On 24 May, Romania enacted Law no. 62/2020 on the application of incentives for rent payment during the state-of-emergency period. The details of this law include:
Incentives for lessees
Under the law, private individuals who have been directly or indirectly affected by the pandemic and freelancers or legal persons (i.e. businesses) whose activity was interrupted or who registered a revenue decrease of at least 15% in May (compared to the average income earned during the last calendar year) can request for a postponement of their rent. In this situation, the Tax Office will complete the rental payment on behalf of the freelancer, legal person or individual. The incentive is applicable for the period during the state of emergency and the following month.
In order to benefit from the incentive, the lessee must submit a request, together with the following documents:
- the lease agreement, including an addendum to the lease agreement, the agreement for the postponement of the rent payment, the duration of the postponement and the rent amount related to this period;
- identification data of the lessor and lessee, including the bank account details of the lessor;
- the signing date, the parties’ signatures and any document proving the lessee’s inability to pay the rent during the period stipulated in the addendum.
The request may be submitted electronically to a specific e-mail address that will be displayed on the websites of the pertinent authorities.
Furthermore, the lessors should fulfil the following conditions:
- ensure that the monthly rent stipulated in the addendum is lower or equal to the monthly rent applied in February 2020; and
- ensure that the monthly rent value, as per the addendum, is lower than RON 10,000 for each location in the case of legal persons and freelancers, and RON 2,000 for one location in the case of individuals.
The lessees benefiting from the payment postponement are obliged to pay the monthly rent in instalments to the Tax Office until 31 December 2020, otherwise enforcement procedures will be initiated.
Incentives for lessors
For the year 2020, revenues derived by individuals from real estate, based on leases, subleases or usufruct agreements will not be subject to personal income tax and health insurance contributions.
In order to benefit from this incentive, taxpayers must decrease their monthly rent for the year by at least 30% (compared to February 2020 prior to Covid-19 crisis). The exemption is applicable for the period during which the rent decrease was negotiated, but no later than 31 December 2020.
The exemption is also applicable to individuals who in 2019 obtained revenues from real estate transfers from more than five lease agreements and in 2020 requalified and obtained revenues from independent activities.
In case of corporate income tax and microenterprise income taxpayers, revenues obtained from real estate based on leases, subleases or usufruct agreements will only be taxed on 80% of their income. In order to benefit from this provision, taxpayers must decrease their 2020 monthly rent by at least 20% compared to rent for February 2020.
The reduction of the taxable base for corporate income tax and microenterprise income tax is applicable only for agreements where the value of the rent has been decreased and only for the period of the rent decrease (but no later than 31 December 2020).
For more information on how these tax changes might affect you, contact our local CMS experts Roxana Popel and Andrei Tercu.