Lecture example 1.6 Absolute SRL, a Romanian company established in Februay 2012 had in 2012 the following elements of Profit and Loss: 1. Total income of 16,000,000 Lei 2. An accounting gross profit of 1,000,000 Lei 3. Expenses of 10,000 Lei representing sponsorship 4. Revenues of 50,000 Lei from revaluation of investments bonds 5. Revenues of 10,000 Le ftom cancelation of a fine of 18,000 Le stated on 30" June payable to Public Health Ministry | 6. Protocol expenses of 23,000 Lei 7. Agoverimental non-eimbursable donation of 100,000 Lei. « Required 3) State which of the above shall be considered when agjusting the ‘ccounting profit in order to Compute the taxable profit. 5) Compute the deductible allocation fo logal reserve, considering thatthe share capital of Absolute ‘SRL is 250,000 Lei ©) Calculate the total ajutmens to be made on the accountng gross proft andthe tax lability for ‘he year considering also the deductible allocation to legal reserve Solution $6 Unless cherise specie al reerences in his couse notes mate ae tm the Fiscal ode as at 30 September 2012 2representing sponsorship itis not deductible => considered; from revaluation of bonds itis not taxable => considered from cancelation of fine itis not taxable => considered itis not deductible => considered partially deductible (see w) => considered tal non-reimbursable donation taxable => not considered Deductible allocation to legal reserve: qualying amount 8%*gross profit; 20% share capital - already constituted reserve) ‘amount = the amount established by shareholders to increase the legal reserve (not given) so not considered profit* = 5% of (gross profit non-taxable incomes (except those resulted from cancellation of non- expenses) + expenses related to the non-taxable income considered) = * (1,000,000 - 50,000) = 5% * 950,000 = 47,500 * shere capital - already constituted reserve = 20% of share capital = 20% * 250,000 = 50,000 le allocation to legal reserve = min (47,500; 50,000) = 47,500 lei Lei nting gross profit 1,000,000 ‘non-taxable income: = Revaluation of bonds (60,000) = Cancellation of fine (10,000) LessiAdd assimilated incomes ~ _ Less allocation to legal reserve (b) above) (47 500) ‘Add back non-deductible expenses: - Sponsorship expenses 10,000 Fine 18,000 - Non-deductible protocol expense (w 1) 3,380 Taxable profits 923,880 ‘Tax @16% before sponsorship allowance 147,821 Unless otherwise spect, al references in his course notes material are fromthe Fiscal Code as et 30, ber 2012, 45Less tax credits (sponsorship -w 2) 10,000) Final tax liability 137,82: Workings Working 1: Non-deductible protocol expense Deductible expense = min{ qualifying amount; 2%'CB) Qualifying amount = amount actually spent = 23,000 ‘Computation of 2%*CB: Lei Gross profit 1,000,000, Less non-taxable incomes (50,000 + 10,000) (60,000) ‘Add expenses related to non-taxable incomes 18,000 ‘Add protocol expense 23,000 Total 981,000 2% deductible portion 19,620 Deductible expense = min(23,000; 19,620) 19,620 Non-deductible expense = (23,000 - 19,620) 3,380 Working 2: Allowed tax credit for sponsorship += min{qualifying amount; 0.3%stumover, 20%'CIT lability} Qualifying amount = amount actualy spent = 10,000 Lei ‘Annual tumover = 16,000,000 ~ 50,000 ~ 10,000 - 100,000 = 15,840,000 Lei 0.3 Yegf annual tumover = 47,520 Lei CHT lability = 147,821 Lei 20% of CIT fability = 29,664 Lei ‘Allowed tax credit = min (10,000; 47,620; 29,564) = 10,000 Lei Note: Uniess otherwise specified, al references i this course notes material are from the Fiscal Code as at 30 ‘September 2012. 