The restructuring plan, a particularly important element in the implementation of the tax amnesty

What is tax amnesty?

The object of the amnesty is the cancellation of certain budgetary obligations and related accessories.The main budget obligations outstanding on December 31, 2021 and unpaid until the date of issuance of the tax certification certificate, as well as the accessory budget obligations can be restructured (according to the previous provisions, the obligations in the balance on 12.31.2020 could be restructured).

In order to revitalize and avoid the opening of insolvency proceedings, debtors, legal entities under public or private law, with the exception of public institutions defined according to art. 2 para. (1) point 30 of Law no. 500/2002 on public finances, with subsequent amendments and additions, and administrative-territorial units, in financial difficulty and for which there is a risk of insolvency, can restructure their main budgetary obligations, outstanding on December 31, 2021 and unpaid until the date of issuance of the tax attestation certificate, as well as the ancillary budgetary obligations.

These are the main budgetary obligations outstanding on December 31, 2021 and the budgetary obligations declared by the debtor or established by the competent tax authority by decision after January 1, 2022 related to the tax periods up to December 31, 2021.

The restructuring of budget obligations also applies to the main and accessory budget obligations established by institutions other than the tax autorities, as well as to fines of any kind, sent for recovery to the central fiscal bodies after January 1, 2022 until the date of issuance of the tax attestation certificate.

Debtors with budgetary obligations that are subject to compensation cannot benefit from this treatment, nor those whose obligations are established by administrative documents suspended for execution under the terms of the Administrative Litigation Law.

Also, in order to benefit from the restructuring, it is mandatory that the debtors have submitted all tax returns, according to the tax vector.

What must be done by those who have accumulated debts to ANAF until December 31, 2021:

until January 31, 2023 – submit to ANAF a notification regarding the intention to restructure the debt.

until July 31, 2023 – to submit the application requesting the restructuring of the debt to ANAF accompanied by the Restructuring Plan and the Test of the prudent private creditor, drawn up by an independent expert.

It is important to mention that the measure of cancellation of some main budget obligations can take place for a maximum of 50% of the total of the main budget obligations, under the conditions of the payment of a share of the amount of the budget obligations that are the subject of payment facilitation (variable percentage depending on the percentage of the obligations cancelled) and cannot be subject to main and accessory budgetary obligations representing state aid to be recovered.

What is the Restructuring Plan

The restructuring plan is a complex document, which must include the presentation of the debtor’s patrimonial situation, the causes and extent of the debtor’s financial difficulty, as well as the measures taken to overcome them. It also requires an analysis of the market in which the company operates, a detailed analysis of the company’s financial statements and patrimony, as well as the presentation of the reasons why the taxpayer cannot benefit from the deferred payment according to the legislation in force.

A particularly important part of the restructuring plan is represented by the financial projections, which must clearly reflect the restructuring measures and the ways to overcome the state of financial difficulty (facilitation for the payment of obligations, the conversion of the main budget obligations into shares, the payment of some real estate, etc.).

Financial projections, especially revenue estimation, must be based as much as possible on certain information, such as the signing of new contracts with clients, the recovery of receivables, the capitalization of assets, letters of intent from potential clients, etc., with clear deadlines implementation, measures to restructure budget obligations, as well as the presentation of the relevant economic and financial indicators, which demonstrate the restoration of the debtor’s viability.

The restructuring plan, which can be assimilated to the business plan, is a particularly important document, being also the tool used throughout the monitoring of the implementation of the restructuring plan (up to 7 years). The independent expert is obliged to permanently monitor the measures included in the restructuring plan and to draw up a periodic report on the implementation status.

The prudent private creditor test

The prudent private creditor test consists in comparing the situation with an imaginary, diligent and prudent private creditor seeking to recover its claims from a debtor in difficulty, analyzing whether this private creditor would take similar decisions in order to recover the claims.

The analysis reflects to what extent the steps proposed in the reorganization plan with which the debtor goes to ANAF is a solution for the state to recover as much of that debt as possible than if it were to do it through other methods, such as foreclosure or bankruptcy of the taxpayer. Basically, the state behaves like any other private creditor in its situation.

The prudent private creditor test, a novelty in the field of fiscal procedure, represents an independent analysis, carried out on the basis of the premises considered in the debtor’s restructuring plan.

Thus, budgetary creditors “can accept the deferral or waiver of part of the debts if the debtor demonstrates that its financial restructuring plan and anticipated financial liquidity will allow the latter to recover financially and pay the amounts owed. Otherwise, the creditors would find themselves in the position of asking for forced execution, which can lead to the liquidation of the debtor company.

The result of the test shows whether the measure taken, as the case may be, by the budgetary creditor gives an advantage to the debtor, which the latter would not have obtained under normal market conditions.

Thus, the preparation of the application documentation for the restructuring of budget obligations, as a rule, involves a collaboration between several experts from various professional organizations (tax consultants, lawyers, valuation experts, accounting experts, etc.).

Given the complexity of the process and tight application and documentation deadlines, taxpayers who would benefit from these facilities must make quick decisions and turn to experts in restructuring processes.

What is the role of the independent expert?

The main role of the independent expert is to carry out the two studies in a realistic, professional and committed manner. The financial forecasts included in the restructuring plan regarding the updated amount that the state will be able to recover will be tested under the prudent private creditor test by comparing it with the amounts that the state could collect in the event of enforcement or the initiation of insolvency proceedings. In order for the restructuring plan to have the greatest chance of success, the scenarios must be realistic and achievable.

The independent expert will then be responsible for the periodic monitoring of the implementation of the plan (quarterly). Thus, the figures put on paper will have to produce concrete effects. If the measures provided in the restructuring plan do not happen, either the plan needs to be adjusted, which is up to the expert, or the measures have not been applied properly, and here is the responsibility of the company’s management.

There are no clear specifications as to who the independent expert can be. Being a complex process, it will be difficult for all the necessary operations to be carried out by one person. But certainly in the liberal financial professions, which also include financial auditors, accounting experts, tax experts and appraisers, there are the skills necessary to carry out the restructuring study and the test of the prudent private creditor in an appropriate mix of professionals.

Both a mix of experienced independent experts and a consulting firm to provide the necessary professional and quantitative resources are an essential premise for the success of the plan.