Finance News by Mazars Romania - Feb 2021

Fri | 12.02.2021

Accounting/audit/tax

MAZARS Romania, the international audit, tax, and advisory firm, published its new report, Conscious, collaborative, connected: making over the luxury business model. The report, released in partnership with the Arianee project consortium, reveals how the luxury sector is shaping a new business model that allows customers to experience and engage with brands in new ways and to purchase goods knowing they can be easily and expertly repaired and resold.

 

In a recent material, Mazars tackled this topic and also talked about Romania’s luxury market.

 

Changing the world of luxury

The luxury business model is transforming in response to a changing world: in 2010 luxury customers spent €4.3 billion online; in 2019 that figure rose to €33.3 billion. China is now luxury’s number one growth market. And the global second-hand goods market has reached €30 billion annually, thanks to 12% average annual growth in the last five years. 

 

According to the report, the new business model taking shape addresses the expectations of these new customer cohorts, prioritises luxury experiences, engages in partnerships, and adopts circular practices in pursuit of greater sustainability.

 

Romania’s luxury market: living circular is the new goal

Luxury is indeed less wasteful and destructive than fast fashion and smaller players are also considering how to tackle the environmental issues, by working simultaneously on circularity in their brands. A very new concept introduced by them is the trend “Less is more”, through which it is encouraged to buy only 10 clothing items per year. The trend brings sustainability into the luxury fashion sector, by stimulating clients to consume in small quantities quality products, instead of wearing many items of clothing that do not link to each other and on the long term they have a negative impact on nature, but also on the economic and social environment which produces them.

 

The expectations, shopping habits, and concerns of the clients are pushing luxury brands to change – they expect to be able to browse and buy online as well as in-store, to get instant and accurate information about a product’s sustainability and authenticity, and to be looked after following a purchase.

 

Therefore, luxury leaders have pivoted to customer experience, responding to the needs of their clients and making them able to own, wear and experience luxury without causing undue harm to the planet.

 

Read more info HERE. 

 

A reflection of 2020 in the transfer pricing analysis for Romanian manufacturers – Mazars analysis

Due to the economic conditions changed by the health crisis, both documentation and compliance with the transfer pricing principle is a priority for tax authorities. 2020 had a strong impact in the transfer pricing analysis for Romanian manufacturers with limited functions and risks, whether we are talking about imbalances in the supply chain of the Groups, low-capacity operation or even cessation of production.

 

How will 2020 impact the transfer pricing analysis of limited risk manufacturers in Romania?

The preparation of benchmarking studies to document the main business activities of textile, footwear, or electronic components manufacturing in 2020 raises practical difficulties, especially in the application of the transactional net margin method, as the financial information for 2020 will be available in the second half of 2021 at the earliest.

 

In the context of the COVID-19 pandemic, the set of measures adopted by the authorities have led to imbalances in the supply chain of the Groups and low-capacity operation or cessation of production.

 

In order to document transactions with related parties in 2020, Romanian taxpayers engaged in contract manufacturing or toll manufacturing activities in areas such as textile, footwear, or electronic equipment should consider the practical approach proposed by the OECD in the new Guidance. Thus, the starting point in the preparation of the benchmarking analysis for 2020 is the analysis of the extent to which the manufacturing capacity for textiles, footwear, or electronic components has undergone changes in parameters, the assessment of fluctuations in sales volume, during and before the COVID-19 pandemic, the comparison of budgeted results with the financial results achieved, and identifying the variations caused by the effects of the COVID-19 pandemic.

 

Read more info HERE.

 

Annual Personal Income Tax obligations

For everyone, 2021 started with new business and personal goals, that have the purpose of organizing our lives a little bit more and help us grow. Tax season is approaching very fast, and for this reason, Mazars advises you to start thinking about your tax situation now while you still have time on your side.

Mazars wrote an article, in which they tackle both the personal income tax return, a very important topic at the start of every year, and the latest legislative changes that are having an impact on this subject.

From 1 January 2021, a change was brought in Law no. 296/2020, which is related to the conditions of establishing the tax residency of the individuals.

 

Individuals that are having their center of vital interests in Romania will be liable to pay Personal Income Tax starting with the first day declared as having this situation. Also, the individual exceeding 183 days, during any interval of 12 consecutive months, which ends in the calendar year concerned, is liable to pay income tax for all the income (from Romania and abroad), starting with the first day of arrival.

 

This amendment is important for individuals deemed as tax residents in Romania, as they have the obligation to declare the worldwide private income in Romania, by submitting the Unique Statement by the 25 May of the year following the one in which the income is obtained (previously 15 March). The same deadline is applicable also for the payments of the taxes due.

 

Read more info HERE.

 

This article is provided by our Finance Partner, MAZARS Romania

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