6losses (Art. 26) ‘cal loss Incurred before 2009 may be carried forward and ofiset against following fiscal profs (S}-year period. ‘05s incurred from 2008 onwards may be carried forward during a seven (7}-years period ‘ess incurred in @ period in which the company was excepted from corporate income tax may be used taxable profits (art 37) jexample 1.7 ‘SRL had * in 2003 reported a fiscal loss of 10,000 Lei + in.2004 obtained a taxable profit of 2,000 Lei ‘+ in.2005 reported a fiscal loss of 7,000 Lei ‘+ in 2006 reported again fiscal loss of 20,000 Lei * in 2007 obtained a taxable profit of 00 Lei + in-2008 obtained a taxable profit of 1,250 ‘+ in. 2009 obtained a fiscal loss of 10,000 Lei ‘+ in. 2010 obtained a taxable profit of 3,000 Lei © in2011 obtained a taxable profit of 25,000 Lei “e how Norocosul SRL can use its fiscal losses. Compute the tax lability for each ofthe ical years as ‘wel as the fiscal losses to be carried forward. Solution Note: Uniess otherwise specified, al references inthis course notes material are from the Fiscal Code as at 30 September 2012 23Note: The fiscal loss brought forward from 2003 cannot be used starting with 2009 because itis older than 5 years. ‘The fiscal loss brought forward from 2005 cannot be used starting with 2011 because itis older than 5 years. Unless othenvise specified all references in this course notes material are from the Fiscal Code as at 30 iber 2012 sf70,000) 2.000 7.000) (20,000) 1,250 (10,000) 3,000 25,000 Use of fiscal (loss) loss brought fwd 0 (10,000) (8,000) (15,000) (35,000) (34,500) (27,000) (37,000) (30,000) Tax to be paid 0 0 a Fiscal loss carried fwd 10,000 8,000 8,000 7.000 16,000 8,000 7,000 20,000 35,000 7,500 7,000 20,000 34,500 6,250 7,000 20,000 33,250 7,000 20,000 10.000 37,000 4,000 20,000, 0.900 34,000 5.000 The year of loss carried forward From 2003, From 2003 From 2003 From 2005 From 2003, From 2005 From 2006 From 2003 From 2005 From 2008 From 2003 (see Note) From 2005 From 2006 From 2005 From 2006 From 2009 From 2005 (see Note) From 2006 From 2009 From 2009 (see Note)and tax payments (Title Il Chapter V) ssstums and payments of tax liabilities are due at the same time, ‘Quarterly prepayments at the level of % of the tax due for the previous fiscal year, adjusted by ‘the estimated inflation index (i = 3.5% for your exam). The deadline for payments is the 25° of ‘the first month of the following quarter (i.e. 25 April, 25 July, 25 October, 25 January — art 34 (4), 2nd 8) Final annual computation of the tax, and reconciliation of payments for the tax is due by 258 March, ofthe following year (art. 35). rules: ‘The anticipated payment of corporate income tax is 16% of the accounting profit ofthe relevant ‘quarter (art 34 (7) ‘© itis the first tax year, or © Itis the first full tax year, or © IFincurred tax loss in the preceding year. For companies: For companies (starting with 2013), they may opt for: Annual computation with quarterly prepayments: © Quarterly prepayments at the level of % of the tax due for the previous fiscel year, adjusted by the estimated inflation index (i = 3.5% for your exam). The deadline for payments is the 25 of the first month ofthe following quarter (ie. 25 Apri, 25 July, 25 October, 25 January — art 34 (2), and (8)) ‘© Final annual computation ofthe tax, and reconcilation of payments for the tax is due by 25 March, of the following year (ar. 35). Quarterly computation and payments: ‘* Quarterly declaration and payments of CIT for the first 3 quarters, by 25% of the first ‘month of the following quarter (i.e. 25 Apri, 25 July, 25 October, art 34 (1)) Final annual computation ofthe tax, and reconcliation of payments forthe tax is due by 25 March, ofthe following year (art. 35). ‘The option for annual computation should be declared at the beginning ofthe tax year (by 31+ January) and once exercised should be kept fo at east 2 consecutive tx years (at 34 (3)) Note: Unless otherwise specified, all references inthis course notes material are from the Fiscal Code as at 30, September 2012, aSpecial rules: ‘The CIT should be computed, decared and pais quarto fat 34 (6) i: © itis the first tax year! @ isthe fest fll tax year © Inthe previous year a tax loss was reported * In the previous year the company did not compute CIT (paid tax as small