TAX NEWSFLASH

nr. 262, February 2012

Changes to the Norms for the application of the Fiscal Code

Government Decision no.50/2012 (the Decision) amending the Norms for the application of the Fiscal Code has been published in the Official Journal of Romania (no. 78/31 January 2012). We list below the most important changes. Changes to the definitions Supplementary provisions have been introduced with respect to the term center of vital interests which appears in the definition of a resident. More specifically, the Decision mentions that additional consideration will be given to the residents family, husband/wife, child/children, persons in his/her care, persons arriving in Romania together with the resident, economic relations (if the individual concerned is an employee of a Romanian employer, carries out business in Romania, has bank accounts in Romania, or has credit/debit cards at a Romanian bank) as well as social relations (if the individual is a member of a charity or religious organization, or takes part in cultural or other such activities). The expression any activities, referring to the activities carried out by non-resident legal entities or individuals in Romania, for which the registration of contracts with the relevant tax authorities is required, means any activity carried out in Romania that generates taxable income. If a written contract is not concluded, the supporting documents related to the activities carried out in Romania must be registered with the relevant tax authorities (timesheets, documents confirming receipt of goods, reports, feasibility studies, market studies, any other relevant documents). Corporate Income Tax Income and expenses derived from the evaluation of long-term participation titles are taxable and deductible elements for corporate tax purposes. Evaluations made according to accounting regulations are also recognized in determining the fiscal value of participation titles.

A new paragraph introduced by the Norms refers to the fiscal treatment of income and expenses which represent contractual interest / penalties / indemnifications which are cancelled through addendums to the initial contracts. These are defined as taxable income and deductible expenses for corporate tax purposes if the fiscal treatment previously applicable when the initial contracts were in force was similar. At the time when such addendums to the initial contracts (cancelling income or expenses) take effect, the taxable income referring to the previous periods when the income/expenses were initially recorded must be adjusted accordingly. Deductible expenses The following expenses have been listed as deductible for corporate tax purposes:

Expenses resulting from the depreciation of participation titles, recorded according to accounting regulations. Expenses for electrical energy consumed up to the threshold defined in the entitys own norms or, in the absence of such a threshold, at the threshold level set by the Romanian National Energy Regulatory Authority (ANRE), which also includes energy consumed for commercial purposes, for taxpayers carrying out activities in the electrical energy distribution field. Penalties resulting from contracts concluded with residents/non-residents (previously, only interest expenses and indemnification expenses were mentioned). Expenses for cash-settled remuneration in equity instruments given to employees are deductible, as per Government Ordinance no. 125/2011, at the time when the benefit is granted, if the benefit is taxed in accordance with personal income tax legislation.

Non-deductible expenses Expenses representing the difference between the market price and the preferential purchasing price in the case of share transactions made under a stock options plan system have been eliminated from the category of expenses incurred in favor of shareholders or associates. Expenses for equity-settled share-based payment remuneration given to employees are non-deductible, as per Government Ordinance no. 125/2011. They will be treated as deemed expenses at the time when the benefit is granted, if the benefit is taxed in accordance with personal income tax legislation. Expenses incurred in relation to derecognition of tangible and non-tangible assets in progress which will not be finalized, as well as expenses incurred to write off the net book value of investments performed in relation to leased or rented fixed assets if the contracts are terminated before maturity, are also non-deductible, if no economic benefits result from such assets, either by sale in their existing state or sale of the components resulting from dismantling. Reorganizations In the case of a transfer of all assets and liabilities related to one or more economic activity, between two Romanian legal entities, in exchange for participation titles, the identification of the assets and liabilities belonging to the economic activities transferred will be made by assessing the independent character of the line of activity, in accordance with the criteria which have referred by now only to cross-border reorganizations within the 1 European Union (the norms applicable for Art. 27 of the Fiscal Code). Specific attention is given also to assets and liabilities which are not considered to be a part of an economic activity, namely isolated assets and liabilities, as well as those which relate to the management of a legal entity.

