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The change of the ceiling for micro-companies from 1st of January 2018 and other new fiscal rules

With the latest tax changes some new information appeared regarding the micro-enterprise regime. They refer to the ceiling up to which a company is consider a micro-company and pays the tax on revenues, not on profits, the extention of this taxation system also to the companies who are now the now excluded, ans also the impossibility of companies with a certain share capital to switch from revenu tax to profit tax. The recent changes also include measures to combat outsourcing of profits made by multinational companies.

According to Government Emergency Ordinance no. 79/2017, published on November 10, starting with 1st of January 2018, will increase the ceiling to which a company becomes a taxpayer on micro-enterprise income, from 500,000 euros (as it is currently) to 1.000.000 euros.

This means that companies with a yearly turnover below 1.000.000 euros will not pay profit tax, but they will pay a 1% tax on the turnover.

Another provision of the Ordinance refers to the elimination of the possibility for companies to apply the corporate tax on companies with a minimum share capital of 45.000 lei. Currently, the companies that have a registered capital of 45.000 lei this year, may opt to pay profit tax (instead on income tax) starting with the quarter in which they meet the condition, but from 1st of January 2018 they will be forced to return to the income tax.

The banking, insurance and reinsurance companies, capital markets or gambling companies may also be liable to income tax if they do not exceed the 1.000.000 euros ceiling.

Additionally, through GEO no. 79/2017 is also eliminated the requirement for micro-companies to have an income resulted in proportion of at least 80% form activities other than consultancy and management. Thus, even companies that receive the majority of their income from consultancy and management activities will no longer be required to pay corporation tax in the future, but they will still be taxed on income.

In addition, from 1st of January 2018 there will be imposed some measures to combat tax evasion and avoidance, which directly targets multinationals, introducing the European Directive to combat the outsourcing of company profits. Multinationals that have so far avoided paying taxes in Romania will no longer be able to do so by applying the following measures: the limitation of interest deductibility, and the taxing of transfers of the amounts to the parent companies abroad in order to reduce the tax base.

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