company) * The anticipated payment of corporate income tax is 16% ofthe accounting proft ofthe relevant uarter (art 34 (9) inthe second year of annual computation option when in the fist year a loss was recorded Entities that are dissolved during the year must fle the tax retum and pay the prof tax until closing Gate the date they fe the financial statements with the Trade Registry (Art. 34, (14) and (18) Non-profit organisation declare and pay corporate income tax annually by 25 February nex year Note: Uniess otherwise specie, all references inthis course notes material are from the Fiscal Code as at 30 September 2012. .rr ecited bank established in Romania in May 2011. In tax year 2011, BING reported a corporate ty of 80,000 Lei. < the following incomes and expenses: Quarter | Quarter2 Quarter 4 200,000 |~ 300,000 “400,000 100,000 |~ 100,000 00,000 20,000 | 20,000 20,000 eapenses 0,000 | 10,000 10,000 depreciation for BING's fixed assets is 2,000 Lei/month, established in Romania 5 years ago. In 2012 MING reported a final taxable profit of pred te following incomes and expenses: Quarter] Quarter? | Quarter3 | Quarter 4 100,000 | 150,000 | 200,000 | 200,000 0,000 | 60,000} 700,000 | 60,000 20,000} 20,000) 20,000 20,000 2,000 3,000 [4,000 7000 7,000 7000] 1,000 7,000 VAT 360 360 360 360 ~ salesmen 3,000 “F000 | _5,000 5,000 oe - management 2,000 2,000 |—_2,000 2,000 on of cars 400 400 400 00 jexpenses™ 78,760 | 90,760 | 132,760 | 112,760 WAT relates to expenses with fuel and maintenance of management cars (per quarter: 120 \VAT for fuel; 240 lei = non-deductible VAT for maintenance expenses). on of all cars is 200 leimmonth. ‘the payment and declarative obligations of MING SRL regarding corporate income tax in joarporate income tax bit for 20131 MING SRL exercised is option for annual j. MING SRL did not exercised its option for annual computation GFT for 2013 Solution Note: Unless otherwise specie, al references inthis course notes material are from the Fiscal Code as at 30 September 2012 30Solution 1.9 4) CIT payment and declarative obligations of BING SA in 2012 and 2013 In 2012: Because BING SA was incorporated in 2011, in 2012 it will have to: ~ Pay and declare anticipated CIT for quarter 4 of 2011 (computed using the accounting profit of q 2011) by 254 January 2012 ~ Declare final CIT lability of 80,000 Lei and pay the outstanding balance (final tax — total anticip paid) by 25% March 2012 = Declare and pay anticipated CIT for each quarter of 2012 as follows: Quarter Quarter1 | Quarter2 | Quarter3 | Quarter4 | Total ‘Accounting incomes 200,000 | 300,000 | 200,000 | 400,000 | 1,100,000 Less accounting expenses (130,000) | (130,000) | (130,000) | (130,000) | (520,000) ‘Accounting profit forthe quarter 70,000 | 170,000 | 70,000 | 270,000 | 580,000, Anticipated tax @16% 14,200 | 27,200) 11,200} 43,200 Due date for payment and declaration | 25.04.2012 | 25.07.2012 | 25.10.2012 | 25.01.2013, By 25 March 2013, BING SA will have to compute is final CIT lbilty for 2012 and to pay any outstanding tax: Lei Accounting incomes 4,100,000 Less accounting expenses (520,000 + 92.800) (612,800) ‘Accounting profit 487,200 Loss tax expenses: Tax depreciation (2,000"12) (24,000) ‘Add back non-deductble expenses: ‘Accounting depreciation (20,000"4) 60,000 CIT expense 92.8 : Taxable profits 636,000 Note: Uniess otherwise specifi, al reerences inthis course notes material are from the Fiscal Code as at 20 September 2012. 50x ted tax paid CIT lability ING will have to declare and pay 035: -annwally L will have to pay anticipated tax ig incomes (100 + 150 + 200 + 20 unting expenses (78,760 + ..