This summer there has been a heated public debate on possible fiscal-budgetary measures to help restore budgetary balance. Strongly contested by the business community, some of the proposed measures were not found in the draft amendment to the Fiscal Code published this week by the Government for public debate. But many of them remain in force.
However, below are the changes that the Government is now trying to impose with the vote on the law. These measures concern Law 227/2015 on the Tax Code:
According to the bill, micro-enterprises will be taxed as follows:
- 1%, for micro-enterprises whose income does not exceed EUR 60,000 inclusive and which do not carry out the activities referred to in point b);
- 3%, for micro-enterprises which:
- has an income in excess of €60,000; or
- carry out main or secondary activities corresponding to CAEN codes: 5821 – Publishing activities of computer games, 5829 – Publishing activities of other software products, 6201 – Custom software development activities (client-oriented software), 6209 – Other information technology service activities, 5510 – Hotels and similar accommodation activities, 5520 – Holiday and short-stay accommodation facilities, 5530 – Caravan parks, camping sites and campsites, 5590 – Other accommodation services, 5610 – Restaurants, 5621 – Event catering activities, 5629 – Other food service activities n. c.a., 5630 – Bars and other beverage serving activities, 6910 – Legal activities – only for professional legal persons incorporated under the law, 8621 – General medical practice activities, 8622 – Specialised health care activities, 8623 – Dental practice activities, 8690 – Other human health activities.”
The above-mentioned tax rates applicable to the income of micro-enterprises shall be regulated from 1 January 2024.
If during a tax year the income exceeds EUR 60,000 or the micro-enterprise starts to carry out activities in the areas listed above, the 3% tax rate is applied from that quarter (also for other activities than those corresponding to these CAEN codes). This is also valid if the threshold is not exceeded, or if these activities are not carried out, the micro-enterprise applies the 1% tax rate from that quarter.
In calculating this limit, account is taken of the cumulative amount since the beginning of the year and the exchange rate at the close of the previous financial year.
IT, construction, agriculture and food companies
It limits tax breaks for those in IT, construction, agriculture and the food industry. The former exemption now applies only to one employment contract, with one employer, for amounts of gross monthly income up to and including 10,000 lei. The part of the gross monthly income exceeding 10,000 lei does not benefit from tax relief; it applies from the income for the month following publication in the Official Gazette of Romania.
The following provisions will be regulated from 1 January 2024:
PFA – self-employed activities
New for PFAs is the introduction of a CASS cap at 60 minimum wages.
Thus, self-employed persons will have a new ceiling for CASS payment of 10%. They would have to pay 10% on net income if they have less than 60 minimum wages. If they have more, then it will be capped at 60.
Taxing large companies
Minimum turnover tax will be introduced from the 2024 tax year. Thus, companies with a turnover of more than €50 million in the previous year and a corporate income tax of less than the minimum turnover tax in the current reporting year will owe corporate income tax at the level of the minimum turnover tax.
The minimum turnover tax is determined by applying 1% to a tax base, which is equal to: total income – exempt income – acquisition of assets – depreciation of assets acquired before 1 January 2024.
The exact assets and depreciation to be taken into account in this calculation will be determined later by Ministerial Order.
Income whose source cannot be proven is taxed at 70%.
From 1 July 2024, it is proposed to change the tax rate for income earned by individuals whose source cannot be proven, by introducing a rate of 70% with the aim of increasing voluntary compliance by taxpayers, with favourable implications for increased budget revenue.
Mandatory audit for sponsorships and donations
At the same time, it is proposed to supplement the accounting law by introducing the obligation of auditing in the case of non-profit legal entities which, in the reporting financial year, have received amounts, in a cumulative amount to be determined by order of the Minister of Finance, representing subsidies, sponsorships, amounts redirected, according to the law, from corporate income tax or income tax on micro-enterprises, respectively from income tax due by individuals, as well as other similar forms of financing.
In the case of such persons, the annual financial statements shall be accompanied by a statement showing the amounts so received or used. The annual financial statements, together with the said statement, shall be subject to an external audit by a financial auditor in accordance with the law.
