Practical tax issues analyzed by the LDDP, CERTIC and Soter & Partners experts in the “Business Taxation: Challenges and Solutions” Conference
The first edition of the “Business Taxation – Challenges and Solutions” Conference took place Friday, September 14, 2018, at the Palas Mall Iasi. During the event, organized by the accounting and tax consulting company CERTIC, a number of issues raised in the practice of tax law were addressed by the speakers from the law firm Leaua Damcali Deaconu Paunescu – LDDP and the accounting, tax consultancy and audit company – Soter & Partners: Dan Manolescu, Ph.D., President of the Chamber of Romanian Tax Consultants, Partner Soter & Partners, Assoc. Prof. Crenguţa Leaua, Ph.D., Managing Partner Leaua, Damcali, Deaconu, Paunescu – LDDP, Professor Radu Bufan Ph.D., The West University in Timisoara Law School, Mariana Vizoli, former Director General of Tax Legislation and Customs Registry, and State Secretary at the Ministry of Public Finance, currently a fiscal consultant and member of the Tax Consultants Chamber, Gheorghe Matei, Ph.D., Managing Partner of the Tax Department at LDDP, Mirela Buliga, Ph.D. – Senior Associate at LDDP and Radu Constantin Iaţco, economist and Manager of CERTIC.
Dan Manolescu, chairman of the Fiscal Consultants Chamber, introduced the audience to this autumn’s trends in fiscal legislation, expectations for VAT changes that already have political support, and discussions on Ordinance 79. “There are taxpayer complaints about excessive transposition of the ATAD Directive on the extent of interest deductibility, as our regulation has adopted the most restrictive conditions offered in the Directive and the business environment has called for the correction of this situation“, said Dan Manolescu.
The necessity to regulate fiscal consolidation in Romania, with all its advantages, especially in view of the very demanding current tasks on the preparation of the transfer pricing dossier and which ANAF would like to maintain for domestic transactions, even in the context of fiscal consolidation, was another subject approached by Dan Manolescu. “Although the preparation of this system is particularly laborious, sooner or later, Romania will have to accept it, especially as significant progress is made at EU level in finalizing the Common Consolidated Tax Base (CCCTB)”, said Dan Manolescu.
Dan Manolescu also analyzed the expansion of the micro-enterprise taxation system, pointing out that it “currently comprises over 80% of the total number of economic agents and which seems to have been accepted by most small entrepreneurs, so that this system and the specific tax have become dominant on a number of corporation tax payers “.
Dan Manolescu also presented the discussions on the application of IFRS 16 in the case of lease agreements. “The new regulation, under discussion at the MFP, leads to the recognition in the financial statements of intangible assets and not of the actual rent”, said Dan Manolescu.
Crenguța Leaua, Managing Partner of LDDP, emphasized the importance of the drafting of the price clauses in international trade agreements, with due consideration for the tax obligations of the parties and their dynamics during the contractual relation. “If the price clause does not indicate the extent to which taxes (VAT, customs duties, excises, etc.) are included and in what amount, disputes may arise. Litigation inevitably also occurs if the consequences of legislative changes on tax issues over the contract price are not clarified. The international practice in international arbitration abounds in cases of this kind, which the parties could avoid with a good drafting of the contract.“
Crenguţa Leaua drew the attention on the existence of a legislative coordination gap between the tax regime and the common law regime in the case of separation of property between spouses. “The amendment brought by the New Civil Code, which introduced the possibility of choosing between several matrimonial regimes, was not reflected in the tax legislation. The latter fails to consider these new regimes, and does not take into account the situation of the separation of goods. It basically starts from the premise that all situations would be those of a commodity community. Logically, the two situations cannot be treated in the same way”, said Crenguţa Leaua.
“European Union law is dynamic, the practice of the CJEU practice is part of EU law, so when the taxpayer addresses the CJEU, the decision to be rendered becomes obligatory for all Member States and their taxpayers”, said Crenguţa Leaua. “A taxpayer is not limited, in terms of his defense capabilities, to national law and national courts but has the possibility to invoke the provisions of EU law and to address also the CJEU. CJEU’s decisions being a source of EU law, the taxpayer has the possibility, by appealing to this court, to make decisions on the very content and interpretation of the legal norms in domestic law”, pointed out Crenguţa Leaua.
