The start of 2023 comes with a new series of tax changes. Some of them came into force on 1 August 2022. Among the most important of these, are the inclusion of microenterprises in a new increased taxation of dividends and changes to rent tax and the declaration of rental contracts.
However, experts say that in 2023 there will be no new tax changes for Romania. So, we have reviewed the main tax changes, of Romanian companies, that come into effect starting with this year.
The law O.U.G. no. 12/2022 came in force with the following taxation changes:
1. A Romanian company will be considered a microenterprise if it does not exceed the limit of 500.000 euro income.
In the past, your Company would be considered a microenterprise, with beneficial taxation and regulations, if it didn’t exceed the limit of 1.000.000 euro income in one year.
The tax regime for microenterprises becomes now optional. And it lowers the threshold from one million euro to 500.000 euro.
It is important to specify that the inclusion, of the fiscal status for microenterprises, in the new limit will be done next year, according to the revenues from the present year.
2. The tax rate for a microenterprise becomes unique of 1% of the Company’s income.
Compared to last years, when there were two variations for the tax rate: 1% and 3%.
For this taxation of 1% to be applied on your company, starting with this year, the condition is established only if the company has at least one employee.
There are only few exceptions to this one-employee rule, and it is based on what kind of activity do you have on your Romanian Company. For example, any company that has its activities in HoReCa Business – meaning Hotels, Restaurants and Coffee Shops – it can choose the 1% taxation, even if it doesn’t have any employee.
Access to this tax regime of 1% is restricted for companies that generate income from consulting and/or management activities, in a proportion greater than 20% of the total income.
In addition, a shareholder can hold more than 25% of the value of shares or voting rights only on three companies that apply this microenterprise regime.
3. The following companies that have these kind of activities are excluded from the scope of the microenterprise income tax:
– banking activities.
– in the fields of insurance and reinsurance, of the capital market, including the one that carries out intermediation activities in these fields.
– in the field of gambling.
– exploration, development, exploitation of oil and natural gas deposits.
4. Tax on dividends increases
The government has decided to increase the taxation of dividends to 8%, from 5%, with application from the beginning of 2023.
Also 8% will be the tax on income obtained by non-residents of Romania. The tax rate on dividend income is 8%.
The law also added some conditions for applying tax exemptions for dividends paid by a resident to a company that is resident in another member state of the European Union.
5. Profit tax of 16% is exempt if you reinvest the money.
When you decide to not take the dividends from your Romanian Company, and reinvest the profit of the company, this revenue will be exempt from taxation.
The companies that benefit from this tax exemption, are the ones that take the profit and invest it in assets. These goods must be used in production and processing activity of your company, as well as assets representing technology.
There are some more changes according to this law, some as the VAT increases on more products and services, new taxes for rent contracts and many more tax changes for employees, National Health Insurance system and real estate’s taxation rules.
If you have any questions about your Romanian company, on how these changes might affect your activities, don’t hesitate to contact us