Deposit rate taxation sparks controversy

Owners of banking deposits who opted to collect rates on due date will have the surprise to see that banks deduct the 16% tax for the entire interest rate, not just for the amount accrued after July 1, because this is what the Finance Ministry requires.

Deposits with longer maturities, such as those made for one year, come with the option of monthly interest payment or payment in one tranche upon the due date. If the depositor chose to collect interest every month, they will only pay tax on the interest rate accumulated after July 1. On the other hand, if they chose to collect the entire rate upon the due date, which is some time after July 1, then they will pay tax for the entire amount.

"The 'realised interest rate' phrase is understood to mean the interest registered in the accountholder's account (...) Compared with what was previously stated, in case of a term deposit made on January 10, 2010 and falling due on July 10, 2010, the interest rate thereof registered in the current or deposit account as of July 1, 2010 is subject to tax," reads a letter signed by Finance Minister Sebastian Vlădescu addressed to Radu Gheţea, in his position as chairman of the Romanian Banking Association (ARB). The letter reached ARB yesterday. Bankers challenge this interpretation of the Finance Ministry.

"Our interepretation is that the tax should be applied on a pro-rata basis, that is only for that part of the interest accrued after July 1. The banks calculate the interest rate due to their clients daily, and the interest is only due when the deposit reaches maturity. In other words, the end client whose income is subject to tax derives an income from interests daily, therefore the income made before July 1 should not be subject to tax," says Corina Vasile, Raiffeisen Bank's communication manager.