+ 1 ng profit non-deductible expenses: ‘Accounting depreciation (400°4) ClT expense Profits 16% enticipated tax paid nding tax Geclerative payments and obligations of MING SRL regarding its CIT liablity for 2043 without option to ute CIT liability annually also anticipated tax for 2013, quarterly, equal to: of 16%6"150,000"1,035:4 = 24,840:4 = July 2013, 25" October 2013 and 25° January 2014, 25° March 2014, MING SRL will have fo compute, declare and pay is inal CIT laity 10)",000 12,760 + 24,768) expenses (tax depreciation) (200"12) Non-deductible fuel and related VAT expense (4°(1,000 + 120)*50%) Non-dedlutiole maintenance and related VAT expense (4°(2,000 + 240)*50%) #s case MING SRL should compute, declare and pay quarterly its CIT liability as folows: Unless othenvise spected, al references miber 2012 in this course notes material are rom the Fiscal Code as at 30 5 101,760 (92,800) 8,960 5,390 Lel by 25% Apri 2013, 25" July 2013, 25% October 2013 and 25% January 2014 tive Payments and obligations of MING SRL regarding its CIT abilty for 2018 with option to compute 210 Lei, quarterly by 25M April Lei 650,000 £438,808) 210,192 (2,400)Quarter 1 Quarter 2 Quarter 3 ‘Accounting incomes 400,000 250,000 450,000 Less accounting expenses (as per question) (78,760) (169,520) (302,280) Less CIT expense (see prior quarter computation) - (3,635) (13,350) ‘Accounting profit 21,240 76,845 434,370 Less tax depreciation (200°S/quarter) (600) (1,200) (1,800) ‘Ad tack non-deduetitfe expenses: -fuel and related VAT for management cars (1,120°60%/a) 560 4,120 1680 - maintenance and related VAT for mgmt. cars (2,240°50%Ia) 1,120 2,240 3,360 - accounting depreciation (400/quarter) 400 800 4,200 = CIT expense (see prior quarter computation) s * 3,638 13,350 Taxable profits 22,720 83,440 152,160 Tax @16% 3,635 13,350 24,348 Less tax already assessed (and paid) : 3.635 13,350 Outstanding tax payable forthe quarter 3,635 9715 10,996 By 25m Apr"13 25h Jul"13 254 Oct 13 ‘And by 25" March 2014, MING SRL has to compute and declare its final annual CIT liability of 38,541 Lei (see b) i)) and to pay the outstanding tax of 38,541 ~ 24,346 = 13,350 Lei. Note: Uniess otherwise specified, al references inthis course notes material are from the Fiscal Code as at 30 ‘September 2012. 2ding tax on dividends (Title Il Chapter VI) -2ny cistribution in cash or kind done by a legal entity towards its shareholder'shareholders (art. 7, par snot considered dividend: ‘of shares which does not modify the percentage of share capital withhold nt of shares which does not modify the percentage of share capital withhold in cash or in kind following the liquidation ofthe legal entity in cash or in kind following the reduction of share capital ofthe legal entity ‘of share premium which does not modify the percentage of share capital withhold fs considered di nd (also called deomed dividend) ‘Any amount paid to a shareholder in exchange for his/her products/services over the market price if this ifference has not been taxed as income at the shareholder level Any amount paid by the legal entity for goodsiservices to be used by the shareholder for his private benefit rian entity that pays dividends to another Romanian entity must withhold and pay to the state budget a ‘ax ofthe gross dividend incomes on or before the 25* of the month that follows the month in which the dis pad (art. 36, (1) (2) and (3). ‘where distributed dividends are not paid by the end ofthe year in which the annual financial statements been approved, the tax on dividends shall be paid by 25% January, next year (ar. 36, (3)) and if by payment all conditions for exemptions are fulfiled, the (Romanian) company paying the dividend has the right to the tax paid back (norms to art 35, p 100). Exemptions: in the following cases the dividend income is exempt from tax Ifthe beneficiary is a Romanian entity that holds at least 10% of the shares of the entity that derived such dividends for a minimum period of 2 years as atthe date of dividend payment ‘© Ifthe beneficiary is @ pension fund or a public institution Note: Unies otherwise specified, all references inthis course notes material are from the Fiscal Code as at 30 ‘September 2012, 319. Proforma tax computation