Meal vouchers will be taxed additionally at 10%
For meal vouchers and holiday vouchers, an additional 10% health contribution is levied. The additional tax is calculated by applying the 10% rate to gross income less the health insurance contribution due and deducted at source.
Electronic invoicing in Romania
Starting from 01.01.2024, for transactions between taxable persons established in Romania according to Art. 266 para. (2), only invoices that meet the conditions laid down in Government Emergency Ordinance No 120/2021 on the administration, operation and implementation of the national system for electronic invoicing RO e-Invoice (details here) are considered invoices. The deadline for sending invoices will be 5 working days. Failure to comply with this deadline will result in contraventions from 31.03.2024.
Extra tax on high-value movable and immovable property
Individuals who own or jointly own residential buildings located in Romania, if the taxable value of the building, calculated in accordance with Article 457, exceeds RON 2,500,000; individuals and legal entities who own cars registered or recorded in Romania whose individual purchase value exceeds RON 375,000, are liable to pay the special tax on immovable and movable property of high value. The tax is due for a period of 5 years starting from the tax year in which the transfer of the car takes place or for the fraction of years remaining until the expiry of the 5-year period from this date for those for whom the transfer of the car took place earlier. The amount shall be calculated as follows:
- in the case of properties representing residential buildings, by applying a rate of 0.3% on the difference between the taxable value of the building communicated by the local tax authority in the tax decision and the ceiling of 2,500,000 lei;
- in the case of properties representing cars, by applying a rate of 0.3% on the difference between the acquisition value and the ceiling of 375,000 lei.
Change of VAT from 5% to 9%
Applies to social housing that meets certain conditions. However, the 5% rate will be maintained until 31.12.2024 if advances have been received for the dwellings in question by 31.12.2023. The same rate changes will also apply to photovoltaic panels and their components; from 5% to 19% – for entry to sports events and for the use of sports facilities from 9% to 19% – rate changes for added sugar products.
It is proposed to implement a system based on the use of electronic devices and an IT application that allows the competent authorities to determine potential points of diversion of road consignments of goods, whether they are in transit or have as final destination an economic operator on national territory. The application of smart seals and the monitoring of road consignments of goods on national territory is carried out by the National Tax Administration Agency and the Romanian Customs Authority on the basis of a risk analysis.
The procedure for establishing risk criteria, applying smart seals and monitoring the road transport of goods shall be established by joint order issued within 60 days from the date of publication of this Law in the Official Gazette of Romania.
In the case of application of intelligent seals on means of transport, the driver is obliged to ensure their integrity. Failure by the driver to comply with this obligation shall constitute a contravention, unless it has been committed under such conditions as to be considered, according to criminal law, an offence and shall be punishable by a fine of between 20,000 and 50,000 lei.
Change in the ceilings for cash payments and introduction of a cash ceiling of 50,000 lei
The new measures propose changes to the amounts that can be paid in a day. The limits for cash transactions, which are currently 5,000 lei and 10,000 lei respectively (cash & carry shops), will be reduced to 1,000 lei and 2,000 lei respectively, as follows:
- collections/payments with persons with a legal form of incorporation up to a daily limit of 1,000 lei per person, or 2,000 lei in the case of cash and carry shops;
- payments from advances for settlement, up to a daily ceiling of 1,000 lei, set for each person who has received advances for settlement.
Cash receipts and payments between legal entities and natural persons, representing the value of supplies or purchases of goods or services, dividends, assignments of claims or other rights and receipts or repayments of loans or other financing shall be made within the daily ceiling of 5,000 lei until 31 December 2024 and 2,500 lei from 1 January 2025.
Cash receipts and payments between natural persons, carried out as a result of the transfer of ownership of goods or rights, the provision of services, as well as those representing the granting/refund of loans, may be carried out within a daily ceiling of RON 10,000/transaction until 31 December 2024 and RON 5,000/transaction from 1 January 2025. The difference between these amounts and the transaction total can only be paid by non-cash payment instruments, with the fragmented payment still prohibited.