Transilvania UniversityFaculty of Economic Sciences and Business AdminstrationSection: Business AdministrationYear II, Group 8811

TAXATION PROJECT

Theme: Presentation of direct and indirect taxes (+Analysis of a company and the way taxes are applied)

Student:

Coord. teacher: Mrs. Mirela Baba

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Contents

Chapter 1. Theoretical consideration regarding taxes and fees..............................................41.1. General considerations regarding taxes.......................................................................4

The Four "R"s.................................................................................................................51.2 Presentation of direct taxes...........................................................................................5

1.2.1 Profit tax (in Romania)...........................................................................................61.2.1.b Capital gains tax.................................................................................................91.2.2 Salary tax...............................................................................................................9Categories of income subject to taxation........................................................................9Employment income.......................................................................................................9Social security...............................................................................................................10Social security contributions at the individual level.....................................................10Social security contributions at the employer level......................................................10Contribution to the health fund by foreign individuals................................................111.2.3 Dividend tax.........................................................................................................111.2.4 Local taxes...........................................................................................................12Building tax..................................................................................................................12Land tax........................................................................................................................12Vehicle tax....................................................................................................................13Tax for construction authorizations..............................................................................13Publicity and advertising tax........................................................................................13Resort tax......................................................................................................................13Show tax.......................................................................................................................13Other local taxes...........................................................................................................141.3 Indirect taxes..........................................................................................................141. Taxable persons........................................................................................................142. Taxable operations....................................................................................................163. Simplified recording of VAT....................................................................................184. Specific VAT schemes and simplification rules.......................................................185. Taxable base.............................................................................................................196. Tax rates....................................................................................................................197. Payment and filing requirements..............................................................................191.3.2 Excise duties........................................................................................................201 Fiscal warehouse regime............................................................................................212. Excise duty suspension regime.................................................................................211.3.3 Custom duties.......................................................................................................221. Common customs tariff............................................................................................22Establishing the customs value of goods......................................................................23Customs procedures......................................................................................................231.4 Taxes around the world (Short comparison)..........................................................25

Chapter 2. Presentation of the company...............................................................................272.1 Short History...............................................................................................................272.2.....................................................................................................................................282.2 Organizational structure..............................................................................................282.3 Trading partners..........................................................................................................29

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2.4 Activity.......................................................................................................................29Chapter 3. Case Study...........................................................................................................30

3.1 Main accounting operations+ Profit tax, Salary tax, VAT.........................................30References :..........................................................................................................................37

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Chapter 1. Theoretical consideration regarding taxes and fees

1.1. General considerations regarding taxes

To tax (from the Latin taxo; "I estimate") is to impose a financial charge or other levy

upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a

state such that failure to pay is punishable by law.1

Taxes are also imposed by many subnational entities. Taxes consist of direct tax or

indirect tax, and may be paid in money or as its labour equivalent (often but not always

unpaid labour). A tax may be defined as a "pecuniary burden laid upon individuals or

property owners to support the government […] a payment exacted by legislative

authority." A tax "is not a voluntary payment or donation, but an enforced contribution,

exacted pursuant to legislative authority" and is "any contribution imposed by government

[…] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise,

subsidy, aid, supply, or other name."

In modern taxation systems, taxes are levied in money; but, in-kind and corvée taxation

are characteristic of traditional or pre-capitalist states and their functional equivalents. The

method of taxation and the government expenditure of taxes raised is often highly debated

in politics and economics. Tax collection is performed by a government agency such as

Canada Revenue Agency, the Internal Revenue Service (IRS) in the United States, or Her

Majesty's Revenue and Customs (HMRC) in the UK. When taxes are not fully paid, civil

penalties (such as fines or forfeiture) or criminal penalties (such as incarceration) may be

imposed on the non-paying entity or individual.

1 -see http://en.wikipedia.org/wiki/Tax

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The Four "R"s2

Taxation has four main purposes or effects: Revenue, Redistribution, Repricing, and

Representation.

1. The main purpose is revenue: taxes raise money to spend on armies, roads, schools and

hospitals, and on more indirect government functions like market regulation or legal

systems.

2.A second purpose is redistribution. Normally, this means transferring wealth from the

richer sections of society to poorer sections.

3. A third purpose of taxation is repricing. Taxes are levied to address externalities; for

example, tobacco is taxed to discourage smoking, and a carbon tax discourages use of

carbon-based fuels.

4. A fourth, consequential effect of taxation in its historical setting has been representation.

The American revolutionary slogan "no taxation without representation" implied this:

rulers tax citizens, and citizens demand accountability from their rulers as the other part of

this bargain. Studies have shown that direct taxation (such as income taxes) generates the

greatest degree of accountability and better governance, while indirect taxation tends to

have smaller effects.

1.2 Presentation of direct taxes3

The term direct tax generally means a tax paid directly to the government by the persons

on whom it is imposed.

2 -see http://en.wikipedia.org/wiki/Tax3 -see http://rbd.doingbusiness.ro/ro/1/articole-recente/1/300/taxation-in-romania#16514

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In the general sense, a direct tax is one paid directly to the government by the persons

(juristic or natural) on whom it is imposed (often accompanied by a tax return filed by the

taxpayer). Examples include some income taxes, some corporate taxes, and transfer taxes

such as estate (inheritance) tax and gift tax. Some commentators have argued that "a direct

tax is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax

can be.

