Corporate income tax rules revised
The Romanian government published amendments to the corporate income tax rules in the official gazette on 31 August 2021, which generally are effective three days after publication.
The key changes are as follows:
- To conform Romania’s domestic rules implementing the EU parent-subsidiary directive with the directive, changes are made to the conditions to qualify for the withholding tax exemption on dividends received from a company located in another EU member state. Specifically, the exemption will apply where the Romanian payer of the dividends is subject to corporate income tax or a tax that substitutes for the corporate income tax (the company receiving the dividends can be subject to a different type of tax, not necessarily corporate income tax). Previously, the payer had to be subject to the normal corporate income tax for the exemption to apply.
- A new exemption is introduced regarding the withholding tax on dividends paid by a Romanian resident to a legal entity that is resident in Iceland, Liechtenstein or Norway if the foreign beneficiary of the dividends holds on the date the dividends are paid, at least 10% of the share capital in the Romanian legal entity for one year (which was fulfilled at the payment date).
- The rules governing the declaration, withholding and payment of tax on dividends distributed to a Romanian legal entity are revised to eliminate the reference to the year in which the annual financial statements were approved and replace that with a reference to the year in which the dividend distribution was approved.
- As from 1 January 2022, the limit on the deduction of impaired receivables (i.e., bad and doubtful debts) is increased from 30% to 50% if certain requirements are met.
- Changes are made to the calculation of the quarterly advance payments of corporate income tax for tax years 2022-2026. To calculate the first quarterly payment, the taxpayer should apply the tax rate to the accounting profit for the relevant quarter (the calculation previously was based on the profit of the preceding tax year).