Who stands to benefit from these facilities? What are the conditions provided by the law?
According to the law, „tenants- economic operators, individuals exercising liberal professions, private legal entities- that suffered an interruption of their activity or a decrease of income or cashing-in with at least 15% in March 2020, compared to the average income of the last calendar year, during the state of emergency, the individuals affected economically, directly or indirectly, may request the postponement of, without any additional payment of interests or penalties, the payment of the rent due for the use of the real estate property registered as headquarters, registered offices, working points or even housing.”
Instead of the tenants, the rent will be paid, upon request from the interested parties, by the local competent tax authority, based on an application, together with the supporting documents. It is expected that further procedural aspects related thereto being set more clearly through further enactments to be issued for implementing this law.
It is important to underline that the timeframe for which the taxpayers may benefit from the postponement of the payment of the rent is the timeframe for which the decrease of the amount of rent was negotiated, but not later than 31st of December 2020. Therefore, one of the indirect conditions necessary being fulfilled for benefitting from this facility consists of the decrease of the amount of rent for a certain real estate.
Furthermore, in order to benefit from the postponement of the payment of the rent, the tenants must make available to the local tax authorities any kind of documents that support and attest the impossibility to make the payment of the rent during the timeframe provided in the addendum signed by the tenant and the landlord. Such a document could be, for example, the proof of termination of the employment contract, which led to a lack of income for an individual during the respective timeframe.
Moreover, the following conditions should also be cumulatively fulfilled:
(a) the monthly rent provided in the addendum signed by the tenant and the landlord and thus, supporting the application of payment, should be lower or at least equal to the rent established for February 2020, in order to avoid an abuse by encouraging individuals to increase unjustly the rent, so as to benefit from the provisions of this law;
(b) the maximum amount of monthly rent provided in the addendum is of RON 10,000 for legal persons, for each location, and maximum RON 2,000 for pivate individuals, for just one location.
Thus, the application of the tenant shall be accompanied by the following:
a) the rent contract between the tenant and the landlord;
b) the addendum to the contract between the tenant and the landlord, that shall entail the followings:
-the agreement of the parties to postpone the payment of the rent; the timeframe for which the payment of the rent is postponed; the total sum of the rent for this period of postponement, including for the eventual decrease of rent;
-the identification data of the tenant and the landlord;
-the bank account information of the landlord in which the payment shall be made by the competent tax authority;
-the date of the signing and the signatures of both parties;
c) any kind of document of the tenant that proves the impossibility of payment of the rent during the timeframe specified in the addendum between the tenant and the landlord.
The request for postponement of the payment of the rent may be filed also through electronical means, by mail at the e-mail address that shall be published on the internet page of each local tax authority.
What are the benefits enjoyed by the owners of rented real estate properties, according to this law?
The law provides that, by way of derogation from the Tax Code, during the fiscal year 2020, the taxable income received from renting, subletting or giving in usufruct the respective real estate property, in the case where the owners have decreased the amount of rent established in cash or in kind, during the year of 2020, with at least 30% compared to the amount of the monthly rent due in February 2020.
Thus, the taxpayers that receive income from renting real estate property can benefit from this derogation for the entire time for which the decrease of the amount of rent was negotiated, but not later than 31st of December 2020.
Also, by derogating from the provisions of the Tax Code, in the fiscal year 2020, the amount of the rent established in cash or in kind, according to the contract concluded between the parties, is not to be taken into account when calculating the annual computation cap, as long as it is decreased with at least 30% compared to the amount of monthly rent due in February 2020.
The individuals obtaining an income from renting real estate during 2019, by way of more than 5 rent agreements and who, starting from 2020, have qualified these income as deriving from independent activities, are also benefit from the facilities described above.
Also, in the case of taxpayers subjects of profit tax or tax on income on micro-enterprises, the income deriving from the rent agreements, subletting agreements or usufruct agreement shall be taxed solely for 80% of their value rent. These operators benefit from these provisions in the situation where they decreased during the year 2020 the amount of rent established in cash or in kind, according to the contract concluded between the parties, with at least 20% compared to the amount of the monthly rent due in February 2020.
It is noteworthy that the income above are only those that derive from agreements for which the taxpayers have decreased the amount of the rent in relation to the respective real estate. With regard to the timeframe when the taxpayers may benefit from these provisions, it is the period for which the decrease of the rent was negotiated, but not longer than 31st of December 2020.
The payment procedure
Although the norms of application for this law have not been issued yet, we deem that once the payment application was filed, together with the supporting documents, the tax authority shall approve or reject the application, and once the application is approved, the tax authority shall make the payment accordingly, in the bank account of the landlord. There are no provisions, though, regarding the deadline until these applications of payment are received or with regard to the terms when the tax authorities shall make the payment to the landlord.
The law provides that tenants benefitting from these facilities have the obligation to pay the monthly rents, whose payment was postponed through the addendum between the tenant and the landlord, to the competent local tax authority that has previously paid the rent instead of the tenant, staggered in equal installments, after the term when the payment was postponed, until 31st December 2020. It is, thus, absolutely necessary that the tenants manifest good faith.
If the tenants do not fulfil their payment obligation, they will be subject to the foreclosure procedure, as initiated by the competent local tax authority.
Conclusions
The intention of the legislator is to balance the dysfunctionalities created by the state of emergency, affecting both the tenants and the landlords under the rent agreements. In this sense, the law established certain facilities for both parties to the agreement. At this moment, the facilities are being introduced generally, and it is expected that the enactments implementing this law to entail the procedural details necessary for a proper and effective application of these facilities.
Up until the moment when the procedural norms will be published, parties to the rent agreements should analyze and revise, if they have not done so already, the damages suffered by both parties during the state of emergency period, and establish a way to properly manage them, as well as the manner in which the contractual risks shall be borne by the parties. Furthermore, they can negotiate, keeping in mind the indicators established by the law, the decrease of the rent, the postponement of the payment of rent, as well as the duration of application thereof.