From January 1st, 2023, new tax regulations will enter into force, following the adoption of Government Ordinance no. 16/2022 amending and supplementing Law no. 227/2015 on the Fiscal Code, repealing certain regulatory acts and other financial-fiscal measures (“GO no. 16/2022“).
The main changes introduced by GO no. 16/2022 in the field of taxation applicable as of January 1st, 2023 concern the following aspects:
Dividends paid by a Romanian legal person to another Romanian legal person or to a non-resident are subject to a dividend tax of 8% of the gross dividend paid (representing an increase of 3 percentage points of the rate currently due).
Taxation for Micro-Enterprises
▸ Micro-enterprise income tax becomes optional;
▸ The conditions that a Romanian legal person must meet to be a micro-enterprise are amended and supplemented. Compared to the current conditions: (i) the revenue threshold that a micro-enterprise must not exceed is lowered from EUR 1,000,000 to EUR 500,000, (ii) it removes from the scope of micro-enterprises entities that generate more than 80% of their total revenues from consultancy and/or management, (iii) it introduces the requirement to have at least one employee in order to apply the micro-enterprise tax regime, (iv) it introduces the condition that the micro-enterprise must have as shareholders persons holding more than 25% of the value/number of equity securities or voting rights in at most two other Romanian legal entities qualifying to apply the micro-enterprise tax regime.
▸ Romanian legal entities that are currently subject to the specific tax on certain activities (which will be repealed from January 1st, 2023) are exempted from meeting the conditions required to apply the micro-enterprise regime.
▸ It extends the scope of activities carried out by Romanian legal entities that cannot apply the micro-enterprise regime to activities in the following fields: banking, insurance and reinsurance, capital market, gambling, exploration, development, exploitation of oil and gas deposits.
▸ The income tax rate for micro-enterprises is a flat rate of 1%.
▸ If on January 1st, 2023 a legal person does not meet the new conditions for being classified as a micro-enterprise, it becomes liable for corporate income tax and is obliged to notify the competent tax authorities of its exit from the micro-enterprise income tax system by March 31st, 2023.
▸ The threshold of EUR 100,000 from which taxpayers determining net income on the basis of income norms are obliged to determine annual net income under the real system is reduced to EUR 25,000.
▸ A number of monthly accrued incomes become non-taxable for income tax purposes only up to a threshold of 33% of the basic salary corresponding to the job held, including: additional benefits received by employees under the mobility clause, the cost of food provided to own employees, accommodation and the cost of rent for premises made available to own employees, the cost of tourist and/or treatment services, contributions to a voluntary pension fund, voluntary health insurance premiums and medical services provided in the form of a subscription, amounts paid to employees working on teleworking to support certain expenses, under the conditions and within the limits provided by law. Income in excess of the statutory limits or the above-mentioned threshold becomes taxable for income tax purposes.
▸ It redefines the concept of personal deduction for income tax purposes, which will include a basic personal deduction and an additional personal deduction, granted within the limit of the monthly taxable income earned. The basic personal deduction is granted to individuals who have a gross monthly income of up to RON 2,000 above the level of the basic gross national minimum wage guaranteed in payment and is degressive, based on the amount of gross monthly income and the number of dependants. An additional personal deduction is granted to individuals up to the age of 26 who qualify for the basic personal deduction, and to individuals earning income from wages, regardless of their level, for each child up to the age of 18 if the child is enrolled in an educational unit.
▸ Gross income in the case of income from the transfer of the use of goods, other than lease income and income from the rental for tourist purposes of rooms in personally owned dwellings becomes fully taxable, without applying the flat rate of 40%.
▸ Dividend income is taxed at a rate of 8% of the dividend amount (representing an increase of 3 percentage points on the current rate).
▸ Different tax rates are set for the transfer of real estate from personal wealth, depending on the period of ownership of the real estate (3% for real estate owned for up to and including 3 years, and 1% for real estate owned for more than 3 years). The tax is calculated on the value of the transaction and no deduction is applicable.
Mandatory social contributions
▸ The cumulative monthly income which is not taxable for income tax purposes, as described in point 3 above, is not included in the monthly basis for calculating mandatory social contributions up to a maximum of 33% of the basic salary corresponding to the job held.
▸ The annual basis for calculating social security contributions for persons earning income from self-employment and intellectual property rights is the chosen income, which may not be less than (i) 12 gross minimum wages per country in the case of income between 12 and 24 gross minimum wages per country, (ii) 24 gross minimum wages per country in the case of income above 24 gross minimum wages per country.
▸ The annual basis for calculating the health insurance contribution for persons with income subject to health insurance contributions (excluding wage and pension income) is (i) the level of 6 gross minimum wages per country for income between 6 and 12 gross minimum wages per country, (ii) the level of 12 gross minimum wages per country for income between 12 and 24 gross minimum wages per country, (iii) the level of 24 gross minimum wages per country for income above 24 gross minimum wages per country.
▸ The reduced rate of 9% also applies to the following supplies of services and/or goods: (i) accommodation in the hotel sector or in sectors with a similar function, including the rental of camping sites, (ii) restaurant and catering services, with the exception of alcoholic and non-alcoholic beverages falling within CN codes 2202 10 00 and 2202 99, (iii) the supply of chemical fertilisers and chemical pesticides of a kind normally used in agricultural production, provided for by joint order of the Minister for Finance and the Minister for Agriculture and Rural Development.
▸ The reduced rate of 5% applies to the supply of dwellings whose value, including the land on which they are built, does not exceed RON 600,000, if the other conditions laid down by law are met.
▸ The Register of housing purchases at the reduced VAT rate of 5% is organised from January 1st, 2023.
Local taxes and fees
▸ It redefines the taxes/fees regime for residential buildings, non-residential buildings and buildings comprising both residential and non-residential premises. The amount on which building tax/fee is due is determined by reference to the Market Studies on the indicative values of real estate in Romania, administered by the National Union of Notaries Public of Romania.
GO no. 16/2022 brought a number of other changes in the tax area, which have already entered into force, including:
▸ Lowering the exemption threshold for persons earning income from wages and salaries in the construction sector, the agricultural sector and the food industry, defined by law, from RON 30,000 to RON 10,000.
▸ Increase in the tax due on income from gambling, depending on the gross income earned.
▸ Establishing a minimum threshold for the social security contribution and the health insurance contribution payable by individuals earning wage income (with certain exceptions), equal to the amount resulting from the application of the corresponding rate to the minimum gross basic wage in the country. The difference between the social insurance contribution/health insurance contribution calculated according to the general rules of determination and the minimum threshold is borne by the employer/income payer.