by Florin Gherghel, Tax Manager Ensight Finance
Ordinance no. 16/2022, published in the Official Gazette no. 716/15 July 2022, brings a series of important amendments to the Fiscal Code. We present below the significant changes.
- Corporate income tax
a) Exemption of reinvested profits
Starting January 1, 2023, other assets are eligible for the exemption from corporate income tax regarding the reinvested profit. Investments in assets used in the production and processing activity, the assets representing refurbishment will be exempted from corporate income tax (these assets will be established by order of the Minister of Finance).
b) Dividend tax regarding dividends distributed to a Romanian company
The dividend tax is computed by applying an 8% tax rate on the gross dividend paid to a Romanian legal entity (instead of the current 5%).
These provisions apply to dividends distributed after January 1, 2023.
- Micro-enterprise tax
Starting January 1, 2023, the regime of the income tax of micro-enterprises is significantly modified.
The conditions that must be met cumulatively by a company in order to be a taxpayer on the tax of micro-enterprises (these must be met on December 31 of the previous fiscal year) are amended as follows:
- revenues must not exceed the RON equivalent of 500,000 EUR (instead of the current 1,000,000 EUR);
- its share capital is held by persons other than the state and the administrative-territorial units (condition currently in force);
- it is not in dissolution, followed by liquidation, registered in the trade register or in the courts, according to the law (condition currently in force);
- the company generates revenues, other than those from consulting and / or management, in proportion of over 80% of the total revenues (new condition);
- the company has at least one employee (new condition – respectively, the differentiated tax rate is no longer applied in relation to the existence or not of the employee);
- the company has associates / shareholders who hold over 25% of the value / number of participation titles or voting rights to at most three Romanian legal entities that apply to apply the income tax regime of micro-enterprises, including the analyzed company (if they are more than three Romanian companies, the three legal entities paying the micro-enterprise tax will be established, and the rest of the legal entities will become corporate income tax payers) – new condition.
Given the above conditions, the tax rate becomes 1% in all cases. The tax regime becomes optional upon the registration of the company. The option can be exercised after registration if certain conditions are observed.
Example: Romanian legal entities may choose to apply the micro-enterprise tax starting with the fiscal year following the one in which they meet the micro-enterprise conditions and if they were not micro-enterprise tax payers after January 1, 2023.
Micro-enterprises cannot opt for the payment of the corporate income tax during the fiscal year, the option being able to be exercised starting with the following fiscal year, with certain exceptions.
Special rules for leaving the income tax system of micro-enterprises during the year were also established.
Example: If during a fiscal year a micro-enterprise generates revenues higher than 500,000 EUR or the share of revenues from consulting and / or management in total revenues is over 20% inclusive, it owes corporate income tax starting with the quarter in which any of these limits are exceeded, without the possibility to opt to apply the micro-enterprise tax afterwards.
- Withholding tax
The tax on dividends paid to non-residents becomes 8% applied to the gross dividend (instead of 5%), starting with dividends distributed after January 1, 2023. Nevertheless, the exemption / reductions based on European directives or double tax treaties can be applied (if the required conditions are fulfilled).
- Salary / income tax
a) Dividend tax
Starting with dividends distributed after January 1, 2023, the dividend income granted to individuals is subject to a tax rate of 8% of their gross amount.
b) Decrease of exempt incomes obtained by the employees from agriculture and constructions
Starting with the incomes related to August 2022, the conditions regarding the tax exemption for the employees from constructions and agriculture are modified, the most important being the reduction of the eligible gross monthly salary to 10,000 RON. The exemption is applied for the amounts from the gross monthly income of up to 10,000 RON inclusive. The part of the monthly gross income that exceeds 10,000 RON does not benefit from fiscal facilities.
From July 18, 2022, the computation method of the share of turnover actually realized from the construction activity carried out on the Romanian territory in the total turnover as well as the computation of the share of turnover from activities specific to the agricultural sector and food industry is modified.
c) Decrease of non-taxable incomes in the computation of salary tax & social contributions
Starting with January 2023, certain incomes that currently appear as limited non-taxable incomes were eliminated from the category of non-taxable incomes but were grouped in a new category of “cumulative non-taxable monthly incomes when computing the salary tax / social contributions, within the monthly threshold of maximum of 33% of the basic salary”, as follows:
- contributions to an optional pension fund, according to the related regulations, supported by the employer for its own employees, up to a limit of 400 EUR / year for each person (RON equivalent);
- the voluntary health insurance premiums, as well as the medical services provided in the form of a subscription, supported by the employer for his own employees, up to 400 EUR / year for each person (RON equivalent);
- the amounts granted to employees who carry out telework activities within a monthly ceiling of 400 RON corresponding to the number of days in the month in which the natural person carries out telework activities;
- the equivalent value of the food provided by the employer for his own employees (food prepared in own units or purchased from specialized units), within the maximum value of a daily meal ticket / person. This provision does not apply to employees who receive meal tickets;
- accommodation and the equivalent value of the rent for the accommodation / living spaces provided by the employers at the disposal of their own employees;
- additional benefits received by employees based on the mobility clause, other than those provided for the delegation / secondment allowance (with specific limits);
- the equivalent value of the tourist services and / or treatment granted by the employer during the holiday, within an annual ceiling, for each employee, representing the level of an average gross salary.
