2022-06-29-KPMG_Global-Romania_–_Fiscal_Code_Changes_Rules_on_Investment_Income_3页_289kb

Romanian Fiscal Code Changes for Investment Income

Overview

Law 142/2022, published on May 23, 2022, amends the Fiscal Code (Law no. 227/2015) and will take effect on January 1, 2023. The changes aim to stimulate the capital market, attract investors, and increase funding for companies by reducing tax rates on certain investment incomes and simplifying reporting obligations. Affected parties include individuals, expatriates, private clients, and intermediaries providing services in Romania.

Key Amendments

• Capital Gains Taxation: Rates reduced from 10% to 1% for holding periods longer than 365 days and to 3% for shorter periods. Gain calculation now uses the weighted average cost method, including transaction fees for each symbol, making it comprehensive regardless of ownership period. Capital losses can no longer be carried over and offset future gains.
• Tax Withholding and Reporting: Intermediaries must calculate, withhold, declare, and pay income tax on every transaction, covering both Romanian and foreign income (except transfers of investment gold). They are required to report annual gains/losses to taxpayers and the National Agency for Fiscal Administration (ANAF).
• Intermediary Obligations: Defined intermediaries include investment management companies, self-managed investment companies, administrators of alternative investment funds, and entities with a permanent establishment in Romania. They face additional reporting obligations.
• Transitional Measures: Specific provisions for capital gains in tax year 2022.

Why This Matters

• Affects individuals, expatriates, and private clients investing through Romanian intermediaries by altering their tax liabilities.
• Intermediaries such as banks and other service providers under Romanian law face increased reporting requirements.
• The changes may lead to reduced tax on capital gains obtained from foreign markets through Romanian brokers, potentially impacting the intended benefits.

KPMG Note

The reduced tax rates apply only if the intermediary is Romanian or has a permanent establishment in Romania, which could result in discriminatory treatment and unintended effects. For instance, same-source income might be taxed differently based on the intermediary's location, creating inconsistencies.