In the Official Gazette no. 716 of July 15th, 2022, Government Ordinance no. 16/2022 for the amendment and completion of Law no. 227/2015 on the Tax Code and for the repeal of Law no. 170/2016 regarding the specific tax for certain activities was published.
Please find below the most important tax amendments:
- Corporate income tax
Starting with 2023 year, it is extended the application of the tax exemption for the reinvested profit also on the profit invested in assets used in the production and processing activity and in assets representing refurbishment, the list of such assets will be established by Order of the Minister of Finance.
- Dividend tax
From January 1st, 2023, the tax rate on dividends will increase from 5% to 8%, for dividends distributed / paid to Romanian legal entities, as well as to non-residents, but also for dividends distributed / paid to privately managed pension funds and / or voluntary pension funds.
The increased rate will apply to dividends distributed after January 1st, 2023.
- Micro-enterprises income tax
Numerous changes are brought to the micro-enterprises income tax system, with effect from January 1st, 2023, out of which we mention:
- The system becomes optional. Taxpayers can choose to apply this system starting with the fiscal year following the one in which they meet the conditions and as long as they were not micro-enterprises income taxpayers after January 1st, 2023. In respect to the conditions for being a micro-enterprises, the following amendments are introduced:
- It is reduced the threshold of revenues obtained in the previous year from 1 million euros to 500,000 euros;
- Limitation of the revenues from consultancy and management obtained by a micro-enterprises to 20% of the total revenues obtained;
- The micro-enterprises must have at least one employee (micro-enterprises without employees will owe 16% corporate income tax);
- Introducing the condition of holding shares by the same shareholder / associate in maximum three micro-enterprises, for those holding more than 25% of the shares. The decision regarding the companies that will continue under this system belongs to the shareholders / associates.
- The tax rate of 3% is eliminated, remaining a unique tax rate of 1%;
- If, during a fiscal year, the conditions for being a micro-enterprises (for example exceeding the revenue threshold of 500,000 euro or obtaining revenue from consultancy and / or management over 20% of total revenue), the taxpayer owes corporate income tax starting with the quarter in which the limits are exceeded;
- Newly established Romanian legal entities may choose to pay micro-enterprises income tax starting with the first fiscal year, if the conditions regarding the holding of share capital and the holdings of associates are met at the date of registration at the Trade Register and the condition regarding the employment of at least one employee is met within 30 days from the date of registration of the respective legal entity;
- Romanian legal entities that fulfil the conditions for applying the micro-enterprises income tax can opt for the corporate income tax system only starting with the next fiscal year;
- Taxpayers that carry out activities in the field of banking, insurance and reinsurance, gambling, exploration, development, exploitation of oil and natural gas fields are excluded from the application of the micro-enterprises income tax system;
- Income from dividends received by a micro-enterprises from its subsidiary, located in another Member State of the European Union, is excluded from the taxable base, as long as the micro-enterprises and the subsidiary meet the conditions provided at article 24 Tax Code;
- The annual Informative statement regarding the beneficiaries of sponsorships (Form 107) is submitted until June 25th of the following year, during the application of the provisions of the Government Emergency Ordinance no. 153/2020.
- SPECIFIC TAX
Starting with January 1st, 2023, Law no. 170/2016 regarding the specific tax to certain activities is repealed. Taxpayers who were subject of the Law 170/2016 until December 31st, 2022 can choose to apply either (i) the micro-enterprises income tax system, even if they do not meet the conditions for the application of this system, or (ii) the corporate income tax system.
- INCOME TAX AND SOCIAL CONTRIBUTIONS
- Cancellation of the income tax exemption for individuals who earn income from salaries and assimilated to salaries, as a result of carrying out the activity on the basis of an individual employment contract concluded for a period of 12 months, with Romanian legal entities carrying out certain seasonal activities provided in art. 1 of Law no. 170/2016 regarding the specific taxation of certain activities.
