Tax Code and Fiscal Procedures drafts, approved by the Government

The Romanian Government has approved the Tax Code and new fiscal procedures draft which will be submitted to Senate for including them on the Permanent Bureau's agenda for the next week.

According to the new version of the Tax Code, the VAT rate will go down from 24 percent to 20 percent in 2016, while the VAT on certain categories of goods, such as meat, fish, vegetables, fruits, dairy products, live animals and poultry, and eggs will be dropped to 9 percent. Also, starting with 2018, the VAT will be further reduced to 18 percent.

The revised Tax Code draft provides that social insurance rate shall be reduced starting with 2018 instead of 2017 as follows: for employees, it will be cut to 7.5 percent from 10.5 percent, and for employers, it will be diminished to 13.5 percent from 15.8 percent.

Tax reductions are envisaged with respect to income and profit, too. Accordingly, both the flat tax on income and the flat tax on profit will be lowered to 14 percent from 16 percent starting with 2019.

Non-residents will also pay a lower flat tax – 14 percent, instead of 16 percent, for the income resulted from their domestic operations, with effect from the same year.

Also,micro-enterprises will pay differentiated income taxes, depending on the number of employees.

The provisions of the new Tax Code target the domestic capital market, too, as one of the recommended measures concerns the elimination of the tax on dividend payments, which shall come into effect in 2016.

Furthermore, the Government plans to reduce the excise duties on fuel, tobacco, and alcohol products, whereas the crude oil produced in Romania, coffee products, jewelries, or cars could be eliminated from the tax base.

Finally,the tax on construction could be eliminated starting with 2016, whilst taxes on buildings, collected by the local authorities, will be modified: