Year 2016 brings important fiscal novelties for entrepreneurs, regardless of the form of organization: SRL (LLC - Limited Liability Company), PFA (Registered sole trader), etc. The main modifications are brought about by the appearance of the new fiscal code (Law 227/2015) and of the Order 2634/2015, which bring important updates to the form of fiscal - accountancy documents. We present below an overview of the main modifications with an impact on the entrepreneurs' day to day activity.
1. The new VAT rate
Beginning with the 1st of January 2016 until the 31st of December 2016, the VAT standard rate is 20%, then, from the 1st of January 2017, it will become 19%. The standard rate applied until December, 31st 2015, was 24%.
The reduced rates remain 9%, respectively 5% for certain categories of goods and services.
Still as an element of novelty applicable from the 1st of January 2016 is the reduced rate of 9% for water. This modification was introduced through OUG 50/2015.
A very common case in practice is that where an invoice was made out in December for services in advance (for instance, IT technical services), with deadline in 2016. The advance invoice was issued with 24% VAT. Will the advance be paid back?
Considering the fact that the fact that generates the VAT is happening in 2016, when a new rate is in force, the old invoice with a 24% VAT rate will be cancelled and a new invoice will be issued for the entire amount, with a 20% VAT rate.
2. The new taxing rates for small businesses
The taxing rates for the income of small businesses, applied from the 1st of January 2016 are:
a) 1% for the small businesses that have over 2 employees, inclusively;
b) 2% for the small businesses that have one employee;
c) 3% for the small businesses that have no employees.
Meeting the condition regarding the number of employees:
An employee is the person hired with an individual work agreement and full time, but the law also accepts the cases when the small businesses:
a) have people hired part time with an individual work agreement, if the fractions of time stipulated represent the equivalent of a full time job when added up - for instance, two employees, each hired for 4 hours/ a day, or 4 employees, each working for 2 hours/ day or any other alternatives that sum up 8 hours.
b) have concluded contracts of administration or mandate, according to the law, in the case when their remuneration is at least equal to the minimum gross basic salary in our country, guaranteed in payment.
As an exception, the small businesses set up after the 1st of January 2016 benefit from further facilities, meaning that, if they have at least one employee and are established for at least 48 months and the shareholders/ associates haven't had participation titles in other companies, the taxing rate is 1% for the first 24 months from the registration date of the Romanian company. The taxation rate is applied until the end of the semester when the 24 months period is over. The hiring must be carried oud within 60 days from the registration of the company.
Beginning with the 1st of December 2016, for an employee working 8 hours/ day with the minimum salary on economy (1.050 lei), the following taxes are paid:
• contributions and taxes withheld from the employee: 265 lei;
• contributions owed by the employer: 240 lei.
The net salary pertaining to a gross salary of 1.050 is 785 lei.
We supposed the employee has no persons in his care.
Beginning with the 1st of May 2016, the minimum gross salary on economy will increase to 1.250 lei.
3. The new turnover limit for small businesses
Still in 2016, the limit of the turnover for which an entity can register as a small business has changed. Thus, if during the fiscal year a small business makes an income higher than 100.000 euro or the percentage of the income made from consultancy and management from the total income is over or equal to 20%, it owes a tax on profit, beginning with the trimester when any of these limits has been exceeded. Until the 31st of December 2015, the limit was 65.000 euro.
What happens if the conditions of being registered as small business are no longer met?
If during a fiscal year a small business makes an income over 100.000 euro or the percentage of income made from consultancy and management is equal or higher than 20%, it owes a tax on profit, beginning with the trimester when any of these limits was exceeded. Till December 31st 2015, when the limits were exceeded, the recalculation of taxes was done from the beginning of the respective year, which was a much more disadvantageous situation from the fiscal point of view.
4. The taxation of the registered sole traders (PFAs)
Most certainly, year 2016 will not be a fiscally favorable one for the registered sole traders (PFA).
What has changes since the 1st of January 2016?
• beginning with the 1st of January 2016, for the income from independent activities, one will pay CAS, no matter if the person also has an income from salary or not (until this date, if the PFA also gained income from salary, it did not have the obligation of paying the CAS);
• the PFA can chose between the CAS rate of 10,5% (individual rate) applied to the net income gained or 26,3%, corresponding to a complete contribution stage;
• the manner of paying the CAS is the following: during the year, the registered sole trader in real system has the obligation of making anticipated payments, on a monthly calculation base of 35% of the gross medium salary on economy, then in the following fiscal year, based on the declaration of gained income, the fiscal authorities will recalculate the monthly base of calculation of the contribution as the difference between the gross income and the expenses incurred in view of carrying out the activity, excluding the CAS payments.
• The CASS is still due in the rate of 5.5%, on a monthly base calculated as the difference between the gross income and the deductible expenses, excluding the CASS expenses.
• There are no obligations of paying the other contributions: unemployment, risk fund, vacations, indemnities or debt securities. One can contribute, however, by choice, to unemployment or vacations and indemnities.
• In regard to the tax of 16% of the income, it is still due, as there is no change from the previous year.
There are certain minimum and maximum limits to the CAS owed by a PFA (registered sole trader):
• the minimum limit of CAS is of 35% of the medium gross salary on economy.
• in 2016, this salary is 2.681 lei. So, the resulted minimum contribution is 0.352.681 lei 10.5% = 99 lei.
• the maximum limit of CAS is 5 gross medium salaries. Thus, the maximum contribution is 10.5% 2.681 lei 5 = 1.408 lei.
