Answers

Applied Skills, TX ROM December 2019 Answers

Taxation – Romania (TX – ROM) and Marking Scheme

Section A

1 A
Deductible expense Company 1 = 30% x (100,000 – 30,000) = 21,000 lei
Deductible expense Company 2 = 200,000 lei
Deductible expense Company 3 = 30% x 60,000 lei = 18,000 lei
Total deductible expenses = 21,000 + 200,000 + 18,000 = 239,000 lei

2 D

3 C
Annual gain from Romania = 200,000 – 30,000 = 170,000 lei
Income tax on gain from Romania = 10% x 170,000 = 17,000 lei
Annual gain from Germany = 100,000 euro x 4·6 lei/euro = 460,000 lei
Income tax on gain from Germany, before tax credit = 10% x 460,000 = 46,000 lei
Available tax credit = 9,000 euro x 4·6 lei/euro = 41,400 lei
Income tax on gain from Germany, after tax credit = 46,000 lei – 41,400 lei = 4,600 lei
Total income tax = 17,000 + 4,600 = 21,600 lei

4 C
Taxable base for social security contribution = 30,000 – 40% x 30,000 = 18,000 lei
Threshold to pay social security contribution = 1,900 x 12 = 22,800 lei
Taxable base < threshold ➔ no social security contribution is due.
Taxable base for health care insurance contribution
= (30,000 – 40% x 30,000) + (20,000 – 40% x 20,000) = 18,000 + 12,000 = 30,000 lei
Threshold to pay health care insurance contribution = 1,900 x 12 = 22,800 lei
Taxable base > threshold ➔ health care insurance contribution is due.
Health care insurance contribution for 2019 = 10% x 22,800 lei = 2,280 lei
Total social contributions due = 0 + 2,280 = 2,280 lei

5 B

6 A
VAT due = 4,000 euro x 4·6 lei/euro x 19% + 5,000 euro x 4·6 lei/euro x 19% = 3,496 + 4,370 = 7,866 lei

7 D
Price for independent parties = 40 + 15% x 40 = 46 lei/piece
Price for Fruit SRL = 42 lei/piece
⇒ Transfer pricing adjustment for Tree SA= 46 lei/piece – 42 lei/piece = 4 lei/piece additional income
Additional corporate income tax to be paid by Tree SA = 4 x 50,000 x 16% = 32,000 lei

8 B
Social contributions for Bogdan’s salary
Social security contribution = 8,000 x 25% = 2,000 lei
Health care insurance contribution = 8,000 x 10% = 800 lei
Work insurance contribution = 8,000 x 2.25% = 180 lei
Social contributions for Bogdan’s income derived from intellectual property rights
As Bogdan earns salary income, he is not liable to pay social contributions for his intellectual property rights
income.
Total social contributions due in July 2019 = 2,000 + 800 + 180 = 2,980 lei

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9 C
Number of days of delay for the additional corporate income tax due for the 1st quarter (26 June–30 July 2019)
= 5 + 30 = 35 days
Number of days of delay for corporate income tax due for the 2nd quarter (26 September–10 October 2019) =
5 + 10 = 15 days
Interest due = 150,000 x 35 x 0·02% + 200,000 x 15 x 0·02% = 1,050 + 600 = 1,650 lei
Penalties for late payment due = 150,000 x 35 x 0·01% + 200,000 x 15 x 0·01% = 525 + 300 = 825 lei
Total interest and late payment penalties due = 1,650 + 825 = 2,475 lei

10 A
Income tax for self-employed activity = 10% x (1,800,000 – 1,300,000) x 30% = 15,000 lei
Income tax for rent = 10% x (180,000 – 40% x 180,000) = 10,800 lei
Total income tax = 15,000 + 10,800 = 25,800 lei

11 C
Corporate income tax due for the first quarter before sponsorship tax credit = 280,000 x 1% = 2,800 lei
Tax credit for sponsorship = min (1,000; 20% x 2,800) = 560 lei
Available tax credit for sponsorship to be carried forward: 1,000 – 560 = 440 lei
Corporate income tax due for the second quarter before sponsorship tax credit = 470,000 x 3% = 14,100 lei
Tax credit for sponsorship = min (440; 20% x 14,100) = min (440; 2,820) = 440 lei
Final corporate income tax due for the second quarter = 14,100 – 440 = 13,660 lei

12 D

13 B
Output VAT = (870,000 – 530,000) x 19% + (870,000 – 530,000) x 19% = 129,200 lei
Input VAT = (870,000 – 530,000) x 19% = 64,600 lei
VAT to be paid = 129,200 – 64,600 = 64,600 lei
Note: The invoice issued by Land SRL to Kiwi SA is without VAT, as Kiwi SA must apply the reverse charge
mechanism to it.