Below you have a simplied form of the annval Separate income tax declaration (Declaration 101), inthe ae so the Course Notes you find the offial Declaration 100, {for quately corporate income tax declaration) and the official Declaration 101 (or the annual corporate income tax declaration). Total accounting revenues Total accounting expenses Accounting gross. profit ” Loss tax expenses: Fiscal depreciation o a mal Other fiscal expenses (0 9, tax value of asses sald) ow Less non-taxable incomes 2 ws Dividend incomes - from Ro legal entities ) Te ther nontaxable incomes (.g, some di ftom EU, non ealed gain on tes, eta) oO - pot c « AddiLess assimilated items ef tess: {ssilated expenses (¢.. RED supplementary allowance, Hk Xp brought forward allowed | (x) qe 7 | deduction for legal reserve, IFRS adjustments) ‘Adi assisted incomes (eg, amortisation of reves, ASO Yeu ‘8, other IFRS adjustments) | XIX) ‘Add back non-deductible expenses Corporate income tax expense — ‘Accounting depreciation : +-_ Penalties and fines due to authorities = Cow ‘Sponsorship expenses got! Other non-deductible expenses (onded, protocal on-ced, social, expenses, accounting G Drovsion exp, ex elated to nortxable incomes) Deol Limitoty be] >] | ofa 87 | Profit(loss) before loss brought forward e — | rec bes brought forward Tax base Corporate income tax @16% before adjustments Less fiscal credit External fiscal credit ®) Corporate income tax liabilty before sponsorship allowance x | > [oe $8 Unless chev specie, al eerences in his course notes mate are rom the Fiscal Code as at 30 September 2012, .ip allowance x ate income tax liability or 8% of income (for night clubs, discos) - the higher x income tax already declared ), ‘corporate income tax payable x jexample 1.10 started its trade business in October 2011. Since establishment Star SRL is 100% owned by Skipe SRL ‘companies are registered under Romanian legislation. In 2012, Star SRL recorded a taxable profit of Lei ‘accounting proft for 2013 was 5,320,000 Lei and includes the following items: 2) Reversal of a 120,200 Lei allowance for impairment of fixed assets made in 2011 5) Accrual of a telephone expense of 600 Let ©) Accrual ofa bonus expense of 2,500 Lei granted to distributors 4) Protocol expense of 80,000 Lei ©) Sponsorship of 52,000 Lei, out of which 2,000 Lei was granted to a charity without a written contract y, again, no contract was signed ) One invoice of 8,000 Lei representing adver 19) The profit tax booked during the year is the anticipated tax paid by Star SRL which is exactly in accordance with the FC. 2013, Skipe SRL sold 50% of its shares in Star SRL to Moon SA. The net proft of 2013 is distbuted as 2) 50% will be paid to the shareholders in May 2014. >) 50% will be subject to a further decision of the shareholders. “The annual income recorded in 2013 (inclusive all incomes above) is 34,257,800 Lei. Star SRL opt to compute CIT annualy sired ‘State how and when will declare Star SRL its quartery tax labilties for 2013. Compute the tax liability for Skype for the year ended 31* December 2013, ‘Compute the withholding tax on dividends and state how and when it should be paid. Note: Unless otherwise specid, al eferences in this course notes material are fromthe Fiscal Code as at 30, September 2012 \ 3 Tet - Tet. bo0!C|compute, declare and pay its anticipated corporate income tax liability quarterly: ‘should compute, declare and pay anticipated corporate income tax of 16%"4,000,000:4 25" April 2013 should compute, declare and pay anticipated corporate income tax of 16%*4,000,000:4 by 25" July 2013 should compute, declare and pay anticisated corporate income tax of 16%"4,000,000:4 Bby 25° October 2013 should compute, declare and pay anticipated corporate income tax of 16%"4,000,000:4 Sby 25° January 2014 for the annual CIT computation is te following: a Lei 5,320,000 (120,200) expenses: 500 + 2,500) 3,000 protocol expense (w 1) y 52,000 