Direct taxes have the characteristic that are fixed in nominal load of natural or legal

person, depending on their income or assets, the tax rates specified in law. They are charged

directly to the subject at some tax before set deadlines. For these taxes, and subject tax

payers, are intent legislature, one and the same person, although in practice, sometimes they

do not coincide.

Direct taxes have the following advantages:

- a secure income for the state, known in advance, which may be based on certain

time intervals;

- meet goal of tax justice, because they are exempt minimum income necessary to

subsist and that take account of family tasks, are easily calculated and perceived.

Direct taxes have the following disadvantages:

- there are delightful payers, it is considered that it would not be productive, whereas

the lead Member would not have interest to become unpopular by the size of these taxes

- could lead to abuses in the settlement and collection of taxes.

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1.2.1 Profit tax (in Romania)4

The Fiscal Code came into effect on 1 January 2004. The code has integrated key tax

legislation and provides the basis for a more stable framework of tax legislation by

requiring amendments to follow a specific juridical route.

Resident entities as well as legal entities having their headquarters in Romania, but

incorporated as per the European legislation (i.e. European companies) are subject to tax on

worldwide income. An entity is resident in Romania if it is incorporated according to the

Romanian legislation, or its place of effective management is in Romania (for foreign legal

persons), or if its headquarter is in Romania (for legal persons incorporated as per the

European legislation).

Associations or consortia between Romanian legal entities, which do not qualify as legal

persons, are taxable in Romania separately at the level of each partner. For such

associations between a Romanian legal entity and individuals or foreign entities, the tax

must be computed and paid by the Romanian legal entity on behalf of the individuals or its

foreign partners.

Non-resident companies are subject to tax on their Romanian-sourced income only. Sale

of shares held in Romanian companies by non-resident companies, and sale of real estate

located in Romania, are also subject to profits tax in Romania (see section on Capital gains

tax).

A permanent establishment in Romania may be constituted inter-alia by: an office, a

branch, a factory, a mine, land for oil and gas extraction, or a building site that exists for a

period exceeding six months. Also, a permanent establishment includes the place where an

activity continues using the assets and liabilities of a Romanian legal entity undergoing a

restructuring process (e.g. merger, spin-off).

4 - see http://www.business.gov.au/BusinessTopics/Taxation/Pages/default.aspx http://rbd.doingbusiness.ro/ro/1/articole-recente/1/300/taxation-in-romania#16514

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Romanian legal entities should register with the relevant tax authorities any contracts

signed with non-resident legal entities or individuals performing in Romania construction

and assembly works, surveillance, consultancy, technical assistance or any other activity

performed in Romania if such activities could give rise to a permanent establishment of the

non-resident in Romania. The contracts should be registered by submitting a declaration

within 30 days from the date they were concluded. The form and content of the respective

declaration is approved by order of the National Agency of Fiscal Administration (ANAF).

The fine for non-compliance with the above registration requirements is RON 1,000 –

RON 5,000.

1.2.1.a Rates of profits tax and the minimum tax

Starting from May 2009, taxpayers pay the higher of the standard profits tax rate and the

minimum quarterly/annually tax. The standard profits tax rate is 16%.

The minimum annual tax ranges between RON 2,200 – RON 43,000, depending on the

level of total income derived in the previous year.

The minimum tax does not apply in certain cases (e.g. to companies that are temporarily

inactive).

Profits tax payable by companies earning revenues from bars, nightclubs, discos, casinos

and sports bets, including revenues from an association agreement, is computed at the

standard 16% rate, provided the tax amount is not less than 5% of the total declared

revenue. In case the profits tax payable is below this threshold, the taxpayer is liable to pay

profits tax computed at 5% of the declared revenue from such activities. The minimum tax

provisions mentioned above are not applicable to these taxpayers.

Starting from 2010, the Romanian Ministry of Finance did not set the percentage of tax to

be applied to the revenues earned by micro enterprises. Thus, the companies that used the

micro enterprise taxation regime will become subject of the standard profits taxation.

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In this respect, companies that were taxed under the micro enterprise regime are required

to make quarterly anticipated payments amounting to one quarter of the micro enterprise

revenue tax liability for the previous fiscal year, in line with an inflation rate.

Representative offices are taxed on a yearly basis at a lump sum of the RON equivalent

of EUR 4,000, payable in two equal instalments, until 25th of June and 25th of December.

1.2.1.b Capital gains tax

No separate capital gains tax is payable by resident entities. Capital gains of non-resident

entities from the sale of immovable property in Romania, or from sale/transfer of shares

held in a Romanian legal entity, are taxed at the standard corporate tax rate of 16%.

During the period 1 January – 31 December 2009, profits derived by non-resident legal

entities from transactions with participation titles held in Romanian companies and traded

on the regulated market in Romania were treated as non-taxable.

1.2.2 Salary tax

Categories of income subject to taxation

A flat income tax rate of 16% applies to the following categories of income:

Income from independent activities

Salary income

Rental income

Pension income

Prizes

Agricultural income

Other income

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The Fiscal Code provides special tax rates in case of income obtained from investments,

gambling, and transfer of real estate from personal patrimony.

Employment income

Taxable compensation includes salaries, benefits in cash or in kind, wage premiums,

rewards, temporary disability payments, paid holidays, and any other income received by

an individual based on an employment agreement. Taxable compensation also includes

compensation received by daily or temporary workers, fees and compensation paid to

directors and managers of private commercial companies, to members of the board of

directors and General Shareholders Meeting, to members of the administration council, and

to members of the audit committee.

