A series of amendments and additions to the Romanian Fiscal Code were made by way of GO no. 16/2022 in Romania impacting a wide range of entities. With the changes, which will come into force on January 1st, 2023, micro-companies' income tax will become optional.
Additionally, significant changes include the following:
- A Romanian legal entity will now be able to opt for the application of the micro-company income tax if it cumulatively meets the following conditions on December 31 of the previous year:
- The income achieved did not exceed the lei equivalent of 500,000 euro (previously the limit was 1,000,000 euro);
- The social capital is owned by entities other than the state and administrative-territorial units, according to the fiscal Code;
- The entity is not in dissolution, followed by liquidation, registered in the commercial register or in the courts of law (this criterion was applicable previously as well);
- At least 80% of its total revenues are generated from services other than consulting and management (newly introduced condition)
- The entity has at least one employee (newly introduced condition)
- The entity has associates/shareholders that hold more than 25% of the value/number of participation titles or voting rights in no more than three Romanian micro-companies (newly introduced condition)
- Law no. 170/2016 regarding the specific tax will be repealed/revoked as of January 1, 2023.
- Romanian legal entities that carry out activities corresponding to the CAEN codes for HORECA (5510, 5520, 5530, 5590, 5610, 5621, 5629, 5630) can opt for the payment of micro-company tax (without having to fulfil the above conditions) or for the payment of CIT.
- Romanian legal entities, apart from those that carry out activities corresponding to the above CAEN HORECA codes, can opt to apply micro-company tax as of the fiscal year following that in which they meet the conditions.
- New categories of Romanian legal entities that cannot apply the micro-companies' regime have been introduced, including Romanian legal entities carrying out activities in the:
- banking field;
- fields of insurance, reinsurance, of the capital market, including the one that carries out intermediation activities in these fields;
- field of gambling;
- exploration, development, exploitation of oil and natural gas deposits sector.
Romanian legal entities that meet the conditions for applying the tax on the income of micro-companies can opt for the payment of the profit tax only starting from the following fiscal year.
- If a micro-company derives revenues exceeding EUR 500,000 or its revenues from consulting and management exceed 20% or more of the total revenues during a fiscal year, it owes CIT as of the quarter in which it exceeded those limits.
- The dividend income received from a subsidiary located in another member state of the European Union can be deducted when calculating the micro-company tax, to the extent that both the micro-company and the subsidiary meet the EU Parent-Subsidiary Directive conditions.
- The tax rate on the income of micro-companies is 1% (the 3% rate previously applicable to entities without employees has been revoked).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.