Romania: Summary of recent tax law changes, including VAT and excise tax

Government Ordinance 16/2022

Government Ordinance 16/2022

Government Ordinance 16/2022 introduced the following changes to the tax law:

Corporate income tax

  • Corporate tax relief on reinvested profit: Corporate tax relief on reinvested profit was extended to cover investments made in assets used in production and processing activity, and in assets representing reinvested profit—effective from 18 July 2022. The definition of such assets will be set out in an Order of the Ministry of Finance.
  • Tax on dividends: The tax rate on dividends distributed/paid between Romanian legal entities, as well as on dividends distributed/paid to non-residents will increase from 5% to 8%—effective 1 January 2023. In addition, the conditions for the application of the tax exemption for dividends paid internally and cross-border by a Romanian tax resident are aligned for comparable situations. Finally, the dividend tax exemption for dividends distributed/paid to private pension funds, non-resident pension funds and/or voluntary pension funds was abolished. 

Specific tax

Law 170/2016 on the specific tax was repealed—effective 1 January 2023. Taxpayers that fell under the provisions of this law can opt either for the application of the microenterprise tax regime or for the corporate income tax regime.

Microenterprise income tax

  • Changes to definition of microenterprise: New requirements for a company to be considered a microenterprise apply—effective 1 January 2023—including:
    • Turnover from consulting and/or management services of no more than 20% of total revenues
    • At least one full-time employee
    • Turnover of less than €500,000
    • Shareholders cannot hold more than 25% of the participation titles in more than three other Romanian legal entities that are micro-enterprise taxpayers
  • Companies not subject to microenterprise income tax regime: The list of companies that cannot be subject to microenterprise tax was extended to include legal entities that carry out the following activities:
    • Banking
    • Insurance and reinsurance activities, on the capital market and intermediaries in these fields
    • Organizing gambling activities
    • Exploration, development, and/or exploitation of oil and of natural gas deposits
  • New rules for applying the microenterprise income tax system: The microenterprise tax system becomes optional—effective 1 January 2023. Companies will be able to opt to apply the microenterprise tax system starting from the following fiscal year, if they meet the aforementioned conditions and if they were not microenterprise taxpayers in a previous fiscal year beginning after 1 January 2023. Newly incorporated companies can opt to apply the microenterprise tax system starting from the first fiscal year, if they meet certain conditions.
  • Tax rate: The new microenterprise tax system has a tax rate of 1% regardless of the number of employees.
  • Additional new rules: New rules under the microenterprise income tax system related to the following issues also were introduced:
    • Leaving the microenterprise tax system during the year
    • Taxable base
    • Terms for declaring amendments
    • Payment of microenterprise tax

Value added tax (VAT)

  • Certain categories of non-alcoholic drinks will no longer will be subject to the reduced VAT rate. For these products, the standard VAT rate of 19% will apply—effective January 2023. 
  • The supply of hotel accommodation, and restaurant and catering services will no longer be subject to the 5% VAT rate but will be subject to the 9% VAT rate—effective 1 January 2023.
  • A new threshold of 600,000 RON has been introduced for the application of the 5% rate for the supply of housing. Any individual will only be allowed to acquire a single property whose value does not exceed this threshold. There are certain transitory measures that provide that the 5% VAT rate will also apply if (such transactions are not be considered for the 1 property limit mentioned above).
  • The application of the 5% VAT rate for supply of wood for use of firewood (in certain conditions) was extended to 31 December 2029.

Excise tax

  • Excise tax for alcoholic beverages and cigarettes will increase by approximately 5%—effective 1 August 2022.

Other changes

Government Ordinance 16/2022 also introduced changes to local taxes, the salary income tax regime, and the independent activities regime. 
 

Read a July 2022 report prepared by the KPMG member firm in Romania

 

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