News / Publications

• Legal updates
• Latest News
• In The Press
• Press center

Misreported taxes? Tax authorities will penalize you double in 2016

The interest and penalties system will dramatically change in 2016. The new Fiscal Procedure Code, Law 207/2015, reduces by 60% the total level of the accessories for the delayed payments, but it doubles it for the undeclared obligations  (or incorrectly declared). Practically it is about the differences of the tax liabilities identified by the fiscal inspection.

The tax authorities believe that, through the new system of accessories, will separate the good faith taxpayers by the bad faith taxpayers, which reduce their tax obligations by submitting incorrect statements or by not declaring at all their obligations for taxes or social contributions. However, according to Contexpert, the risk that some taxpayers to be sanctioned, although they are good faith taxpayers, exists, because of a calculation error or a different interpretation of the law text as against the one of the inspectors. Attention! Companies must pay maximum attention in preparing the tax declarations starting with 2016.

Thereby, interest and late payment penalties will be 10.95% per year instead of 18.25% which is the current value, but by adding the penalties for failure to declare, will be increased, cumulatively,  to 40.15 % per year, starting with 2016.

The level of interest and penalties

2015

• the delay interest = 0.03% per day = 10.95% per year
• the delay penalty = 0.02% per day = 7.3% per year
• The total level= 18.25% per year

2016

• the delay interest = 0.02% per day = 7.3% per year
• the delay penalty=0.01% per day = 3.65% per year
• the failure to declare penalty = 0.08% per day = 29.2% per year
• The total level = 10.95% per year or 40.15% per year

The failure to declare penalty:

• It will apply only to tax claims arising after January 1^st 2016.
• It will apply from the day following the due date and until the date of the settlement of the amount owed, from the undeclared fiscal obligations, determined by the tax inspection through tax decisions.
• This will not exclude interest and late penalties payment.

• It will be reduced with 75%, at the taxpayer’s request, if the main tax obligations determined by the tax inspection are closed by payment/ compensation until the payment deadline or are rescheduled. The payment deadline is determined by the decision‘s communication date, so: if the communication date is between 1-15 of the month, the payment deadline is until the 5^th of the following month; if the communication date is between 16-31 of the month, the payment deadline is until 20^th of the following month.
• It will be increased with 100% if the  undeclaring is the result of committing acts of tax evasion according to Law no. 241/2005.
• It will not apply when the tax differences are resulting from the application of the interpretation provided by the tax authorities in the concerned situation, interpretation arising from public documents such as: circulars, instructions, methodological guidelines.

In this case it must be stated that the new Fiscal Procedure Code introduces the principle of ”in dubio contra fiscum” – in case of doubt about the fiscal norm, the interpretation it’s made in the taxpayer’s advantage.

This principle would prevail in situations where between the taxpayer and the tax inspectors are differences of opinion regarding the interpretation of a law text. Thereby, when the tax authority must apply the tax norm and there is an uncertainty, the authority must do the following:

• first of all, it has to clarify that text by calling on the legislator’s will and on the purpose of the law, as they are expressed in various public documents (substantiation notes, statements of reasons, parliamentary debates, reports and opinions of the Parliament’s specialized committees, documents that are published on the website of the Government, the Ministries, the Parliament, etc.)
• to apply a systematic interpretation (in terms of the whole assembly of the Law)
• if through this rules, the meaning of the norm hasn’t been clarified, it will be applied the rule of interpretation in the advantage of the taxpayer.

Theoretically, based on this principle, the taxpayer would be protected from the possible abuses. But, we have to consider that the documents that would form the basis of the tax authority interpretation, are not always available to taxpayers. Therefore, the risk of sanction is quite high. It should be noted that accepting the reduction of the penalty with 75%, when paying additional obligations set out in legal terms, will mean, implicitly, that the taxpayer is assuming it’s mistake and will not appeal to the court.

In conclusion, from case to case, each company will have to analyze very carefully, starting from next year, its obligations and tax statements in order to avoid, as far as possible, the penalties and to evaluate, in case it is sanctioned, if it’s more convenient to accept the tax authority’s decision and to reduce its penalties with 75%, from 40.15% to 10% of the amounts set additionally or to continue with the court proceedings.