For employment income, the taxable amount is determined by deducting the following

from the gross income:

Mandatory social security contributions

Personal deductions allowed, if any

Monthly trade union contribution

Contribution to the voluntary occupational pension scheme (up to EUR 400 per

year)

Social security

Under Romanian employment regulations, both employer and employee are required to

contribute to the social security system.

Social security contributions at the individual level

Social security contribution (i.e., pension) – 10.5% on the gross monthly income

Health fund contribution – 5.5% on the gross monthly income

Unemployment fund contribution – 0.5% on the gross monthly income

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Social security contributions at the employer level

Social security contribution – between 20.8% and 30.8% depending on working

conditions, of the total gross amount paid to employees on a monthly basis

Health fund contribution – 5.2% of the total gross amounts paid to employees on

a monthly basis

Unemployment fund contribution – 0.5% of the total gross amount paid to

employees on a monthly basis

Contribution for medical leave and indemnity – 0.85% of the total gross amount

paid to employees on a monthly basis, capped at 12 national minimum gross

salaries multiplied with the number of insured persons

Contribution to the National insurance fund for work accidents and professional

diseases – the contribution ranges between 0.15% and 0.85% of the total gross

amount paid to employees on a monthly basis, depending on the risk category

Labor Chamber commission – 0.25% or 0.75% of the total monthly salary fund,

depending on whether the company or the Labor Chamber keeps the workbooks

Contribution to the Guarantee fund for payment of salary debts – 0.25% of the

total gross amount paid to employees on a monthly basis

Contribution to the health fund by foreign individuals

Citizens of the European Union countries and Switzerland (as of 1 June 2009) benefit from

coverage of medical expenses incurred on Romanian territory, as well as exemption from

the social security contributions based on certificates of coverage (E101 forms) issued

according to the EU legislation on social security.

However, if an individual is not subject to social contributions in the home country, that

person will fall under the jurisdiction of the Romanian social security system and will be

liable to pay social security contributions due under Romanian regulations.

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1.2.3 Dividend tax

Dividends paid by Romanian companies to resident companies are subject to a 10%

withholding tax. The 10% tax is considered a final tax and, accordingly, the dividends are

not included in the taxable incomes of the recipient.

Dividends paid by Romanian companies to resident individuals and non-resident

companies and individuals are subject to a 16% withholding tax. However, effective from 1

January 2007, dividends paid by a Romanian legal entity to a legal entity resident in

another EU member state or to a permanent establishment of an entity from another EU

member state that is located in another EU member state are exempt from withholding tax

if the beneficiary of the dividends owned at least 15% of the participation titles in the

Romanian legal entity for an uninterrupted period of at least two years that ended on the

date of payment of the dividend. The minimum shareholding requirement will be reduced

to 10%, effective from 2009.

1.2.4 Local taxes

Local taxes in Romania are regulated by the Fiscal Code. Local taxes represent a distinct

category of taxes set by the local administration, which are payable by both individuals and

entities in Romania.

The local councils may annually increase local taxes over the level established for any local

tax provided by the Fiscal Code up to 20%, with a few exceptions. The legislation also

provides for some exemptions, for example local councils may grant building and land tax

exemptions to legal entities, provided these are in line with the state aid legislation.

These local taxes include:

Building tax

Building tax is payable by owners of buildings located in Romania, regardless of their

residence. The tax rate ranges between 0.10% and 0.20% for individuals and between

0.25% and 1.50% for legal entities. For buildings not revaluated three years prior to the

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concerned year, the tax payable by legal entities may vary between 5% and 10%. The tax is

applied to the value of the building (established values are provided) for individuals and to

the book value of the building for legal entities. The tax must be paid annually, in two

equal instalments by 31 March and 30 September.

Land tax

Land tax is payable by owners of land. Generally, the tax is established as a fixed amount

per hectare, depending on the location of the land within certain determined zones, towns

or villages and depending on land use. The tax is payable annually, in two equal

installments, by 31 March and 30 September.

Vehicle tax

Vehicle tax is payable by owners of land/water vehicles, which should be registered in

Romania. The tax depends on the engine capacity or vehicle characteristics (e.g. number of

axles, suspension system, weight, etc.). The tax is payable annually, in two equal

installments, by 31 March and 30 September.

Tax for construction authorizations

The tax is established as a percentage on the construction value and is payable upon

obtaining the construction authorization.

Publicity and advertising tax

Advertising tax is payable by the 10th of each month during the execution of the contract

by the suppliers of publicity and advertising services rendered in Romania, except for

publicity and advertising services through audio, video and the print medium. The tax rate

is established by the local councils and ranges between 1% and 3%. It is applied to the

value of the publicity and advertising services. Users of outdoor advertising must pay an

outdoor media advertising tax computed as a fixed amount established by the local councils

per square meter, depending on the surface used for advertising. Such tax should be paid in

four equal instalments by 15 March, 15 June, 15 September and 15 November.

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Resort tax

The tax is payable by individuals over 18 years for their stay in resorts and is included in

the accommodation tariff. The tax rate is established by local councils and ranges between

0.5% and 5% on the accommodation tariff.

Show tax

Show tax is payable by individuals and entities for public performances at a rate of

between 2% and 5% of revenues, or a fixed fee depending on the surface area of the

premises. The show tax is payable monthly, in arrears by the 15th of the month following

the performance.

Other local taxes

The local councils may impose a daily fee for temporary use of public places and for

admissions to museums, memorials, or historical, architectural, and archaeological

monuments, and also for the ownership or use of equipment that is held for the purpose of

obtaining income using public infrastructure, as well as fees for activities with an impact on

the environment. 

