According to the latest amendments to the Fiscal Code, reinvested profit is exempt from tax in the case of the production or acquisition of technological equipment. When determining the tax exemption, the ratio between the accounting profit and the value of the investment will be considered. However, in order to truly benefit from this fiscal facility, investors must record an accounting profit in the financial year in which the investment is made.
In this context, the Ministry of Public Finance has also developed implementing regulations for this measure, which are included in a draft Government Decision (GD).
According to the Fiscal Code, the profit reinvested in the production and/or acquisition of technological equipment (machinery, tools, and working installations), as provided in subgroup 2.1 of the Catalog regarding the classification and normal useful life of fixed assets, used for generating taxable income, is exempt from profit tax.
Within the meaning of Article 19^2, paragraph (1) of the Fiscal Code, the production of technological equipment refers to the in-house manufacture of such equipment and their registration as fixed assets under Article 24 of the Fiscal Code.
Calculation Examples:
Example I – Tax Exemption When Accounting Profit Exceeds Investment Value
At the end of 2009, a company records a taxable profit of 170,000 lei. The profit tax owed at the end of Q3 is 10,000 lei. On November 15, the company purchases technological equipment worth 80,000 lei. The accounting profit for the period October 1 – December 31, 2009, is 90,000 lei.
Steps to determine the reinvested profit tax exemption and the final tax due after applying the facility:
Calculate Q4 profit tax:
170,000 x 16% = 27,200 lei
27,200 – 10,000 = 17,200 lei
Since the accounting profit for Q4 (90,000 lei) covers the investment, the tax exemption is:
80,000 x 16% = 12,800 lei
Final tax due after applying the facility:
17,200 – 12,800 = 4,400 lei
According to Article 192, paragraph (12) of the Fiscal Code, the fiscal value of the technological equipment, used to calculate depreciation, is determined by deducting the amount for which the exemption was applied from the purchase value:
Fiscal value = 80,000 – 80,000 = 0
Example II – Tax Exemption When Accounting Profit Is Less Than Investment Value
At the end of 2009, a company records a taxable profit of 60,000 lei. The profit tax owed at the end of Q3 is 4,000 lei. On November 20, the company acquires technological equipment worth 70,000 lei. The accounting profit for Q4 is 30,000 lei.
Steps to determine the reinvested profit tax exemption and the final tax due:
Calculate Q4 profit tax:
60,000 x 16% = 9,600 lei
9,600 – 4,000 = 5,600 lei
Only 30,000 lei of the investment is covered by profit. Tax exemption is:
30,000 x 16% = 4,800 lei
Final tax due:
5,600 – 4,800 = 800 lei
Fiscal value = 70,000 – 30,000 = 40,000 lei
Example III – Tax After Exemption Is Lower Than Minimum Tax
At the end of 2009, a company records a taxable profit of 45,000 lei. The profit tax owed at the end of Q3 is 2,000 lei. On December 15, the company acquires equipment worth 25,000 lei. The Q4 accounting profit is 30,000 lei. On December 31, 2008, the company had total annual revenue of 250,000 lei, with a corresponding minimum quarterly tax of 1,625 lei.
Steps:
Q4 profit tax:
45,000 x 16% = 7,200 lei
7,200 – 2,000 = 5,200 lei
The profit covers the investment. Tax exemption:
25,000 x 16% = 4,000 lei
Tax due after facility:
5,200 – 4,000 = 1,200 lei
Since this is less than the minimum tax, the company must pay the minimum of 1,625 lei
Fiscal value = 25,000 – 25,000 = 0
Example IV – Annual Taxpayers: Reinvested Profit Exemption
At the end of 2010, a company records a taxable profit of 2,500,000 lei. The accounting profit for 2010 is 1,900,000 lei. The company acquires:
March 15: equipment worth 70,000 lei
July 16: equipment worth 110,000 lei
October 15: equipment worth 90,000 lei
Steps:
Annual profit tax:
2,500,000 x 16% = 400,000 lei
Total investments:
70,000 + 110,000 + 90,000 = 270,000 lei
Since accounting profit covers investment, tax exemption:
270,000 x 16% = 43,200 lei
Tax due after facility:
400,000 – 43,200 = 356,800 lei
Fiscal values of the equipment:
70,000 – 70,000 = 0
110,000 – 110,000 = 0
90,000 – 90,000 = 0
If the technological equipment investments are not fully covered by accounting profit, the fiscal value is determined based on the chronological order of their registration as fixed assets under Article 24 of the Fiscal Code.
According to Article 192, paragraph (7), the exemption applies to tangible fixed assets under construction recorded between October 1, 2009 and December 31, 2010, and commissioned within the same period.
