Main tax changes expected as Romanian tax reform | News Flash

On Friday, October 27, 2023, Law no. 296/2023 regarding certain fiscal and budgetary measures to ensure the long-term financial sustainability of Romania, aimed as tax reform measures – was published in the Official Gazette. The Law contains both tax changes and other measures that strengthen financial discipline. Regarding the entry into force of the measures, some of them have immediate applicability, i.e. November 1, whilst others will enter into force gradually, according to the particular entry into force dates, e.g. November 14, 2023, January 1, 2024, July 1, 2024, etc. We have structured below the tax changes depending on the date of entry into force:

Fiscal changes entering into force on November 1, 2023

Starting with the revenues of November 2023, the tax treatment applicable to employees operating in the IT sector (activities of software development, tax exempt so far), construction, agriculture and agri-food sector is standardized as follows:

• Tax exemption on gross salaries up to a limit of Lei 10,000, inclusive, the portion exceeding the threshold being fully taxable. 
• Pension fund contribution of 25% is due, less the mandatory private pension fund contribution of 3.75% (that will increase to 4.75% starting 1st of January 2024) – until 31.12.2028. Employee may though opt for the payment of the thus reduced contribution. 
• Health insurance contribution of 10% is due.
• Work insurance contribution is due – 2.25% or the one applicable to special conditions, if the case.

Fiscal changes that enter into force on January 1, 2024

These tax changes target a wider range of tax areas, as we will detail below:

1. Corporate income tax

Minimum corporate tax for taxpayers with a turnover higher than EUR 50 million

• A minimum tax of 1% on turnover is implemented for taxpayers who derived a turnover of over 50 million euros in the previous fiscal year and, during the concerned year, the corporate tax computed at the level of the cumulated profits is lower than the minimum tax.
• The calculation of the minimum corporate tax will be performed as follows: IMCA = 1% x (VT – Vs – I – A), where the indicators are:
  • IMCA = minimum tax, determined cumulatively from the beginning of the fiscal year/modified fiscal year up to the end of the quarter/concerned year.
  • VT = total revenues, determined cumulatively from the beginning of the fiscal year/modified fiscal year to the end of the quarter/concerned year, as the case may be;
  • Vs = revenues that are subtracted from total revenues, determined cumulatively from the beginning of the fiscal year/modified fiscal year to the end of the quarter/concerned year, as the case may be, representing: regulated non-taxable revenues, revenues related to work in progress, revenues from subsidies, compensations for damages.
  • I = the value of the purchase/production of assets carried out in the quarter/concerned year, starting with FY 2024, respectively with the modified fiscal year starting in 2024; if the assets are realized during several consecutive years, the value taken into account for the determination of this indicator is the one recorded in the accounting records related to the accounting quarter/year, as the case may be;
  • A = accounting depreciation of assets purchased/produced before January 1, 2024 / first day of the modified fiscal year beginning in 2024.
• If the minimum tax is negative, then, it shall be considered NIL.
• The corporate tax that serves as a comparison is the cumulated corporate tax after deducting the tax credit for sponsorship, the bonuses provided for by EGO 153/2020, but without deducting the external tax credit or the tax exemption on reinvested profit.
• Rules are also introduced for taxpayers who apply the annual system with advance payments of profit tax, as well as for members of the fiscal group / responsible person within the group.

Additional tax on turnover for credit institutions – Romanian legal entities and Romanian branches of credit institutions – foreign legal entities.

An additional tax of 2% is established (until December 31, 2025), respectively 1% starting from January 1, 2026 on the turnover derived by credit institutions – Romanian legal entities and Romanian branches of credit institutions – foreign legal entities, tax in addition to the profit tax due.

Additional tax on turnover for legal entities that carry out activities in the oil and gas sectors and that register a turnover of over EUR 50 million in the previous year. The formula for calculating the tax on turnover is: 0.5% x (VT – Vs – I – A).

2. Microenterprise tax

• First of all, we mention that the eligibility conditions for the qualification of a Romanian legal entity as a microenterprise taxpayer have not been changed, as initially proposed.
• The tax rates are amended as follows, depending on new conditions introduced by the law:
  • 1%, for microenterprises that derive revenues that do not exceed EUR 60,000 inclusive and that do not carry out the activities provided for in letter b) point 2 below;
  • 3%, for microenterprises that:
    • derived revenues higher than EUR 60,000; or
    • carry out activities, main or secondary, corresponding to the following NACE codes:
      • 5821 – Computer game publishing activities,
      • 5829 – Editing activities of other software products,
      • 6201 – Custom software creation activities (customer-oriented software),
      • 6209 – Other service activities regarding 7 information technology,
      • 5510 – Hotels and other similar accommodation facilities,
      • 5520 – Accommodation facilities for holidays and short periods,
      • 5530 – Caravan parks, campsites and camps,
      • 5590 – Other accommodation services,
      • 5610 – Restaurants,
      • 5621 – Food activities (catering) for events,
      • 5629 – Other food services n.e.c.,
      • 5630 – Bars and other activities serving drinks,
      • 6910 – Legal activities – only for professional companies with legal personality, established by lawyers according to the law,
      • 8621 – General medical assistance activities,
      • 8622 – Specialized medical assistance activities,
      • 8623 – Dental assistance activities,
      • 8690 – Other activities related to human health.
• Rules are introduced for shifting to one tax rate to another in case of exceeding the threshold of EUR 60,000 or the performance of the regulated activities mentioned above.

