Government Ordinance no. 16/2022 published on 15 July 2022 has introduced significant changes to the Romanian Fiscal Code. The amendments will enter into force in two steps, on 1 August 2022 for some of them and on 1 January 2023 for the others.
- Corporate income tax
Tax exemption on reinvested profit
The Ordinance has extended the profit tax exemption for profit used to finance investments made in assets used in production and processing and assets representing refurbishments, to support companies in developing new production capacities and refurbishing the existing ones. This measure entered into force on 18 July 2022.
Dividend tax
As of 1 January 2023, the tax rate applied to dividends distributed/paid between Romanian legal entities and to dividends distributed/paid to non-residents will increase from 5% to 8%.
The tax exemption for dividends distributed/paid to private pension funds and/or to voluntary pension funds has been abolished, as well as the tax exemption for dividends paid to non-resident pension funds.
Specific tax
The Ordinance has abolished Act no. 170/2016 on the specific tax as of 1 January 2023. Taxpayers which fell under this act will have to choose between the micro-enterprise tax regime and the corporate income tax regime.
- Micro-enterprise tax regime
The provisions amending the micro-enterprise tax regime will enter into force on 1 January 2023.
Change of the definition of the micro-enterprise
To qualify as micro-enterprise, a legal entity will have to meet the following conditions:
- The turnover from consulting and/or management services cannot represent more than 20% of the total revenues (new condition) ;
- The legal entity must employ at least one employee on a full-time basis (formerly the micro-enterprise could have no employees);
- The turnover cannot exceed EUR 500,000 (formerly EUR 1,000,000) ;
- The shareholders cannot hold more than 25% of participation in more than three other Romanian legal entities submitted to the micro-enterprise regime (new condition).
Companies excluded from the micro-enterprise tax regime
According to the new provisions, the micro-enterprise tax regime will not apply to :
- Legal entities having activities in the banking sector ;
- Legal entities having activities in the insurance and reinsurance sectors, on the capital markets, and intermediaries in these fields ;
- Legal entities having activities in the gambling sector ;
- Legal entities having activities in the exploration, development and/or exploitation of oil and natural gas.
Application of the micro-enterprise tax regime
As of 1 January 2023, the micro-enterprise tax regime becomes optional. The choice of this tax regime must be communicated to the tax authorities before 31 March of the year for which the tax is due. The microenterprises that no longer meet the new conditions and therefore become subject to the corporate income tax in 2023 must notify their change of regime no later than 31 March 2023. The new provisions also abolish the specific tax for companies in the HoReCa sector (hotels, restaurants, cafes) which will now be able to opt for the micro-enterprise regime without having the obligation to fulfil the conditions for qualifying for the corporate income tax regime.
Tax rate
The tax rate is 1% regardless of the number of employees (formerly the micro-enterprises having no employees applied a tax rate of 3% instead of 1%).
- Local taxes
The following amendments will enter into force on 1 January 2023 :
- Introduction of uniform tax rates for the same type of building, i.e. residential or non-residential, regardless of the owner of the building, i.e. individual or legal entity;
- Elimination of the notion of mixed-use building when determining the destination of a building, which until now had some impact on the calculation of the tax payable on the building ;
- The taxable value of a building shall be determined by the local authorities on the basis of market studies published yearly by the National Union of Romanian Public Notaries;
- Modification of the minimum tax rates for the residential buildings (0,1%) and the non-residential building (0,5%) and elimination of caps for these tax rates.
- Income tax
The following amendments will enter into force on 1 January 2023 :
- Elimination of the tax exemption for salary incomes earned by seasonal employees (employees who had contracts concluded with employers paying the specific tax in the HoReCa sector) ;
- Introduction of a new cap on non-taxable income that employers can grant, within the monthly threshold of 33% of the employee’s gross base salary for the following benefits : contributions to voluntary pension funds up to an annual limit of EUR 400, voluntary health insurance premiums up to an annual limit of EUR 400, teleworking allowance up to a monthly cap of RON 400, the cost of food provided by the employer up to the equivalent of one meal ticket/day, mobility allowance within the limit of 2.5 times the legal threshold, accommodation and rent for employees within a monthly cap of 20% of the minimum gross national wage;
- Elimination of the flat-rate deduction of 40% on income from letting property (except income from renting property for tourism purposes) and establishing taxable income at the level of real gross income ; introduction of the obligation to notify the lease agreements and their amendments to the tax authorities within 30 days from the date of conclusion or the modification of the contract ;
- Modification of the taxation of income from the transfer of real estate from personal assets: elimination of the non-taxable ceiling of RON 450,000 representing a deduction from the value of the transaction when establishing the taxable income ; introduction of a 3% rate for real estate owned for up to 3 years and 1% for real estate owned for a period longer than 3 years ;
- Reduction from EUR 100,000 to EUR 25,000 of the ceiling up to which taxpayers can opt to have their net income determined based on income tax brackets was decreased.
As of 1 August 2022 : decrease from RON 30,000 per month to RON 10,000 per month of the maximum monthly gross salary threshold up to which tax relief for the construction, agriculture and food sectors is granted.
- Social security contributions :
The Ordinance has modified as of 1 January 2023 the annual basis for calculating social security contributions for individuals earning income from independent activities and/or income from intellectual property from one or more sources and/or income categories:
- The annual taxable base is 12 minimum gross salaries if the income is equivalent to between 12 and 24 minimum gross salaries;
- The annual taxable base is 24 minimum gross salaries if the income is equivalent to more than 24 minimum gross salaries.
- Health insurance contributions :
The Ordinance has modified as of 1 January 2023 the annual basis for calculating health insurance contributions for individuals earning income from independent activities, income from intellectual property, letting of property, agricultural, forestry and fishery activities, investments and other sources:
- The annual taxable base is 6 minimum gross salaries if the income is equivalent to between 6 and 12 minimum gross salaries;
- The annual taxable base is 12 minimum gross salaries if the income is equivalent to between 12 and 24 minimum gross salaries;
- The annual taxable base is 24 minimum gross salaries if the income is equivalent to more than 24 minimum gross salaries.
The Ordinance has also reintroduced as of 1 August 2022 the obligation to pay social security and health insurance contributions by persons earning less than the minimum national wage equal to a minimum contribution amount calculated on the basis of the gross minimum national wage. If the amount of the contribution calculated on the basis of the employee’s actual income is lower than the amount of the contribution set at the level of the gross national minimum wage, the difference is covered by the employer on behalf of the employee.
- VAT
The following amendments will enter into force on 1 January 2023 :
- Increase from 9% to 19% of the VAT rate for non-alcoholic beverages containing added sugar or other sweeteners or flavorings;
- Increase from 5% to 9% of the VAT rate for restaurant and catering services and hotel accommodation ;
- Decrease from RON 700,000 to RON 600,000 of the maximum value threshold for the application of a reduced 5% VAT rate on acquisition by individuals of a single property under social policy. Any individual will only be allowed to acquire a single property whose value does not exceed this threshold.
- Excise duties
- From the period 1 August 2022 to 31 August 2022, the level of excise duties on energy products will be increased by 14.27% ;
- For 2023, for certain categories of energy products (gas, diesel), the level provided by the Ordinance will not be adjusted with the index on consumer prices. However, if the level of the excise duties for 2023 will be lower than the level provided by EU legislation, the applicable level will be the EU one ;
- From 1 August 2022, the level of excise duties for alcoholic beverages and cigarettes will increase by approx. 5%.