Draft law on certain facilities in regards to payment and taxation of rent
The Romanian Parliament adopted on 29.04.2020 the draft law regulating facilities concerning the deferral of rent payments by companies and individuals that were economically affected during the state of emergency; as well as tax reliefs relating to rental of immovable property under certain conditions.
I. Deferral of rent for companies and individuals whose businesses or activities were affected during the state of emergency:
1. Purpose and eligibility
Companies or individuals whose businesses or activities have been affected by the state of emergency and who meet certain criteria, may request postponement of rent due for the entire period of the state of emergency, as well as for the month following the cessation of the state of emergency, and have these payments covered (temporarily) by the relevant tax authority subject to reimbursement by the end of 2020.
This facility only applies to rents (on a single location) amounting to the higher of either;
- Lei 10,000 for companies;
- Lei 2,000 lei for individuals.
In both cases, the monthly rent specified in the addendum between the landlord and the tenant, as described below, must be less than or at most equal to the rent in February 2020.
The following categories of tenants who may qualify for this facility: (i) economic operators, freelancers, private companies, whose business has been suspended or whose income have dropped by at least 15% in March 2020 compared to the average monthly income achieved in 2019; and (ii) individuals directly or indirectly affected economically during the state of emergency; may defer the payment of rent, without any interest or penalties being due, for headquarters, secondary places of business or residential premises.
2. Which procedure needs to be followed?
The relevant tax authority will cover the rents deferred further to a request by the tenant.
The following documents should accompany the tenant`s request to the tax authorities:
- The relevant lease agreement;
- The addendum of the lease agreement in application of the law;
- Any document supporting tenant`s impossibility to pay the rent during the period provided in the addendum.
The addendum to the lease agreement must provide for the following:
- The details of the landlord and tenant
- Agreement of the parties on the deferral of rent;
- The period for such deferral;
- The rent due for this deferral period;
- Details of landlord’s bank account (where the tax authority shall disburse the rent to);
- Date of execution and signatures of both parties.
Note: The draft law contains a discrepancy with respect to the person that should submit the request to the tax authorities, referring to both the landlord and the tenant, but we hope that this discrepancy will be remedied once the implementing regulations of the law are published with the Romanian Official Gazette.
3. When and how do qualified tenants have to reimburse the rent paid by the tax authority?
The tenants shall reimburse the deferred rent to the relevant territorial tax authority which had covered these payments, in equal installments, immediately after the lapse of the period of deferral but, in any case not later than December 31, 2020.
Shall the tenants not reimburse the due amounts, the tax authority may collect the due amounts by enforcement, including by seizing the bank accounts of the tenant in accordance to the applicable tax laws.
II. Tax reliefs related to rental of immovable property:
1. The law further regulates that, for the year 2020, the income resulting from lease/ sublease or usufruct agreements, are not deemed to represent taxable income, shall the following conditions are met:
- The consideration collected by the owner of the property in exchange for the transfer of use of such for the year 2020 dropped by at least 30% compared to the consideration collected for February 2020;
- Applicable for the negotiated period for the value decrease of the use of the immovable property, but not longer than December 31, 2020.
2. In case of income tax payers, including micro-enterprises, the income obtained by means of transfer of use related to the immovable property, namely under lease/ sublease or usufruct agreements, shall be taxable only at the rate of 80% of their value.
This provision applies for:
- The income of the taxpayers who shall decrease their income consideration with respect to 2020, with at least 20% comparing to February, 2020;
- The period related to the negotiations conducted in respect to decreasing the consideration related to the use of the immovable, but no longer than 31 December, 2020.
Note: The new provisions should be applicable only after the drafted law will be promulgated by the President of Romania and will be published in the Romanian Official Gazette.