Providers of on demand streaming entertainment subscriptions such as Netflix, HBO GO, Amazon Prime Video, Voyo, are compelled, starting with July 2022, to pay a fee for the revenues obtained from Romanian users for watching movies online, known as “Netflix fee.” The law establishing this obligation was recently adopted by the Romanian Parliament and entered into force on July 3. The tax was maintained at the level of the initial draft, respectively 4% of the mentioned revenues, although following the debates in the Senate, the first notified chamber had been reduced to 2%. But, although the first deadline for declaration and payment should be August 25, 2022, there are still some technical issues still unclear for the taxpayers concerned.
The bill was drafted last year, with proponents arguing the need for a fee in the context of declining film fund revenues due to pandemic restrictions, including the closure of movie theaters, while the online movie platform market was booming. . The fee will be paid at the National Center of Cinematography, and part of the funds thus collected (40%) can go to the direct financing of local film production.
The obligation exists, the procedure does not
The basis for calculating the 4% tax consists of the revenues obtained by the targeted operators from Romanian users, from single transactions or in the form of a subscription. This will also apply to non-resident entities, which do not have subsidiaries registered in Romania, but only on the incomes obtained from our country. On the other hand, platforms that obtain annual revenues of less than 65,000 euros or have an audience level below 1% compared to the total number of subscribers in Romania will be exempted, according to the mentioned normative act.
Therefore, the obligation to pay this tax exists, but the declaration and payment procedure has not yet been made available to taxpayers. Moreover, the text of the law creates confusion among the companies concerned – on the one hand it provides that the deadline for declaration and payment is the 25th of the month following the receipt of income (in this case August 25, 2022), and on the other hand it contains a statement according to which the providers of audiovisual media services, upon request, have the obligation to declare and transfer to the National Center of Cinematography the fee of 4% on a quarterly basis, within 30 days from the end of each quarter.
Taxing the digital economy in Europe
The “Netflix tax” is inspired by a broader, global trend, also present in the European Union, namely the tax on digital services, given that many players who earn income in the digital field do not pay profit tax in the countries where they are consumers, because current legislation allows them to do so if they do not have a physical presence in those countries.
There are European jurisdictions that have already introduced or plan to apply, unilaterally, taxes on digital services, either on a wider range of digital services or lower, such as the “Netflix tax” (introduced in Romania), but the level differs from case to case. For example, in France the tax is 3% and has been in force since the beginning of 2019, in the United Kingdom (2%), Italy (3%) and Austria (5%) it applies from 2020, and in Spain (3%). ) of January 2021. There are also discussions about the introduction of such a tax in the Netherlands.
The taxation of the digital economy has been under discussion for many years globally, and the member states of the Organization for Economic Co-operation and Development (OECD) have reached a two-pillar agreement in 2021, which aims to tax companies in the field and distribute quotas. from income tax to the countries from which they derive their income. But by signing the agreement, states that have unilaterally introduced digital taxes are committed to eliminating them when they introduce the provisions agreed at OECD level into local law.
The international organization recently published the general rules for the implementation of pillar I of the agreement, regarding the partial distribution of taxes on profits registered by multinational companies to source states, so that it can be implemented from 2024. For pillar II, which provides for the application of tax minimum profit margin of 15%, the OECD launched the technical specifications guide in December 2021, and the European Commission published a draft directive, scheduled to enter into force on 1 January 2023. Thus, at least in the short term, current taxes are likely to remain in place.
In this context, similarly to other European countries, the “Netflix Tax” was introduced in Romania, and the companies covered by the new regulation are required to apply it, but need to complete the procedure to be followed for compliance and payment.
by Ana Petrescu-Mujdei, Manager Senior, Deloitte Romania
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