Associations with legal status set up according to another countrys legislation The procedure for obtaining a fiscal credit in relation to the tax paid on profits derived by a Romanian legal entity from an association with legal status registered in another state is similar to that which is applicable if the Romanian legal entity was carrying out activities in that state through a permanent establishment. External fiscal losses Losses from activity carried out abroad through a permanent establishment in a state which is not a member of the EU, or the European Free Trade Association and is not a state Romania has concluded a convention for the avoidance of the double taxation with, may be recovered only from the taxable income derived by the permanent establishment, separately for each source of income, up to 5 years after the losses have been incurred. For the application of the above mentioned provisions, source of income is defined as the country where the permanent establishment is located. Therefore, losses incurred by a permanent establishment in a state from the categories mentioned above, cannot be compensated with taxable profits obtained by a permanent establishment situated in another state. Payment of tax and submission of tax returns Taxpayers which set up their business during a fiscal year must declare and pay income tax quarterly, no later th than 25 of the month which follows the completion of the quarter for the first three quarters. They must then submit an annual tax return by 25 March for the previous tax year as well as declaring and paying the tax due for the final quarter. However, different rules apply to credit institutions, non-profit organizations, taxpayers which earn income mainly from cultivating cereals and technical plants, fruit growing and viticulture, as well as taxpayers mentioned in art.13 letters c)-e) of the Fiscal Code. Taxpayers which derive income mainly from cultivating cereals and technical plants, fruit growing and viticulture are classified according with the provisions of Government Ordinance no.656/1997 on the approval of the classification of activities in the national economy (CAEN). The share of the income derived from such activities is subject to review at the end of each fiscal year and if the income is mainly derived from other activities, these taxpayers will apply the quarterly system of declaring and paying income tax starting from the following year. Non-resident legal entities and individuals carrying out activities in Romania through an association with or without legal status, as well as individuals resident in Romania, associated with Romanian legal entities in an association without legal status, carrying out activities either in Romania or abroad, must declare and pay corporate income th tax quarterly, no later than the 25 of the month following quarters I-III. The final calculation and payment of the corporate income tax for the year is made by 25 March of the following year, which is also the deadline for submitting the annual corporate income tax return. The above mentioned taxpayers must also submit a declaration detailing the distribution of income and expenses between the associates. The annual tax return due by resident individuals carrying out activities in association with Romanian legal entities, in respect of income realized in Romania or abroad from associations without legal status, must be submitted no later than 25 March of the following year in respect of the year for which the tax is due. Personal Income Tax Income from intellectual property rights, from activities performed under civil contracts/ conventions and agent agreements, as well as income from activities involving technical and accounting, judicial and extrajudicial expertise are subject to 10% income tax prepayments. The taxable basis is the gross income less the mandatory social contributions withheld at source. Income payers must calculate, withhold and pay the income tax prepayments. However, individuals obtaining the above mentioned incomes may choose to tax the gross income at a 16% flat rate, this being the final tax. In the case of civil contracts, this obligation arises only for written agreements and only for those taxpayers defined according to Title III of the Fiscal Code (associations without legal status are excluded).

Taxpayers obtaining income from other independent activities must continue to make quarterly pre-payments and book them separately. For income resulting from ongoing contracts as at 1 October 2011, which qualify as civil contracts beginning from 1 October 2011, the obligations in relation to the calculation, withholding and payment of the income tax prepayments, are those in force at the date of payment of such income. Delegation expenses include transportation and accommodation expenses as well as delegation allowances for assignments in Romania or abroad, as defined by law or under the individual labor contract. Withholding Tax