14 A

15 C
Social expenses = 2,000 x 30 + 3,000 x 13 = 60,000 + 39,000 = 99,000 lei
Maximum deductible social expenses = 5% x 1,280,000 = 64,000 lei
⇒ Maximum deductible expenses with presents = 64,000 lei
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2 marks each 30
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Section B Marks

1 Tomato SA

Output VAT, input VAT and VAT to be paid to/reimbursed from the State budget for July 2019
Transaction Input VAT Output VAT
(lei) (lei)
Adjusting VAT for the building and land bought in 2017 (W1) (57,000 ) 2
Rent (150,000 x 0%) 0 1
Car (400,000 x 19% x 50%) 38,000 1
Adjusting input VAT for the first investment 0 1
Adjusting input VAT for the second investment (W2) (171,000 ) 2
Supplying real estate services to a French company (280,000 x 19%) 53,200 1
Supplying consultancy services to a German company (120,000 x 0%) 0 1
–––––––– –––––––
Total (190,000 ) 53,200
–––––––– –––––––
VAT to be paid to the State budget = 53,200 – (–190,000) = 53,200 + 190,000 = 243,200 lei 1
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10
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Tutorial notes:
– Services supplied to the French company are connected with immovable property, thus the place of supply
of these services is where the immovable property is situated (i.e. Bucharest), according to the Tax Code,
art 278(4)(a).
– Services supplied to the German company are not connected with an immovable property, thus the general
rule for the place of supply of B2B services is applicable, according to the Tax Code art 278(2).
WORKINGS
W1. Adjusting VAT for the building and land bought in 2017
Input VAT on building’s acquisition in 2017 = 2,800,000 x 19% = 532,000 lei
Input VAT on land acquisition in 2017 = 3,200,000 x 19% = 608,000 lei
VAT adjustment in July 2019 = 1/20 x (532,000 + 608,000) = 57,000 lei
W2. Adjusting VAT for the first and second investment
As the first investment was abandoned due to reasons independent of Tomato SA, no VAT adjustment is required.
The second investment was abandoned as per Tomato SA’s choice, so this VAT adjustment must be made.
VAT adjustment for the second investment = 1,500,000 x 60% x 19% = 171,000 lei

2 Ionescu family

Mihaela
Mihaela earns employment income, thus she is liable to pay both social security contribution and health care
insurance contribution. ½
Monthly taxable base for social contribution for January–November 2019
= 8,000 lei ½
Monthly taxable base for social contribution for December 2019 = 8,000 lei + 450 lei = 8,450 lei ½
Social security contribution due in 2019
= (8,000 x 25% x 11) + (8,450 x 25%) = (22,000 lei + 2,113) = 24,113 lei 1
Health care insurance contribution due in 2019
= (8,000 x 10% x 11) + (8,450 x 10%) = (8,800 + 845) = 9,645 lei 1
Tudor
Tudor obtains only rent income, thus he is not liable to pay social security contribution. ½
Tudor will be liable to pay health care insurance contribution, only if his annual taxable income is higher than the
threshold of (1,900 x 12 months) = 22,800 lei. ½
Taxable income = (5,000 – (40% x 5,000)) x 12
= 3,000 x 12 = 36,000 lei ½

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Taxable income > threshold ➔
Health care insurance contribution due for 2019 = (22,800 x 10%) = 2,280 lei 1
Bogdan
Bogdan obtains self-employment revenues, thus he will be liable to pay both social security contribution and health
care insurance contribution, but only if his annual taxable income is higher than the threshold of (1,900 x ½
5 months) (August–December) = 9,500 lei. ½
Taxable income = (24,000 x 144/365) = 9,468 lei 2
Taxable income < threshold ➔ No social contribution is due. 1
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3 Salad SA

