On 15 July 2022, the Romanian Fiscal Code was significantly amended. The changes were published in Ordinance no. 16/2022 in the Official Gazette no. 716 and will take effect on 1 January 2023. The most significant amendments to the Romanian Fiscal Code affect the withholding tax, corporate income tax, micro-enterprise tax and the VAT rules as well.
According to the above-mentioned amendments to the Romanian Fiscal Code, the tax on dividends paid to non-residents becomes 8% applied to the gross dividend (instead of 5%), starting with dividends distributed after 1 January 2023. Nevertheless, the exemption / reductions based on European directives or double tax treaties can be applied (if the required conditions are fulfilled).
Corporate income tax
The CIT-related changes of the Romanian Fiscal Code affect from one hand the exemption of reinvested profits. Starting from 1 January 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).
Another CIT-related change of the Romanian Fiscal Code affects the dividend tax which is computed by applying an 8% tax rate on the gross dividend paid to a Romanian legal entity (instead of the current 5%).
Both of these provisions apply to dividends distributed after 1 January 2023.
The amendments to the Romanian Fiscal Code significantly modify the regime of the income tax of micro-enterprises as well.
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 31 December of the previous fiscal year) are amended as follows:
- revenues must not exceed the RON equivalent of EUR 500,000 (instead of the current EUR 1,000,000);
- 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, from 2023 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.
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 EUR 500,000 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.
According to the amendments to the Romanian Fiscal Code, 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.
The VAT rate increases to 9% (from 5%) for hotel accommodation, restaurant and catering services (with certain exceptions).
The delivery of homes with a VAT rate of 5% to individuals applies to homes with a usable area of up to 120 square metres, excluding household annexes, whose value, including the land on which they are built, does not exceed the amount of RON 600,000, excluding VAT. Any natural person can purchase, starting with 1 January 2023, individually or jointly with another natural person / other natural persons, a single home whose value does not exceed the amount of RON 600,000, excluding VAT, with a reduced rate of 5% (there are transitional measures for 2022).
If you would like to know more about the latest amendments to the Romanian Fiscal Code or if you have any tax related question in Romania, please visit the homepage of Ensight, the exclusive representative of WTS Global in the country.