1.3 Indirect taxes5

Indirect taxes, ranging from VAT and customs duties to environmental levies, affect the

supply chain and the financial system. They pose unique challenges to multi-national tax

functions, since they must be managed accurately and in real time. These often invisible

taxes can have significant impacts — on cash flow, absolute costs and risk exposures.

1.3.1 VAT

The Romanian VAT system is harmonized with EU VAT Directive.

5 - see http://rbd.doingbusiness.ro/ro/1/articole-recente/1/300/taxation-in-romania#16514 http://www.fita.org/countries/

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1. Taxable persons

General

Any person supplying taxable goods or services in the course of business on a regular

basis is considered a taxable person. The term "business" refers to all independently carried

out activities of producers, traders and suppliers of services.

Taxable persons established in Romania with an annual turnover exceeding EUR 35,000

are required to register for VAT purposes. Persons not meeting the above-mentioned

turnover criterion may also register for VAT purposes.

The registration may be performed before carrying out any taxable and/or exempt with

right of deduction operations (by opting for registration or by declaring an envisaged

turnover higher than the registration threshold upon starting the activity). Persons that were

not registered as VAT payers will have to register within 10 days from the end of the

month, during which the above threshold was reached or exceeded.A taxable person having

the place of business outside Romania but established in Romania via a fixed establishment

is required to register for VAT purposes in Romania (i) before receiving services from

taxable persons established in another Member State in whose respect he is liable to pay

VAT (general B2B rule), (ii) before supply of services from that fixed establishment to a

beneficiary, taxable person established in another Member State, in whose respect the

beneficiary is required to pay VAT, (iii) before e.g. performance from that fixed

establishment of activities which are taxable and/or exempt with credit.

A taxable person having the place of business in Romania, but not registered for VAT

yet, is required to register for VAT purposes before supply / receipt of services to / from

taxable persons established in other Member States in whose respect the beneficiary is

liable to pay VAT (general B2B rule).

Until January 2012, VAT tax groups may be formed only by taxable persons deemed as

large taxpayers. The VAT tax groups do not have the meaning defined by the EU VAT

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Directive, but, in Romania the members of such a group could only offset their VAT

payable/refundable positions (with impact on the VAT cash flow).

VAT representative

Taxable persons that are established in the Community (but outside Romania), and

obliged to pay Romanian VAT (for certain transactions and provided they do not give rise

to a fixed establishment in Romania), have to register directly or appoint a fiscal

representative for VAT purposes to fulfill their VAT obligations in Romania. If the person

liable to pay tax is a taxable person who is not established in the Community, such a person

is required to appoint a tax representative as the person liable to pay tax. Under certain

cases, if the foreign taxable person does not register for VAT purposes, the VAT liability

shifts, in principle, to the Romanian beneficiary of the supply (under the reverse-charge

mechanism).

2. Taxable operations

Transactions subject to VAT refer to the supply of goods and services, import of goods,

and intra-Community acquisitions of goods. To be taxable in Romania, a supply must

cumulatively meet certain requirements (e.g. it is made for consideration, the place of the

transaction is in Romania).

Supply of goods

Supply of goods refers to the actual transfer of the right to dispose as owner of the goods

from one person to another against payment, directly or through an intermediary.

As a rule, a supply of goods has the place of supply where the goods are located at the

moment when the delivery takes place — with certain exceptions for goods to be

transported, installed, delivered on board of ships, aircraft, trains, and for distance sales —

provided certain conditions are met.

Supply of services

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The place of supply of services to a taxable person acting as such is the place where the

person receiving the services has established the place of business. If services are supplied

to a fixed establishment of the taxable person, located in a place other than the place where

he has established the place of business, the place of supply of services is the place where

the fixed establishment of the person receiving the services is located (general B2B rule).

The place of supply of services to a non-taxable person is the place where the supplier

has established the seat of business. If services are supplied from a fixed establishment of

the supplier, located in a place other than where the person has established the seat of

business, the place of supply of services is the place where that fixed establishment is

situated (general B2B rule).

There are a few derogations from the general rule concerning the place of supply of

services (e.g. services in connection with immovable property, cultural, artistic, services

passenger transport, etc). Also, Romania implemented the place of use and enjoyment rule

for certain services supplied to taxable persons established in third countries (e.g. services

to tangible movable property, local transport of goods).

The term "services" applies to all transactions not treated as supply of goods.

Import of goods

Goods brought from outside the Community and introduced into EU territory in Romania

are considered to be imports and fall within the scope of VAT with certain exceptions (i.e.,

entry of goods under a qualifying customs duty suspension procedure).

Intra-Community acquisition of goods

Intra-Community acquisition of goods means acquisition of the right to dispose, as

owner, of movable, tangible property dispatched or transported to the destination indicated

by or on behalf of the purchaser or the supplier to Romania from another EU member state

from which the goods are dispatched or transported.

"Reverse-charge" VAT

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In case of taxable intra-Community acquisitions, certain acquisitions of goods/services

and imports (if the postponement certificate is obtained by the taxable persons registered

for VAT purposes performing such operations), for which the "place of supply" is deemed

to be in Romania, the law imposes the application of the so-called VAT "reverse-charge"

mechanism by the Romanian beneficiary provided certain conditions (which vary for

different operations) are met.

