In the Official Gazette no. 1139/2023, the Government Emergency Ordinance no. 115/2023 was published on fiscal budgetary measures for 2024, which introduces significant changes to the fiscal measures previously introduced by Law no. 296/2023. These changes are summarised below:
Corporate income tax
The most relevant changes in the area of corporate income tax concern the following:
- The following are listed as social expenses subject to the 5% limitation on salary expenses: (i) amounts paid by the taxpayer for the children of employees with their placement in early education units, within the limit of Lei 1500 per month per child and (ii) expenses incurred by the taxpayer in respect of units managed by itself as well as for nurseries and kindergartens.
- A 50% limit is introduced for operating expenses relating to a registered office owned by an individualor acquired by the taxpayer, which are not used exclusively for business purposes (i.e. also used for personal purposes).
- Private scholarships are no longer eligible for the tax credit. Private scholarships granted according to the law up to Lei 1500 per scholarship will be cumulated with other social expenses in order to fit within the 5% ceiling applied to salary expenses.
- The deductibility ceiling is reduced from 50% to 30% for adjustments for impairment of receivables that are uncollected within a period exceeding 270 days from the due date, applicable to receivables registered after 1st January 2024.
- Changes are brought to the depreciation of head offices which are not used exclusively for business purposes. Also, in case of use of registered offices for the benefit of shareholders, tax depreciation will not be deducted upon the computation of the corporate income tax.
- Tax losses incurred by the taxpayer will be carried forward up to 70% over a period of 5 years. Tax losses incurred in years prior to 2024 will be carried forward for the remaining 7 years up to a maximum of 70%.
- Changes are made to the excess borrowing costs. Excess borrowing costs which do not finance the acquisition/production of fixed assets which will be subject to an ANAF Order and which are incurred in relation to related parties are deductible up to a limit of €500,000. The ceiling of 500,000 Euro relating to excess borrowing costs incurred with related parties does not apply to credit institutions – Romanian legal entities, Romanian branches of credit institutions – foreign legal entities, non-banking financial institutions and investment firms defined by law. Excess borrowing costs incurred in relation to affiliated/non-affiliated parties may not exceed the ceiling of EUR 1,000,000 in a tax period.
- The corporate income tax may be redirected to sponsorship actions within the eligible limit up to the deadline for filing the corporate income tax return.
- Amounts for electronic cash registers will no longer be eligible for tax credit. Amounts of electronic fiscal cash registers remaining to be carried forward at the end of 2023 are items similar to expenses and their tax depreciation is not deductible.
Microenterprise income tax
- The eligibility conditions for a legal entity to apply the micro regime are modified as follows:
- The number of micro enterprises is limited to 1 (one) for each shareholder who owns, directly or indirectly, more than 25% of the shares/shares of the company; by 31st March of the following year, it shall be determined which of the companies will apply the microenterprise taxregime.
- The requirement to have filed annual financial statements within the legal filing deadline is introduced. For the year 2024, the condition is deemed to be met if the financial statements for FY 2023 are filed by 31.03.2024.
- In addition, for the determination of the ceiling of 500.000 Euro, the income obtained by other related micro-enterprises (definition according to Law no. 346/2006 on the stimulation of SME development) of the micro-enterprise under analysis will also be taken into account.
- From 1st January 2024, the special provisions applicable to taxpayers operating in the Horeca sector – applying the same standard eligibility conditions – are repealed.
- The micro-enterprises that are inactive at the Trade Register will apply the micro regime until they resume their activity, with a reassessment of the criteria after resuming the activity.
- If, during a tax year, the condition of at least 1 employee is not met and/or the financial statements are not timely submitted, the legal entity will owe standard corporate income tax from the quarter in which one of the conditions is no longer met.
- The tax credit for sponsorships/private scholarships/electronic cash registers is eliminated.
Clarifications for the IT, construction, agricultural and food sectors:
- Wage and salary-related income
For individuals with income from wages and salaries in the IT, construction, agriculture and food industry sectors, who in the course of the same month earn income for a fraction of the month, in the basic function, with one or, as the case may be, several employers in succession, for the application of the exemption, each employer determines the part of the 10,000 lei monthly ceiling corresponding to this period and grants the exemption for the gross monthly income earned, within the limit of the fraction of the ceiling thus determined.
- Contributions to the privately administered pension fund
Individuals in the above-mentioned fields may opt to pay contributions to a privately administered pension fund. The option is filed with the employer and the contribution is deducted from the month following registration of the option. Employees may revoke the option by submitting a written request to their employer, and the waiver will take effect from the following month’s income.
- Reduction of the contribution rate for programmers
The social security contribution rate for programmers is reduced until 31 December 2028, for gross monthly income of up to 10,000 lei. The part of the income exceeding this ceiling does not benefit from tax relief.
Other amendments and additions:
- Teleworking allowance
The provision qualifying the teleworking allowance as a type of income that is non-taxable and not subject to social security contributions, up to a monthly ceiling of 400 lei is repealed, from January 2024.
- Sports facilities for employees
The ceiling for sports facilities paid by employers is reduced from €400/year to €100/year as from January 2024.
- Inclusion of previously non-taxable income in the 33% monthly ceiling
Income representing (i) amounts paid by employers for the early education of employees’ children, but not more than 1,500 lei/month for each child, and (ii) the favourable difference between the preferential interest rate and the market interest rate for loans and deposits, are excluded from the category of non-taxable income covered by Art. 76 para. (4) of the Tax Code and included in the category of income that is non-taxable and not subject to social contributions within the monthly ceiling of at most 33%.
- Calculation of the ceiling for the delegation/secondment/transnational secondment allowances
In the case of delegation, secondment, transnational secondment allowances and the benefits received by mobile workers referred to in H.G. 38/2008, as well as any other amounts of the same nature, the ceiling corresponding to the value of 3 basic salaries corresponding to the post occupied shall be calculated separately for each month by comparing the 3 salaries with the number of working days in that month, and the result shall be multiplied by the number of days corresponding to each month of the period of delegation/secondment/work in another locality, in the country or abroad.
- Inclusion of sick leave allowances in the basis for calculating health insurance contributions:
Starting with January 2024, sick leave benefits become part of the health contribution base, except for those for accidents at work or occupational diseases, which are exempt.
Tax on private income
An allowance of20% is introduced for rental income.
Regarding the obligation to issue e-invoices, equal sanctions are introduced for both the issuer and the recipient in case of non-compliance with the legal obligations – the fine is 15% of the total invoice value.
If you have any further questions regarding these fiscal changes, please do not hesitate to contact our Romanian team.