​Minimum sales tax is a difficult topic for interested companies, as the method of application is very complex and requires regulations from the Ministry of Finance. In a new episode of PwC Romania Tax Talks, Ionuc Simion, Partner at PwC Romania, and Florin Rizea, Senior Manager, discussed the practical difficulties that companies may face when applying this tax, giving examples for the target taxpayers.

Watch episode 4 of PwC Tax Talks:

Key statements:

• Almost no developed country applies such a tax. And all because the size of turnover does not mean high profitability.
• The International Monetary Fund, during the last evaluation mission, recommended the Romanian government to think carefully about the necessity and usefulness of such a measure, in fact recommending its revision.
• starting in 2024, companies paying income tax above the €50 million turnover threshold will also calculate this minimum tax at each income tax period. If the minimum tax is higher than the corporate tax, taxpayers will pay the minimum tax.
• We have three categories of taxpayers subject to this new tax: general companies, financial institutions and oil and gas companies. For ordinary companies, we have a percentage of 1% applied to the calculation base, which starts from the total revenue of the company. Be careful here! This is called turnover tax, but technically we do not mean turnover calculated according to accounting rules. In banks, the settlement system is a little different, we have a clear time limit, namely 2% until 2025, that is, for two years, after which 1% will apply from 2026. For oil and gas companies, we have a combination of both.
• As far as we understand, unofficial rules will no longer be published, but there is a great need for clarification. What do you mean? There are several unclear aspects, and I would mention here what is happening with the tax losses of the past. Are they considered used when we compare the income tax and this minimum tax?
• We defined other aspects as unclear. What happens to the exchange rate difference in the basis of the calculation, given that we are starting from the total income. And here a legislative inconsistency appears. In the case of tax groups, all members of the group will have to calculate the minimum turnover tax, check whether it is higher than the income tax.
• In certain discussions, representatives of the Ministry of Finance claim that, in principle, the minimum turnover tax should follow a logic similar to the tax on micro-companies. But let’s look specifically.
• This minimum sales tax is a new innovation of the Romanian governors. As we had the pole tax and others, we also had that famous Ordinance 114. Many measures were repealed in a short period of time because they did not have the expected effect.

Article supported by PwC Romania