Law 170/2016 on the tax specific to certain activities
5 minute • Anca Dascalu • 01 noiembrie 2016
The President of Romania enacted a Law on the tax specific to certain activities which was published in the Official Journal of Romania on October 14th, 2016 and shall be effective on January 1st, 2017.
The bill of this law has generated dissatisfaction mainly as regards the higher tax that would be payable by some companies acting in the HORECA industry (in particular, the smaller companies) and, therefore, the President forwarded it for re-examination by the Parliament.
The Parliament has brought some minor changes to the law while the main provisions regarding the computation of the tax remained basically unchanged.
ENTITIES SUBJECT TO THE TAX SPECIFIC TO SOME ACTIVITIES
By exception from the Tax Code, this Law sets forth a specific tax payable by Romanian corporate entities that conduct their business in the following industries:
5510 – “Hotels and similar accommodation”
5520 – “Holiday and other short-stay accommodation”
5530 – “Camping grounds, recreational vehicle parks and trailer parks”
5590 – “Other accommodation”
5610 – “Restaurants and mobile food service activities”
5621 – “Event catering activities”
5629 – “Other food service activities”
5630 – “Beverage serving activities”
According to article 3 of the Law the tax specific to some activities (hereinafter the “specific tax”) is applicable to Romanian corporate entities that on December 31st, 2015, met the following simultaneous conditions:
- The main activity or the secondary activity as described in the entity’s articles of incorporation included one of the above mentioned NACE Codes;
- The entity was not undergoing liquidation according to the law.
Furthermore, the taxpayers that conduct several activities from the NACE Codes listed above, except for the ones that conduct activities under the form of a hotel complex must calculate the specific tax by adding up the tax determined according to article 6 of the Law for each activity.
Taxpayers that have several units must determine the annual tax by adding up the specific tax for each unit.
RULES FOR THE COMPUTATION OF THE ANNUAL SPECIFIC TAX
The annual specific tax is computed for each unit based on the formula stated in Annex 1, Annex 3 and Annex 3, depending on each category of activity.
Thus, for the activities listed in Annex 1 (5610 – Restaurants and mobile food service activities; 5621 – Event catering activities; 5629 – Other food service activities), the calculation formula takes into account a standard tax of 1,400 Lei per year which is subject to a set of criteria:
- The rank of the locality (the larger the city the higher the tax);
- The net area (the larger the area the higher the tax);
- The seasonality (a factor that reduces the tax depending on the rank of the locality);
- A fix coefficient that reduces the technical area (0.9).
For the activities listed in Annex 2 (5630 – Beverage serving activities) the rules shall be similar to those in Annex 1.
For the activities listed in Annex 3 (5510 – Hotels and similar accommodation; 5520 – Holiday and other short-stay accommodation; 5530 – Camping grounds, recreational vehicle parks and trailer parks; 5590 – Other accommodation), the annual specific tax per unit shall be calculated as follows:
annual specific tax/unit = k* number of accommodations
where k = standard tax, the amount of which can be retrieved from one of the tables in Annex 3 depending on the category and/or type of tourist accommodation structure mentioned in the classification certificate.
For instance:
For a 3* hotel in the Danube Delta that can take in 50 tourists the annual specific tax per unit is 64 (standard tax for the 3* hotel in the Danube Delta as per Annex 3) x 50 (places) = 3,200 Lei/unit/year.
According to article 6(6) of the Law, taxpayers that conduct their activity through a hotel complex would calculate the specific tax based on the formula laid down in Annex 3.
A hotel complex is a set of tourist accommodation structures with different functions that simultaneously meet the following conditions: (i) are operated by the same entity; (ii) all the activities conducted are reflected in the same accounting book; (iii) are located within the perimeter of the same accommodation unit.
In our opinion, the meaning of article 10(1) according to which “Taxpayers who during the year obtain income from activities other than the NACE Codes listed in article 1 of the Law, declare and pay their profit tax according to law 227/2015 as further amended and supplemented (the Tax Code)” and of article 10(2) according to which “Taxpayer who conduct activities through a hotel complex and obtain income from other activities declare and pay their profit tax according to law 227/2016 as further amended and supplemented (the Tax Code)”, should be that only the income obtained from “activities other than the one listed in the bill of Law” shall be subject to taxation separately from the income obtained from the activities listed in the bill of Law. An opposite interpretation would be meaningless in respect of the purpose of this bill of Law.
Taxpayers who conduct their activity through hotels, apart-hotels, motels, tourist boarding houses, rural boarding houses, urban boarding houses, agro-tourism boarding houses, apartments for rent, hostels, bungalows, villas, representing tourist accommodation in buildings or in building units that offer accommodation premises and restaurant-like and bar-like public food locations, with all these specific services being offered by the same company who offers the accommodation, shall calculate the specific tax in accordance with the formula laid down in Annex 3.
DUE DATE FOR THE TAX SPECIFIC TO SOME ACTIVITIES (PAR. 1 OF ART. 8)
Corporate entities must pay the tax specific to some activities twice a year:
- For the 1st Semester – half of the amount no later than July 25th, inclusively (first payment to be due in 2017);
- For the 2nd Semester – half of the amount no later than July 25th, inclusively (first payment to be due in 2018).
OTHER PROVISIONS
The Law becomes effective on January 1st, 2017.
The norms for the application of the Law – to be approved by Joint Order of the minister of the public finance and the minister of economy, trade and relations with the business environment, shall be drafted within ninety (90) days from the publication of this Law in the Official Journal of Romania, Part I.