(a) Computation of exceeding borrowing costs in 2018

Exceeding borrowing costs registered in 2018 = 1,200,000 – 50,000 – 89,000 = 1,061,000 lei 1
Exceeding borrowing costs brought forward from 2017 = 480,200 lei ½
Total exceeding borrowing costs which could be deducted in 2018 = 1,061,000 + 480,200 =
1,541,200 lei
Maximum fixed threshold for deducting borrowing costs = 200,000 euro x 4·6 lei/euro = 920,000 lei 1
Exceeding borrowing costs above the fixed threshold = 1,541,200 – 920,000 = 621,200 lei
Computation base for the variable threshold = accounting profit – non-taxable revenues + corporate income
tax expenses + exceeding borrowing costs registered in the year of computation + tax depreciation
Computation base for the variable threshold in 2018 = 20,000 – 390,000 + 0 + 1,061,000 + 18,000 =
709,000 lei 1
Maximum variable threshold = 10% x 709,000 = 70,900 lei ½
Maximum deductible exceeding borrowing costs in 2018 = 920,000 + 70,900 = 990,900 lei, out of
which: ½
– 480,200 lei are exceeding borrowing costs deducted in 2018, but registered in previous years ½
– 510,700 lei are exceeding borrowing costs deducted in 2018, and registered in 2018 ½
Non-deductible exceeding borrowing costs in 2018 which may be carried forward = 1,541,200 – 990,900
= 550,300 lei ½
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(b) Tax depreciation in 2019

Building
Tax value of the building = 4,300,000 – 1,200,000 – 600,000 = 2,500,000 lei 1
Number of months of depreciation = 50 x 12 = 600 months ½
Number of months of depreciation in 2019 = 6 ½
Tax depreciation in 2019 = 2,500,000/600 x 6 = 25,000 lei 1
Car
Monthly computed depreciation = 180,000/(12 x 5) = 3,000 lei ½
Maximum monthly depreciation = 1,500 lei
Tax depreciation of the car in 2019 = 1,500 x 12 = 18,000 lei ½
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 Marks
4 Mircea

(a) Calculation of personal employment tax

lei
Gross salary 5,300 ½
Use of company car (W1) 3,514 2
Meal vouchers 150 ½
Present vouchers (the vouchers are only taxable for Eva) 150 1
Voluntary health insurance (W2) 560 1
Bonus – profit participation 2,000 ½
Personal loan written off 4,000 ½
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Total gross employment income 15,674
Social contributions (5,430 ) ½
Medical subscription (W3) (1,200 ) 1
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Taxable income 9,044
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Income tax (10%) 904 ½
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WORKINGS
W1. Use of company car
Benefit in kind for the use of car = (60,000 x 1·7% x 70%) = 714 lei
Benefit in kind for the expenses with fuel and maintenance = (4,000 x 70%) = 2,800 lei
Total benefit in kind from using the company car = (714 + 2,800) = 3,514 lei
W2. Voluntary health insurance
Maximum non-taxable value = (400 euro x 4·6 lei/euro) = 1,840 lei
Taxable voluntary health insurance = (2,400 – 1,840) = 560 lei
W3. Medical subscription
Maximum value which may be deducted = (400 euro x 4·6 lei/euro) = 1,840 lei
Eligible medical subscription = (2 x 600) = 1,200 lei, as only the medical subscription paid for himself and
for Diana may be deducted. Diana is the only dependent person to Mircea
➔ 1,200 lei may be deducted from the taxable base.

(b) The tax treatment of dividends received by individuals

The income tax rate for dividend received by individuals is 5%. ½
The tax is due when the dividend is paid. ½
The income tax is withheld by the dividend payer at source and paid to the state budget until the 25th of the
month following the payment of dividend. ½
However, if a dividend is distributed during the year, but not paid until the end of that year, the tax is due until
25th January of the year following the distribution. ½
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2
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10
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5 Cucumber SRL

Computation of corporate income tax for each quarter

Quarter 1
Taxable base for the corporate tax for very small companies = 700,000 lei ½
Cumulated taxable base from the beginning of the year until the end of Q1 = 700,000 lei
Threshold for applying the corporate tax for very small companies = (1,000,000 euro x 4·6 lei/euro) =
4,600,000 lei

