The companies that will post profit after selling shares, investment fund units or real estate will have to pay only 10% tax for the respective gains, as of next year. If the sale does not yield profit, but the company actually incurs losses instead, this will be recouped from the taxable profits resulted from similar transactions concluded in the next five consecutive fiscal years.
These are the special taxing rules for the income earned from selling shares and real estate, as stipulated in the Fiscal Code bill, which is still waiting to be debated by Parliament.
According to current regulations, earnings from the companies' transactions with shares are added to the rest of the profit and then taxed together, as a whole. The tax is 25%. As of 2004, the profits derived from transactions involving shares and real estate will bear a 10% tax, the same level as the dividend tax paid by legal persons. However, this relaxation will only enter effect if three conditions are met. First of all, to put a lid on speculative transactions, the Exchequer requires that the seller must own the units or the property for at least two years before parting with them. Moreover, the buyer cannot be affiliated to the seller. Last but not least, the 10% tax will only be applied to real estate and stock transactions concluded after December 31, 2003.
"This is all good at first sight, but I don't think it will change the way companies feel about portfolio investments on the capital market. The companies that have money to invest on the Stock Exchange would have invested even without this change, whereas those that have never considered this kind of dealings will not be attracted only by the tax cut. I hope this decision will not be put under the 'Capital market boosting measures' category, because it does not belong there. Other wheels should be set in motion," says Nicu Pascu, an analyst with SIVM Broker, Romania's largest independent brokerage.
In the case of natural persons, the Fiscal Code stipulates they will continue to pay 1% of the amounts they earn from the transfer of shares and from the contractual sale-purchase of currency. Moreover, the Code maintains the 10% tax on the gross dividend paid by a Romanian legal person. However, the Exchequer officials are talking about raising the dividend tax up to 15-18 percent, as the profit tax is set to go down to 20%. razvan.voican@zf.ro
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