These days, entrepreneurs have to decide with which companies they will remain on income tax, that is, on the micro-business regime. The problem is related to the interpretation of the law.

“Now the decisions belong to those who are interested: what they do to comply with the law,” says Finance Minister Marcel Bolosh.

He gave several examples of how he interpreted the law in the case of married people:

• “If these are two different persons and they do not own each other’s shares, then the question of the influence of related enterprises does not arise”
• “If they own each other’s shares, i.e. 25% in the capital of another person, then they fall under the scope of related enterprises”
• “If they are completely different activities and different people, then this related corporate rule cannot even be an issue.”

During the conference that took place in February, Georgeta Toma from the Ministry of Finance could not provide clarification on these regulations, noting that she received many questions, but they will bring a draft clarification in the second half of February. He still hasn’t come.

In early February, the Chamber of Fiscal Consultants (CCF) sent a letter to the Ministry of Finance, citing several examples that require clarification. One of them is related to married people.

One spouse has the majority of voting rights in a healthcare company and the other spouse has the majority of voting rights in an accounting services company, for example, each of the 2 spouses has an administrator right in the company in which they hold the majority of voting rights and does not have any authority or participation in the management of another company (in both situations, the remaining voting rights belong to third parties).

In such a situation, it is unclear to what extent the 2 companies are considered related enterprises – it is unclear whether the simple fact that the 2 shareholders/partners are husband and wife is considered to be within the scope of the two companies for any of the reports described above.

“In our opinion, taking into account the fact that each of the two spouses separately realizes the qualities of a shareholder/associate participant and administrator in one of the 2 companies, it is considered that within the meaning of para. (4) of Art. 44 of Law No. 346/2004, that the two companies do not represent related enterprises, since none of the coefficients described in Art. 44 para. (1) of Law No. 346/2004, two spouses do not act together,” says the Chamber of Tax Consultants.

Another situation that needs clarification

2 shareholders/associates (they are not relatives or husband/wife) own 50% each in 2 companies that do not have a single administrator and work in the field of IT (both with CAEN code 6201 – custom software development activities (client- oriented software) ).

It is not clear to what extent these enterprises can be considered related.

“Thus, upon first analysis of the statutory regulation, it may appear that these two companies are not related enterprises – neither of them holds the majority of voting rights in the other / neither has the right to appoint or remove the majority of the members of the board of directors, management or supervision of by another enterprise / no one has the right to exercise a dominant influence on another enterprise on the basis of a contract concluded with this enterprise or a provision in its charter / no one is a shareholder or associated participant of another enterprise and, thus, owns the majority of voting rights of shareholders or associated persons another company,” says CCF.

However, tax consultants point out that according to the presented provisions “Enterprises between which there are any of the relationships described above through an individual or a group of individuals acting in concert are also considered related enterprises if they carry out their activities or part of their activities in the same relevant market or in adjacent markets”.

From the analysis of these provisions, it is unclear to what extent in the given example the shareholders/associates, each of whom owns 50% of each company separately, are considered related enterprises – accordingly, it is unclear whether, due to the existing ownership of shares, it is considered that within the framework of the two companies any of the relationships described above.

“According to the above provisions, it is understood that in the given example, given that two shareholders/associates own shares in two companies with the same object of activity, then it is considered that within the meaning of para. (4) of Art. 44 of Law No. 346/2004, that the two companies do not represent related enterprises, since none of the coefficients described in Art. 44 para. (1) from Law No. 346/2004 – even with the application of the provisions of para. 4 of the same article,” the organization notes.

The ownership condition, namely the issue of 25% shares, has two interpretations

According to the CCF:

1. We understand that in accordance with the new regulations, as of January 1, 2024, an associated member/shareholder may own, directly or indirectly, more than 25% of the value/number of shares or voting rights in one microenterprise tax-paying company, and we we understand that the new paragraph (4) of Art. 47 also serves as a transitional provision for actual situations recorded on December 31, 2023.

Thus, if the same partner owned (directly or indirectly) as of December 31, 2023, more than 25% in two or three micro-enterprises, then by March 31, 2024, only one of the enterprises must be created, which will remain an income tax payer micro enterprises. – enterprises, the rest will apply income tax, including for the 1st quarter of 2024.

In other words, the possibility of designating one company for the application of the tax regime for micro-enterprises in 2024 does not depend on the transfer of holdings to other companies until December 31, 2023, but no later than the first quarter. 2024, since the goal of the regulation on the application of the micro-enterprise taxation regime by only one such company has been achieved.

2. The second problem of interpretation and, accordingly, the need for clarification is related to how letter h) of Art. 47 par. (1) and, taking into account the fact that letter h) is one of the conditions that must be met collectively for the application of the micro-enterprise regime, it refers to the ownership by associated persons/shareholders of more than 25% of the shares, the value/number of participation securities or voting rights :

“(1) For the purposes of this section, a micro-enterprise is a Romanian legal entity that, as of December 31 of the previous fiscal year, collectively meets the following conditions:

[…]

h) has associated companies/shareholders who own, directly or indirectly, more than 25% of the value/quantity of participation rights or voting rights, and is the only legal entity established by the associated persons/shareholders for the application of the provisions of this title;”

In the spirit of the law, as it follows from the will of the legislator, expressed in the explanatory note, by making changes to item h) of Art. 47 par. (1) situations where the ownership percentage of 25% of the value/number of shares or voting rights is exceeded (directly or indirectly), in which case the number of micro-enterprises owned by such shareholder/associate is limited/reduced to apply this tax system to an individual micro-enterprise.

In our opinion, this was not taken into consideration while adopting GEO no. 115/2023 and an amendment to the micro-enterprise taxation rules in a situation where the company is owned only by shareholders/associates holding less than 25% of the value/quantity of participation rights or voting rights (eg 5 associated companies with 20% each), although the usual reading the text of the law can easily lead you to such a conclusion because of the less successful form in which it is drafted.

Therefore, our belief remains that such a company, which exists on 12/31/2023 or is newly established during 2024, can apply the micro-business regime under the conditions in which other conditions provided for in Art. 47 par. (1) are performed.

We show that such an interpretation is clearly consistent with the stated purpose of the amendments made by GEO no. 115/2023, as follows from the explanatory note.