3. Income tax

• It is clarified that taxable income represents the equivalent in Lei of meal vouchers within the same limits and conditions, as well as within the same destinations as those provided by law, granted to employees who do not benefit from such vouchers.
• Changes are brought to the types of revenues that are included in the non-taxable 33% basic salary limitation:
  • With regard to the value of the food provided by the employer to its own employees, it is mentioned that the number of days in the month in which the employee carries out telework activity or work from home or is on holiday/medical leave/delegation is not taken into account.
  • Regarding the value of the touristic and/or treatment services, including transport, during the holiday period, for own employees and their family members, the provisions are not applicable to employees who benefit from holiday vouchers, in accordance with the legislation in force.
• Changes to the computation of the personal income tax for individuals carrying out independent activities subject to cash accounting system: the annual taxable income is the net income from any source out of which pension fund and health insurance are deducted. The deduction of the social contributions are proportionate with the ratio of such revenues in total revenues subject to social contributions.

4. Social contributions

• Health insurance contribution becomes due for meal vouchers and holiday vouchers.
• Individuals who earn income from independent activities from one or more sources are subject to 10% health insurance contribution applied to the annual net income (income allowances) which cannot be higher than the level of 60 gross minimum wages in force upon the submission of the Unique Tax Return.
• Individuals who derive income from independent activities below 6 gross minimum wages are not subject to health insurance contribution as long as they also derive salary revenues or other source of income higher than 6 minimum gross salaries.
• Individuals who obtain income from investment, rental activities, intellectual property rights will be subject to health insurance applied to:
  • 6 minimum wages in force upon the submission of the Unique Tax Return, if the income falls between 6 and 12 minimum wages;
  • 12 minimum wages in force upon the submission of the Unique Tax Return, if the income falls between 12 and 24 minimum wages;
  • 24 minimum wages in force upon the submission of the Unique Tax Return, if the income is at least 24 minimum wages.

5. VAT

• The concept of home that can be lived in as such, for VAT purposes, is redefined.
• For the following products, the VAT rate is increased to 19%: alcohol-free beer, foods with added sugar (over 10g/100g product), with the exception of Romanian specialty (RO: cozonac) and biscuits.
• The following operations will be charged with 9% VAT (increased from 5%):
  • the delivery of housing as part of the social policy (i.e. with a useful surface of a maximum of 120 sqm, exclusive of household annexes, whose value, including the land on which they are built, does not exceed the amount of Lei 600,000, exclusive of VAT);
  • delivery and installation of photovoltaic panels, solar thermal panels, heat pumps and other high-efficiency, low-emission heating systems, including installation kits, as well as all necessary components purchased separately for housing/central public administration buildings or local with the exception of commercial companies;
  • delivery and installation of components for the repair and/or expansion of systems as a component part of construction deliveries;
  • services that consist of access to malls, amusement parks and recreational parks whose activities are included in CAEN codes 9321 and 9329, fairs, exhibitions, cinemas and cultural events, other than those exempt from VAT;
  • services consisting of access to sports events.
• The following operations will be charged with 19% VAT (increased from 5%):
  • the right to use sports facilities whose activities are included in NACE codes 9311 and 9313, other than the exempt ones;
  • the transport of persons by trains or historical vehicles with steam traction on narrow lines for touristic or leisure purposes;
  • the transport of persons using the cable transport facilities – cable car, cable car, chair lift, ski lift – for tourist or leisure purposes;
  • the transport of persons with animal-drawn vehicles, used for tourist or leisure purposes;

6. Excise duties

• Unharmonized excise duties are introduced for the following categories of products: products containing tobacco, intended for inhalation without burning; liquids with or without nicotine, intended for inhalation without burning; products intended for inhalation without burning, containing tobacco substitutes, with or without nicotine; non-alcoholic drinks with added sugar for which the total sugar level is between 5g – 8g/100ml; non-alcoholic drinks with added sugar for which the total sugar level is more than 8 g/100 ml.
• We remain available for details regarding the tariff classification as well as other conditions provided by law.

7. Special tax on high value goods

• The special tax on high-value goods is introduced for the following categories of taxpayers:
  • Individuals who, as of December 31 of the previous fiscal year, own residential buildings in Romania solely or under joint ownership whose taxable value exceeds Lei 2,500,000. The tax is computed as 0.3% applied to the difference between the taxable value of the building communicated by the local fiscal body through tax decision and the threshold of  Lei 2,500,000;
  • Individuals/legal entities that own vehicles registered in Romania and whose purchase value exceeds 375,000 lei. The special tax is computed as 0.3% applied to the difference between the purchase value and the threshold of Lei 375,000 and is due for a period of 5 years from the date of registration of the vehicle or for the fraction of time until the completion of the 5-year period.
• Deadlines for submission of the tax return and payment of tax:
  • April 30 inclusive of the current fiscal year – for owners of residential buildings;
  • December 31 inclusive of the current fiscal year – for vehicle owners.