peithout contract 8,000 income tax expense (160,000°4) 40,000 9,902,800 sponsorship allowance) 944,448 allowance (w 2) 50,000) 894,448 isetiement isbilty forthe year: 894,448, already paid 0,000) ybe declared and paid by 25" March 2014: 254,448 ‘otherwise specified al references inthis course notes material are from the Fiscal Code as at 30 2012, 534) Withholding tax on dividends Dividends caloulation: ‘Accounting profit ‘Add back corporate income tax expense recorded Less final tax expense for the year Distributable profit 50% distributed ta shareholders in May 2014 Shareholder Gross dividend Taxrrate Dividend tax Skipe SRL 1,266,388 Exempted Moon SA, 1,266,388 16% 202,622 The tax should be declared and paid by 25% June 2014 Workings Working 1: Non- deductible protocol expanse The protecal expense is ‘protocol on profit tx expenses: Computational base ly ‘Accounting profit 5,320,000 Less non-taxable income: (120,200) ‘Add back Profittax 640,000 Protocol expense 80,000 ‘Computational base 5,919,800 118,396 Deductible portion of 2% Conclusion: the entire amount of 80,000 Leis allowed as deductible expense. Note: Unless otherwise spectfid, al reerences inthis course notes material ae from the Fiscal Code as at 30 September 2012 im lei $320,000 640,000 (804,448) 5,065,552 Explanation ‘Sipe is a proft tax payer from Romania (EU), ‘holds more than 10% since more than 2 years, The 2 years condition is nat fulfled.‘credit for sponsorship Lei 52,000 t (2,000) ‘expense (that may be deducted from CIT liabilly) 50,000 #> be deducted = min (3o" turmover; 20%" prof tax computed; qualifying amount) (34,257,000 - 120,200) = 102,413 Lei 20%'944,448 = 188,890 Lei \Geduction = 50,000 Lei _Sniess otherwise specified, ll references inthis course notes material are from the Fiscal Code as at 30 2012, 5510. Income tax for small companies (micro-enterprises) (Title IV) 10.1 Definition (art 112") Small company (micro-enterprise) is @ Romanian legal entty-that cumulatively meets the folowing conditions on December 31* ofthe preceding fiscal year: 8) _Eams income, other than that derived from banking, insurance, brokerage, gambling, consultancy ‘and management services ) The number of employees is from 1 to 8, inclusively ©) The realised income does not exceed the equivalent in Lel of 100,000 Euro ) The social capital ofthe legal entity is owned by persons other than the state, local authorties and public institutions. lf a company considered small has only 1 employes which terminates his working agreement, the company is stil considered small it's employing another person in the folowing month, The limit of 100,000 Euro is computed taken into consideration the income forming the tax base for a small ‘company and the foreign exchange rate as of 318 December last year 10.20ption to pay tax on income for small companies (Art 1122) ‘A company that qualifies as small company may choose to apply the exception for small companies orto be {xed asa profit tax payer if a 31* December prior year t satisfied the above conditions. The option to apply the ‘small companies’ scheme should be exercised by 31* January current year ‘This option isnot granted tothe above companies forthe current year ithose companies have ever applied the ‘small companies’ scheme and had to switch and to pay corporate income tax. ‘A new established company may opt to apply the small companies’ scheme itt satisfies the condition related to {he share capital since regstraton and the condition related to the number of employees in 60 days from registration lfthe shareholder is @ company with more than 250 employees, the company may not apply the small ‘companies’ scheme. | during a fiscal year a micro enterprise eams income which exceeds 100,000 Euro, the entity shall pay profit tax {king into accounts incomes and losses made a fom the beginning of the fiscal year, without the possibilty of beneftng from the provision of the present ite