Amendments to Law no. 241/2005 for preventing and combating tax evasion

Amendments to Law no. 241/2005 for preventing and combating tax evasion

On December 17, 2021, the Romanian Government adopted Emergency Ordinance no. 130/2021 regarding some fiscal-budgetary measures, the extension of some terms, as well as for the modification and completion of some normative acts (hereinafter referred to as “GEO no. 130/2021”) which, among others, brings with it a series of amendments to Law no. 241/2005 for preventing and combating tax evasion (hereinafter referred to as “Law no. 241/2005”).

In this respect, the provisions of art. XXIX of GEO no. 130/2021 state the following:

Law no. 241/2005 for preventing and combating tax evasion, published in the Official Gazette of Romania, Part I, no. 672 of July 27, 2005, as subsequently amended and supplemented, is amended and supplemented as follows:

1.            After Article 6, a new Article 61 is inserted, with the following wording:

“ Art. 61

(1) The withholding and non-payment, the collection and non-payment, within 60 days from the due date provided by law, of taxes and/or contributions provided in the annex to this law constitute criminal offences and are punishable by imprisonment from 1 year to 5 years or by a fine.

(2) The provision from par. (1) shall enter into force on 1st of March 2022”

Thus, this legislation is understood to incriminate also (i) withholding and non-payment, respectively (ii) collection and non-payment, within 60 days from the due date provided by law, of the taxes and/or contributions provided in the annex to Law no. 241/2005

At the same time, the mentioned annex presents exhaustively the taxes and the contributions whose withholding/collection and non-payment attract criminal liability, under the conditions of art. 61 of Law no. 241/2005, as follows:

  1. Tax on dividends paid by a Romanian legal entity to a Romanian legal entity
  • Tax on income from independent activities based on sporting activity contracts
  • Tax on income from intellectual property rights
  • Income tax on salaries and those assimilated to salaries
  • Income tax on agricultural lease
  • Income tax on interest
  • Tax on taxable income obtained from the liquidation of a legal entity or from the reduction of the share capital, according to the law
  • Income tax on dividends
  • Income tax on pensions
  1. Income tax on prizes and gambling
  1. Tax on income from other sources
  1. The tax on income obtained by a natural person from an association with a legal entity, taxpayer according to title II of Law no. 227/2015, with subsequent amendments and completions
  1. Tax on income obtained by a natural person or entity– association without legal personality from an association with a legal entity, taxpayer according to Law no. 170/2016 on the specific tax, with subsequent amendments and completions
  1. The tax on income obtained by a natural person from an association with a legal entity, taxpayer according to title III of Law no. 227/2015 with subsequent amendments and completions
  1. Social security contribution
  1. Social health insurance contribution
  1. Withholding tax on income obtained from Romania by non-residents
  1. Tax due on income from the transfer of real estate from personal patrimony
  1. Contribution to the Environment Fund

However, this amendment gave rise to discussions on the constitutionality of these provisions, not excluding a possible referral to the Constitutional Court of Romania (hereinafter referred to as the “CCR”) in this regard.

For context, it is necessary to mention the fact that, in a previous form, Law no. 241/2005 contained, in art. 6, a regulation similar (but not identical) to that of the current art. 61, which was declared unconstitutional by Decision no. 363, pronounced by the CCR on May 7, 2015.

However, it cannot be concluded that the new provisions also violate the mandatory provisions of the Romanian Constitution, given that there are a number of differences between the two regulations, as well as the reasons why the CCR admitted the exception of unconstitutionality in 2015.

In the initial version, art. 6 of Law no. 241/2005 had the following wording: “The withholding and non-payment, with intent, within a maximum of 30 days from the due date, of amounts representing withholding taxes or contributions constitute a criminal offence and it is punishable by imprisonment from one year to 6 years “.

The first distinction between the previous regulation and the new amendment is represented by the scope, the old art. 6 incriminating only the withholding and non-payment of taxes/contributions, while the new art. 61 incriminates both their withholding and non-payment, as well as their collection and non-payment

It is important to make a number of remarks on the two ways provided by this legal text, namely the withholding and collection.

Thus, the withholding applies to taxes and contributions which, according to the law, are withheld at source, for example income tax on wages and those assimilated to wages, tax on income in the form of dividends, income tax on pensions, social security contributions, social health insurance contributions. Consequently, the withholding and non-payment, within a maximum of 60 days from the due date, of taxes and/or contributions by the persons who are obliged to withhold these amounts constitute a criminal offence.

With regard to collection, this concept refers to taxes and contributions that, according to the law, are collected by a person for a third party, such as the tax due on income from the transfer of real estate from personal patrimony, which is collected by the notary public and subsequently paid by him/her.

The second difference concerns the scope. In this respect, the old regulation did not expressly present the taxes/contributions whose withholding and non-payment entailed criminal liability. On the other hand, art. 61 in the form adopted by GEO no. 130/2021 refers to the taxes/contributions indicated in the annex.

However, the reason for admitting the exception of unconstitutionality was precisely the fact that this criticized norm “does not specify, concretely, what the withholding tax incomes are”, the CCR considering this to be unpredictable.

Therefore, strictly from the perspective retained by the CCR, the current art. 61 provides exhaustively the taxes and contributions whose withholding and non-payment, respectively collection and non-payment constitute a criminal offence.

To conclude, although the new regulation is similar to the previous one, there are still a number of significant differences, so it is necessary for the targeted subjects to pay more attention to the withholding, respectively the collection of taxes/contributions as described above.