Taxes will rise, as confirmed by the draft fiscal measures developed by the PSD-PNL coalition. The Ministry of Finance officially published the document.

Fee and Tax Increase Bill 2023-2024 – click to open

What is said in the Note of the fund:

Income tax

According to some analyzes carried out regarding the tax liability to the state budget of income tax payers and income tax payers of micro-enterprises in relation to the achieved turnover, it turned out that there are income tax payers who register a higher tax burden, lower than the tax payer that pays tax on the income of micro-enterprises under the conditions under which they demonstrate similar financial indicators.

In this context, it is necessary to strengthen fiscal discipline by establishing a turnover-related minimum tax to determine the income tax of income tax payers who have situations where the tax payable quarterly/annually is lower than the minimum value, for example if the cumulative tax the result at the end of the reporting quarter/year is a tax loss or taxable profit, to

reimbursement of tax losses of previous years.

In addition to income tax, in the case of credit institutions – Romanian legal entities and branches of credit institutions – foreign legal entities in Romania, turnover tax is established on the basis of turnover.

The minimum/additional turnover tax ensures minimum taxation at the expense of revenue to the income tax budget, from the relevant taxpayers, especially for those who re-register losses.

Income tax of micro-enterprises

Currently, there is a single tax rate of 1% for all taxpayers who pay tax on the income of micro-enterprises, without structuring their taxation according to the rate of income.

In the Report on the tax system in Romania, including a comparative analysis and recommendations for reforming the tax system, hereinafter referred to as the Report, among other aspects related to the tax system for micro-enterprises, the World Bank also analyzed the tax rate of micro-enterprises, expressing the opinion that the current tax rate of 1% needs to be revised in line with the profits recorded by micro-enterprises.

Taking into account the corporate income tax rate of 16%, the World Bank believes that applying a microenterprise income tax rate of 1% effectively corresponds to a profit margin of 6.25% after tax deductions allowed by law.

Citing an analysis by the International Monetary Fund (2022) that the average rate of return for SMEs with employees is around 12%, the World Bank considers a tax rate of 1% to be a low rate for micro-enterprises with employees.

Income tax and mandatory social contributions

1. According to the current legislation, natural persons who receive income from wages and similar wages on the basis of an individual employment contract, service report, act of delegation or business trip or special status provided for by law are exempt from paying income tax, in as a result of activities for creating computer programs, under the conditions established by a joint order of the Minister of Research, Innovation and Digitalization, the Minister of Labor and Social Solidarity, the Minister of Education and the Minister of Finance.

2. In accordance with the current regulations, natural persons who receive income from wages under individual employment contracts with employers who meet the conditions established by the Fiscal Code enjoy tax benefits provided in the field of construction, as well as in the agricultural sector and food industry. The provision is valid until December 31, 2028 inclusive.

Among the conditions for granting tax benefits for individuals who receive income from wages and income related to wages, there is also a condition related to the level of gross wages for 8 hours of work/day of at least 4,000 lei per month for the construction sector and, accordingly, 3,000 lei per month for the agricultural sector and the food industry.

Currently, there are no provisions regarding the number of individual employment contracts under which an employee can take advantage of the relevant tax benefits. In the case of natural persons who receive income from a salary equivalent to a salary on the basis of an act of posting on the territory of Romania, the exemption applies if the payer of the income to whom the natural persons are posted carries out on the territory of Romania an activity expressly defined by the Fiscal Code , and fulfills the conditions stipulated by it.

3. Pursuant to the current provisions of the Internal Revenue Code, expenses representing meal vouchers provided by employers are, by law, limited expenses that are subject to deduction in determining the annual net income from self-employment.