Cabot Transfer Pricing

Tax facilities in special sectors: The correct calculation of the turnover share also means a clear and fair view of the income from the sale of goods07 March 2024

Tax facilities in special sectors: The correct calculation of the turnover share also means a clear and fair view of the income from the sale of goods

One of the conditions for the application of tax facilities in construction and the agri-food area is the share of the turnover from the activities specified in the Fiscal Code in the total turnover – and it is also the reason why employers are sometimes penalized by tax inspectors. Incorrect marking of goods in accounting can lead to misclassifications and the application of facilities where they are not appropriate – for example, income from the sale of products purchased for the purpose of resale is not taken into account.

The fiscal code provides that for determining the share of turnover actually achieved from construction activity in the total turnover, the indicator turnover actually achieved from construction activity includes only the income from construction activity carried out on the territory of Romania, and the indicator total turnover includes the revenues from the entire activity carried out on the territory of Romania. The activity carried out on the territory of Romania means the activity actually carried out in Romania for the purpose of producing products and providing services.

We also find specific provisions for determining the share of turnover from agri-food activities: this turnover is based on a contract, order or other documents specific to the agricultural sector and the food industry and covers labor, materials, machinery, transport, equipment, endowments and will also include realized and uninvoiced production.

In order to apply the tax facilities in the two special fields of activity, it is absolutely necessary for the employers to have an extremely high share of the turnover in these fields by reference to the total turnover – at least 80%, to be exact.

Employers’ miscalculations on these figures often lead to additional charges, as we have seen in recent years, especially in the construction sector. Income generated by activity abroad and beyond is added.

During the most recent conference organized by avocatnet.ro on the topic of salary taxation, Cristina Săulescu – Managing Partner, Cabot Transfer Pricing – emphasized that when determining the turnover actually achieved from the construction activity/agricultural sector and the food industry, not in the calculation of the income from the sale of products purchased for the purpose of resale. When determining the actual turnover from the construction activity/agricultural sector and the food industry, for determining the income from the sale of products, the income from the sale of finished products, semi-finished products, residual products and goods, which are obtained from production, are taken into their own account.

Unfortunately, there are still many economic agents who, even when they draw up the profit and loss account, do not have a clear and correct picture of what income from the sale of goods means (…) It is very important that the goods are clearly highlighted correctly in accounting and reporting (…) the goods should be reported separately – the amounts related to the goods should not be included in the income from production (even if they are from agricultural production). In these areas, it is all the more important that they should not be taken into account when determining whether or not the income from these areas represents 80% of the total turnover“, stated Cristina Săulescu at the avocatnet.ro conference. The specialist insisted that there should be no confusion between the “accounting terms”: one is the production purchased from someone else for resale and the other is for its own production.

The turnover actually achieved from the construction activity/agricultural sector and the food industry means the turnover actually achieved from the activities carried out related to the CAEN codes provided for in art. 60 para. 5, respectively para. 7 lit. a) Tax code to which is added:

• revenues from operating subsidies related to net turnover, recorded in accounting;
• the monthly credit balances before the transfer to the profit and loss account of the revenues related to the costs of stocks of products and services in progress;
• revenues from the production of tangible assets and the production of real estate investments, recorded in accounting

and subtract the amounts representing the monthly debit balances before the transfer to the profit and loss account of the revenues related to the costs of the stocks of products and services in progress, highlighted in the accounting, explains, on the occasion of the event, Cristina Săulescu.

 

Article published in Avocatnet.ro

Cristina Săulescu

Tax & Transfer Pricing Partner

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