It looks like the Romanian companies will not see their dream of stable tax legislation come true this year. Only six months after having been enacted, the Profit Tax Law and the VAT Law are to be modified.
This time, the changes are generally "welcome," benefiting the companies taking loans, those in need of sponsors and the enterprises that will be able to land contracts with the NATO members.
First of all, the Exchequer is trying to help the companies that use credits to finance their operations. According to an emergency ordinance draft, the interest spending that can be fully deducted by companies from the taxable profit will go up to three times the value of capital stock.
Although likely to boost financing by loans, the new stipulation will not have any spectacular effects, since most Romanian companies have small capital, often close to the minimal accepted level. "The capital indebtedness increase from 1 to 3 is a positive change, but will not have the desired effects on the companies with a relatively small share capital, which turn to big loans to fund their operations," says Cezar Boleac, a senior consultant with Deloitte&Touche Romania.
Since the Exchequer doesn't just give something for free, it has eliminated the law paragraph stipulating that interest spending can be deducted by those companies with indebtedness higher than one, up to the sum total of interest revenues plus 10% of the other revenues earned by the taxpayer.
Due to the quoted paragraph, the indebtedness level was of no consequence to the companies with significant revenues. "The increase in the indebtedness level means it has been brought to an acceptable quota, similar to the one applied in the neighbouring countries," says Mihaela Mitroi, tax director with PricewaterhouseCoopers Romania.
The positive changes also include the unlimited deductibility of interest spending for leasing and mortgage companies. Moreover, those in need of sponsors will be able to get the money more easily, since the ceiling for sponsorship expenses goes up to 7% from 5%, when the profit tax is calculated.
The draft law also tackles capital increases, stating that money derived from fiscal incentives cannot be used for augmenting the capital or for patching up losses.
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