Last updated: 28 July 2022
The Fiscal Code was subject to major changes enacted by the GO no. 16/2022 published in the Official Gazette no. 716 of July 15, 2022. The changes – aimed at important matters, such as the profit and income tax paid by companies, tax on dividends, VAT rate for certain categories of services or mandatory social contributions – are intended to enter into force in two stages: August 1st, 2022, and January 1st, 2023.
There follows an overview of the most important changes.
Changes in force as of the 1st August 2022
- Income tax reliefs: Reduction of the threshold for granting tax incentives in the fields of agriculture, food industry and constructions. Tax-exempt gross incomes of natural persons obtaining salaries and salary-related incomes in the fields of constructions, agriculture and food industry are capped to 10,000 lei, included, as compared to the current 30,000 lei ceiling.
- Taxation of part-time employment contracts: The social security contribution (Romanian CAS) owed by the employee is due for full time minimum gross salary and not proportionally to the number of hours provided for under the contract. This rule applies starting with the income pertaining to the month of August 2022, and the difference between the amount of social security contributions due for the number of hours actually worked and the amount of the social security contributions due for the full time minimum gross salary will be paid by the employer.
The measure does not apply to:
- employees earning income, in the same month, based on two or several employment contracts, with a cumulated monthly calculation basis at least equal to the minimum gross salary. For this exception to be enforceable, the ministry of finances will have to issue an order and provide an official procedure for this category of employees until August 14 ;
- students by the age of 26, enrolled in a form of education ;
- apprentices by the age of 18 ;
- disabled persons or other categories of persons who are, under the law, allowed to work fewer than 8 hours a day ;
- old age pensioners from the public pensions system, except for those benefitting of work pensions based on special laws / statutes, and those cumulating the old age pension from the public pension system with the pension from other pension systems not integrated therewithin).
- Excise duties on cigarettes and alcoholic beverages: increase of excise duties and setting up a timetable regulating the rate and term of application of excise duties for the products subject to harmonized excise duties.
- Tax on gambling winnings: the rates of gambling income tax, currently ranging from 1% to 25%, will range from 3% to 40%, whereas the gross income tranches the rates apply to are brought from 66,750 lei to 10,000 lei, and respectively from 445,000 lei to 66,750 lei. Also, the companies performing in the gambling field will pass from microenterprise tax to profit tax.
Changes in force as of January 1st, 2023
- Dividends : The tax rate applying to dividends raises from 5% to 8% for dividends distributed / paid up between Romanian legal persons and for those distributed / paid to privately managed pension funds and / or optional pension funds.
- Microentreprises : taxation on microentreprises’ income becomes optional.
So, what is new?
- The turnover ceiling, priory a condition for a company to be microenterprise, is lowered from EUR 1,000,000 to EUR 500,000 (equivalent in RON) ;
- The 3% tax rate on microenterprises without employees is removed whereas the 1% tax rate remains in force conditional upon the microenterprise employs at least one employee ;
- Companies with a share capital of at least 45,000 lei and at least 2 employees may no longer opt for tax profit regime ;
- A shareholder may no longer hold more than 25% of the shares / voting rights in more than three microenterprises ;
- A new condition is introduced : activities, other than counselling and / or management, shall account for over 80 % of the turnover.
A Romanian newly incorporated legal entity may opt for microenterprise tax starting with the first financial year, if the following conditions are met upon registration to the Trade Registry: (i) the share capital is held by persons other than the state and the territorial administrative units and (ii) the shareholders hold more than 25% of the value / number of shares or voting rights in maximum three legal entities subject to tax regime on microenterprises, the newly incorporated entity included.
The condition regarding the existence of at least one employee must be fulfilled in maximum 30 days since incorporation of the legal entity.
- The HoReCa sector : the specific tax under the Law no. 170/2016 is removed being granted the possibility to opt for the 1% tax on microenterprises income, without verification of the access conditions being met and without application of the rules for exiting the system or payment of profit tax.
These provisions apply to Romanian legal entities carrying out activities under the following CAEN Codes: 5510, 5520, 5530, 5590, 5610, 5621, 5629 and 5630.
- Taxation of salaries and salary related incomes : for certain remunerations, monthly incomes not subject to taxation and not included in the calculation base for mandatory social contributions shall from now on be capped 33% of the basic salary:
- Supplementary pay to employees under a mobility clause ;
- Food allowance - limited to a ticket restaurant per person / per day;
- Accommodation and the amount of the rent for housing facilities provided by the employers - capped to 20% of the gross basic salary at national level, under certain conditions ;
- Contributions to optional pension funds and contributions to optional pension schemes - capped to 400 euros (equivalent in RON) per person and per year ;
- Optional health insurance premiums and medical subscriptions - capped to 400 euros (equivalent in RON) per year ;
- The amounts granted to teleworking employees - capped to 400 RON / month, proportionally to the number of telework days.
The cumulative amount of the incomes listed above will account for the said ceiling. It is the employer who decides which of these incomes are included in the monthly 33% ceiling.
- Taxation of renting : the lump amount of 40% is removed being replaced by a tax on the overall amount of the rent – this applies to incomes from lease of assets other than those under agricultural leases and touristic lease of rooms within private houses.
The obligation to file to NAFA all lease contracts / amendments thereto, within 30 days since the contract is concluded / amended, is restored.
- Taxation of personal patrimony real estate sales : the 450,000 RON ceiling not subject to taxation, meaning the amount that could be subtracted from the value of the transaction in order to determine the taxable income, was removed.
The income tax is determined based on the term of ownership and amounts to 3% for real estate property that has been owned for up to 3 years, included, and to 1% for real estate property that has been owned for more than 3 years.
- Social security contributions (CAS) for income from independent activities and copyrights, from one or several sources and / or income categories : the contributions are due if the estimated cumulated net income for the current year at least equals 12 minimum basic gross salaries in force at the deadline for filing the tax return.
The annual calculation basis is the income chosen by the taxpayer, but it cannot be lower than:
- 12 minimum basic gross salaries, for incomes amounting to between 12 and 24 minimum basic gross salaries;
- 24 minimum basic gross salaries, for incomes topping 24 minimum basic gross salaries.
- Health insurance contributions (CASS) for income from independent activities and copyrights, from one or several sources and / or income categories : the contributions are due if the estimated cumulated net income at least equals at least 6 minimum basic gross salaries (for 2022 – 12 minimum basic gross salaries), in force at the deadline for filing the tax return.
The annual calculation basis is, from now on, the following: 6 minimum basic gross salaries, for incomes amounting to between 6 and 12 minimum basic gross salaries;
- 12 minimum basic gross salaries, for incomes amounting to between 12 and 24 minimum basic gross salaries;
- 24 minimum basic gross salaries, for incomes topping 24 minimum basic gross salaries.
- VAT : the reduced rate of 9% is removed ; instead the 19% standard rate applies to non-alcoholic beverages containing sugar and other sweeteners or flavorings ; the current 5% VAT rate applying to restaurants and catering services and hotels is increased to 9%.
- Local taxes : the notion of "mixed use building", which used to be considered when calculating the tax on buildings, is no longer considered when determining the intended use for a building. Also, the minimum tax rate on residential and non-residential buildings has been altered (minimum 0,1% for residential buildings and 0,5% for non-residential buildings).
Last, but not least, the calculation of the taxation value of residential and non-residential buildings abides by new rules, and will be based on the underlying values published yearly on the website of the National Union of Public Notaries of Romania and no longer based on the table provided for by the Fiscal Code.