Tax amnesty - what measures did the Government approve yesterday for bad payers and how will correct taxpayers be rewarded

Companies and natural persons who pay their outstanding main debts to the state budget by August 31, 2024, will benefit from the cancellation of the ancillary debts calculated for the payment obligations, according to the emergency ordinance approved in yesterday's government meeting by which more many fiscal measures, including the allocation of a bonus for good paying taxpayers.

Prime Minister Marcel Ciolacu stated before the government meeting: "We are introducing fiscal facilities such as canceling budget arrears for both companies and individuals. But only if certain conditions regarding debt payment are met. For the first time, we also come with bonuses for correct taxpayers with up-to-date taxes. As we promised, we also consulted with the business environment on this project, and we will continue to do so."

For his part, Marcel Boloş, the Minister of Finance, stated in the press briefing that took place after yesterday's meeting: "It is an extremely complex package of measures that concerns the business environment and the state's public expenditures. Regarding tax benefits, they are divided into two categories. The first concerns good paying taxpayers for whom we have a 3% bonus that will be granted automatically by ANAF decision and can be used to pay taxes and fees for 2025 or to offset other tax debts. This measure is a mark of respect for taxpayers who have paid their taxes and duties on time and is an initiative to encourage voluntary compliance. The second category refers to taxpayers who have outstanding debits to the state budget registered until August 31, 2024. Under the condition of paying the main debts until November 25, 2024, companies and individuals will benefit from the total cancellation of accessories to these debits, accessories which consist of late payment penalties, interest, etc.. Individuals will also benefit from the cancellation of part of the main debt owed, if they pay by November 25, 2024. (...) From the recovery of the enormous value of the main debts, of 60 ,1 billion lei, we want to finance the investment projects that are carried out in Romania. We cannot stay with this uncollected, unrecovered money, and have the tax statute of limitations kick in after five years. Between choosing to lose everything or collect the debts, I think the partial tax amnesty is a very good alternative. In this way, we also support companies in difficulty to give them a chance to continue their economic activity, and we also support the state by collecting the respective amounts that go into the development of the national economy".

The Minister of Finance stated that there will not be another tax amnesty in the short and medium term, because the state does not want to encourage non-compliance with the payment of taxes and fees to the state budget.

• Partial tax amnesty

The normative act adopted yesterday introduces a partial tax amnesty for natural persons who register debts to the state budget on August 31, 2024. The main provisions are:

- Individuals with debts of less than 5,000 lei can benefit from the cancellation of 50% of the outstanding principal amount. To benefit from this facility, the taxpayer must pay half of the amount owed and submit a request to ANAF by November 25, 2024, after which the related interests and penalties will be deleted. For example, if a taxpayer owes 2,000 lei, he will have to pay 1,000 lei, and the remaining 1,000 lei, together with interest and penalties, will be cancelled.

- Individuals with debts greater than 5,000 lei can benefit from the cancellation of 25% of the outstanding principal amount, and the taxpayer must pay 75% of this amount and submit the application by the same date.

- For companies, the emergency ordinance provides for a similar amnesty scheme, through which they can erase the interest and penalties related to the debts if they pay the principal amount and submit a request to ANAF by November 25, 2024.

Following the application of the partial amnesty, the state hopes to initially collect approximately 9.5 billion lei from the companies that benefit from this facility, given that the total recoverable arrears amount to 71.8 billion lei, of which 60.1 billion lei are the main fiscal obligations.

According to the data provided yesterday by Minister Marcel Boloş, on August 31, 330,000 companies were registered with outstanding debts, the total value of which amounted to 32.4 billion lei. As for natural persons, the Minister of Finance stated that on August 31, 2024, 848,000 natural persons registered outstanding principal tax obligations, with debts totaling 39.2 billion lei.

• Bonus for good payers

The normative act also provides that companies that have respected the tax payment deadlines benefit from a bonus of 3% of the profit tax or the income tax of micro-enterprises. In the case of tax groups, the bonus is applied to the annual profit tax declared by the responsible legal entity.

The conditions to benefit from this bonus include:

- Timely submission of all tax returns.

- Full and timely cancellation of taxes related to fiscal year 2024.

- The absence of any outstanding tax obligations at the date of submission of the declarations.

ANAF will check ex officio if the companies meet these conditions and will issue appropriate decisions. The amounts subject to the rebate are not refunded, but are used to offset other taxes and fees. The procedure for applying this measure will be approved by order of the Minister of Finance, upon the proposal of the president of the National Fiscal Administration Agency, within a maximum of 45 days after the publication of the new normative act in the Official Gazette.

• Supporting public and private investments

The Emergency Ordinance also provides for a series of measures aimed at supporting the investments of local authorities and companies, among which we list:

- Redistributing budget credits to allow local authorities to secure the necessary funding for ongoing projects.

- Increasing the ceiling for contracting loans for administrative-territorial units from 1 billion to 2 billion lei.

- Contracting loans through green Eurobonds for the financing of railway and metro transport projects.

These measures are intended to encourage investment in infrastructure and the development of strategic transport projects, with a special focus on sustainability and ecological transition.

• Budgetary expenses, reduced by the new GEO

An essential component of the new normative act is the reduction of budget expenditures, given that the budget deficit has exceeded 4% of GDP. These measures include:

- Limitation of expenses for goods and services in the period September - December 2024 at the level of the average expenses in the period January - August 2024. Exceptions are provided for the field of health and social assistance.

- Prohibition of the purchase of furniture, consultancy and professional training, except for those necessary for projects financed by European funds.

- Suspension of public investments, except for those already in the finalization phase and which are financed from PNRR and other European funds.

- Salary capping for state-owned companies, which will be able to increase salary expenses only under strict conditions, such as the existence of a net annual profit in the last three years and the reduction of subsidies received from the budget.

Through this package of fiscal measures, the Government is trying to keep under control the budget deficit, which on July 31, 2024 amounted to 4.02% of the Gross Domestic Product, given that the target set for the end of the year is 5%.