Under the reverse-charge mechanism, the beneficiaries must recognize the related output

VAT in their return for the respective month. The input VAT may, as a general rule, be

recovered in the same VAT return to the extent of the beneficiary's right to deduct VAT.

3. Simplified recording of VAT

For certain supplies (e.g., waste and scrap materials, wooden material), a simplified VAT

mechanism is applicable, provided that both the seller and the purchaser are registered as

VAT payers in Romania.

Under this mechanism, the purchaser has to simultaneously recognize the related VAT,

both as an output and input VAT in the return of the respective month, without any cash

flow implications (provided the purchaser has a full right to deduct VAT).

4. Specific VAT schemes and simplification rules

Romania adopted in the national legislation simplification rules referring, inter alia, to

Triangulation transactions

Consignment/call-off-stock

Multipartite transactions within the Community related to works on movable

tangible property

Repairs during the guarantee period

Returns of goods within the Community

Also, a series of special VAT schemes are applicable, such as:

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Special scheme for small undertakings

Special scheme for travel agents

Special scheme for second-hand goods

Special scheme for investment gold, etc.

5. Taxable base

VAT is assessed on the total amount received or to be received by the supplier as

consideration for the supply of goods or services; this includes taxes, commissions,

packaging, transport and insurance expenses. Certain elements such as price discounts are

not included in the taxable base.

As of 1 May 2009, the VAT related to the acquisition of motorized road vehicles, as well as

the one related to the acquisition of fuel for the vehicles, owned or used by taxpayers

(provided they meet certain criteria), is generally non-deductible. The rule applies until 31

December 2010, with certain exceptions (vehicles used for commercial/resale purposes,

used for paid passenger transport including taxi, the ones used for supply of services

against consideration, for interventions, security and protection, etc.) in case of finance

lease of such vehicles a VAT deduction on lease installments is allowed, in principle.

6. Tax rates

The following rates apply in Romania:

24% standard rate, which is applicable to supplies of goods and services not

subject to VAT exemptions or to the reduced rate

9% reduced rate, which is applicable to the supplies of certain goods/services

specifically enumerated in the Fiscal Code, such as sale of medicines, hotel

accommodation, books, tickets for museums, cinemas, etc.

5% reduced rate, which is applicable to supplies of social housing, including

related land (certain conditions have to be fulfilled for applying this provision)

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7. Payment and filing requirements

Taxpayers must file VAT returns with the tax authorities and pay VAT on a monthly

basis, specifying the taxable amount and the tax due. The tax return must be filed and the

respective VAT paid by the 25th of the following month. In case of taxpayers whose

annual turnover is less than EUR 100,000 and who carry out no intra-Community

acquisition of goods, VAT returns should be filed with the tax authorities on a quarterly

basis and VAT shall be paid quarterly.

A VAT recapitulative statement should be filed with the tax authorities on a monthly

basis on or before the 15th day of the following month. Such statement should comprise:

intra-Community supplies of goods exempt from VAT, intra-Community acquisitions of

goods for which the beneficiary is obliged to pay VAT, and acquisitions as part of

operations within the triangulation scheme, as well as acquisitions and supplies of intra-

Community services taxed based on the general B2B rule.

Taxpayers should also submit a declaration of all supplies/acquisitions of goods/services

taking place in Romania to/from other taxable persons registered for VAT purposes in

Romania. The declaration should be submitted on a half-yearly basis, by the 25th of the

month following the end of semester.

Companies registered for VAT purposes in Romania, having deliveries of goods

to/arrivals of goods from other EU member states which exceed an annual amount of RON

900,000/RON 300,000 are obliged to submit INTRASTAT declarations on a monthly

basis.

1.3.2 Excise duties

Excise duty is a consumption tax payable on certain categories of goods including

alcoholic beverages, gasoline, tobacco products, coffee, electricity and certain other items.

The tax is payable on import and sales of locally produced items on the domestic market

and is set as fixed EUR amount per unit ("specific excises") or as a percentage of a

specified taxable base.

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The excise duties in respect to the main categories of goods are given in EUR in the table

below (see figure 1.3.2):

Figure 1.3.2

Taxpayers are normally required to submit monthly tax returns and pay the excise duties

for excisable goods by the 25th of the following month, with certain exceptions. In case of

imported goods, the related excise duty, if applicable, should be paid at the time of making

import declaration at customs.

A special supervision and control system is provided for the production and distribution

of excisable goods.

A specific reimbursement procedure for harmonized excise duties based on fiscal risk

analysis is available for supplies of certain excisable goods.

1 Fiscal warehouse regime

The fiscal warehouse regime allows the production, transformation and/or storage of

products subject to harmonized excise duties (e.g., beer, wines, other fermented beverages,

intermediary products, ethyl alcohol, tobacco products, mineral oils) without the payment

of related excise duties. Generally, the fiscal warehouse regime cannot be used for retail

sale of such products.

The Fiscal Code allows production (and storage) of electricity and natural gas outside

fiscal warehouses.

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2. Excise duty suspension regime

In certain condition, the excisable goods could be moved under an excise duty suspension

regime within the territory of the Community. The movement of the excisable goods under

the suspension of excise duty must be covered by an administrative document.

The paper document that currently must accompany the movement of the excisable goods

under the suspension of duty (the Administrative Accompanying Document or AAD)

would be replaced with an electronic message from the consignor to the consignee,

certified by the authorities of the Member States involved.

For this purposes, a computerised system for monitoring movements of the harmonised

excisable goods under suspension excise duty within the Community, named EMCS

(Excise Movement and Control System) will be implemented starting with 1 April 2010.

