Amendments to the Fiscal Code proposed by the Romanian Government

14. July 2022 | Reading Time: 5 Min

The Romanian Government is getting ready to introduce various amendments and additions to the Fiscal Code. These are included in a draft ordinance which will be at the Government meeting on Friday for approval. The amendments and additions cover several tax areas, thus affecting the majority of taxpayers.

We present below the main novelty elements included in this draft normative act, pointing out that, in order to be applicable, they will have to be published first in the Official Gazette of Romania. Moreover, the draft ordinance provides for different deadlines of entry into force (most with effect from 01.01.2023), which is why it is recommended to carefully examine them once the final form of the normative act is available.

  1. Corporate income tax 
  • The invested profit facilities will also apply to investments in assets intended for production and processing, as well as assets intended for refurbishment. The assets used in the production, processing activities and refurbishment will be settled by an order of the Ministry of Finance.
  • The dividend tax is increased from 5% to 8%.
  • Specific conditions are set for dividend payers, as well as for dividend recipients regarding the application of a favorable tax regime to dividend income.
  1. Micro-enterprise income tax
  • The definition of micro-enterprise is amended – please note that the following conditions must be met cumulatively by the micro-enterprise:
    • generated revenue, other than consulting and/or management, more than 80% of the total revenue;
    • has at least one employee;
    • generated revenue that did not exceed the RON equivalent of 500,000 euros. The exchange rate for determining the euro equivalent shall be that at the end of the financial year in which the revenue was recorded;
    • has associates/shareholders holding more than 25% of the value/number of participation titles or voting rights in up to three Romanian legal entities, which fall within the scope of applying the micro-enterprises tax system, including the person verifying that the conditions laid down in this article are met;
    • the share capital is held by persons other than the state and administrative-territorial units;
    • is not in dissolution, followed by liquidation, registered as such at the Trade Register or at the courts of law, according to the law.
  • Certain activities are excluded from the application of micro-enterprise income tax.
  • The income tax on micro-enterprises becomes optional.
  • Micro-enterprises will be able to opt for a corporate income tax regime under certain conditions.
  • A single tax rate for micro-enterprises will be applied, respectively 1%.
  • Transitional provisions are implemented for the exercise of the option to pay income tax on micro-enterprises.
  1. Income tax and social contributions 
  • Amendments are made to the tax incentives applicable to the construction sector, the agriculture sector, and the food industry as well. Among others, the maximum salary threshold up to which the tax incentives apply is to be reduced, also limited the incentives to activities performed under the individual labour contracts.
  • The fixed income quota for self-employed is to be reduced from EUR 100.000 to EUR 25.000.
  • The tax regime applicable to per diems and additional benefits received under the mobility clauses is to be amended once more.
  • A new additional threshold of 33% of the gross salary corresponding to the job held will apply to certain non-taxable salary benefits. Among others, the following will be included under this: additional benefits received under the mobility clause, food granted by employers to employees in certain circumstances, the rent expense incurred by the employer, and the accommodation made available by the employer for the employees in certain conditions, the costs with tourist and treatment services, the contributions to the facultative pension scheme, the voluntary health insurance premiums and medical subscriptions, the amounts granted to employees carrying out their activity under the telework regime. Similar provisions apply for establishing the computation base for social contributions.
  • A complex mechanism is introduced in respect of personal deductions, also being added as a supplementary personal deduction.
  • The flat-rate quota of expenses used to determine taxable income from rent income, other than the rent of agricultural land and renting of rooms for tourism purposes, is to be eliminated. The rent agreements shall have to be declared with the tax authorities.
  • Income tax on dividends is to be increased from 5% to 8%.
  • Several amendments are made to the taxation of income from gambling.
  • The taxation applied on the sale of a property is also to be amended.
  • Social contributions owed by individuals under individual labour contracts cannot be lower than the social contributions that would be due on the minimum gross salary. Certain exemptions will apply, such as the case where individuals derive during the same monthly income from salaries or assimilated to salaries under two or more individual labour contracts and the aggregated monthly basis is at least equal to the minimum gross salary.
  • The way in which social contributions are determined for income obtained from activities other than salary income is changed. According to one of the amendments, the annual basis for calculating the social security contribution and the health social security contribution will double if the income is higher than 24 gross minimum wages per country. Practically, in these cases, according to the draft ordinance, the contributions will be set at the level of 24 gross minimum wages per country.
  1. Value added tax 
  • The VAT rate applicable for accommodation services, restaurant, and catering services is increased from 5% to 9%.
  • The VAT rate applicable to beverages with high sugar content is increased to 19%.
  • A threshold of RON 600.000 is set for the supply of housing to individuals up to which VAT of 5% is applied. The reduced rate will apply to a single property purchased by the individual.
  1. Other changes included in the draft ordinance 
  • Dividend payments to non-residents will also be increased to 8%.
  • The level of excise duty applicable to supplies of alcohol and tobacco products is increased.
  • Minimum thresholds for building taxes due to local authorities are set. In the case of residential buildings, the minimum tax rate will be 0.1% applicable to the value of the building and in the case of non-residential buildings, the minimum tax rate will be 0.5% applicable to the value of the building. The way in which the value of the building is to be determined in each individual case is presented in the draft ordinance.
  • The regulations on the specific tax of certain activities are repealed. 

Source: Draft Government Ordinance amending and supplementing Law no. 227/2015 on the Fiscal Code, repealing some normative acts and other financial-fiscal measures. The normative act is not yet in force and may be subject to changes until publication in the Official Gazette.

Tax Alert July 2022
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