The New Year has not only brought in some changes to the Fiscal Code which taxpayers need to be aware of, but also an intensification of activity by the tax authorities which are carrying out increasingly rigorous audits. These can be both general, to investigate a taxpayer’s position as a whole, and specific, looking at a particular tax or issue. For instance, pharmaceutical companies have faced particularly complicated audits, including in relation to the “clawback tax” on medicines, decisions by the authorities having been contradictory at times.
The TaxExpress mobile application, launched last year by KPMG in Romania, provides taxpayers with updated information about fiscal obligations.
This year has begun with numerous notifications of fiscal inspections, by which the fiscal authorities announce that they will visit to carry out audits. The purpose varies: It can be a general audit, a transfer pricing audit, or an additional verification relating to a particular tax, levy or the fiscal treatment of particular operations. These types of additional investigations are increasingly common, and follow a fiscal audit after which a decision imposing tax obligations has been issued, which the taxpayer has subsequently appealed with the relevant fiscal authority and the tax authorities have decided to re-investigate the issue or the operation in question.
Also, more rigorous verification is taking place in relation to payment of the quarterly contribution for medicines subsidized by the National Health Fund and the Health Ministry budget (the so-called “clawback tax”). This tax is payable on sales of medicines to hospitals or patients, the price of which is subsidized by the health system.
Teodora Alecu, Director in KPMG in Romania’s Tax Department comments: “It is not an easy exercise to verify the correct payment of the clawback tax, because the legislation which governs it is not clear. The legislation has seen several modifications over the course of time. Some changes have been made with the aim of better application of the spirit of the initial law. However, subsequent ad literam interpretations have not been without controversy. The treatment of the clawback tax in terms of its deductibility as an expense when calculating profit tax for previous years can also generate controversy. In practice, fiscal audits have taken varying approaches, including ruling in some cases that amounts paid for the clawback tax are non-deductible in the calculation of profit tax.
Ramona Jurubita, Partner in KPMG in Romania’s Tax Department points out: “Numerous firms in the pharmaceutical industry have recently been subjected to a tax audit. However, the industry and its operations have very specific characteristics. The text of the Fiscal Code should be clarified to take account of these, and its application should correspond to the nature of the business. It is an industry where fiscal rules cannot be applied without a good understanding of the specific activities of that industry.”
Niculae Done, Senior Tax Partner in KPMG in Romania’s Tax Department comments: “While managing KPMG in Romania’s tax litigation assistance services, I have been able to observe the various types of tax audit which have taken place recently. We support clients when they need help to prepare the documentation which the tax inspectors have requested, and our assistance means they can reduce the time lost from commercially productive activity.”
Taxpayers’ efforts to manage their tax declaration and payment obligations are supported by KPMG in Romania through the TaxExpress mobile app. The app can be accessed on an iPad, iPhone, iPod Touch and devices with Android operating systems and helps taxpayers easily keep up to date with their fiscal obligations. The app gives constantly updated information about fiscal obligations in Romania, indicating deadlines and references to the relevant legislation. Moreover, the TaxExpress app allows users to filter fiscal obligations based on sectors of activity and to create personalized alerts. Thus, taxpayers have more time to concentrate on their core activities.
Ramona Jurubita adds: “This new app, launched by KPMG in Romania, will be a big help to the management of companies, allowing them to access information easily, even when they are travelling, about their declaration obligations that month. At the same time, errors in declarations or failure to pay on time inevitably lead to penalties which can add up to significant amounts. KPMG in Romania’s Taxation Services Department can assist you throughout fiscal audits.”