For movements of excisable goods under the suspension of duty on the Romanian territory,

the component EMCS - RO of the computerized system is already used.

1.3.3 Custom duties6

1. Common customs tariff

The specific customs duties payable upon releasing the goods into free circulation, are

established based on the Community Customs Tariff (adopted for each year by the

Commission) and related preferential tariff measures. There is an online EU customs tariff

database (TARIC) which comprises the following:

The combined nomenclature of goods

The rates and other items of charge normally applicable to goods covered by the

combined nomenclature, as regards customs duties and import charges laid down

under the common agricultural policy, or under the specific arrangements

applicable to certain goods resulting from the processing of agricultural products

6 - see http://rbd.doingbusiness.ro/

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The preferential tariff measures contained in agreements which the European

Community has concluded with certain countries or groups of countries and

which provide for the granting of preferential tariff treatment

Preferential tariff measures adopted unilaterally by the European Community in

respect of certain countries, groups of countries, or territories

Autonomous suspensive measures providing for a reduction in, or relief from,

import duties chargeable on certain goods

Other tariff measures provided for by other Community legislation

Customs duties are expressed as a percentage of the customs value of goods. Other taxes,

duties and levies may be required to be paid upon import in addition to customs duties,

such as excise duty, VAT, etc.

The CCC and its Implementing Regulations include new rules and provisions in respect

of the status of the goods, customs valuation, amendment of customs declarations, binding

origin information and binding tariff information, quota administration system, etc.

Establishing the customs value of goods

Where the goods to be imported into Romania as from the Accession date will be subject

to a sale, the customs value should be based generally on the sale price increased with

certain other costs that may have been incurred with purchasing the goods (e.g., insurance,

transport, commissions, royalty and license fees). 

The cost of (i) transport and insurance of the imported goods, and (ii) loading and

handling charges associated with the transport of the imported goods to the place of

entering into the customs territory of the Community shall be added to the price actually

paid or payable by the importer when declaring the customs value of the goods, to the

extent that they are incurred by the buyer but are not included in the price actually paid or

payable for the goods.

23

Customs procedures

As provided by the Community Customs regulations, the goods may be placed under one

of the customs procedures, as follows:

Release of goods for free circulation

Transit

Customs warehousing

Inward processing

Processing under customs control

Temporary admission

Outward processing

Exportation

Free warehouse

Free zone

The release for free circulation confers non-Community goods the status of Community

goods. This means that the customs duties and charges have been paid and, as a result, the

goods may freely move within the territory of the European Community from a customs

perspective.

The specific customs procedures suspending the payment of the import duties are generally

subject to authorization from the customs authorities.

The transit procedure allows the movement of non-Community goods from one point to

another within the customs Community territory, without such goods being subject to

import duties and other charges or to commercial policy measures for a certain period of

time. Certain Community goods meant for export could also be placed under the transit

procedure.

A customs warehouse is any place approved by, and under the supervision of, the customs

authorities where goods may be stored under certain conditions.

24

The customs warehousing procedure allows the storage in a customs warehouse of the

following:

Non-Community goods, without such goods being subject to import duties or

commercial policy measures

Community goods, where Community legislation governing specific fields

provides that their placement in a customs warehouse attracts the application of

measures normally used for export of such goods

1.4 Taxes around the world (Short comparison)7

Comparison of tax rates around the world is difficult and somewhat subjective. Tax

laws in most countries are extremely complex, and tax burden falls differently on different

groups in each country and sub-national unit. The lists below give an indication by rank of

some raw indicators.

Denmark is the most taxed country in the world with a tax-to-GDP ratio of 48.9%.

This is a list of tax rates around the world. It focuses on three types of taxes: corporate

taxes, individual taxes and sales taxes (value added taxes (VAT) / goods and services taxes

(GST) / sales).

Country Corporate tax

Maximum

Personal

Income

tax

VAT

Austria 25% 50%20% (10% for tourism services,

food and agriculture)

Belgium 33% 50%21% (12%, 6% or 0% in some

cases)

Bulgaria 10% 10% 20% (7% or 0% in some cases)

Croatia 20% 45% 23%

7 - see www.fita.org

25

Cyprus 10% 30% 15%

Czech Republic 21% 15% 20% (10% on selected goods and services)

Denmark 25% 58% 25% (VAT free on aeroplanes)

Estonia 20% 21% 20% (9% on selected goods and services)

Finland 26% 53% 23% (Increased to 23% from 22% in July 2010)

France 33.33% 41% 19.6% (2.1% drugs, newspapers, theatres), (5.5% raw food, books)

Germany15.825 % (federal) plus 14.35 % to 17.5 % (local)

45% 19% (7% on selected goods and services)

Greece 25% 40%21%(11% on selected goods and services). Increasing to 23% from July 2010

Hungary 16% 36% 25% since 1 july 2009Iceland 26% 45.58% 25.5%

Ireland 12.50% 41% 21% (0%, 4.8%, 5.2% and 13.5% for selected goods and services)

Italy 31.4% 45% 20% (10% and 4% on selected goods and services)

Latvia 15% 23% 21% (10% certain goods and services)Lithuania 20% 21% 21%Luxembourg 29.63% 38.95% 15%

Macedonia 10% 10% 18% (5% VAT on food, medicine, IT technology and other products)

