Investors on the Stock Exchange have to pay tax on the profitsmade from the capital market as of this year. Still, they have afew methods available to go around the stock market transactiontax.
Investors using companies registered in tax havens as investmentvehicles no longer have to worry about taxes on the capital marketin Romania, consultants say.
"The most frequently used method to maximise profit on thecapital market in Romania is to trade through a firm registered ina friendly jurisdiction country such as Cyprus. Cypriot firms donot pay capital market tax in Cyprus or in Romania, either," saysGabriel Biris, partner of Biris Goian law firm.
At the same time, if an investor has more stocks in hisportfolio, some of which are generating profits and some losses,and wants to sell the profit-making ones without paying tax, theycan sell some of the loss-making ones to offset the profits. Thismechanism enables investors to completely avoid paying tax thisyear or to substantially reduce the taxable value.
The new regulations of the Finance Ministry as of 2010 stipulatethat investors shall pay 16% tax on the profits made fromtransactions with financial instruments held for less than one yearand 1% tax for those held for more than one year.
At the same time, investors may not carry over losses from theprevious year into 2010 in order to reduce the taxation base, whichwill only be allowed as of next year, so that they have to findother ways to minimise taxes.
"Carrying over losses through the following year is a very goodincentive for the Stock Exchange investors and is closer to whathappens in companies, which may carry over the losses for a numberof years," says Dumitru Beze, chairman of the Association ofCapital Market Investors.
The companies that posted losses from transactions on thecapital market may carry them over the next seven years to reducethe taxation base but are required to set up provisions for thedepreciation of the stock portfolios.
