If you have a small business, or if you’ve made a calculation and want to switch from PFA to micro business because it will benefit you more, you should take into account the tax changes that apply from 1 January 2023.

They were introduced by OG 16/2022 or, as we also call it, the Tax Increase Ordinance (because that is exactly what is happening).

As Dan Manolescu, president of the Chamber of Fiscal Consultants, said in an interview with HotNews.ro, the whole philosophy of micro-enterprise is changing (or has changed, given that the Decree is in the Official Gazette of July 15).

Do the math and see which is more profitable for you: 16% corporate tax or 1% on profits

First of all, you should take into account that the income tax ceiling will no longer be €1 million and has been halved to €500,000.

that’s not all. The 3% turnover tax rate (which existed for companies that had no employees) disappears.

So, 1% remains, but with one condition: you must have at least one employee.

CAREFULLY: A newly established company can choose to pay micro-enterprise income tax starting from the first financial year, if the conditions are met on the date of registration in the commercial register, within 30 days inclusive of the date of registration.

In addition, if the employment contract is suspended, the condition regarding the maintenance of the employee is considered fulfilled if the period of suspension is less than 30 days and the situation is registered for the first time in the relevant fiscal year. Otherwise, it goes to income tax.

important EXCEPTION: For a micro-enterprise with one employee, the employment relationship with which is terminated, the condition is considered fulfilled if, within 30 days after the termination of the employment relationship, the new employee is hired under an individual employment contract for an indefinite period or for an indefinite period. determined for at least 12 months.

*If the part-time supplement is abolished in Parliament (as there is an OG) we may see a change here where the employee has to work full-time. We will see soon.

VERY IMPORTANT: If during a financial year a micro-enterprise has revenues exceeding €500,000, it must pay income tax starting from the quarter in which any of these limits was exceeded, without the possibility of choosing for the next period of application of the provisions.

So, probably not necessary (given the previous paragraph), but micro-enterprises without employees will be subject to corporate income tax.

For those with multiple companies, there is a limit: one person can be a shareholder in no more than 3 micro-enterprises if they own more than 25% of the shares.

If you have already exceeded the threshold of €500,000, you will pay income tax next year

As the Decree is currently formulated, it shows us that if a company that today has already exceeded a turnover of 500,000 euros, it is clear that on December 31, 2022 it will have more. Therefore, from next year, it will pay income tax, which was also confirmed by the president of the Chamber of Fiscal Consultants (CCF), Dan Manolescu.

Essentially, for these companies, the rules have changed during the game.

Since we mentioned the micro tax and income tax, the special Horeca tax will disappear from January 1, 2023. Thus, companies in the industry will be subject to the general rules mentioned above.

Everyone has to do their own calculations to understand whether it is more beneficial to use a corporate tax rate of 1% or 16% depending on each person’s balance sheet. As I mentioned at the beginning, if you are a PFA and have a slightly higher income (given the new restrictions) then you can get the advantage as a micro.

Photo source: DreamTime.com

Read also: The Chamber of Fiscal Advisers wrote to Adrian Caccia asking him to change two harmful things / Part-time overtaxation is wrong and offensive / It has proven to be harmful to the economy but also ineffective

Inflating part-time pay: a measure based on lies? Where are the 300,000 full-time “watchmen”? What do the numbers say?