forthe future period. Calculation and payment of prof tax shall be made as rom the quarter in which the limit exceeded, without any lato penalties being due. On detemining Profi tx due, the payments representing tax on micro enterprises’ income made during the fisal year shall be deducted. \ during a fiscal year a small company is obtaining income ftom one ofthe excluded actives, this company Should switch and pay prof tax starting withthe quarter in which the excluded actvty started taking into account the incomes and expenses incurred starting with that quarter. If during a fiscal year one of he other conditions is no longer met, then the company should switch tothe proft tax starting from the following year. Note: Unless othenwise specified, all reerences in tis course notes material ae from the Fiscal Code as at 30 September 2012, u‘of micro-enterprise constitutes income from any source, from which the following Hwork in progress tion of inventory the production of tangible and intangible assets ‘operations representing the share-part of goverment subsidies cancelation of provisions and impaiiments from the cancellation of interest and/or penalties, that were not deductible expenses taxable profi, according to legal provisions sealed from compensations, from insurance companies, for damages to own tangible assets, terprise that acquires electronic cash registers, the acquisition value of such registers is the taxable base, in accordance withthe justfying document, forthe quarter in which the. jsters were put into operation, as provided by law. (art 1125) fax on the income of mioro-enterprses is 3%, requirements (Art 1128) 0 pay tax under the small companies’ scheme should be done by 31* January ofthe current year yis newly established, the option should be done at registration. ‘the case related to the overriding of income limit, the option, once exercised should be kept for the ent of tax and submission of tax declarations(Art 112°) ‘computation, payment and declaration of tax on income of micro-enterprses is to be made on a quarterly ‘on or before the 25H of the first month following the quarter for which the tax is calculated, Unless othenvise specited, al references in his course notes material are from the Fiscal Code as at 30 tember 2012. 3510.7Other (Art 112") ‘The companies applying the scheme for small companies sfil have to compute and keep evidence of the tax depreciation of their assets, Lecture example 1.41 ‘ABC SRL. opted for the tx on income of micro enterprises. During 2012 the total revenues were of 405,000 Lei (exchange rate as of December 31, 2011 is 4.36 for Le/Euro), This tumover was made of: a) Tuition fees for accounting course provided to one customer's employees of 318,000 Lei (79,500 Lei per quarter) 8) Database administration services of 36,000 Lei @,000 Lei per quarter) c) Consultancy services of 51,000 Lei. The consultancy services were provided during August and September. ‘The total expenses for the year were of 280,000 Lei (70,000 Lei per quarter). Required Explain how should ABC SRL pay and declare its tax ibilty in the year ended 31# of December 2012. Solution Nol: Unless otherwise specified, all references in this course notes materia are from the Fiscal Code as at 30 September 2012. 36Solution 1.14 Uni the 3° quarter ABC SRL qualifies for he small companies’ scheme Starting with quarter 3, ABC does fo longer quel forte smal companies’ scheme (because in Avast provided consutancy serves) and wil ha compute its corporate income tax labiltes in accordance with its taxable profs, For quarter 1: ‘Tax base = 79,500 + 9,000 = 88,500 Lei Tax ability forthe quarter = 3%"€B 500 = 2655 Leto be decared and pad by 25" Ap 2012 For quarter ‘Tax base = 79,500°2 + 9,000"2 = 177,000 Lei “Tax liability forthe 6 months ended 30” June = 3%"177,000 = §,310 Let Less tax already assessed (and paid) Tax liability for the 2% quarter: For quatter 3: Taxable incomes: = From teaching (79,500°3) 238,500 = From database admin (9,000°3) 27,000 = From consultancy 51,000 Total taxable incomes Less deductible expenses (70,000"3) Taxable profits Tax @16% Less tax already assessed (and paid) Tax liability for quarter 3 2,655) 2,655 Leito be declared and paid by 25° July 204 316,500 (210,000) 106,500 17,040 (5310) 44,730 to be dectared and paid by 25° October 2012 Note: Unless othensse speed, al references in is course notes materia are from the Fiscal Code 2s al 30 September 2012. 