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The Minimum Tax or Lump Tax in 2010. Evolution and Expectations

In 2010, in addition to the minimum tax that has got no economical logic, the tax system for micro-enterprises in Romania was adjusted as well, from an income tax based on applying a rate of 3% on revenue, to the implementation of an income tax with a rate of 16%, even further burdening these enterprises that have been already affected by the global economic crisis.

I believe that eliminating the income taxation of micro-enterprises and keeping the minimum tax which, I repeat, has no economical logic, will substantially contribute to the suspension or closure of many companies and certainly the growth of tax evasion in 2010.

I restate on this occasion that the minimum tax is due by all taxpayers, legal persons, except taxpayers referred to in Article 13 paragraph c)-e), art.15 and art.38, as well as taxpayers referred to in paragraph (1) of Article 18 of the Tax Code, which perform activities such as night bars, night clubs, discotheques, casinos or sports betting, including legal persons obtaining such income under a contract of association and which, if the tax payable for the activities referred to above is less than 5% of such income, are forced to pay a tax of 5% imposed on such income recorded.

Currently the amounts corresponding to the minimum tax are:

Total annual revenues (RON) Minimum annual tax (RON)
0-52.000 2.200
52.001-215.000 4.300
215.001-430.000 6.500
430.001-4.300.000 8.600
4.300.001-21.500.000 11.000
21.500.001-129.000.000 22.000
over 129.000.001 43.000

The lump tax or minimum tax, is currently in the process of change in order to reduce the scope of its application to services where there is an alleged tax evasion and where the ANAF believes that tax evasion can not be fought against by other means.

At least in principle, it is mentioned that the minimum tax will be applied only to the hotel industry, to restaurants and to IT services, but there is no real guarantee that it will be limited to these activities only, especially since there are voices that do not agree with its application to the hotels industry.

The new version of the minimum tax should be completed by the end of February 2010, but its application in practice will be made as early as 1st of Aprilie 2010 or at latest starting with the second half of 2010.

Under the circumstances where the application in 2010 of the minimum tax in all fields will not be given up, I think the application of the prepayment system in accordance with art. 34 of the Tax Code will be made by comparing these prepayments with the minimum tax and if the minimum tax is bigger, the minimum tax will be paid.

For further details and clarifications, please feel free to contact one of Ascent Group's financial consultants. .

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