The fiscal landscape of Romania witnessed significant changes in May 2024, marked by legislative amendments and proposals that could reshape the country’s tax regime. This article delves into the key developments of the month, ranging from legislative reforms to prospective shifts in taxation policies.
May’s fiscal review centers on pivotal legislative alterations and anticipates future regulatory trajectories. Notable highlights include the enactment of Law 126/2024, introducing substantial penalties for tax evasion while decriminalizing offenses below €1 million upon restitution to the state. Additionally, proposals such as maintaining a flat tax rate for a decade and raising the gross minimum wage signal potential shifts in Romania’s fiscal landscape.
Decriminalizing Tax Evasion: Recent legislative changes, notably Law 126/2024, introduce higher penalties for tax evasion while simultaneously decriminalizing offenses below the €1 million threshold upon restitution to the state. This nuanced approach seeks to balance deterrence with incentivization, sparking debates over its efficacy in enhancing compliance and revenue recovery.
Flat Tax Rate Proposal: The Liberal Party advocates for the flat tax rate, evident in both public statements and a legislative proposal submitted to the Senate. Their initiative aims to preserve the flat tax on income and profits until December 31, 2033, ensuring tax stability and predictability for the next decade. Although endorsed by the Senate Budget Committee, the proposal awaits further review in the same committee. Ultimately, the Chamber of Deputies will decide on the matter.
Minimum Wage Adjustments: In July, the minimum wage rises to RON 3,700. A proposed Government Decision outlines this increase, slated for July 1, 2024. Initially, the Liberals aimed to delay the decision until after June 9 elections, prioritizing measures to support private capital, while the social democrats lean towards easing the labor tax burden.
*The Decision for increasing the salary, plus an Emergency Ordinance for raising the non-taxable threshold to 300 lei were adopted on June 6 in the Government meeting.
Norms for VAT Deduction and Bioethanol: Government Decision no. 451/2024 introduces amendments to tax regulations. It eliminates VAT deduction provisions for employee invoices transmitted electronically. Moreover, it supports fuel producers by permitting bioethanol production in fiscal warehouses and clarifies marking procedures for tobacco products.
NAFA (National Agency for Fiscal Administration) Reorganization: Finance Minister Marcel Boloș announced the completion of NAFA’s reorganization, facilitated by a Government Decision. The restructuring introduces the role of anti-fraud inspector to enhance tax evasion controls and develop the RO e-Sigiliu System. Additionally, the General Directorates for Large Taxpayers and Asset Seizure have been revamped for streamlined operations, while a new digital system in Customs improves goods transit management.
“The FASTER” Directive: The EU Council agreed on the FASTER directive, aimed at relieving double taxation, enhancing cross-border investment, and combating tax abuse. It introduces an EU digital certificate of residence (eCRF) and standardized reporting for financial intermediaries to streamline tax relief procedures and detect fraud. Transposition deadline for Member States is December 31, 2028, with national rules applicable from January 1, 2030.
Future Prospects
Last year’s Government’s GEO disrupted tax predictability, complicating future forecasts. However, we aim to glean insights from political discourse and legislative progress to anticipate the tax regime’s trajectory:
Despite debates on a progressive tax system, Romania is likely to maintain the current flat rate with sector-specific exceptions. However, after this year’s elections, the projected 7% budget deficit might prompt tax increases without enhancing tax institution efficiency. Thus, major Tax Code changes are unlikely in the near future.
Conclusion
May 2024’s fiscal landscape underscores the interplay between legislative reforms, economic imperatives, and political agendas. As Romania navigates these complexities, the trajectory of its tax regime will profoundly shape its economic future.
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*This is a native article provided by Issue Monitoring.