From 2017, there will also be a limit of the calculation base for the CASS (health) to 5 times the medium gross salary.
5. Taxation on dividend income
In 2016, the tax on dividend income is established by applying a taxation rate of 5% on the gross dividend paid to a Romanian juridical person. In 2015, this rate was 16%, and from 2017, besides the 5% tax on dividends, the contribution to health social insurance of 5.5% will also be applied, reaching thus a taxation rate of 10,5%.
Therefore, 2016 is a favorable period for collecting the dividends pertaining to the preceding financial exercises.
What happens if there isn't enough money in the company to make the payment of dividends?
Even if at the moment when the profit that can be shared is known, one realizes there isn't enough money in the company to carry out the payments, it is important to mention that they can be carried out at a later date, as resources accumulate, based on the decision of sharing them.
It is also important to mention the fact that the tax on dividends must be withheld in the moment of the payment and transferred to the budget until the 25th of the month following the one when the payment towards the associates or shareholders was made.
If an associate is also an employee of the company, what taxes is he subjected to in 2016 for the dividends taken out? What about in 2017?
In 2016, an associate that is also an employee in his own company or in another one, will not owe but 5% tax on dividends.
In 2017, the same associate - employee will also pay 5.5% CASS besides the 5% tax.
Sponsorship is the judicial act through which two parties agree on the transfer of the right of property on some material goods of financial means in order to support some activities with no gainful purpose carried out by one of the parties, named the sponsorship beneficiary.
Sponsorship beneficiaries can be: legal persons with no gaining purpose, who carry out (or will carry out) in Romania some activity in the following domains: culture, art, education, training, science - fundamental and applied research, humanitarian, religious, philanthropy, sports, human rights, medical health, social assistance and services, protection of the environment, social and community service, representation of the professional associations, as well as maintenance, restauration, preservation and promoting the historical monuments, shows or programs of television or radio, as well as books or publications from the above mentioned domains.
In 2016, the limit to which sponsorships can be made increases in the case of contributors who pay the taxation on profit.
The manner of calculation for 2016 is the minimum of:
1. the value calculated by applying the rate of 0,5% to the turnover;
2. the value representing 20% of the owed tax on profit.
Previously to that, till the 31st of December 2015, the criterion on the first point was of 3 to thousand of the turnover.
7. Remission from taxes on reinvested profit
The profit invested in technological equipment, computers and off-line equipment, machines and devices of registry, control and invoicing as well as IT programs, products purchased, inclusively based on financial leasing agreements and put into usage with the purpose of carrying out the economic activity, is exempt from taxation.
The tangible assets for which the exemption from taxation is applied are the ones stipulated in the sub-class 2.1, respectively 2.2.9 of the Catalogue regarding the classification and usual functioning duration of capital goods (HG 2139/2004).
The novelty for 2016 is the introduction of group 2.2.9 into the list of assets for which the remission is applied. Group 2.2.9 contains "Computers and off-line equipment, machines and devices of registry, control and invoicing."
8. Day allowance for administrators
If, till the 31st of December 2015, the fiscal code did not stipulate the possibility of granting deductible day allowance to administrators, starting with the 1st of January 2016, it is stipulated that they can also benefit from deductible allowance.
An important note introduced in 2016: the daily limit not subjected to taxation is granted only if the duration of travel is over 12 hours, every 24 hours being considered a travelling day in view of carrying out the activity.
The level of deductible allowance is currently 42.5 lei/ day (legal base: Order 60/2015).
9. Social expenses
The social expenses are those expenses which, as the name suggests, have a social purpose such as: funeral aid, aid for serious or terminal illnesses, birth aid, expenses for the proper functioning of some units found in the administration of the contributors, such as: nurseries, kindergartens, schools, museums, libraries, cafeterias, sport facilities, clubs, hostels and other such things, the expenses representing: gifts in money or in kind, including the present tickets offered to employees and to their under aged children, health services offered in the case of professional illnesses and work accidents, nursery tickets given by the employer according to the law in force, the value of touristic and/ or treatment services, including transport, offered by the employer to his own employees and their family members, as well as the contribution to the funds of intervention of professional associations of miners or other social expenses incurred based on the collective work agreement or any other inner regulations.
Social expenses will have, starting with 2016, a deductibility limited to 5% of the value of expenses with the salaries of the staff, instead of 2% as it was until December 31st 2015.
As of 2016, one will be able to also include in the social expenses the present tickets offered to employees and their under aged children on the occasion of Easter, the 1st of June, Christmas and similar holidays of other religious cults, within the limit of 150 lei/person/event. In other words, the tickets offered in these situations are not taxed by 16%.
10. Updating the form of the financial-accountancy documents
• the removal of the obligation of applying the stamp on financial documents, as result of the abrogation of legal stipulations regarding the obligation of applying the stamp by the parties and entities stipulated in art. V paragraph (1) and (2) of the OG no. 17/2015 regarding the regulation of some fiscal measures and the modification and completion of some normative acts (eg. travelling order, receipt, expense account);
• the removal of the compulsory minimal content within the norms of drawing and using of each form;
• the removal of the obligation of issuing a certain number of copies of a document;
• the removal of the stipulations regarding the circuit and place of filing away of every document.
In conclusion, year 2016 brings novelties on every level: fiscal as well as accountable, both favorable (the reduction of taxes on dividends, the reduction of taxation rate for small businesses) and unfavorable (the additional taxation for the registered sole traders).
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