Tax changes in 2016

Wed | 24.02.2016

Accounting/audit/tax

1Dear Edwin, in our opinion, what new challenges will 2016 bring for companies in terms of tax changes?
Significant changes have been brought to the tax legislation as of 1 January 2016 and most companies may be facing an increase of compliance cost (e.g. submission of form 088).  A significant number of changes are of a technical nature, although from a material point of view the reduction of the dividend withholding tax rate to 5% will allow Romanian tax residents to own their shares directly at a significantly reduced rate in respect of dividend received vs. before (e.g. 16%). Still not 100% clear is the application of the new approach of taxing real estate held by individuals, who also have a company HQ in their premises. This could have a significant impact on their tax burden, which is likely to increase. Due to that, further administrative burden for companies might arise having their HQ at the premises of a private person.

2.  How do you appreciate these changes will affect companies’ financial health?
Creating the same level playing field should be high on the agenda also from a tax perspective, for example the VAT reduction is facilitating the creation of this same level playing field. The deduction of costs of deteriorated stocks may provide a welcome tax credit to the retailers. 

3. What should companies be especially aware off? 
Please make sure that all accounting records are in order and that appropriate supporting documents including Transfer Pricing documentation is readily available it is only a matter of time until that one will regret not having done so earlier. One should be better prepared for tax controls which frequency and  intensity are expected to be intensified but quality of tax inspectors is unlikely to improve at the same speed. It should be taken into account of specifics regarding management and consulting (intra-group) charges, as these are not solely connected with formalistic aspects like contracts, back-up documentation, etc. It is the taxpayer’s duty to justify (still with documents) that these kind of expenses were incurred for business purposes.

4. Since 2014, you operate in Romania Mazars Dutch Desk, supporting also Dutch investors that want to start locally. In terms of nearshoring, what consequences will bring the new fiscal framework?
The new fiscal code is a step in the direction of creating more certainty in respect of the tax legislation and thus will allow to budget accordingly in advance when taking investment decisions. We do not believe that the new fiscal framework will attract particularly nearshoring. The latter will be rather growing due to the state aid schemes, which are still in place and we experience amongst our clients that the beneficiary base of such schemes grows rapidly. 

5.  Please share with us some industry-focused recommendations.
Maybe more appropriate to talk on significant reforms which are expected to come into place in the near future like the proposal for a EU Anti-tax avoidance directive which is a response to the finalization of the BEPS (Base Erosion and Profit Shifiting) project, which is expected to be discussed during the Dutch chairing the EU. This could most possibly become one of the most significant direct tax reforms within the existence of the EU. A particular recommendation can be made with regards to changes triggering the filling of the form 088. Any company risking to be forced to do so shall seek for professional advice before starting the submission. It appears to be one of the biggest struggles in the past years with potential impact on information exchange of tax data.

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