56eto 318,000 jadi 36,000 51,000 405,000 (280,000) 125,000 20,000 (end paid) 17,04 2,960 to be declared and pay by 25" March 2012 12 Unless otherwise spected, all references in this course notes material are from the Fiscal Code as at 30, ber 2012, 87|Shop SRL is established on 01.07.2012. According to the law, fhe company opted to pay tax ismall companies’ scheme. Below is 2 summary of Carola's Pet Shop financial data for the period December 2012. The euro exchange rate as at 31% December 2012 was 4.5 Lei/Euro. September | October | November | December July | August 143.000| 127,000] 135,000 178,300| 135,000) 123,600 4,000 3,000 4,000 5,000 2,000 4,000 - : 2,000 1,000 3,000 1,000 25,000} 20,000" 30,000 20,500 40,000 30,000 85,000 76,500 64,200 99,400 88,900] 116,000 4,000 1,100 1,300 2,000 2,000 2,200 this amount, 2,000 Lei represents electronic cash register. fixed assets acquired by Carole’s Pet Shop have a usetul fe of 3 years for tax depreciation purposes uired . te the deadlines for Carola’s Pet Shop to submit its income tax declarations, 2012 Note: Uniess otherwise specified, all references inthis course notes material are from the Fiscal Code as at 30 September 2012. aSolution 1.12 ‘As long as the taxable base of Carola’s Pet Shop (i.e. the total incomes less the income from release of dou debts provision is below 100,000 Euro @ 31.12.2012 (i.e. 450,000 Lei), Carola’s Pet Shop will be alowed to a the small companies’ scheme. Once the limit exceeded, Carola’s Pet Shop hes to inform the Fiscal Authorities in 30 days from the end of month in which the limit was exceeded and to compute its tax ibilty in accordance with its taxable profits. For quarter 3: Lei Total incomes (143,000 + 127,000 + 135,000) 405,000 Less incomes from release of provision (2,000) Tax base for small companies : 403,000 Because the tax base is less than 450,000 Lei, Carola’s Pet Shop is allowed to pay tax using the small compari scheme and, in quarter 3, will be allowed to deduct the value ofthe electronic cash register (2.000 Lei). Tax liability for quarter 3 = 3%"(403,000 ~ 2,000) = 12,030 Lei to be declared and paid by 25” October 2012 For quarter 4: Lei Total incomes (405,000 + 178,300 + 135,000 + 123,500) 841,800 Less incomes from release of provision (2,000 + 1,000 + 3,000 + 1,000) {7.000} ‘Tax base for small companies 834,800 Because the tax base is above 450,000 Lei, Carola's Pet Shop will have to compute is tax liability in acoordar With its taxable profits and because ths limit is exceeded in the month of October, Carola's Pet Shop will have inform the Fiscal Authorties in 30 days (i.e. by 30" November). Total incomes 841,800 Less total expenses (85,000 + ....+ 116,000) (530,000) Accounting profit 311,800 Less: Nontaxable incomes: Income from release of provisions 7,000 ‘Tax expenses: Note: Unless othenvise specified, all references in this course notes material are from the Fiscal Code as at 30 September 201210,444 (17,444) expense 19,000 9,600 28,600 322,956 51,673 ‘he year Carola’s Pet Shop has to pay and declare its outstanding tax liability by 256 000 ompanies 2 5*25,000/36 4°20,000/36 = 2,222 September: 3*30,000/36 = 2,500 : fin October: 2°20,500/36 139 a Novertber. PEOMMREA ‘in December: no tax depreciation expense in 2012 10,444 Lei srdance jhave to D End of chapter ) Ctherwise spectied, al references inthis course notes material are ftom the Fiscal Code as at 30 2012, 59