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Taxation for Micro-Enterprises in Romania

Taxation for Micro-Enterprises in Romania

According to the new changes to the Fiscal Code in Romania, micro-enterprises without employees are subject to the profit tax, as are consulting ones, starting with January 2023. Among the changes made is the elimination of the 3% income tax rate for this type of micro-enterprises that have no employees, leaving only the 1% tax for those with at least one employee. Lowering the threshold from EUR 1 million to EUR 500.000 for income tax is another important change.

It is advisable for foreign investors to obtain professional assistance before making any decision in relation to setting up micro-enterprises in Romania. Our Romanian accountants are committed to providing financial services that cater to every business needs and are experienced in taxation matters relating to micro-enterprises. They can explain the Romanian micro company tax regime applicable in this country.

Characteristics of a Romanian micro-enterprise

According to the latest changes in the Fiscal Code, a newly established legal entity is required to follow the Romanian micro company tax regime starting with the first fiscal year and will remain under this tax regime if it meets all of the following criteria:

  • The maximum threshold of annual turnover is EUR 500.000.
  • Income generated from consultancy and management activities is not more than 20% of the annual turnover;
  • It does not carry out any banking, insurance and reassurance, capital markets, gambling or upstream oil & gas activities;
  • The share capital must be held by entities other than the state or the local authorities.

Any newly registered legal entity with a share capital of at least RON 45,000 may choose to become a corporate income taxpayer as of its date of incorporation. Our accounting firm in Romania can offer you advice and assistance in relation to the latest changes in the Romanian micro company tax regime.

What you need to know about the taxation on micro-enterprises

Micro-enterprises are taxed on their turnover. Micro-enterprises with at least one full-time employee are subject to a tax rate of 1% imposed on the business income. Moreover, the firm has to pay to the state the imposed social contributions (pensions, health, work contribution) and the income tax for each employee.

One should know that micro-enterprises with no employees are no more subject to the business income tax of 3% imposed on profits generated in one fiscal year, as such regulation has been eliminated. 

Taxpayers of income tax like companies with a turnover of more than EUR 1 million may choose, according to the Fiscal Code, for the calculation, declaration, and payment of profit tax on a yearly basis or for quarterly installments. You can discuss further details about  Romanian micro company tax with our local specialists.

Taxation of micro-enterprises with large revenues

In the case of micro-enterprises with revenues exceeding the threshold of EUR 500.000, the profit tax is 16% of the quarter in which this ceiling was exceeded. This profit tax is also applicable in 2023 for micro-enterprises that have more than 80% income from management or consulting. But in the case of those who exceed EUR 500.0000 following the services provided of this kind or 20% of the total income, the profit tax is applied starting with the quarter in which the respective exceedance was registered (either the threshold mentioned above or the percentage), but except to opt for micro tax in the next period.

It is essential to mention that exiting the microenterprise income tax regime due to exceeding the newly established threshold must be declared to ANAF by March 13, 2023. These changes in the law come to the attention of our Romanian accountants, so get in touch with us if you want more information about Romanian micro company tax.

What other provisions and changes were made to the Fiscal Code

In addition to the changes mentioned above, the dividend tax is also mentioned, which increases from 5% to 8% starting from January 2023. The salaries of those who work part-time were also targeted, for which the social insurance contribution cannot be lower than the one applied for the minimum gross basic salary existing in Romania. There are exceptions in the case of income registered by special categories of taxpayers, such as people with disabilities, students, apprentices, or those who can work less than 8 hours a day. Here are other changes that you should take into account:

  • Starting from January 1, 2023, the VAT of 9% will be applied, instead of 5% for HoReCa services, as well as that for sweetened drinks, respectively 19%.
  • Legal entities with activities in sectors such as insurance, banking, mining, exploration and development, and gambling are exempted from the application of the micro tax.
  • Profit tax is due if a micro-enterprise carries out exempted activities, and this is implemented at the beginning of the respective quarter.

Therefore, there are a series of fiscal changes that you should consider starting next year. You can learn more about Romanian micro company tax from our accountants in Romania. We can explain the new requirements and implement them in terms of documents if you own a micro-enterprise in Romania.

Tax deductions for micro-enterprises in Romania

According to the Fiscal Code for 2022, micro-enterprises in Romania can also benefit from tax deductions. More specifically, they may represent 20% of tax for sponsorship, for the quarter in which the expenditures were registered. For a proper understanding of the new business and tax rules for micro-enterprises in Romania, it is best to talk to one of our accountants in Romania. They can help small, medium and large entrepreneurs align with the tax regulations imposed by the Fiscal Code and its modifications. 

Reasons to invest in Romania

Romania is part of the category of countries with an optimal profile for investments of any kind. The advantage of a strategic geographical position, with links to important financial centers in the world, a multilingual and experienced workforce, as well as a wealth of natural resources, places Romania on the list of foreign investors who want to develop their portfolio in this part of Europe. Here are some interesting figures and statistical data:

  • The total FDI stock registered by Romania in 2021 exceeded USD 108.7 billion.
  • Among Romania’s biggest investors, we mention countries such as Germany, the Netherlands, Cyprus, Austria, and Italy.
  • Around EUR 6.8 billion was the total FDI inflow recorded in the first 11 months of 2021.
  • Most foreign investments are directed to sectors such as manufacturing, real estate, financial and insurance, and construction.

Should you require further information in relation to accounting services for micro-enterprises or any assistance in the accountancy field in Bucharest and audit in Romania, please contact our Romanian accounting firm. We can explain in details what Romanian micro company tax entail.