The Decision clarifies that amounts paid to satellite operators under a transponder leasing agreement, through which the satellite operator allows the customer to use the capacity of a satellite transponder to transmit over several geographic areas, do not classify as royalties if no satellite-related technology is transferred and the client is not in possession of the satellite when making the transmission, but simply has access to its transmission capacity. If the satellite is leased by the owner, the amounts paid will be deemed to represent consideration for the rental of industrial, commercial or scientific equipment, and hence they will be treated as royalties. Similar treatment will be applicable for the rental or purchase of transmission capacity for power or telecommunications cables and for gas and oil pipelines. Clarifications have been made with respect to the corporate forms of organization for which the provisions of the Agreement between the European Community and the Swiss Confederation providing for measures equivalent to those laid down in Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments are applicable. The Decision clarifies that a non-resident may be deemed to be a resident of a State based on information received as a result of the exchange of information procedure initiated by another country with which Romania has concluded a convention for the avoidance of double taxation. Certificates of fiscal residence based on which taxpayers benefit from the provisions of conventions for the avoidance of double taxation must certify that non-residents deriving income from Romania were residents in the relevant country during the year/period when the income was earned and must include the identification elements of the non-resident, as well as of the authority that issued the certificate of fiscal residence or the certifying document. The Decision states that the income payer is responsible for obtaining the certificate of fiscal residence within the set deadline and for the application of the conventions for the avoidance of double taxation concluded by Romania with various states. Clarifications are made with respect to a non-resident individuals obligations to declare and pay tax related to income derived from the transfer of shares, either directly or by proxy. Remuneration received by non-resident individuals for acting as an administrator, founder or member of the board of a Romanian legal entity are subject to personal income tax legislation. Clarifications have been made with respect to the refund procedure for tax withheld in excess from nonresidents, in cases where the tax withheld in Romania is higher than provided under conventions for the avoidance of double taxation or under European Union legislation. The non-resident must file a request with the Romanian income payer, which will repay the amounts. Subsequently, in order to recover the amounts effectively repaid to the non-resident, the Romanian income payer must submit rectifying tax return(s) to the appropriate fiscal body, followed by a request for the refund of the tax paid in excess. The Decision also states that, if the non-resident taxpayer cannot recover the tax paid in excess from the Romanian income payer, it is possible to recover the tax directly from the state, either directly or by proxy. The procedure for

refund of excess tax paid in this case will be set out in a forthcoming Order to be issued by the National Agency of Fiscal Administration (ANAF).

The new Norms provide for the possibility of assigning a tax identification number for non-resident taxpayers, at the request of the resident income payer, addressed to the tax authority governing the area where its fiscal domicile is located. The informative return detailing the tax withheld and paid in relation to income derived from Romania, subject to withholding tax or exempt from it, has also been modified to include the tax identification number assigned by the Romanian tax authorities for non-residents deriving income from Romania.

Value Added Tax Setting up a fiscal group Changes to the conditions required to set up a fiscal group have been introduced. The condition that each group member must be a large taxpayer has been replaced with a condition that only taxable persons registered with the same tax office may form a fiscal group. In addition, the new Norms state that at the date when the fiscal group is set up, the designated group representative must include in its first consolidated VAT return the payable VAT balances which have not been paid as at the date of submission of the consolidated VAT return, as well as the negative VAT balances for which reimbursement has not been claimed from the previous VAT returns of the group members. Self supplies of goods A specific reference to electricity distribution companies has been introduced. The updated Norms now state that the quantity of energy consumed as per the internal level of technological consumption norms or, in the absence of these internal consumption norms, within the limit approved by the National Regulatory Authority for Energy (ANRE) for each distribution company, are not deemed as a self-supply of goods. In other words, the amount of energy consumed within the above mentioned limits does not qualify as a self-supply of goods and, therefore, no VAT needs to be self-collected in this respect. Supply of goods versus supply of services The updated Norms set out new provisions on digital photo processing, which is defined as being: a) a supply of goods, to the extent that the processing is limited to media image reproduction, the right of disposal being transferred in this respect from the legal entity or individual processing the photos to the customer which ordered copies of the originals. b) a supply of services, when the processing is accompanied by complementary services which can prevail in comparison with the supply of goods so that the complementary services represent an end in itself for the customer. Services connected to immovable property Further clarifications are made in relation to the services that are considered to be rendered in connection with immovable property, as well as with respect to the services that are not considered to be in connection with immovable property: For instance, the following services are included in the category of services rendered in connection with immovable property:

storage services for which a part of a building is intended for the exclusive use of the client; granting credits when a certain building or a certain part of the building that will be acquired, built or repaired or a certain plot of land is used as a mortgage;

insurance and reinsurance services covering risk of loss and damage to real estate.

