According to the Tax Code there is a series a deductible expenditure regarding corporate tax. Protocol expenditures represent tax deductible expenditures, but these do not have a limited deductibility to the calculation of taxable profit. Moreover, regarding the VAT treatment regarding these expenditures, there are, also, certain rules that have to be followed.

Legal provisions

According to the provisions of art. 25, para. (3), letter a) from the Tax Code, the „protocol expenditure within the limit of a margin of 2% applied over accounting profit to which income tax expenditures and protocol expenditures are added. The protocol expenditure also includes the expenditures registered with collected value added tax (…) for presents offered by taxpayers, with a value higher than RON 100” have limted deductibility.

Therefore, the calculation basis for the protocol expenditures is calculated after the following formula:

The protocol expenditures deductibility calculation = 2%* [(total incomes – total expenditures) + profit tax expenditures + protocol expenditures (including collected VAT)].

Regarding the VAT tax treatment related to the protocol expenditures, art. 270, para. 8, letter c) from the Tax Code specifies that „giving low cost goods, for free, within protocol (…) actions, under the conditions established by the methodological norms” is not a delivery of goods.

In the methodological norms of applying the Tax Code, at point 7, para. (12), letter a) it is specified that „low cost goods given for free within protocol actions are not considered delivery of goods if the value of each offered present is smaller or equal to the amount of RON 100, exclusively VAT”.

It is specified, also in the methodological norms, that a present can comprise one or more goods offered for free, and if the value of the offered present surpasses the RON 100 amount, the taxable person shall collect the VAT for the overflow if the related tax gift has been deducted at the beginning. The VAT collection shall be made by self-invoicing and shall include the statement drawn for the tax period in which the taxable person offered the gifts, for free, within protocol actions and surpassed the amount.

Practical aspects

Companies have to pay attention to the expenditures that they register within the protocol account.

Protocol expenditures refer to those expenditures made by companies regarding various business partners of potential business partners.

For example, there are situations in which companies register various employee expenditures (meals served, fruits, water, refreshments etc.) as protocol expenditures. Please be aware that these costs do not represent protocol expenditures, but the employee expenditures and shall be registered in the personnel account and shall be subject to a tax treatment similar with salary incomes.

In conclusion, the expenditures registered by companies within the protocol expenditures account have to strictly follow this destination, and these are fiscally deductible at the calculation of the taxable profit, within the limits set out above.
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