Major changes to the fiscal Code since January 2023

In these days, the Ministry of Finance will publish the draft amendment of the fiscal Code, which provides, among others:

• increase the dividend tax from 5% to 8%;
• lower the income threshold up to which a company is considered a micro-enterprise;
• increase to 9% the VAT on alcoholic and non-alcoholic beverages containing added sugar or other sweeteners or flavored and increase the excise duty on cigarettes.

All these changes will take effect from 01.01.2023.

Dividends

In Article 43, paragraphs (2) and (3) shall be amended and shall read as follows:

The tax regime applicable to dividends paid by a Romanian legal entity to another Romanian legal person/legal entity resident in another EU Member State. It is proposed to increase the dividend tax rate, from 5% to 8%, for dividends distributed/paid between Romanian legal entities, as well as for those distributed/paid to non-residents.

The dividend tax is declared and paid to the state budget, until 25 inclusive of the month following the one in which the dividend is paid.

By way of exception from the provisions of paragraphs (1) and (2), if the dividends distributed, according to the law, have not been paid by the end of the year in which their distribution was approved, the related dividend tax shall be paid, as the case may be, by 25 January of the following year, respectively until 25 of the first month of the modified fiscal year following the year in which the distribution of dividends was approved. These provisions shall not apply to dividends distributed and unpaid until the end of the year in which their distribution was approved, if on the last day of the respective fiscal year, calendar or modified, as the case may be, the conditions set out in paragraphs 4 (a) and (b) are met.

Micro-enterprises

The project proposes substantial state-related changes to their micro-enterprises, such as:

• reduction of the micro-enterprises ceiling for revenues obtained in the previous year from euro 1 000 000 to euro 500 000;
• establishing the condition that the micro-enterprise has at least one employee, in which case it is necessary to eliminate the 3% tax rate;
• the establishment of a condition for holding shares by the same shareholder/associate in no more than three micro-enterprises, in the case of shareholders of associates holding more than 25% of the value/number of units or voting rights;
• limiting to 20% the revenues obtained from consulting and management;
• exclusion from the scope of micro-enterprise income tax of legal entities carrying out activities: in banking, insurance and reinsurance, capital market, including intermediation activities in these fields, in the field of gambling, as well as romanian legal entities carrying out activities of exploration, development, exploitation of oil and natural gas deposits;
• elimination of the option for applying corporate tax in case the conditions related to the value of the share capital (45 000 lei) and the number of employees (to have at least 2 employees) were met;
• maintaining the 1% tax rate.

The current situation

According to the tax rules in force, the classification as a micro-enterprise is carried out on the basis of certain conditions to be fulfilled, one of them imposing that the romanian legal entity has achieved by December 31st of the previous fiscal year revenues that did not exceed the ron equivalent of 1 000 000 euros.

The tax rates are differentiated according to the number of employees, being applicable:

• the 1% share if the micro-enterprise has at least one employee and
• a 3% share if the micro-enterprise has no employees.

VAT

Also on 1 January 2023, in the VAT chapter, it is proposed to increase the quota for beverages containing added sugar. The measure aims to discourage the consumption of such products, with a significant impact on consumers.

The VAT rate increases from 5% to 9%, both for the supply of food, including beverages (except alcoholic and non-alcoholic beverages containing added sugar or other sweetening matter or flavored), intended for human and animal consumption, as well as for restaurant and catering services and hotel accommodation activities.