Introducing the concept of bonus for early payment. The year 2018.
With the introduction of the unique statement, the concept of bonus for the early payment of income tax and related social contributions was introduced.
The fiscal code initially established bonuses were only for 2018 and they concerned, on the one hand, the electronic submission of the unique statement and, on the other hand, the early payment of the tax or contribution. The detailed regulation was formulated as follows:
(a) a 5% bonus on the income tax fully paid-up by 15 March 2019, inclusively, representing the annual tax obligations for 2018, for the submission of the unique income tax statement and social contributions owed by individuals by electronic means of remote transmission by July 15, 2018.
(b) a 5% bonus on the estimated annual income tax declared in the Unique Statement and fully paid-up by December 15, 2018, inclusively, for the early payment of the income tax.
The bonus values reduced the payable tax on the net annual income/earnings and/or the tax on the annual income.
The aim pursued by these facilities was twofold: (i) on the one hand, to ease the administrative effort of the NAFA by incentivizing the electronic submission of tax statements, and (ii) the collection of money in the budget year 2018, where earnings from income tax and social contributions were virtually canceled by the changes in the working procedure arising from the introduction of the unique statement concept.
A. Extending the concept of early payment bonus
In October 2018, several months away from the date of the amendments to the Fiscal Code on the introduction of the unique statement, Government Emergency Ordinance No. 89/2018 regarding certain budgetary fiscal measures and amending and supplementing certain acts, amended the tax framework with the aim of recovering the outstanding amounts afferent to previous years as quickly as possible.
Thus, the concept of early payment bonus was extended to years prior to 2018. It is true that an extended payment deadline (June 30, 2019) was also set for certain tax obligations prior to 2018, but this regulation is secondary to the bonus.
EGO 89/2018 mainly regulated the payment procedure for the following taxes and contributions:
- annual tax on income earned by individuals in 2017
- individual social security contribution owed by individuals for 2016-2017
- individual healthcare contributions owed by individuals for 2014-2017
Regarding the basic rule, EGO 89/2018 specifies that in the case of annual tax returns, issued and communicated by the competent tax body after the date of its entry into force (October 9, 2018) for the establishment of the annual tax on income earned by individuals in 2017, and for establishing the individual social security contribution (CAS) owed by individuals for the period 2016-2017, and for establishing the individual healthcare contribution (CASS) due by individuals for the period 2014-2017, the payment deadline for the amounts established by these decisions is June 30, 2019.
For early payment of amounts representing income tax for 2017 and the social security contribution afferent to 2016-2017, a bonus of 10% of these amounts is granted if they are paid in full by December 15, 2018, and for the early payment of CASS afferent to 2014-2017, a 10% bonus of these amounts is granted, if fully paid-up by March 31, 2019.
In this case also, the bonus reduced the owed amounts.
B. Procedural regulations
Regarding the bonus afferent to 2018 there were no special norms issued.
For the application of the bonus for years prior to 2018, it was explicitly stated in EGO 89/2018 that the implementation norms would be issued within 30 days.
In the already established practice of the Romanian tax authorities, the legal provision regarding the 30-day term is not observed, but eventually two NAFA orders were issued on November 27, 2018.
- NAFA Order 2906/2018 for the approval of the Procedure for granting the early payment bonus for amounts representing the income tax, the individual social security contribution and the individual healthcare contribution, established by the annual tax return.
- NAFA Order 2937/2018 for the approval of the methodology for distribution of the amounts paid by individuals taxpayers to in the unique account and for settling tax obligations
The two orders do not bring detailed explanations about the working procedure at the level of taxpayers but rather regulate the internal work of the tax authorities and reiterate the conditions in which the bonus is granted.
There are, however, some aspects that are aimed at taxpayers and which are worth mentioning:
- The bonus granting procedure applies only to tax returns issued and communicated by tax authorities for the years 2014-2017, either on the basis of the initial statements or rectifying statements submitted by taxpayers, or ex officio as a result of a tax inspection.
- Only tax returns issued and communicated after the date of entry into force of GEO 89/2018 (October 9, 2018) are taken into account.
- The bonus is granted provided that the difference between the owed amounts established by the annual tax returns and the value of the bonus be paid by 15.12.2018, in the case of the income tax and the CAS, and by 31.03.2019, in the case of CASS.
- The bonuses are also granted for the annual tax returns issued as a result of the corrective statements filed by 30.06.02019, even if these returns are communicated after this date, provided the above-mentioned full payment condition is met
- Bonuses are also granted for the annual tax returns as a result of the tax audit related to the types of tax obligations and the respective periods communicated before 30.06.2019 or after that date, provided the condition of paying by 15.12.2018 or 31.03.2019 is met.
- If the paid amount does not fully cover the amounts established by the annual tax returns, the bonus will only be granted for the amounts paid in full for the annual tax returns that meet the conditions
- If the taxpayers also have outstanding tax obligations, other than those established by the annual tax returns, the amounts paid shall be considered as an order for settling fiscal obligations in the order provided by art 165 of Law 207/2015 regarding the tax procedure code, with further amendments and additions.
As a principle, article 165 provides:
If a debtor owes more types of tax obligations and the amount paid is not sufficient to settle all obligations, then the tax obligation settled is the one indicated by the debtor, according to the law, or the one which is distributed according to the provisions of art. 163, as the case may be, settling occurring by law in the following order:
a. all main tax obligations, from oldest to newest, followed by all accessory obligations, from oldest to newest;
b. obligations with future deadlines, upon request of the debtor
For payments made upon tax returns issued by tax authorities for 2014-2017, one shall use the payment details indicated in the tax returns.
The tax due by individuals taxpayers declared by them through the Unique Statement of income tax and social contributions due by individuals, is paid into the unique account 55.04 "Amounts representing income tax and social contributions due by individuals undergoing distribution", open on the personal numeric code/tax identification number of the taxpayers with the State Treasury facilities afferent to the central tax body competent for managing outstanding tax owed by them.
According to NAFA Order 2937/2018 the payment of tax duties paid by taxpayers individuals in the unique account, approved by order of the president of NAFA, is made by using a payment order to the State Treasury.
The IBANs of these unique budgetary accounts are not mentioned in the IBAN list published on the website of the Ministry of Public Finance.
The Order specifies in detail the procedure for settling debts, for allocating any amounts paid in excess, and set off amounts.
In order to benefit from the bonuses set up by NAFA, the first step would be to request a synthetic tax payer sheet to assess the overall tax position and to identify any outstanding debts.
The next step would be to pursue the process of issuing and communicating tax returns by the NAFA to determine the amounts to be paid.
And the last step would be to calculate and pay the amounts according to the details mentioned in the legislative framework mentioned in this article.
By Alexandru Tabacu, Partner Voicu & Filipescu