1 YEAR END TAX PLANNING
The amendments to the Profit Tax Ordinance has generated a number of specific tax planning opportunities that clients should consider prior to finalising their December 1996 Statutory Accounts.
Income Postponement
Clients in the export industries should consider the postponement of income from 1996 to 1997. 1997 profits generated by export earnings will be subject to profits tax at a reduced rate of 19%, compared to 38% in the current year.
Furthermore, tax returns for 1997 will be filed on a quarterly basis. The first return will be due on 25 April 1997 (except for Banks) and the first tax payment will be due on that date. Banks will be required to submit returns, and pay the tax, on a monthly basis.
Staff Bonuses
If now appears likely that the individual tax rate will be reduced in early 1997. Employers should consider the postponement of the payment of any bonuses until such time.
Tax Payments
If year to date December results are expected to be lower than the year to date November results, companies could consider remitting a reduced profit tax payment for November. Whilst this will result in penalties for the period 25 December to 25 January (approximately 4% on the unpaid amount) any excess paid will need to be reclaimed and this could be take a considerable period of time.
2 WITHHOLDING TAX: RESIDENCY CERTIFICATES
It would appear to be the authorities intention to adhere to the letter of the law as regards the application of any reduced withholding tax rate. Therefore companies will be required to obtain certificates from foreign beneficiaries that confirm their tax residency. If these are not obtained all payments should be subjected to the 15% withholding tax as provided for by domestic legislation.
We are hopeful that the authorities will eventually accept the internationally recognised application of the royalties provision included in most treaties but if the above mentioned certificate is not available, they will be entitled to ignore the treaties entirely.
Disclaimer
The above information is a short summary of recently published information and is not intended to be advise on any particular matter. Price Waterhouse expressly disclaims to any person in respect of anything done in reliance of the contents of these publications.
For additional information on taxation in Romania, contact the following Price Waterhouse Senior Tax Manager:
Ron Barden
Price Waterhouse Romania
Union International Centre
11 Ion Campineanu Street
Sector 1 Bucharest
Romania
Telephone: (40) (1) 311 24 55
Fax: (40) (1) 312 33 34
or
enter a text search 'Price Waterhouse' and 'Business Monitor'.
See More Popular Content From