8. Generalized B2B RO-invoice system

• Electronic invoicing becomes mandatory under B2B regime as follows:
• Starting January 1, 2024, economic operators established in Romania for VAT purposes, as well as those not established in Romania but registered for VAT purposes that supply goods / services with the place of supply in Romania, are required to issue electronic invoices and send them in the national RO-invoice system, regardless of whether the recipient is enrolled in the system or not. Exports and intra-Community deliveries of goods are excluded.
• The deadline for submitting invoices in the national RO e-Invoice electronic invoice system is 5 working days from the date of the invoice, but no later than the 15th of the following month.
• Grace period: during January 1 – March 31, 2024, there are no penalties for non-compliance with the obligations to submit invoices in the RO e-Invoice system.
• Contraventions for failure to comply with obligations in the e-invoice field:
  • Lei 5,000 – 10,000 for large taxpayers;
  • Lei 2,500 – 5,000 for medium taxpayers;
  • Lei 1,000 – 2,500 for other legal entities, as well as for individuals.

Fiscal changes – entry into force from July 1, 2024

• Starting July 1, 2024, only invoices issued and transmitted in the national RO-invoice system by taxable persons established in Romania under the B2B regime for supplies of goods and services taxable in Romania will be considered invoices within the meaning of art. 319 of the Fiscal Code, without the need for being accepted by the recipients.
• Revenues discovered by the tax authorities whose source is not identified will be subject to a 70% tax rate applied to an adjusted basis.

Measures aimed to strengthen financial discipline – entry into force November 14, 2023

• Law 296/2023 amends also Law no. 70/2015 for strengthening the financial discipline regarding the operations of cash collections and payments and for the amendment and completion of EGO no. 193/2002 regarding the introduction of modern payment systems, with subsequent amendments and additions.
• The changes concern the operations of cash collections and payments, as follows.
• Cash collections and payments can be performed under the following conditions:,
  • Collections from legal entities, freelancers and other similar entities, within the limit of a daily ceiling of RON 1,000.00 per person;
  • Collections made by cash and carry stores, from legal entities, freelancers and other similar entities, within the limit of a daily ceiling of RON 2,000.00 per person;
  • Payments to legal entities, freelancers and other similar entities, within the limit of a daily ceiling of RON 1,000.00 / person, but not more than a total ceiling of RON 2,000.00/day;
  • Payments to cash and carry stores, within a total daily ceiling of RON 2,000.00;
  • Advance payments, within the limit of a daily ceiling of RON 1,000.00 per person;
  • The cash amounts in the cash register of legal entities cannot exceed, at the end of each day, the ceiling of RON 50,000.00. Cash amounts that exceed the ceiling are deposited in the bank accounts of these persons within 2 (two) working days;
  • By way of exception, it is allowed to exceed this ceiling only with the amounts related to the payment of salaries and other personnel rights, as well as other operations with individuals, for a period of 3 (three) working days from their scheduled payment date.
• Non-compliance with above provisions constitutes contraventions being sanctioned with a fine in an amount equivalent to 25% of the amount collected/paid, respectively held in the cash register, which exceeds the established ceiling, for each type of operation, but not less than RON 500.00.
• Split cash collections from beneficiaries for invoices whose value is greater than RON 1,000.00 and, respectively, RON 2,000.00, in the case of cash and carry stores, as well as splitting invoices for a delivery of goods or a provision of services whose value is greater than RON 1,000.00, respectively RON 2,000.00 are forbidden.
• Split cash payments to suppliers of goods and services for invoices whose value is higher than RON 1,000.00 and, respectively, RON 2,000.00, to cash and carry stores are prohibited. The persons provided for in art. 1 paragraph (1) from Law 70/2015 can pay invoices with values that exceed the ceiling of RON 1,000.00, to suppliers of goods and services, respectively of RON 2,000.00, to cash and carry stores, as follows: RON 1,000.00 /RON 2,000.00 in cash, the amount exceeding this ceiling can only be paid through non-cash payment instruments.
• Cash collection and payment operations between legal entities, freelancers individuals, representing the consideration for deliveries or purchases of goods or services, dividends, assignments of claims or other rights and receipts or reimbursement of loans or other financing it is carried out within the daily ceiling of RON 5,000.00 to/from one person, until December 31, 2024 and RON 2,500.00, starting from January 1, 2025.
• The operations of cash collections and payments performed between legal entities, freelancers and individuals as shareholders/administrators/natural persons/other creditors save for institutional creditors that carry out financial intermediation activities representing loans regardless of their nature and destination area allowed only through non-cash payment instruments.