On the other hand, the following are not considered to be services in connection with immovable property:

developing of plans / drawings for a building or part of a building which is not allocated to a particular plot of land; intermediation services related to accommodation services in a hotel or accommodation services in sectors with similar functions, in situations where the intermediation is performed by a legal entity or individual acting in the name of and on behalf of another legal entity or individual; legal services if they are not related to a transfer of title of an immovable property.

Access to events Further clarifications have been made with respect to the concept of access to an event. The updated Norms state that this concept includes the right of access to educational and scientific events, like seminars and conferences. This provision applies even if the right to attend an event is granted/ allowed only prior to the registration of participants. However, training events which are not organized as seminars, regardless of the duration of the training process, do not fall under the concept of access to events. Exchange rate Additional clarifications have been made in relation to the exchange rate to be used when finalizing a transaction in cases when the invoices are issued/advances are cashed in before the actual supply, as well as situations where the invoice is issued after the advance is cashed in. Thus, if the invoice is issued before the supply of goods or services or before the advance is cashed in, the exchange rate used for determining the taxable basis at the date of completing the operation, or at the settlement date of the operation, will remain unchanged (i.e. the rate when the invoice was issued/the advance was cashed in). Also, for advances cashed in prior to the issuance of the invoice, the exchange rate used for the determination of the taxable basis when the advance is cashed in, will remain unchanged at the date of completion of the operation, or at the date when the settlement of the advance is performed. VAT exemption for medical services Additional provisions have been made clarifying details of the scope of the exemption of VAT for medical services. The updated Norms state that services such as medical examinations of individuals performed for employers or insurance companies, taking blood or other samples for testing for the presence of viruses, infections or other diseases on behalf of employers or insurers, and health certification (e.g. for the purposes of travel) are considered to be within the scope of the exemption. On the other hand, services that are not meant to protect, restore or maintain health, but rather are used to provide information necessary for making a legal decision are excluded from the application of the VAT exemption. This category includes services such as issuing a health certificate to an individual in relation to the granting of a pension, issuing medical examination reports required to determine liability in cases of injures, as well as medical examinations carried out for this purpose, preparation of medical examination reports in relation to compliance with occupational health requirements in order to solve legal disputes, medical examinations carried out for this purpose, as well as preparation of medical reports based on medical records without conducting medical examinations.

Operations involving receivables For these operations, the new Norms clarify the cases where operations involving receivables are subject to a VAT exemption. The new provisions set out the cases where operations involving trade receivables are taxable (supplies of debt collection services), VAT exempt or outside the scope of VAT, by direct reference to the decisions of the European Court of Justice in cases no. C-305/01 MKG and no. C-93/10 GFKL. In order to determine the applicable VAT treatment, a detailed analysis is required for each particular case. The new Norms also amend the provisions concerning the manner of determining the taxable base of supplies of debt collection services, which represents the remuneration of the services, comprising all elements of the fee charged by the transferee, including the financing component. Supply of immovable property Clarifications are introduced in relation to the supply of a plot of land on which building work has been done after the supply of the building work occurs or independently from the supply of the building, the supply of land being carried out either by the legal entity or individual which owns both the land and the building or by another legal entity or individual which only owns the land (in the latter case it is considered that a supply of building land occurs). Exemption for supply of goods A new paragraph has been introduced on the application of the VAT exemption for the supply of goods whose 1 acquisition was subject to special limitations of the VAT deduction right, under art. 145 of the Fiscal Code. This exemption will apply only where the purchase of goods was subject to the total limitation of the VAT 1 deduction right under art. 145 of the Fiscal Code and not where the purchase was subject only to the 50% limitation of the VAT deduction right. VAT deduction right New paragraphs have been introduced, clarifying that the VAT deduction right may be exercised, in principle, on the intention of a taxable person to carry out operations giving rise to a VAT deduction right. In this respect, the following examples have been provided:

any taxable person keeps the right to deduct input VAT for purchases in connection with work in progress which is no longer completed / used, under circumstances that do not depend on the will of the taxpayer. In this respect, direct reference is made to the decision of the European Court of Justice in case C-37/95 Ghent Coal Terminal NV; the same provisions also apply for other purchases of goods and services that are not used for the taxpayer's economic activity, for objective reasons, which do not depend on the taxpayers will; the taxpayer's intention to carry out operations which give it the right of deduction of VAT, for supplies of immovable property that no longer qualify as new and for hiring/leasing of immovable property, is justified by filing the notifications for VAT taxation provided under the Appendices of the Norms.

Capital goods Clarifications are made for cases where adjustments of deducted input VAT are not required, namely if:

the value of each transformation or improvement does not exceed 20% of the total value of the capital good or part of the capital good, after the transformation or improvement; the disposal of fixed assets, which are classified as capital goods, is made according to the provisions of the legal document that requires the disposal of that type of assets.

Import of goods The updated Norms state that the provision in the previous Norms that any supplies performed prior to imports of goods are not taxable in Romania does not apply to supplies of gas, energy, heat or refrigerant, whose place of supply falls under the specific place of supply rules under Art. 132 of the Fiscal Code. Special exemption regime for small businesses The Norms mention the possibility for taxable persons that have not required a VAT registration, to adjust the input VAT related to purchases, as well as the way the adjustment should be made. Registration for VAT purposes of taxable persons Additional provisions have been introduced to clarify the documents required for optional VAT registration of taxable persons established outside Romania, which perform either (1) imports of goods into Romania or (2) operations such as renting, leasing or supplies of constructions or part of constructions and the land on which the constructions are built, which are taxable by law or for which taxable persons opt to apply the regular taxation regime. Invoicing For invoices sent by electronic means of communication, the requirement to obtain a confirmation from the General Direction of Information Technology within the National Tax Administration Agency (ANAF) that all the conditions for ensuring the authenticity of the source and the authenticity of the invoice content are met has been eliminated. Simplification measures A new paragraph has been introduced that states that if at the date when tax inspectors become aware of the fact that the reverse charged mechanism has not been applied:

suppliers/providers and/or beneficiaries are in default or in insolvency, as well as in cases where the measures imposed cannot be applied at the same time both to the supplier/provider and to the beneficiary because at least one of them is in a situation such as inactivity, suspension from the Trade Registry, removal from the Trade Registry, or cancellation of VAT registration,

the regular taxation regime applied will not be changed, if the following conditions are cumulatively met:

according to the findings of the tax inspectors, no negative fiscal/budgetary consequences have been produced at the level of the suppliers / providers and/or beneficiaries, as a consequence of the regular taxation regime; the application of the reverse charge mechanism to suppliers / providers and / or beneficiaries may generate negative fiscal/budgetary consequences.

Excise duties Level of share capital and minimum guarantee The minimum level for the share capital issued and paid up and the level of the minimum guarantee have been set for fiscal warehouses used for production. For example, for the production of processed tobacco, energy products and beer, the values are:

Share capital:

production of beer - 1.500.000 lei; production of processed tobacco - 2.000.000 lei;

production of energy products, excluding GPL 4.000.000 lei; production of GPL - 500.000 lei; exclusive production of bio-combustibles and bio-fuel 50.000 lei.

Minimum guarantee to be set: production of beer - 100.000 euros; production of processed tobacco 1.000.000 euros; production of energy products, excluding GPL 2.000.000 euros;

production of GPL - 10.000 euros; exclusive production of bio-combustibles and bio-fuel 5.000 euros.

