The manner of calculating the capital gains for initial investments made in foreign currency, the calculation and payment of the capital gain tax, the profit tax payment obligations and what happens with the transactions conducted on a foreign market. These are the major uncertainties when it comes to taxing capital gains in Romania, as regulated in the profit tax law in force since July.
These questions are not the only ones, though. Less than six months after enforcement, the profit tax law now requires major modifications in terms of enforcement guidelines.
“The new stipulations could significantly impact on the development of investments in Romania and of the capital market, while a series of investments already carried out may suffer as a result and those scheduled to be made will probably be restructured,” Ron Barden, tax partner with PricewaterhouseCoopers (PwC) said.
The new profit tax law introduces the taxation of the capital gains of non-residents.
Barden says many of his company clients are already compelled to pay very high taxes due to the introduction of the new regulations, which do not allow adjusting the capital gain derived from a specific transaction according to the inflation rate.
The new law does not refer to the potential impact of the depreciation of the domestic currency, either, as there may be times when a substantial ROL gain is obtained, yet the investor gains nothing in real terms.
“The worst headache of the investors is the lack of any specifications as to how the capital gain should be computed or to which documents should be used to do this,” Ionut Simion, tax senior manager with PwC says.
Another problem is that the law does not distinguish between taxing gains from investments in shares, which are speculative by nature, and the stable investments.
ZF English
Inflation tax for capital gains
The manner of calculating the capital gains for initial investments made in foreign currency, the calculation and payment of the capital gain tax, the profit tax payment obligations and what happens with the transactions conducted on a foreign market