CALZATURA

TEMPO DI CAMBIAMENTI: VARATA LA NUOVA NORMATIVA FISCALE

Once again, many of the Romanian tax regulations have been reviewed. In fact, Law 414 of 26 June, 2002 (published in the Official Gazette of Romania of 27.06.2002) has brought many innovations, some of which, according to the experts, will influence the fiscal choices of enterprises and investors in a substantial way. A premise is necessary. The new Law 414, effective as of 1 st July 2002, in practice cuts the fiscal year in 2 halves: until 30 June 2002, the tax result will be determined according to the old regulations, whereas starting from 1st July the new regulations will be followed. Going into detail, with regard to the tax rates on net profits, the normal rate will still be 25%. As of 1st January 2003, instead, the concessional 6% rate applied to the profits deriving from export of the goods and services will grow to 12,5% and reach 25% by 1st January 2004. The companies operating in free areas will be subject to a tax rate of 5% until 31 December 2004 (no clue has been given as to what will happen net). Companies that are already operating in free areas and have invested at least Usd. 1.000.000 will benefit from income-tax exemption for another 5 years, provided that the company structure is not modified during this period. Finally, he companies operating in the so called “depressed areas” appear to be subject to the normal taxation rates ( while previously they were totally exempted from income taxes for a minimum of 10 years), unless they have obtained the investor certificate before 1st July 2002. With regard to the determination of the net profits, what emerges is the following: the taxable income is calculated on the basis of the book profit, which can increase or decrease depending on the presence of non-deductible costs or non-taxable profits. What do these tow items consist of? Important “non-taxable profits” are the dividends paid to resident juridical persons (previously, also the dividends paid by non-resident companies were non taxable). Note that dividends paid to physical person are subject to a 5% deduction, whereas those paid to juridical persons are subject to a 10% deduction at source. As for the “ non-deductible costs”, the basic principle of the new law is that of inherence: only the costs borne to make taxable profits are deductible. The law gives a list of costs which are totally or partially non deductible:

COST DESCRIPTION	DEDUCIBILITY
Sponsoring and patronage costs	Deductible up to 5% of the profits
Income taxes	Non deductible
Penalties, interest on overdue payments	Non deductible, including those deriving from commercial partnership with non-resident subjects
Employee traveling expenses	Deductible when 2,5 times lower than that established for public employees
Lost or worn-out assets and related VAT	Non deductible
Costs orne in favour of partners	Non deductible, except for the sale of assets and services at their market value
Shareholding devaluation	Non deductible till it is done
Entartainment expenses	Deductible up to 2% of the profits
Service expenses	Deductible only when there is a written contract and when the beneficiary can prove there is a real need for the service
Appropriation of legal reserve	Deductible up to 5% af the profits and within the limit of 20% of the company´s capital

Interests paid and (realised) exchange losses deserve an analysis on their own. Interests paid are deductible only if the “financing payable/capital” ration is lower than one. When the ration is higher that one, interests paid are deductible up to the value of interests earned plus 10% of the other profits. The remaining amount of interests can be carried forward to the next financial years, until it is completely deducted. The exchange losses exceeding the exchange profits can be deducted according to the same rules regulating interests paid (in this case, the law has provided for a more detailed description of the implementation rules to be published by 31 July). As for capital depreciation, it is finally possible to apply the accelerated capital depreciations’ regulation without Any previous authorization of tax authorities. Such possibility only concerns technological equipment, i.e. Machinery , installations, computers and peripherals purchased after 1st July 2002. We would like to remind you+ that by accelerated capital depreciation the Romanian tax system means the possibility to finance 50% of the purchased asset value during the first year. The companies that didn’t opt for the accelerated capital depreciation, that do not benefit from the tax relief on profits deriving from exports and that have invested in depreciable assets, can deduct a further amount of capital depreciation equal to 20% of the purchase value. Other specifications regard leases (the deducibility of the capital depreciation is confirmed only for the beneficiary of a financial lease, whereas in the case of an operative lease only the rent is deductible), the regulation on losses (losses can be carried forward to the next 5 years, but the loss cannot be recovered when the company has merged or has been divided), and the incomes from immovables (regulations have been issued on the taxation of non-resident juridical – non-physical – person having incomes deriving from the transfer of immovables (capital gains), their hiring and the like). Incomes from immovables are taxed at 25%. The same tax rate is applied to the transfer of shares and stakes when the assets of the company transferred mainly consist of immovables. However, in case the purchaser is a non-resident, these transfers can take place only if the company transferred is not debt with the State with regard to taxes on incomes or dividends. This status of “solvent taxpayer” must be previously certified by the competent tax authorities. Finally, remember that Law 414/2002 cancels some reductions such as: 1) those in favour of SMEs (Law 133/99): reinvested profits, which previously were exempted from taxation, are exempted no longer; moreover, the 20% tax reduction granted to the companies that created new jobs has been cancelled; 2) those in favour of micro- enterprises (Government Ordinance 24/2001): tax reduction for companies investing in depreciable assets and creating new jobs have been eliminated also in this case; however, the taxation of these companies at 1,5% of the total amount of profits is still effective; 3) those related to reinvested profits: since the Ordinance 70/1994 has been abrogated and Law 414 does not say anything about it, the 50% tax reduction applied to companies reinvesting their profits in tangible and intangible depreciable assets is to be considered no longer effective.