Obligations with respect to setting up of the guarantee Another important change is a new obligation for a registered consignee to set up a guarantee, when the legal entity or individual holding the final user authorization is also a registered consignee. This registered consignees guarantee must be set up no later than 29 February 2012. For energy products included in Article 206 , paragraph (2) of the Fiscal Code, the level of the guarantee which registered consignees must provide is the same as that for diesel. Also, the reduced rate of guarantee (i.e. when it is reduced by 50% or 75%) for authorized warehouse-keepers, cannot be less than the minimum level set at point 108, article 81 of the Norms for the application of Title VII of the Fiscal Code (detailed above). Guarantees for authorized importers must be updated on a yearly basis depending on the quantities of excisable products acquired in the previous year. Obligations of authorized warehouse-keepers The most important amendments brought to the Norms for the application of Title VII of the Fiscal Code are the following:
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A decision to suspend, revoke or cancel an authorization for a fiscal warehouse/final user/registered consignee/registered consigner/intra-Community operator does not suspend its legal effects for the period of settlement of an administrative appeal. For the production of alcohol and alcoholic beverages, authorized warehouse-keepers must submit a list of semi-finished products which will be produced in the fiscal warehouse. During a period of technological assessment of a new product, a legal entity or individual which has applied to be a warehouse-keeper for this product must submit a note to the central customs authority, giving details of the quantity of raw materials and energy consumption needed to make the finished product. A legal entity or individual which has applied to be a warehouse-keeper is required to sample each excisable product obtained, and provide two identical test samples, and based on the results of their analysis, the local customs authority will check whether the products correspond to the tariff classification and categorization for excisable products set by the central customs authority. For a new product, an authorized warehouse-keeper can carry out production activity if the complete documentation to obtain the tariff classification and categorization for excisable products has been submitted. The validity period of a fiscal warehouse authorization does not change if the taxpayers status changes (e.g. from middle taxpayer to large taxpayer). The registration conditions for registered consignees/registered consigners have become more restrictive;

If renewal applications are not filed at least 60 days prior to the expiry of the authorization, they will be subject to settlement under the normal authorization procedure. 23 As a result of the changes made to Article 206 (1) of the Fiscal Code, in relation to the excise level of finished products which cannot be lower than the weighted average rates of the excise duty for the related raw materials, the Norms for the application of this Article clarify the calculation method of weighted average rates of excise duty on raw materials. Specifically, the weighted average is determined by the total amount of the excise duties of raw materials purchased and used to obtain the finished product according to specific consumptions, divided by the total quantity of raw materials used. In terms of authorization as a registered consignee, the taxpayer must have at least one location to receive excisable goods moving under a suspension regime, from other Member States, for which it must provide proof of registration in the Trade Register. If there are several such locations, they must be recorded as working points in the Trade Register.

Obligations of the final user For taxpayers that have obtained final user authorization, any changes of the information declared when the authorization was issued must be notified to the customs authorities at least 5 days prior to the changes taking place. If changes are recorded in the Trade Register, the economic operator must submit a copy of the document certifying the change to the local customs authority within 30 days of the date of issuance of this document. Refunds of excise duties The procedure for refunding excises has been changed. The local tax authorities will now send the refund request and the other related documents submitted by the applicant to the local customs authority, which will decide whether or not a refund is due by issuing a decision to accept (totally or partially) or reject the refund request. This decision will be then sent to the local tax authority, which will proceed with the refund, as provided in the Fiscal Procedure Code. A refund request for excise duties paid for products released for consumption in Romania by registered consignees and delivered for export must be submitted no later than 25th of the month following the end of the quarter, accompanied by supporting documents, such as a copy of the documents attesting that the goods have been acquired from a fiscal warehouse of another Member State, a copy of the sales invoice issued to a client from a third country, a copy of the customs export declaration and a copy proving payment of excise duties to the state budget. In the case of refund of excise duties of excisable products subject to marking, the registered consignee must file a notification to the local customs authority, seven days before the products are exported, which must contain details of the quantities, the date when the products were released for consumption, the value of excises paid, etc. Ethyl Alcohol In relation to ethyl alcohol used to manufacture goods that are not intended for human consumption, the list of eligible products used for distortion has been changed by adding new substances. Production of other goods not intended for human consumption, except alcohol for use in medicines, is prohibited within fiscal warehouses under the updated Norms. The exemption has been made indirect for denatured ethyl alcohol, used (1) to produce goods not intended for human consumption, (2) to produce vinegar, (3) to produce flavorings that have a concentration of alcohol not exceeding 1.2% of their volume, for preparation of food or soft drinks or (4) as samples for analysis or tests required for production or for scientific purposes.

