During the State of Emergency, the Romanian Government has adopted several fiscal measures to support the taxpayers who were facing financial difficulties due to the pandemic. One of these measures concerned the tax liabilities, which has as due date the period between March 21st, 2020, and June 25th, 2020, mainly that they were not considered overdue and, therefore, did not generate ancillary obligations or enforcement actions – briefly, a payment relief.
Similar measures have been adopted by other European countries, some were even suggested by the Organization for Economic Co-operation and Development (OECD). Among these, the Belgium case is of interest, because of the legislative package that was adopted, granting the possibility to pay the tax liabilities related to this period in tranches (up to 24 months), without imposing ancillary obligations, interest or the need to provide guarantees. Thus, the taxpayers were offered medium- and long-term visibility over the methods for settling their tax liabilities, after the crisis.
Even if these measures were considered auspicious for the Romanian business environment during the period of the State of Emergency, the date of June 25th, 2020 continues to create medium and long-term difficulties for taxpayers with respect to managing their available financial resources.
Thus, from the moment it entered into force in Romania, this measure was considered uncertain, in particular to how the State authorities will decide to pursue the recovery of the overdue amounts, because all the tax liabilities related to the period mentioned above will become due, at once, starting with June 25th, 2020.
Taxpayers must pay on June 25th the tax liabilities for the past four months
In the current legislative context, the taxpayers who decided to postpone the payment of the tax liabilities during the application of this facility (having as due date March 25th, April 25th, and May 25th), will have to pay these amounts on June 25th, 2020. This means that some of the taxpayers, namely those which did not pay their tax liabilities during this period due to lack of liquidities, will have to pay their tax obligations for the past four months on June 25th.
„In this case, the only instrument which can reduce the fiscal burden of the taxpayers and to support them during a period of financial difficulties is represented by the payment schedule procedure provided by the Fiscal Procedure Code. More precisely, the tax liabilities and the related ancillary obligations may be scheduled and paid in equal installments by the taxpayers over maximum five years. However, there is a chance that this procedure not be accessible to all taxpayers or even to be considered financially beneficial, because: it involves the obligation to provide guarantees and the tax authorities will impose legal interest related to each installment from the payment schedule.”, mentioned Elena Dima (photo), Tax Consultant, Mazars Romania.
Thus, we draw the attention on the fact that certain taxpayers may face difficulties in accessing the payment scheduling procedure, because providing a guarantee, a mandatory requirement for granting such scheduling, may not be fulfilled by the taxpayers which do not have sufficient available funds, and, in their absence, do not hold assets which may serve as a guarantee.
Separately, disadvantages may also appear during the scheduling period. In this respect, if the requirements for maintaining the validity of the scheduling are not observed, the taxpayer will lose this right, as well as the right to have the interest and penalties due for the entire scheduling period annulled, whilst, at the same time, having the guarantee provided executed.
Even in the case of taxpayers registered for corporate income tax purposes that complete the scheduling, the legal interest computed for each installment will be recognized as a non-deductible expense.
The ancillary obligations may be canceled, subject to the fulfillment of the compliance and of payment obligations by December 15th, 2020
Embracing the idea of relieving the fiscal burden and increasing tax collection, the Romanian Government adopted several normative acts which provide the annulment of the ancillary tax obligations, subject to the taxpayer fulfilling its compliance and payment obligations by December 15th, 2020.
„This facility is applicable for the ancillary tax obligations related to the tax liabilities with due dates up to March 31st, 2020, either generated by late payment or late submission of the tax return, the issuance of a tax decision, or even previous fiscal periods were rectified. To access this facility, taxpayers must cumulatively fulfill the following conditions upon the submission of the application for annulment (but no later than December 15th, 2020): all outstanding tax liabilities must be settled by any method provided by the law (i.e. payment, netting, lieu of payment etc.) and all the tax statements, according to the fiscal vector , are submitted.”, mentioned Cristian Botezaru, Tax Assistant Manager, Mazars Romania.
The tax periods related to the State of Emergency did not generate any major transactions
Although the annulment of the ancillary obligations is an auspicious measure in the current context, it does not answer the immediate needs of the taxpayers, and we refer here to the fiscal obligations registered during the State of Emergency, which become due on June 25th, 2020.
More precisely, the fiscal measure mentioned above applies only to the tax liabilities which has as due dates up to March 31st, 2020. Thus, in the case of postponement of the tax liabilities’ payment during the State of Emergency, the taxpayers may access this fiscal facility only for the tax liabilities that had as due date the period between March 21st and 31st, 2020.
„In the case of certain taxpayers for which the fiscal year is the same with the calendar year, the tax burden with significant impact consisted in the annual corporate income tax, which was due on 25th March 2020, as the fiscal periods related to the State of Emergency did not generate any major transactions. Although the annulment of the ancillary tax obligations is not precisely the support expected by most of the Romanian taxpayers (in particular those who opted to postpone the payment of the tax liabilities), this measure was conceived to increase both voluntary compliance and the collection rate.”, mentioned Bianca Vlad, Partner, Tax Advisory, Mazars Romania.
However, besides the sought out purpose of these fiscal measures, taxpayers have the opportunity to benefit from an immediate effect, resulting in the form of: i) voluntary disclosure with minimum fiscal consequences; ii) corrections of errors in contemplation of a future tax inspection, errors which would otherwise generate ancillary tax obligations if they are to be imposed by the tax inspection team. Thus, the taxpayers interested in benefitting from this facility (either private individuals or companies) will have to:
– review all their tax obligations, according to the fiscal vector, including those due to the environmental fund, to verify if they were correctly registered within the taxpayer file and to request any potential corrections;
– identify and rectify any potential inconsistencies concerning either the tax returns submitted, the way in which they interpreted the fiscal/accounting legislation or the eligibility of any tax facility applied or which could have been applied.
This creates the premises that reviewing the tax position and correcting inconsistencies with no countermeasures (the ancillary tax obligations may be canceled) result in “T0”, from which all taxpayers (private individuals or companies) should benefit.