PA Focus September — New fiscal regulations: Challenges and opportunities for companies

In a period of economic uncertainty, with a budget deficit nearing 8% and the looming risk of unpopular fiscal measures post-elections, companies are facing significant legal and fiscal unpredictability. This article delves into the major legislative changes adopted in recent months and how corporate legal departments should prepare for the upcoming challenges.

Tax Amnesty and Incentives for Compliant Taxpayers

This month, the government adopted a controversial emergency ordinance aimed at addressing the budget deficit by introducing a mix of fiscal measures, including a tax amnesty for overdue liabilities and a reward mechanism for compliant taxpayers. The ordinance cancels interest, penalties, and other charges on outstanding tax obligations as of August 31, 2024, while also offering bonuses to those who have met their tax obligations on time. Additionally, it includes provisions for individual taxpayers and aims to streamline budgetary spending and improve public fund management.

New R&D Tax Credits

R&D Tax Credits: The government introduced a new ordinance offering tax credits for companies involved in research and development that are subject to the minimum turnover tax. The provision allows companies to deduct 16% of 50% of their eligible R&D expenses from their minimum turnover tax. As the 2024 fiscal results are not yet finalized, this benefit will apply when calculating corporate income tax for 2024 and any amended fiscal year starting in 2024. While theoretically encouraging for innovative companies, the complex eligibility criteria and administrative requirements remain a challenge.

Fiscal Council’s Analysis of the Budget Revision

The Fiscal Council’s review of the 2024 budget projects a deficit of 8% of GDP, up from the initial 5% target. Romania faces “twin deficits” with trade and current account imbalances heavily financed through external borrowing, posing currency risks. To reduce the deficit, the Council calls for tax reforms, better VAT collection, a broader tax base, and tackling evasion. Additionally, poor absorption of EU funds and delayed Recovery Plan payments highlight institutional weaknesses.

Ministry of Finance Semi-Annual Report

The Ministry of Finance’s semi-annual report highlights key 2024 fiscal policies and priorities under the National Recovery and Resilience Plan, focusing on digitalization projects like the SFERA system and a new Big Data platform. SFERA will centralize data from 252 ANAF databases, providing real-time information on legal entities. Together with projects like e-Invoice and SAF-T, the Big Data platform will support a unified fiscal risk register, enabling ANAF to perform standardized risk analysis across all tax control units.