Changes of the Fiscal Code put the car industry at the risk of collapse

Cristian Gubandru, 8 Apr 2009

Romanian version

The new tax rules in the initial draft Fiscal Code are likely to have severe impacts over the car industry activities in Romania, namely car and car parts production and distribution, maintenance and service, as well as leasing services or fuel trade, according to the Association of Car Importers in Romania (APIA).

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APIA: The newly proposed tax changes will affect the car market

The relevant stipulations that APIA refers to are the non-deductibility of VAT in car acquisitions, limited deductibility of service-based expenses (30%) and full non-deductibility of repair/maintenance expenses.

Non-deductible VAT liability applicable for car acquisitions will pave the way to a sharper decline in sales of new cars. Leasing companies will not be able to recover the VAT applied to payment rates. “This will determine the increase in leasing costs, and consequently the collapse of leasing companies. These tax law changes will also result in an increase of number of cars recovered from bad debtors”, APIA said.

The limited tax exemption of car service expenses (30%) will lead to a contraction of activity in this segment.

“We consider that the Ministry of Finances is proposing in fact a lockdown of the car industry and of its adjacent sectors (maintenance, service, leasing, insurance)”, said APIA.

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