Malta 35% 35% 18% (0% VAT on food and medicine)Netherlands 25.5% 52% 19% (6% for certain goods)Poland 19% 32% 22% (some products e.g. food - 7%)Portugal 27.50% 42% 21% (6% for first need products)Romania 16% 16% 24% (24% beginning in July, 2010)

Slovakia 19% 19% 19% (10% on selected goods and services)

Slovenia 22% 41% 20%

Spain

30% (28% Basque Country & Navarra, 4% ZEC companies in Canary Islands)

45% 18% (8% and 4% on selected goods and services)

Sweden 26.3% 55% 25% (12%/6% for certain goods and services)

Turkey 20% 35%18% (8% for essential goods such as medicine and food, 1% for agricultural products)

United Kingdom 21%-28% 50%17.5% (some items at 5%, some items 0%) Increasing to 20% from January 2011

26

Chapter 2. Presentation of the company

2.1 Short History

SC AMANN ROMANIA SRL is a limited liability compay set up in 2001, with the

headquarter in Brasov, No 327, Mihai Viteazu Street. The society has been registered with

the number J/08/8/05.01.2001, fiscal code RO and it begun its activity in October 2005.

The company was set up due to the development of the capitalist economy and the entry

of foreign capitalism in the Romanian economy. The society was first set up in 1854, by

Alois Amann, in the south-west of Germany, Baden-Wuerttemberg, being a family

business. The company is responsible with the production of sewing thread (at that time

manufactured from silk).

The main products-threads- manufactured are the following:

-polyester/polyester core spun threads

- polyester/cotton core spun threads

-spun threads

-texturised threads

-continuos filaments

-special threads for technical applications

-sewing threads for private use

The products’ application covers a wide variety including women’s, men’s and children’s

clothing, underwear, sports and work wear, home textiles, shoes and leather ware, safety

belts, airbags, tents, parachutes etc.

27

The company is present in different countries such as Singapore, Czech Republic, China,

India, Germany, South Africa and Mexico.

2.2

2.2 Organizational structure

The society SC AMANN ROMANIA SRL has an unique associate, the AMANN

INTERNATINAL GMBH, from German nationality. All the decisions are taken by the

General Meeting of the Associates and the company is lead by a general manager and three

executives managers (Finance Manager, Sales Manager and Production Manager).

The society is formed by two departments (Department I and Department II), each

department having several workshops. The first department has 6 workshops and the latter

has five workshops. Each department is lead by an executive manager who has under his

command the followings: Engineer Responsible, Export Responsible, Technical Activities

Responsible, CTC Service, Laboratory Responsible and Accounting Responsible.

28

Germania - Dietenheim România

Cehia

SingaporeMexico South Africa

The figure 2.2 shows the organizational structure of the company and the activities for

which each manager is responsible:

2.3 Trading partners

Customers: are the most important in every business because they ensure the

development of the company. SC Amann Romania SRL has various customers, but the

most important are the followings:

Amann and Soehne GmbH

Amann Bulgaria

Amann Ungaria

Amann Naehgarne(Ackerman)

Suppliers: are represented by different legal persons, who put at the disposal of the

company raw materials, fuel, energy, water, machineries on the basis of a selling-buying

relationship. The most important suppliers of SC Amann Romania SRL are the followings:

Ackermann Embrodery Threads

Amann and Soehne GmbH

Amann Cehia

Amann Donisthorpe UK Limited

Amann Handel

Amann Polonia

2.4 Activity

According to the CAEN classification(„131- Pregatirea fibrelor si filarea fibrelor

textile“)8 SC Amann Romania SRL has 131 code, meaning the manufacturing of fibers

(filaments) and threads.

8 - see http://www.firme.info/fabricarea-produselor-textile-COD-CAEN-13/pregatirea-fibrelor-filarea-fibrelor-textile-COD-CAEN-131.html

29

Chapter 3. Case Study

3.1 Main accounting operations+ Profit tax, Salary tax, VAT

Main accounting operations during March 2011

1. On 04.03.2011, raw materials (100 kg of cotton x 59 lei/kg and 100 kg of polyester x 60

lei/kg) are bought from Ackermann Embrodery Threads, invoice no 00345, in value of

11900 RON with VAT 24%.

% = 401 Suppliers 14756 RON

Raw materials 301 11900 RON

Input VAT 4426 2856 RON

2. On 05.03.2011, the quantity of cotton and polyester purchased according to invoice nr

00345 are given into use (they will be use for the fabrication of the functional sewing

thread-Rasant):

601 = 301 11900 RON

Expanditures with raw materials

3. On 07.03.2011, the company pays through bank account the invoice no 00345:

401 = 5121 14756 RON

Suppliers Cash at bank in lei

4. On 07.03.2011, the company receives an advance payment from its main customers

Amann Donisthorpe UK Limited in value of 2000 RON through bank account:

30

5121 = 419 20000 RON

Cash at bank in lei Advance payments from customers

5. After receiving the advance payment, the company sells to Amann Donisthorpe UK

Limited, 150 pieces of Onyx though continuous thread with 100% Polyamide (1500 pieces

x 40lei/ piece) in value of 60000 RON, VAT 24% on 10.03.2011,according to invoice no

00121.

