On Thursday, 21 May 2020, the Law no. 62/2020 regarding the applicability of certain facilities for the rent payment for the state of emergency period (“Law no. 62/2020”) has been published in the Official Gazette no. 425 dated 21 May 2020. Law no. 62/2020 will enter into force after three days as of the publication date.
Law no. 62/2020 provides that within 15 days as of the publication in the Official Gazette, the ministries will elaborate application norms, although it does not mention which ministries should perform such obligation, which most probably will result in delays. Also note that although Law no. 62/2020 establishes a facility representing a form of state aid, the regulation does not contain essential elements in such cases, such as the source of funding, the expected budget, the rules for cumulation with other forms of state aid from which the beneficiaries of the law have previously benefited, etc.
We expect that the application of this new regulation will be difficult as it has been for other regulations adopted throughout the state of emergency because of the legislative gaps and because of the need to correlate the rules in tax, state aid and budgetary execution matters.
We briefly present below the details of the mechanism for deferral of payment of rent provided by this new law.
I.What facilities may tenants benefit from?
The Law no. 62/2020 provides the possibility for tenants to defer the payment of rent, without penalties, for the use of premises registered as headquarters, working points or residence, while the rent is paid up to a certain amount by the competent tax authority. After the deferral period, the tenants will pay back the deferred rent to the tax authority in equal tranches until 31 December 2020. Non-payment of these amounts to the tax authority will trigger the forced execution under Law no. 207/2015 regarding the Fiscal Procedure Code.
Note that the Law no. 62/2020 only regulates the rent. Therefore, any other amounts due under the agreement, such as the service charge or the utilities charge will have to be paid.
What tenants and in what conditions may they benefit from the rent deferral?
The beneficiaries of the regulation are the tenants which are economic operators, liberal professionals and private law entities under the following conditions:
- they suspended the activity or the income decreased by minimum 15% in March 2020 as opposed to the average income of the former year throughout the state of emergency;
- the lease agreement for which the rent deferral is requested was concluded for premises registered as headquarters or working points.
Natural persons may also benefit from this facility if they have been affected economically, whether directly or indirectly, throughout the state of emergency period. The Law no. 62/2020 does not provide clues as of the manner in which such difficulty will be proven by the said persons. However, these aspects will most probably be regulated by the application norms which will be elaborated within 15 days as of the day the Law no. 62/2020 was published in the Official Gazette.
It is not clear to what extent the decrease in income in March will be correlated with the fact that most economic operators were substantially affected in April and most likely May.
The period of the application of the facility
The facility is applicable throughout the state of emergency period and for the next month following the cessation of the state of emergency.
Given that the state of emergency ceased on 14 May 2020 and that currently Romania is under state of alert, it seems that the rent facility will be applicable only until 30 June 2020. Also, taking into account the time needed for the authorities to elaborate and adopt the application norms, the available time frame for the tenants to request such deferral will be quite short. However, it remains to be seen if the Law no. 62/2020 will be amended to correspond to the current economic reality.
What are the conditions for the landlord in order to request payment?
In order to request payment from the tax authority, the landlord must comply with the following conditions:
- the monthly rent specified in the addendum between the tenant and the landlord is less than or equal to the rent for February 2020;
- the maximum amount of the monthly rent in the addendum is of maximum RON 10,000 (approx. EUR 2,000) for economic operators per leased premises and of maximum RON 2,000 (approx. EUR 410) for natural persons per leased premises.
What is the deferral procedure?
In order to benefit from the deferral provided by law, the tenant must file an application to the competent territorial tax authority along with the following documents:
- the lease agreement concluded between the landlord and the tenant;
- an addendum to the lease agreement which must include (i) the parties agreement to defer the rent, the duration of this deferral and the amount of the rent for this period; (ii) identification information of the landlord and the tenant; (iii) the landlord’s bank account in which the tax authority will make the payment; (iv) the date and the signatures of both parties;
- any kind of supporting document of the tenant proving the impossibility of paying the rent. At this moment it is unclear what typed of supporting documents the tenant should file in order to prove the impossibility to pay and what is the correlation of this condition with the case of decrease and not suspension of the activity. We assume that the application norms will clarify these aspects.
The application may be filed including by e-mail to the address specified on the competent tax authority official website.
II. What facilities may landlords benefit from?
As regards the landlords, the Law no. 62/2020 provides as facility the exemption of payment of the income tax from rents under certain conditions. Thus, the facility is applicable to the contributors which reduce by 2020 the equivalent value for the transfer of the use of the real estate by at least 30% compared to February, during the period when the parties negotiated the rent reduction, but not later than 31 December 2020. Also, the reduced rent will not be included in the annual threshold for the social health insurance contribution.
As regards the taxpayers who pay corporate income tax and those who owe income tax to micro-enterprises, income from the transfer of the use of real estate obtained under leases / subleases or usufruct is taxable only in proportion of 80% of their value, provided that the value of the rent has been reduced by at least 20% compared to February