​The contribution to the Energy Transition Fund, also known as the “excess profit tax”, introduced in November 2021 by Law 259/2021, has been successively amended, but the legal provisions continue to contain certain ambiguities, which creates problems for both taxpayers and tax authorities. As a result, the thematic controls, documentary and tax audits conducted this year regarding the establishment and procedure of calculating the contribution did not bring more clarity, and often involved an extremely formal approach in the interpretation and application of the text of the law. , without a deep understanding of the complexity of the players’ activities on the field and a strictly regulated structure on how to perform certain operations specific to these players.

The difficulties that have had to be faced are numerous and, as I have already indicated, they have not diminished with successive changes to the legislation in this matter, the latest of which took place in July of this year, the most frequent of which are:

The date from which the changes introduced by Law 357/2022 take effect. Despite the fact that Law 357/2022 entered into force on 16 December 2022, in practice, within the framework of thematic control, there was no consistent approach in terms of the applicability of the provisions of the law in time, in some cases they were applied prospectively. , starting on December 16, 2022, and in other cases, the tax authorities believe that the manufacturer contribution formula updated in December 2022 will be calculated and applied starting on September 1, 2022, although this apparently involves a retroactive effect of the law.

Explanation of the formula for calculating the contribution of partners in hedging contracts entered into by the manufacturer. Which treaties are subject to this new contribution – those concluded after December 16, those concluded earlier and the effects of which were consumed after December 16? In addition, hedging contracts may involve a variety of transactions, which in turn may involve different payment streams, so it may be difficult to catalog the impact of such a contract over time. While the concept of “long-term market risk coverage products” is interpreted in accordance with Art. 23 of the Law on Electricity and Natural Gas No. 123/2012 (hedging)”, considering that the concept of “long-term” hedging contracts is not defined either in the Law on Energy or in other regulations/laws specific to the capital market? A possible interpretation, based on specialized literature and practices in the field, would be that such long-term hedging products are considered to be concluded for a period of at least one year. How to interpret the concept of “variable price according to the contract” – in practice, derivative financial instruments, of which risk insurance products are a part, are complex financial instruments, the price of which depends on the performance of certain assets or auxiliary assets and the method of calculations according to which this varies from case to case . Thus, the concept should not be interpreted ad litterambut it would be necessary to adjust it through the prism of the particular type of contract to cover the risks and the method of calculating the price carried out under such a contract, so that it reflects the actual price, that is, the actual income recorded by each party.

Determination of the methodology for calculating the contribution for business entities that are suppliers of energy products and which carry out activity on the wholesale market with the aim of balancing the portfolio, and in respect of which there are situations where such activity is considered trading activity and subject to the obligation to pay a contribution, although it is solely the result of the enforcement of legal obligations balance and pursue a completely different goal, than trading activities as such.

All these situations encountered in practice during the avalanche of tax audits/anti-fraud audits in this matter involve significant challenges on the part of audit teams and, accordingly, different arguments and defenses on the part of taxpayers to respond appropriately to different approaches of groups CONTROL.

From this point of view, the analysis by the tax authorities regarding the qualification of the taxpayer as a subject of contribution to the Energy Transition Fund should take into account the strong regulatory framework of these cases, which require significant technical training, different from the usual tax audit. At the same time, it requires increased attention on the part of the control groups, as well as on the part of the audited companies, regarding the specific circumstances provided by the special legislation for each analyzed type of transaction, which can decisively affect the number of Contributions, such as: the purpose of the transactions, the parties involved and their role, manner of behavior, accepted responsibility and overall outcome of this activity.

What does the future hold?

In accordance with the changes made by Law 357/2022, the provisions related to the obligation to calculate and pay the contribution to the Energy Transition Fund apply to March 31, 2025 for electricity producers and to August 31, 2023 for merchants/suppliers who trade.

So far, no draft legislation has been published that would consider extending the Traders’ Levy until 31 March 2025, but given the current context, it would probably be prudent for players in the industry to consider a possible extension.

It remains to be seen to what extent the legislation will be clarified through future amendments that will promote a fair, consistent and fair application of the law’s texts, and of particular importance from this point of view in the near future will also be the decisions of the courts to be issued in the resolution of various fiscal disputes generated by the imposition contested contributions, and which will clarify through judicial practice the scope of application of certain concepts and institutions used by control groups to calculate contributions in connection with fiscal control.

A brief history of legislation

The contribution to the Energy Transition Fund is a special tax on the additional income of electricity producers in the context of the increase in energy prices due to the national and European energy crisis.

After its implementation in November 2021, several changes took place in 2022. Yes, in March 2022 GEO no. 27/2022, which established the mechanism for calculating the 80% tax on additional income received by electricity producers for the monthly electricity sales price of more than 450 lei/MWh.

Starting from September 1, 2022, on the basis of GEO 119/2022, this tax was replaced by a contribution to the Energy Transition Fund (“Contribution”) in the percentage ratio of 100% of the difference between the monthly sales price and the maximum amount of 450 lei/MWh. At the same time, this contribution also applies to traders, suppliers who carry out trading activities, and aggregators who trade volumes of electricity and/or natural gas on the wholesale market, the formula for calculating the contribution is established in such a way that they register a profit share of no more than 2% of the trading activity

On December 16, 2022, Law 357/2022 came into force to approve GEO 27/2022 with amendments to GEO 119/2022, which also introduced numerous changes, among which we mention: changing the formula for calculating the contribution for producers, introducing a new category of tax payers – partners – non-residents in hedging contracts concluded by producers of electric energy and subjects of aggregated production of electric energy, which carry out trade in volumes of electric energy and/or natural gas on the wholesale market.

Determination of the method of calculation of the contribution in the context when the economic agent performs a dual role – or it is a manufacturer and a supplier, or a manufacturer and a trader, or a supplier and a trader.

The article was signed by Andrea Mitirice, Partner at PwC in Romania, Mykhailo Boyan, Lawyer, D&B Partner David C Baias and Cristina Fuioaga, Director of PwC in Romania

Article supported by PwC Romania