4111 = % 74400 RON

Customers 701 60000 RON

Revenues from selling finish goods

4427 14400 RON

Output TVA

6. The production costs of the Onyx though continuos thread with 100% Polyamide, which

have been sold on 10.03.2011 were 45000 RON (1500 pieces x 30 lei /piece):

711 = 345 45000 RON

Revenues from obtaining Finished goods

finish goods

(variation in inventory)

7. On the same date,10.03.2011, the company receives the difference of money for selling

finish goods, in cash:

5311 = 4111 54400 RON

Petty cash in lei Customers

8. The advance payment account is being closed after all the sum is received from

customers (Amann Donisthorpe UK Limited):

31

419 = 4111 20000 RON

Advance payment Customers

from customers

9. On 21.03.2011, the company sells to Amann Naehgarne soft bulked thread Sabatex in

value of 15000 RON, VAT 24% according to invoice no 1216851 and the money are

cashed by the cashier (250 pieces x 60 lei/ piece):

4111 = % 18600 RON

Customers

707 15000 RON

Revenues from selling finish goods

4427 3600 RON

Output TVA

5311 = 4111 18600 RON

Petty cash in lei Customers

10. On 23.03.2011 is issued the invoice no 102991460 representing the energy, heating and

water services in value of 4500 RON, VAT 24 % which is paid through bank account:

a) % = 401 Suppliers 5580 RON

605 Expenses with energy, heating, water 4500 RON

4426 Input TVA 1080 RON

b) 401 = 5121 5580 RON

11. On 30.03.2011 are recorded the gross salaries:

641 = 421 24.500,00 RON

Salaries Employees-salaries payable

32

12. On 30.03.2011 are recorded the employees contributions:

421 = % 7099.7 RON

Employee salaries-payable 4312 CAS 10,5% 2572.5

4314 CASS 5,5% 1347.5

4372 CFS 0,5 % 122.5

444 Tax on salaries 16% 3057.2

Name of

employee

Gross

salary

CAS

10,5%

CASS

5,5%

CFS

0,5%

Net

salary

Deductions Taxable

income

Salary

tax16%

Received

salary

Popescu

Ioana

6500 682.5 357.5 32.5 5427.5 250 5177.5 828.4 4599.1

Ionescu

Vasile

5000 525 275 25 4175 350 3825 612 3563

Rogojan

Angela

4500 472.5 247.5 22.5 3757.5 250 3507.5 561.2 3196.3

Rohan

Viorel

7000 735 385 35 5845 250 5595 895.2 4949.8

Smeu

Elisa

1500 157.5 82.5 7.5 1252.5 250 1002.5 160.4 1092.1

Total 24500 2572.5 1347.5 122.5 20460.5 - 19107.5 3057.2 17400.3

13. On 30.03.2011 is recorded the payment of net salaries through petty cash in hand :

421 = 5311 17400.3 RON

Employee salaries payable Petty cash in hand

14. On 30.03.2011 are recorded the employer contributions:

a) Company contribution to social insurance (20.8%)

6451 = 4311 CAS 5096 RON

b) Company contribution to health insurance (5.2%)

33

6453 = 4313 CASS 1274 RON

6453 = 4313.01 CCI 0.85% 208.25 RON

c) Company contribution to Unemployment Fund (0.5%)

6452 = 4371 CFS 122.5 RON

d) Company contribution to work accidents and professional diseases (contributia unitatii

pentru accidente de munca si boli profesionale) 0.1%

6458 = 4381 24.5 RON

e) Company contribution to the wage guarantee fund (0.25%)

635 = 447 (fond de garantare) 61.25 RON

15. On 30.03.2011, the company’s contributions and employees contributions are paid

through bank account:

% = 5121 13886.2 RON

4312 2572.5

4314 1347.5

4372 122.5

444 3057.2

4311 5096

4313 1274

4313.01 208.25

4371 122.5

4381 24.5

447 61.25

16. On 30.03.2011 is closed the VAT account:

Input VAT/Deductible VAT(4426): 2856 lei(op.1)+1080 lei(op.10)=3936 lei

Output VAT/ Collected VAT(4427): 14400 lei(op.5)+3600 lei(op.9)= 18000 lei

→ 4427 > 4426 so we have VAT payable 4423

4427 = % 18000 RON

34

4426 3936 RON

4423 14064 RON

17. On 31.03.2011 are closed the expenditures and revenues accounts:

Expenditures:

121 = % 47686.5 RON

601 (op.2) 11900 RON

605 (op.5) 4500 RON

641 (op.11) 24500 RON

6451 (op.14) 5096 RON

6452 (op.14) 122.5 RON

6453 (op.14) 1482.25 RON

6458 (op.14) 24.5 RON

635 (op.14) 61.25 RON

Revenues:

% = 121 120000 RON

701 (op.5) 60000 RON

711 (op.6) 45000 RON

707 (op.9) 15000 RON

Gross profit: 120000 – 47686.5 = 72313.5 RON

Profit tax : 16% x 72313.5 = 11570.16 RON

Net profit : 72313.5 – 11570.16 = 60743.34 RON

35

3.3 Abridged balance

Assets Sum Liabilities+Owner’s Equity Sum

A. Fixed Assets

I. Intangible assets

1. Payment in advance

B. Current assets

1. Stocks (raw materials,

merchandise, finish goods..)

2. Customers

3. Cash in hand

20000

11900

93100

73000

A. Capital and reserves

Profit

Profit apropriation

B. Liabilities

Suppliers

Salaries payable

VAT payable

Social debts

72313

60743

20336

24500

14064

6492

Total 198000 198000

36

References :

1. http://rbd.doingbusiness.ro/ro/1/articole-recente/1/300/taxation-in-romania#16514

2. http://www.business.gov.au/BusinessTopics/Taxation/Pages/default.aspx

3. http://www.fita.org/countries/

37