GEO 33/2020, through which these facilities were introduced, is being debated in the Chamber of Deputies, with the proposal to increase the bonus to 10% for all taxpayers. If approved, the increase could apply for the second and third quarters of this year.
Please note, however, that the application of this bonus may lead to difficulties in reconciling the tax return, if there are unpaid taxes from previous periods for those who have postponed the payment of other taxes, in the context of the measures instituted as a result of the pandemic.
Other fiscal issues that may become relevant in the context of COVID-19
Transition of assets during non-use
For taxpayers who, as a result of the cessation of activities, do not temporarily use part of the depreciable fixed assets, there is the possibility of transferring them to conservation, with the cessation of tax depreciation, but keeping the tax value of the assets. This recommendation comes in the context of the risk of further discussions, in the context of tax controls on the deductibility of depreciation of assets for periods when they are not used in economic activity.
It should also be noted that the application of this scheme depends on the accounting policy adopted. Therefore, companies must first review their accounting policies in this context.
Full deductibility of losses on uncollected receivables
Although financial blockages in the chain are not desirable, there are situations in which customers will not be able to honor their contractual commitments, in which case taxpayers (suppliers) may decide to pass directly on the losses on these debtors.
The full deduction of losses by highlighting these receivables is possible from a fiscal point of view if the debtor (client) has major financial difficulties that affect his entire assets, including in the event of an epidemic. However, the tax legislation does not indicate how the taxpayer can prove that his debtor is unable to pay his bills due to the COVID-19 pandemic, so that he can fully deduct those losses. In this context, the emergency certificate may become such a supporting document.
Specific tax measures for companies operating in the field of HoReCa
For the HoReCa domain, the obligation to pay the specific tax for the period of business interruption was repealed.
Use of existing tax facilities
We must not forget the tax facilities granted for sponsorships, as well as the additional deductions or tax exemptions for investment activities, applicable to companies intending to convert their production activity (for example to the production of medical or protective equipment).
Therefore, in the current context, companies must make the most of the support measures adopted by the Government and, at the same time, fulfill their obligations in good faith, if they are able to do so, because any additional revenue to the state budget can represents an impetus for the restart of the economy.