(P) Tax Flash: Amendments to the Fiscal Code in Romania

(Emergency ordinance No. 125 / 2011 amending Law 571/2003 on the Fiscal Code, published in Official Gazette No. 938 / 30 December 2011) The Emergency ordinance enters into force from 1 January 2012 with certain exceptions. The main amendments to the Fiscal Code include the following: Definitions Fiscal value New provisions have been introduced regarding the determination of the fiscal value of assets and liabilities by the taxpayers (credit institutions) that apply the International Financial Reporting Standards (IFRS) for accounting purposes. Profits tax Fiscal rules for taxpayers that apply the IFRS accounting regulations A new Article has been introduced regarding tax rules that have to be taken into consideration by taxpayers applying IFRS accounting regulations when determining profits tax. These new rules relate inter-alia to the fiscal treatment of amounts recorded in retained earnings from specific provisions or from the update with inflation rate or from other adjustments, further to the implementation of IFRS accounting regulations. Regarding differences between the value of the specific provisions recorded on 31 December 2011 and the depreciation adjustments recorded on 1 January 2012 according to IFRS, the differences are assimilated, as the case may be, to income or expenses having a specific tax treatment. By exception, such tax adjustments in 2012, will not be considered for computing advance tax payments due by credit institutions in the future. Taxable income The favorable differences resulted from the evaluation of participation titles and of bonds issued on a long-term are no longer mentioned as non-taxable income for profits tax computation purposes. Income from cancellation of the reserve recorded upon the contribution in kind to the capital of other legal entities represents non-taxable income. Deferred profits tax and income representing a change in the fair value of real estate investments recorded by the taxpayers applying IFRS are non-taxable. Deduction of expenses The expenses resulted from the unfavorable differences in value of the participation titles or long-term bonds are no longer mentioned as non-deductible expenses for profits tax computation purposes. Starting 1 January 2012, 50% of fuel costs of vehicles used exclusively for passenger transport (under certain conditions and exceptions) are tax deductible expenses. Fiscal depreciation The expenses representing the fiscal value remained un-depreciated of the replaced components for depreciable fixed assets/intangible assets are considered as deductible expenses. The fiscal value of the fixed assets is adjusted with the fair value of the replaced new components.