Profit tax and dividend tax

Taxation regime applicable to a legal person set up in accordance with European legislation The Tax code introduces the concept of legal person set up in accordance with European legislation. Such legal persons will now become tax residents if they establish (or transfer) their registered office in Romania. As a result, such entities will be subject to the same tax treatment as Romanian legal persons for taxation of profits and dividends. Implementation of certain provisions of the Cross-border mergers Directive As a result of the Ordinance, if a Romanian company has a permanent establishment in another Member State, and the Romanian company is dissolved as a result of a cross-border reorganisation, the Romanian tax authorities will not have the right to tax the former permanent establishment. In addition, in the case of a relocation of the registered office of a European Company (SE) and European Cooperative Society (SCE) from Romania to another EU Member State, if certain conditions are met there will not be a tax on the difference between the market value of the transferred assets and liabilities and their fiscal value. There will also be no tax on such movements at the shareholder level, and thus in the case of Romanian shareholders a tax basis step-up may be achieved. Changes related to the taxation of dividends The following will not be deemed as taxable dividends: The acquisition of the company's own shares without changing the percentage of holding of shareholders; The distribution of share premium to shareholders, if done in proportion to their holdings of shares; Any amount paid by companies to their shareholders for goods and services above market prices, provided that the amount is being subjected to taxation at the level of the seller (participant).

If dividends are declared but not paid by the end of the financial year, the payment of the dividend tax will be extended and will have to be paid by 25 January of the following year (as opposed to 31 December of the year declared). This new deadline also applies to dividends paid to non-residents. Tax depreciation changes The calculation of depreciation of fixed assets for tax purposes will now in all cases be based on the tax value, including adjustments resulting from revaluations according to accounting rules. The concept of entry value has been removed from the tax code. Expenses of all intangible assets recognised for accounting purposes, with the exception of start-up costs and goodwill, will now be amortizable. Changes regarding expenses deductibility when calculating the taxable base The following expenses will no longer be considered non-deductible: expenses incurred under a collective labour agreement, if they fall within the overall limit of 2% of staff salary costs incurred for social expenses;

fines, interest, penalties and other increased payments due under commercial contracts concluded with non-residents.

For taxpayers engaged in the exploration of underground natural resources, the basis for calculating the tax deductible provision for land restoration is narrowed. The limit of 1% will now be applied only on the difference between revenues and expenses recorded in connection with the exploitation of these natural resources (whereas previously it was based on overall revenues and expenses). Changes regarding the declaration and payment of profit tax The deadlines for the annual declaration and payment of profit tax have been extended by 10 days. As such, companies will generally now be required to file and pay their final profits tax by 25 April (as opposed to 15 April) of the following year with the following exceptions: non-profit organisations and taxpayers that obtain income mainly from crop production are required to declare and pay annual profit tax by 25 February (as opposed to 15 February) of the following year; taxpayers, other than banking companies, which have elected to close the previous financial year by 25 February also have to file and pay profit by 25 February.

For income earned by foreign companies from disposal of real estate and shares in Romanian companies (or other participation titles), the buyer (as opposed to seller) is obliged to withhold and pay the tax if the buyer is a Romanian legal person or a foreign legal person that has a permanent establishment in Romania.