Tax exemption of reinvested profit
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InfoTax no. 47, April 2014

GEO no. 19/2014,modifying and completing the Fiscal Code, published in the Official Gazette no.308/25.04.2014, brings a new measure of tax relief with the purpose of stimulating investments – tax exemption of reinvested profit. We hereby detail upon the conditions of enforcing this exemption:

- The exemption applies for the profit reinvested in technological equipment produced and/or purchased after 1st of July 2014 and put into function until the 31st of December 2016 inclusive.

- For period 1st of July 2014 – 31st of December 2014, the exemption applies only for the gross accounting profit realized after 1st of July 2014, out of which investments were performed.

- It is subject to exemption the profit invested in new technological equipment – machinery, equipment, working installations – covered under subgroup 2.1 of the Catalogue of Fixed assets, used for the purpose of carrying on the economic activity.

- The tax exemption is calculated quarterly or annually, as case may be. The profits tax exemption related to the investment is granted within the limit of the profits tax due in the respective period.

- The invested profit subject to exemption is represented by the balance of the profit and loss account, namely the gross accounting profit realized in the year of putting into function the equipment.

- The amount of profits subject to exemption, minus the part pertaining to the legal reserve, is allocated at the end of the financial year, with priority, for constitution of reserves.

- In cases where, at the end of the financial year, an accounting loss is recorded, the recalculation of the profits tax related to the invested profit will not be performed and the amount of the invested profit will not be allocated to reserves.

- The reserves resulting from the application of the relief will be taxed at the moment of their usage under any form, as well as in case of reorganization operations, if the beneficiary company does not take over these reserves.

- In case of micro-companies becoming profits tax payers, for the application of the relief there will be considered the gross accounting profit realized cumulatively from the beginning of the year invested in technological equipment that is put into function starting the trimester in which they become profits tax payers.

- The technological equipment must be kept in the patrimony for a period of at least half of the economic usage period, established according to the accounting regulations, but not more than 5 years. Otherwise, the profits tax of the beneficiary is reassessed, and it owes interest and penalties as well.

- For this technological equipment, the accelerated fiscal depreciation method may not be used.