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⇒ Cumulated taxable base < threshold ➔ for Q1 the special scheme of corporate tax for very small companies is
applicable. ½
Tax rate = 3%
Corporate income tax for very small companies = (3% x 700,000) = 21,000 lei ½
Quarter 2
Taxable base for the corporate tax for very small companies = 900,000 lei ½
Cumulated taxable base from the beginning of the year until the end of Q2
= (700,000 + 900,000) = 1,600,000 lei ½
Threshold for applying the corporate tax for very small companies = 4,600,000 lei
⇒ Cumulated taxable base < threshold ➔ for Q2 the special scheme of corporate tax for very small companies is
applicable. ½
Tax rate = 1% ~(with employees)
Corporate income tax for very small companies = (1% x 900,000) = 9,000 lei ½
Quarter 3
Taxable base for the corporate tax for very small companies = (2,900,000 + 200,000) = 3,100,000 lei 1
Tutorial note: The two years of 100,000 lei x 2 assimilated revenue adjustments which were not credited in 2007
and 2008 must be adjusted on sale.
Cumulated taxable base from the beginning of the year until the end of Q2
= (700,000 + 900,000 + 3,100,000) = 4,700,000 lei ½
Threshold for applying the corporate tax for very small companies = 4,600,000 lei
⇒ Cumulated taxable base > threshold ➔ in Q3 the company must switch to the standard corporate income tax. ½
Q3
(lei)
Total revenues 2,900,000 ½
Total expenses (1,001,825 ) ½
––––––––––
Accounting profit 1,898,175
Revaluation reserve 200,000
Elements similar to revenues 200,000 ½
Non-taxable revenues 0
Social expenses (15,000 – min (15,000; 5% x 170,000)) 6,500 1
Contributions to professional association (28,0000 – min (28,000; 4,000 x 4·6)) 9,600 1
––––––––––
Non-deductible expenses 16,100
––––––––––
Taxable profit 2,114,275 ½
––––––––––
Corporate income tax (16%) 338,284 ½
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 Marks
Quarter 4
In Q4 the company continues to apply the standard corporate income tax.
Q4
(lei)
Total revenues 3,710,000 ½
Total expenses (1,965,425 ) ½
––––––––––
Accounting profit 1,744,575
Revaluation reserve 200,000 ½
Elements similar to revenues 200,000
Sale of shares revenues (210,000 )
Non-taxable revenues (210,000 ) ½
Social expenses (15,000 – min (15,000; 5% x 330,000)) 0 1
Contributions to professional association (28,0000 – min (28,000; 4,000 x 4.6)) 9,600 ½
Cost of sold shares 500,000 ½
––––––––––
Non-deductible expenses 509,600
––––––––––
Taxable profit 2,244,175
––––––––––
Corporate income tax cumulated for Q3 and Q4 (16%) 359,068 ½
Corporate income tax due for Q3 (338,284 )
––––––––––
Corporate income tax due for Q4 20,784 ½
–––––––––– –––
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6 Mihnea and Stefan

(a) The procedure for declaring and paying the tax

Mihnea:
– Rent income in euro: Mihnea must file the unique declaration for estimated income within 30 days
after signing the rent contract and then again within 30 days after contract termination. A unique
declaration with the realised income must be filed by 15 March 2020. The tax must be paid by
15 March 2020. 2
– Sale of immovable property: The public notary must pay and declare the tax by 25th of the
month following the month when the public notary received the tax amount from the buyer of the
property. 1
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3
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(b) Stefan’s income: procedure for declaring and paying tax

– Self-employed income: Stefan must file the unique declaration for estimated net income and
related income tax by 15 March 2019. A unique declaration with the realised income and related
income tax must be filed by 15 March 2020. The income tax must be paid by 15 March 2020. 2
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(c) Mihnea: income tax due

– Rent income in euro:
Income tax = 10% x (300 x 4·6 – 40% x 300 x 4·6) x 6 = 497 lei 2
– Sale of immovable property:
Income tax = 3% x (720,000 – 450,000 non-taxable threshold) = 8,100 lei 1
– Interest income:
Income tax = 10% x 20,000 = 2,000 lei 1
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27
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(d) The income tax due by Stefan for his incomes
(lei)
Gross revenues (900,000 + 800,000) 1,700,000 1
Deductible expenses
Interest (min (20,000; 200,000 x 2·5%)) (5,000 ) 1
Car depreciation (min (1,500 x 4; 96,000/60 x 4) (6,000 ) 1
Fuel expenses (3,600 x 4 x 50%) (7,200 ) ½
Subscription to Architect’s order (min (100,000; 5% x 1,700,000)) (85,000 ) 1
Subcontractor expenses (1,200,000 ) ½
––––––––––
Net income 396,800
Fiscal loss brought forward (40,000 ) ½
––––––––––
Final net income 356,800
––––––––––
Income tax (10%) 35,680 ½
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15
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