Law Firm Adela Diaconescu - ROMANIAN SPECIFIC ACCOUNTING RULES
Investing in Romania
Real Estate Acquisitions
Debt Collection
Accounting Rules
Taxation
Payroll Issues
Fiscal
and accounting year
The
fiscal and accounting year is the calendar year.
Accounting
system
The
Romanian Accounting Law no 82/1991, modified by the Government Ordinance
no. 61/2001, stipulates that accounts must be kept according to
the Romanian chart of accounts, built based on the French chart
of accounts and booking system. Nevertheless, each company is allowed
to establish its own analytical accounts of the synthetic accounts,
according to its specific activity. Accounting records are to be
kept in Romanian currency and in Romanian language (bilingual records
are permitted and dual currency records are required for transactions
in other currencies).
The basis of accounting is historical cost; currently, there is
no accounting for hyperinflation and no indexation is available
for revaluation of assets (except revaluation of assets allowed
by government decisions); however, indexation for revaluation of
land and buildings became available in 1999. There are no consolidation
rules available for holding companies. The function of Romanian
accounting is tax collection, so the concept of prudence is less
powerful than in international practice.
The Balance
Sheet must be filled in on the shape that the Romanian Finance Ministry
is issuing in electronic format each year around 01 February for
the previous year. After the approval of the Balance Sheet and Administrators’
report by the General Shareholder Meeting, the Administrator(s)
must register them at the territorial Finance Administration and
then at the Trade Registry. Only after completing this procedure
and only if the minutes of the General Shareholders Meeting stipulates
the distribution of dividends, the shareholders will be allowed
to take the dividends for the previous year.
The Romanian
Company Law no. 31/1990 stipulates that the Administrator is responsible
for organizing and keeping accounts. He/she is allowed to sign all
the accounting documents and situations (monthly trial balance and
VAT declaration, yearly Balance Sheet, etc), for a company having
the turnover of less than 50,000. Should
the company exceed this limit, it must employ an accountant or conclude
a services contract with an accounting company.
International
Accounting Standards
Currently,
the Romanian accounting system is in process of applying the 4th
Decision of the Economic European Community and International Accounting
Standards. Since 2000, the companies listed on the Bucharest Stock
Exchange are applying them.
According to the Order no 1752/2005 of the
Public Finance Ministry for the approval of the Accounting Rules Harmonized with the E.U. Decisions the
companies meeting at the end of the previous 2 consecutive financial years two of the below-mentioned
conditions would use the International Accounting Standards (IAS) for keeping accounts:
Turnover exceeding
7,300,000 EUR;
Total assets exceeding 3,650,000 EUR;
Average number of employees exceeding 50.
Since 01.01.2003,
the companies that do not meet two of the above-mentioned conditions
are applying the Simplified Accounting Rules Harmonized with the
European Accounting Decisions.
Audit
and reporting rules
For
companies using the International Accounting Standards, a certified
financial audit is required at the end of the financial year. The
financial audit can be performed only by an auditor that can be
a natural person or company meeting some conditions stipulated by
the Emergency Ordinance of the Government no 75/1999 regarding the
financial audit activity.
CURRENCY
RULES
The
Currency Operations Regulation no. 4/2005 issued by the Romanian
National Bank stipulates that payments between Romanian entities,
with a few exceptions, must be made with local currency - Leu (ROL).
Payments between resident and non-resident entities and payments
between non-resident entities must be done in hard currency or local
currency - Leu (ROL). Romanian legal entities are authorized to
hold and use hard currency (arising from depositing of the social
capital, loans, exports, etc). Non-resident entities are authorized
to hold local currency in a bank account opened with a Romanian
bank.
Romanian legal
entities are allowed to make, without any prior approval, current
account payment transactions from their hard currency accounts,
but they must be well documented – these transactions are
checked by Romanian National Bank, that requires to see the original
documents on which the transactions are based (contracts, invoices,
custom forms etc.). The current account transactions include, amongst
other things, imports of goods and services, payments of dividends,
and repatriation of profits.
Capital transactions
between residents and non-residents deriving from Foreign currency
financial credits and loans over 1 year, must be notified for statistical
purposes by the National Bank of Romania.
Romanian and
foreign entities are entitled to buy and sell hard currency on the
Inter-bank Foreign Exchange Markets. When buying hard currency,
a justifying document needs to be presented (for example a contract
with a foreign entity showing the necessity to pay an import in
hard currency).
LEASING
The
Romanian definition of finance and operating leases given by the
Government Ordinance no. 51/1997 regarding leasing operations closely
resembles the definitions stipulated by the International Accounting
Standards for Leasing Operations (IAS 17). A leasing operation satisfying
at least one of the following conditions is defined to be a finance
lease:
The risks and
benefits related to the ownership right are transferred to the lessee
from the moment of concluding the leasing contract;
The parties have expressly stipulated that on the expiration of
the contract the ownership right of the good is transferred to the
lessee;
The usage period of the good under the leasing system covers at
least 75 percent of the normal lifetime of the good, even if finally
the ownership right is not transferred.
Any lease not
qualifying as a finance lease will be considered an operating lease.
Cross-border as well as domestic leases are possible. The lease
contract itself represents an enforceable title for the lessor (i.e.
the lessor is granted direct enforceability) in case the lessee
does not return the goods to the lessor in breach of contract or
at the end of the lease term. In the case of finance leases, the
goods are booked and depreciated by the lessee, while for operating
leases the goods remain on the lessor’s balance sheet and
are depreciated accordingly.
Finance lease
payments are subject to withholding tax on the interest portion
of the payment. Operating leases are subject to withholding tax
in the form of a royalty either on the whole payment (in case the
payment is not split in depreciation and margin) or only on the
profit margin.
The goods imported
in leasing benefit from a beneficial customs duty and VAT treatment,
under temporary import regime. The law provides for a minimum customs
value of 20 percent upon final import. No VAT should be paid upon
a lease payment.
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