The order in which the above incomes are included in the monthly ceiling of maximum 33% of the basic salary corresponding to the respective job position is established by the employer. Amounts that exceed the mentioned monthly cumulative limit are considered salary benefits and taxed accordingly.
Also starting with the incomes related to January 2023, there are no more non-taxable incomes equivalent to the expenses incurred by the employer with performing medical tests to diagnose COVID-19 infection.
Starting with January 1, 2023, the personal deductions to which the employees are entitled will be modified for computing the salary tax.
d) Modification of the taxable base for computing rental income
Starting with 2023 rent revenues, the deduction of 40% is eliminated from the computation of the annual net income from the transfer of use of goods. Thus, in the case of rental incomes (other than specific incomes), the obtained gross income represents the taxable income.
e) Changing the taxation of gambling income
Starting with August 1, 2022, the tax due for gambling incomes, with a value higher than the non-taxable amount, is determined by applying a scale on each gross income received by a participant.
f) Modification of the taxable basis of real estate sale incomes
From January 1, 2023, the non-taxable amount of 450,000 RON on the sale of personal property is eliminated. Thus, the transfer of the ownership right over the constructions of any kind and the related land, as well as over the lands of any kind without constructions, is subject to a tax that is computed at the transaction value by applying the following tax rates: (i) 3% for real estate held for a period of up to 3 years inclusive; (ii) 1% for real estate owned for a period longer than 3 years.
g) Modification of the base of social contributions due by an authorized natural person (PFA)
Starting with the incomes incurred in 2023, the independent natural persons will owe pension contribution according to the realized incomes (the level of 12 or 24 minimum gross salaries). The annual basis for computing the social insurance contribution is represented by the income chosen by the taxpayer, which cannot be less than:
(i) the level of 12 minimum gross national salaries, in the case of realized incomes between 12 and 24 minimum gross salaries;
(ii) the level of 24 gross minimum salaries, in case of incomes realized over 24 gross minimum salaries.
The ceiling from which a natural person will owe a contribution for health has also changed (we mention only the change regarding PFA or people who obtain investment income). Thus, starting with the incomes incurred in 2023, PFA / persons who obtain income from investments owe the social health insurance contribution if they estimate for the current year incomes whose cumulative value is at least equal to 6 minimum gross national salaries. The annual basis for computing the social health insurance contribution is:
(i) the level of 6 minimum gross national salaries, in case of realized incomes between 6 and 12 minimum gross salaries;
(ii) the level of 12 minimum gross national salaries, in case of realized incomes between 12 and 24 minimum gross salaries;
(iii) the level of 24 minimum gross national salaries, in case of incomes achieved over than 24 minimum gross salaries.
From January 1, 2023, amongst the goods subject to 9% VAT rate, the list of food products / other similar goods, as well as of the products used in agriculture was modified.
Also, from 01.01.2023, the VAT rate increases to 9% (from 5%) for hotel accommodation, restaurant and catering services (with certain exceptions).
Similarly, from 01.01.2023, the delivery of homes with a VAT rate of 5% to individuals applies to homes with a usable area of up to 120 sqm, excluding household annexes, whose value, including the land on which they are built, does not exceed the amount of 600,000 RON, excluding VAT. Any natural person can purchase, starting with January 1, 2023, individually or jointly with another natural person / other natural persons, a single home whose value does not exceed the amount of 600,000 RON, excluding VAT, with a reduced rate of 5 % (there are transitional measures for 2022).
- Excise duties
The quotas of excise duties are modified from 1 August 2022.
- Local taxes (building tax)
For residential buildings, the building tax is computed by applying a rate of at least 0.1% on the value of the building. The tax rate is established by the decision of the local authorities. The value of the building, expressed in RON, is determined by summing up the value of the building, the annex buildings, as case be, and the value of the land areas covered by these buildings, included in the market studies regarding the indicative values of real estate in Romania, in the evidence of the National Union of Public Notaries in Romania.
For non-residential buildings, the building tax is computed by applying a rate of at least 0.5% on the value of the building. The tax rate is established by the decision of the local authorities. The value of the building, expressed in RON, is determined by summing up the value of the building, the annex buildings, as case be, and the value of the land areas covered by these buildings, included in the market studies regarding the indicative values of real estate in Romania, in the evidence of the National Union of Public Notaries in Romania.
For the buildings that have both residential and non-residential use, the tax rate is determined according to the quota corresponding to the majority destination (> 50%) declared by the taxpayer. If the taxpayer does not declare the majority destination of the building, the tax rate for non-residential buildings is applied on the entire value of the building.
The new provisions no longer differentiate between natural and legal persons in the computation of building tax.
In the same time, evaluation reports will no longer be required by local authorities.
These provisions apply from January 1, 2023.
- Specific tax on activities
Starting with January 1, 2023, the specific tax on certain activities (mainly due to hotels and restaurants) is eliminated. These entities can opt for the payment of the income tax of micro-enterprises or for the payment of corporate income tax.
- The obligation to sue cards
From January 1, 2023, legal entities that carry out retail and wholesale activities, as well as those that carry out service activities, with an annual turnover of more than 10,000 EUR (RON equivalent), have the obligation to accept debit, credit or prepaid cards as means of payment, through a POS terminal and / or other similar solutions, including applications that facilitate the acceptance of electronic payments. This obligation arises starting with the quarter following the one in which the sales during the respective year exceeded the threshold of 10,000 EUR.