Professor Radu Bufan stressed the importance of exercising remedies against the taxation decisions from the perspective of capitalizing on the reason for review provided by art. 21 of the Administrative Litigation Act. “Since 2010, we have won a petition for revision at the Timişoara Court of Appeal by invoking the supremacy of European law”, stated Professor Radu Bufan.
Professor Radu Bufan also underlines that “there is always a risk in identifying the conditions laid down by the law for the VAT exemption for business transfer, even the case law of the Court of Justice of the European Union being insufficient in this respect.”
Professor Radu Bufan also presented the initiative to abandon the declarative principle in the field of local taxes, which would support the population. “As all the data and information that citizens now have to declare are already in the possession of the various state authorities, buildings, land and vehicles can be taxed ex officio, without the need for statements in this respect” said Professor Radu Bufan.
Mariana Vizoli, tax consultant, presented the VAT legislation, as well as the trends at the European level that will lead to a substantial change in the VAT rules.
“We benefit from a fairly rich case law of the CJEU on the right to deduct VAT, there are decisions in which the CJEU has shown that, if the substantive conditions are met, the formal conditions are less important. The CJEU decisions are opposable erga omnes and our administrative legislator – the Ministry of Public Finance – has been trying to illustrate the Methodological Norms for the application of the Fiscal Code with as many relevant decisions of the CJEU on excise and VAT as possible, to ensure these are known and applied in the territory of Romania”, said Mariana Vizoli.
Mariana Vizoli referred to the draft directives that will come into force until 2022, emphasizing the importance of the definitive VAT regime of intra-Community supplies, which requires the VAT tax to be charged on the share in the Member State of destination, the payment being made via the one-stop shop in the Member State where the supplier is established, followed by settlement between the Member States. “The importance of this regulation derives from the perspective of combating cross-border fraud due to the current transitional regime that has been in force for more than 25 years in the EU, namely the exemption of intra-Community supplies and payment by applying the reverse charge mechanism in the case of intra-Community acquisitions of goods“, Mariana Vizoli said.
Gheorghe Matei, Managing Partner of the Tax Law Department at LDDP, stated that “the approach of the fiscal body in the matter of recalculation of the allowances for delegation in terms of salary income is inappropriate for the employees. They cannot benefit from additional social contributions established by the tax body. “
Gheorghe Matei presented the challenges of fiscal inspection and fiscal contentious proceedings. “The tax inspection always raises controversy in practice, there is no transparent, generally applicable procedure for selecting taxpayers for tax inspections“, Gheorghe Matei said.
“The criteria for setting the risk analysis must be made public, each taxpayer must have the opportunity to comply voluntarily, to know the risks to which he is exposed”, Gheorghe Matei added.
Mirela Buliga, Senior Associate at LDDP, presented the challenges of Romanian companies doing business abroad, the refusal to apply Law no. 209/2015 regarding the annulment of some tax obligations, indicating that “in most cases the approach of the courts was to ascertain the incidence of the amnesty law, even in cases where the fiscal body did not use the legal basis of art. 11 par. (1) of the Fiscal Code for the re-qualification of the allowances for assignment / posting in taxable income and social contributions in Romania“.
“In the case of wage activities carried out abroad, by a joint analysis of double taxation avoidance conventions and tax code provisions, these revenues, even if they are recalculated by the tax authority in the allowance for secondment / posting, should not be taxable in Romania, there is an explicit legal basis for non-taxation“, Mirela Buliga said.
Mirela Buliga stressed that in the case of wage activities carried out abroad “special attention should be given to the economic employer, a concept of international tax law distinct from the formal employer, not only in the case of staff leasing and which may lead to another configuration of the rule of the allocation of the competence to tax”.
Radu Iaţco, CERTIC Manager, highlighted the difficulties of applying the CJEU case law on the anchor tenant, due to a conservative way of assessing certain situations. “In our tax practice it was very strange and difficult to accept the idea, consistent with international business practice, that a landlord must indemnify an “anchor” tenant because his reputation will also attract other tenants into the real estate”, said Radu Iaţco.
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