BDO Romania: Tax Alert – March 2022

In the Official Gazette no. 231/08.03.2022 was published the Emergency Ordinance no. 20/2022 for the amendment and completion of some normative acts, as well as for establishing some support measures and humanitarian assistance, in the context of the current crisis on Romania’s border with Ukraine, generated by the military conflict taking place on the territory of Ukraine.

By GEO 20/2022 were introduced the following tax facilities in respect to supporting the persons affected by the military conflict from Ukraine, respectively:

• Donation in money – individuals and legal entities (except for public institutions and authorities) may donate money, in order to provide support and humanitarian assistance to foreign citizens or stateless persons in special situations, from the area of armed conflict in Ukraine, amounts that are collected by the General Inspectorate for Emergency Situations in a separate account available in RON and opened at the Bucharest Treasury, respectively 50.07.03 ” Amounts available from humanitarian aid donations to Ukraine”.

These amounts are:

• Romanian legal entities: (i) tax deductible at the corporate income tax computation, (ii) are deducted from the taxable base in case of micro-enterprises taxpayers.
• Deductible for individuals that determine the tax in real system.

These provisions are in force starting with 8^th March 2022 and are applicable until 31^st December 2022.

• Goods and services rendered intended for the individuals affected by the armed conflict in Ukraine – the expenses have the following tax treatment, as long as the goods and services are granted or rendered based on the request of the Department for Emergency Situations of MAI, being distributed directly or through the non-governmental organizations that have expressed their intention:

a. Corporate income taxpayers:

• Including them in the social expenses and deducting in the limit of 5% of the value of the expenses with the salaries;
• Non-deductible expenses – added to the expenses mentioned at article 25 para (4) letter i) Tax Code (sponsorship, patronage, private scholarships etc.) and deducted within the limits provided by the Tax Code, at the minimum level between 0.75% of turnover and 20% of the corporate income tax.

Note! The tax provisions are not clear at this moment, namely: (i) if taxpayers have to opt for only one of the above provisions or (ii) if both rules apply, if they must be applied in order (classified as social expenses according to existing rules and those that do not fall into this category are considered sponsorships) or depending on the option.

b. Micro-enterprise income taxpayers – these expenses are added to the sponsorships expenses and their total value is deducted from the tax due, up to 20% of the micro-enterprise income tax;

c. VAT – from the VAT perspective, the goods and services fall within the sponsorship limit of 3 per thousand from the turnover.

Note! The distribution of goods and services is made by the Department for Emergency Situations on the basis of documents of delivery-receipt of goods or provision of services.

These provisions are in force starting with 8th March 2022 and are applicable until 31^st December 2022.

Besides the above, by GEO 20/2022 it was introduced a new letter at art. 25 (Expenses), para (4) letter ț Tax Code, according to which, for the provision of goods, services, money to UNICEF as well as to other international organizations that carry out their activity according to special agreements to which Romania is a party, the Romanian legal entities benefit of the following tax treatment:

a. Corporate income taxpayers:

• the expenses are non-deductible;
• the amounts are added up to sponsorships / patronage / private scholarships expenses, mentioned at article 25 para (4) letter i) Tax Code and are decreased from the corporate income tax due in the limits provided by Law, respectively within the minimum value between 0.75% of the turnover and 20% of the corporate income tax.

If the value of sponsorships / goods / services granted for free, inclusively the amounts reported, do not exceed the limit of the tax credit that can be obtained in the respective year according also to art. 25 para (4) letter i) Tax Code, the difference of corporate income tax can be redirected to UNICEF or similar organizations that carry out their activity according to special agreements to which Romania is a party, within a maximum of 6 months from the date of filing the annual corporate income tax return (based on the redirection forms), without these beneficiary entities to be obliged to register in the Register of cult entities / units for which tax deductions are granted.

b. Micro-enterprises income taxpayers: the amounts will be summed up with other sponsorships / scholarships etc. and it can reduce the taxable base up to 20% of the tax due.

Also, it can be redirected also to UNICEF or similar organizations that carry out their activity according to special agreements to which Romania is a party.

The provisions regarding granting of goods, services, money to UNICEF or similar international organizations enter into force within 3 days from the entry into force of GEO 20/2022.

The granting of goods, services, money will be declared through the informative declaration regarding the beneficiaries of the sponsorships / patronage / private scholarships (Form 107).

Besides the tax facilities mentioned above, GEO 20/2022 introduces provisions in order to facilitate the access of Ukrainian citizens on the Romanian labour market. In this respect, according to GEO 20/2022:

• Ukrainian citizens who legally entered the Romanian territory and who do not request a form of protection according to Law no. 122/2006 on asylum in Romania are allowed to be employed without a work permit.
• Moreover, the above-mentioned citizens can extend their right to stay in Romania for work purposes without the obligation to obtain a long-term visa for employment.
• Regarding the Ukrainian citizens who come from the armed conflict zone in Ukraine and cannot prove with justifying documents their professional qualification or the experience in a certain field, they can be hired on the basis of a self-statement, clearly specifying that they meet the qualification criteria for the job and that they do not have criminal offences which might prevent them from developing the activity. Their hiring may be performed for a period of 12 month, with 2 extension periods of 6 months, each.
• The employment procedure for the individuals who cannot prove their professional qualification will be aproved in 5 working days from the entrence into force of this Emergency Ordinance, through an Order of the Labor and Social Solidarity’ Ministry.

Thus, the premises for the employment in Romania of Ukrainian citizens coming from the armed conflict zone in Ukraine are created, but we suggest to all persons interested in this subject not to take any decision based on this material before the employment procedure mentioned above is available.