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Thus, the delivery will take place at prices containing excise duties and economic operators will subsequently request the refund of excise duties. Beer and alcoholic beverages To produce alcoholic beverages under license, authorized warehouse-keepers must submit a notification to the local customs authority and to the central tax authority (prior consent of the Commission for authorization of products subject to harmonized excise duties is no longer required). Also, sale of beer within a fiscal warehouse, authorized only for beer production, does not constitute a retail sale. Direct excise duties exemption Exemption from excise duties is granted directly for energy products acquired through intra-Community purchases and used by economic operators holding certificates of authorization issued by the Civil Aviation Authority, provided that they are authorized as registered consignees. Local Taxes

Various obsolete references to laws and regulations (which have been revoked/republished) have been brought up to date, e.g. the New Civil Code, CAEN, and legislation on agriculture, forestry and transport. In the case of revoked financial leasing contracts, the tax on buildings, land or vehicles, as appropriate, is due by the lessor starting with the date of the document attesting the transfer of the goods as a result of the revocation of the contract. For buildings, the tax is calculated on the book value recorded in the lessors accounts. A new calculation example has been introduced with regard to the building tax due by individuals for rooms in the basement, semi-basement or attic. Reconstruction, consolidation, modernization, modification or expansion work carried out by a tenant to leased buildings within the meaning of the Fiscal Code, is defined as being work leading to an increase of the buildings value by at least 25%. The meaning of buildings used for tourist purposes has been clarified. Certain obligations have been set out for taxpayers which own such buildings, e.g. they must submit an affidavit by 31 January each year detailing the functioning of the accommodation unit during the year. They must also provide documents detailing the current functioning of the unit if requested to do so by the local tax authorities. . Government Ordinance no.125/2011 has modified Art. 261 paragraph (1) of the Fiscal Code to state that the tax on vehicles is due in relation to vehicles subject to licensing (nmatriculare) and registration (nregistrare), while previously the tax was due only for licensed vehicles (nmatriculate). The Norms now state that taxpayers holding vehicles subject to registration have the same tax obligations as applicable in the case of licensed vehicles. Under Government Ordinance no. 195/2002, as further amended, vehicles such as mopeds, self propelled machinery and equipment used for construction, agriculture and forestry activities, as well as trams and trolleybuses, are not subject to licensing, but must be registered with the local authorities. For these vehicles, tax is due starting 1 January 2012. Decoration, removal and maintenance of advertisements are not included in the value of advertising and publicity services, when the relevant local tax is calculated. Taxpayers which are required to pay tax on shows may use their own numbering system for issuing entry tickets, if they observe the minimum information requirements provided by law.

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The new Norms state that local tax authorities can adopt a decision to establish a 1% tax on hotels at any time during the year, for the following fiscal year. Previously, if no decision to establish a hotel tax had been made by 31 May, the local tax authorities could not impose the tax for the following fiscal year. Local councils have been given the authority to establish their own procedures in relation to incentives granted for renovation works which improve the energy efficiency of buildings.

Social security contributions The new Norms do not bring major clarifications related to social security contributions. Details are given of the types of income which are specifically exempted for each type of contribution. The new Norms specify that the social security contributions calculation base also includes the remuneration of administrators, members of the managing and supervisory board and members of the consultative committee, as well as the remunerations of state representatives or the remuneration of managing board representatives in the general meeting of shareholders, or in the managing board.

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