- Revision of the framework for granting tax incentives for employees who carry out activities in the field of constructions, as well as in the agricultural field and in the food industry, as follows:
- The incentives will apply only to individuals who obtain salary income based on an individual employment contract;
- Clarifications are provided regarding the turnover indicator and the calculation method of that turnover;
- The maximum salary up to which the incentives can be applied decreases from 30,000 lei / month to 10,000 lei / month.
- From a salary income tax perspective, the main changes are the following:
- The following types of salary income become non-taxable, up to a monthly cumulated amount of no more than 33% of the basic gross salary corresponding to the occupied job position:
- The additional payments received by the employees based on the mobility clauses;
- The reimbursement of tourism expenses, including transport, during the paid leave, granted by employers to their employees and their family members, capped at the level of one average gross salary/year/employee;
- contributions to a pension fund, borne by the employer for its own employees, up to a limit of 400 euros per year for each person;
- the voluntary health insurance premiums, as well as the medical services provided in the form of a subscription, borne by the employer for his own employees, up to a maximum amount of 400 euros, for each person;
- the amounts granted to the employees who carry out teleworking activities to compensate utilities and furniture expenses at the place where the employees carry out their activity;
- This new ceiling also includes two new types of income, as follows:
- the value of the food prepared in own units or purchased from specialized units, granted by the employer to employees who do not benefit from meal vouchers, within the value of one meal voucher per working day;
- accommodation and/or the value of the rent made available by the employers, within the limit of a non-taxable ceiling of 20% of the minimum gross salary.
- The order in which the income types are included in the monthly ceiling is established by the employer.
- The same rules apply from a mandatory social security contributions perspective.
- Review of the system for granting personal deductions.
- Additionally, the annual threshold from which taxpayers who obtain income from independent activities are obliged to switch from a taxation system based on income norms to a taxation system based on actual income and expenses is reduced from EUR 100,000 to EUR 25,000.
- The lump-sum deductible rate of 40% that is applied on gross income to determine the taxable income from rental activities, other than income from lease and income for rental for tourism purposes of rooms located in personal properties, is eliminated. Thus, the taxable income will become the gross rental income.
- The owner's obligation to register the rental agreement between the parties, as well as all subsequent changes, within 30 days from its entry into force/amendment, to the competent tax authority, is reintroduced. In the case of contracts in progress on 1 January 2023, the registration of the contract and the related amendments shall be made within 90 days from the date on which the obligation to register occurred.
- The dividend income tax rate will increase from 5% to 8%, including for non-residents.
- The non-taxable ceiling, the scales and their respective tax rates for income from gambling activities are modified. The proposed rates are 10%, 20% and 40%, depending on the amounts won.
- The elimination of the non-taxable ceiling (that currently amounts to 450,000 RON) for the income obtained from the transfers of ownership of real estates / land and the application of a tax rate of 1% or 3% on the selling price, dependant of the period in which property is held.
- Reintroduction of the minimum calculation base for social security contributions due by the employee (i.e. health insurance contribution and pension contribution) at the level of the minimum gross basic salary in force in the month for which they are due, corresponding to the number of working days in the month in which the full/part-time employment contract was active, with some exceptions.
- If the social insurance contribution calculated on the basis of actual income derived is lower than the contribution calculated on the minimum basis, the difference is paid by the employer / income payer on behalf of the employee / income beneficiary.
- For individuals who obtain annual income from independent activities and from the transfer of intellectual property rights above the level of 24 minimum gross salaries, the minimum taxable base will increase to this ceiling (24 minimum gross salaries).
- Regarding the health insurance contribution due by individuals for income other than employment (independent activities, transfer of intellectual property rights, rental activities, association with a legal entity, agriculture, fisheries and forestry, other sources and investments), two new annual taxable bases are introduced, as follows:
- 6 minimum gross salaries, in case of obtaining cumulated annual income between 6 and 12 minimum gross salaries;
- 24 minimum gross salaries, in case of obtaining cumulated annual income of over 24 minimum gross salaries.
- Individuals who obtain a cumulative annual net income below the level of 6 minimum gross salaries would not be liable to pay the health insurance contribution, except for the situation where in the previous tax year they did not have the quality of employee and did not fit in the categories of persons exempted from the payment of the health insurance contribution. In the latter case, the persons concerned would owe the contribution at the level of 6 minimum gross salaries.
Most of these changes will enter into force starting with 1 January 2023 (or with the revenues related to the month of January 2023), with certain exceptions, the most important being:
- The new rules regarding the taxation of gambling income, which will come into force for the income paid starting with 1 August 2022;
- The changes related to the tax incentives in the field of construction, respectively in the agricultural field and in the food industry, which will enter into force as follows:
- The facilities will apply only to individuals who obtain salary income based on an individual employment contract - these changes will enter into force starting with the income related to January 2023;
- Clarifications are provided regarding the turnover indicator and the calculation method of the turnover - these changes have entered into force within 3 days from the date of publication in the Official Gazette (18 July 2022);
- The maximum salary up to which the incentives can be applied decreases from 30,000 lei / month to 10,000 lei / month - these changes should come into force starting with the revenues related to August 2022.
- Reintroduction of the minimum calculation base for establishing the employee social security contributions (i.e. health and pension contribution) for salary income below the minimum gross salary and the bearing of the difference in contribution by the income payer, which will come into force starting with the income related to August 2022.
The amendments brought to the Tax Code refer to:
- Increasing the VAT rate from 5% to 9% for accommodation in the hotel sector, restaurant and catering services and the delivery of chemical and pesticide fertilizers, starting with January 1st, 2023;
- Starting with January 1st , 2023, the non-alcoholic beverages falling within CN codes 2202 10 00 and 2202 99, respectively of non-alcoholic beverages containing added sugar or other sweetening matter or flavored, are excluded from the scope of the 9% reduced VAT rate, in addition to the exception already provided for alcoholic beverages;
- Also starting with January 1st, 2023, will be restricted the scope of application of the reduced rate of 5% to the delivery of housing to individuals, in the sense that individuals benefit from this facility only once. Thus, any individual can purchase, individually or jointly with another individual/s, a single home whose value does not exceed the amount of 600,000 lei, excluding VAT, with a reduced rate of 5%.
- Local taxes
Important changes are made in respect to the computation of the building tax from January 1st, 2023, as follows:
- The taxable base for residential / non-residential buildings is changed.
This will be determined by the local authorities according to the values included in the Market Studies regarding the indicative values regarding the real estate properties in Romania, administered by the National Union of Public Notaries in Romania. If this value is lower than the last value registered in the database of the local tax authority on December 31st, 2022, the tax is calculated on the last value registered in the database of the local tax authority at December 31st, 2022 .
In this respect, the local authorities will send the owners a notice with respect to the basis of computation of the local tax, the value is considered accepted, as long as it is not contested within 30 days of receipt;
- The differences between the local tax rates on buildings owed by individuals / legal entities, for the same type of building (residential / non-residential) are eliminated. Also, the minimum limits of tax rates are changed: for residential buildings the minimum will be of 0.1%, while for non-residential buildings the minimum will be of 0.5%.
The maximum limit of the tax rate that can be set by the local authorities is eliminated.
- For buildings consisting of both residential and non-residential spaces, the building tax will be calculated by applying the rate corresponding to the majority destination (over 50%) on the value of the entire building.
- Other changes
From January 1st, 2023, taxpayers that perform retail and wholesale trade, service activities, with an annual turnover over 10,000 euro (currently the threshold is of 50,000 euro), are obliged to accept as payment method debit, credit or prepaid cards, trough a POS terminal and / or other modern acceptance solutions, starting with the quarter following the one in which the revenues exceed the threshold.