Law No. 296 of 2023 regarding certain budgetary and fiscal measures to ensure Romania’s long-term financial sustainability was published in Official Gazette No. 977 of Oct. 27, 2023.
Law no. 296/2023 published in the Official Gazette No. 977 of October 27, 2023, brings multiple changes in the tax system in Romania, but also in other areas of activity of the public system.
Our analysis will focus on the regulatory changes made to the Tax Code, regulatory changes regarding the regulation of cash payments, regulatory changes regarding the expansion of the RO electronic invoicing system, and other elements with tax implications.
Three notices will be communicated on this law, following exactly the structure of the regulatory act. In this notice, we analyze the new procedures regarding the taxation of microenterprises, the new taxes introduced on profits or surtaxes, turnover, respectively the cancellation of certain tax benefits for employees in the IT, construction and agricultural sectors, respectively the new contributions to health insurance to be paid by those with additional income.
The tax changes are as follows:
1. There is hereby regulated a new tax payable by individuals levied on real estate (buildings and land) exceeding the amount of 2,500,000 lei or on automobiles worth more than 375,000 lei, levied at a rate of 0.3 percent of what exceeds these two ceilings .
Tax procedure: the individual submits a tax return to the tax authority where it is assessed by April 30 of the current year for the current year, and by that date the tax payment must be made.
Note to remember: for the car, the tax is paid only in the first 5 years after the car purchase.
The amendment applies as of January 1, 2024.
2. A minimum profit tax is introduced on turnover exceeding the amount of 50,000,000 euros as a percentage of 1% of the fiscally adjusted turnover (this is not the turnover). The higher amount will be paid to the budget, i.e. 16% of the profit tax calculated according to the already regulated method, or this 1%.
The basis of calculation is: IMCA = 1% x (total income VT – Vs exempt income – I fixed and current assets – A depreciation). All of these have the date of 01.01.2024 as a reference point.
Tax procedure: Two separate calculations will be performed, where we will cascade analysis of how we take into account the bonuses of GEO No. 153/2020 regarding profit tax reduction for equity increases, sponsorships and other reductions. Note to remember: the regulation is also adopted for tax groups from the point of view of profit tax.
Applies from January 1, 2024.
3. A new tax other than profit tax is introduced at the rate of 2% of turnover, for the years 2024 and 2025 paid by lending institutions.
Tax procedure: The tax is paid quarterly by the 25th of the month following the quarter ended for quarters T1-T3. For Q4, the due date is March 25 of the following year.
Note to remember: From 2026, the tax is reduced to 1%.
Applies from January 1, 2024.
4. A different tax will be paid on profits at a rate of 0.5% of tax-adjusted turnover for persons engaged in activities in the oil and natural gas sectors. This tax, which is different from the profits tax and is a non-deductible expense, will be paid.
Tax procedure: The basis of the horse is: IMCA = 0.5 percent x (total income VT – Vs exempt income – I fixed and current assets – A depreciation). All these have as a reference point the date of 01.01.2024.
Note to remember: by Ordinance of the Minister of Finance, the procedure for identifying such taxpayers will be adopted.
Applies from January 1, 2024.
5. The tax rate on microenterprise income is changed , in the sense that the scheme will have two rates, 1% and 3%, but the taxable ceiling of 500,000 euros for microenterprise status is maintained.
Tax Procedure: The following areas of activity of a microenterprise are subject to the 3% tax, regardless of the amount of income: CAEN: 5821 – Computer game publishing activities; 5829 – Other software editing activities; 6201 – Custom software activities (customer-oriented software); 6209 – Other information technology service activities; 5510 – Hotels and other similar lodging facilities; 5520 – Vacation and short-term lodging facilities; 5530 – Caravan sites, campgrounds, and campgrounds; 5590 – Other lodging services; 5610 – Restaurants; 5621 – Event catering activities; 5629 – Other food services n.c.a.; 5630 – Bars and other beverage service activities; 6910 – Legal activities – only for corporations with legal personality, which are not fiscally transparent entities, established by lawyers within the meaning of the Act; 8621 – General medical care activities; 8622 – Specialized medical care activities; 8623 – Dental care activities; 8690 – Other human health related activities.
For other microenterprises whose activity does not fall under these CAEN codes, taxation is 1% for revenues up to 60,000 euros and 3% from the quarter in which this ceiling is exceeded. The rate is from December 31 of the previous year to 12/31/2023 for the year 2024.
Note: Restrictions on the obligation to pay profit tax for those companies that conduct activities in the field of gambling, have consulting and management activities exceeding 20% of total revenues (without tax consulting), conduct brokerage activities in banking and insurance, etc. are maintained.
Applies from January 1, 2024.
6. Employees who create computer programs enjoy exemption from payroll income tax only to the amount of 10,000 lei gross. For amounts exceeding this ceiling, tax is payable on wage income.
Fiscal procedure: a programmer benefits from this facility only with an employer where he declares his main place of work. The employer must request a declaration from the employee with the primary place of work.
Note: Through the joint ordinance of several ministries (finance, research, labor, etc.), the new conditions of employment for computer program creators eligible for this benefit will be adopted.
Applies from November 1, 2023.
7. The exemption from payroll income tax for employees in construction and agriculture for a monthly income of 10,000 lei is reaffirmed. Payroll income tax is payable for the excess amount.
Tax procedure: the tax exemption is granted only to a single employer. The employer must request a statement from the employee declaring his or her main activity in order to qualify for the exemption.
Note: Employment may be carried out under a full-time or part-time contract of employment, provided that the guaranteed gross minimum wage in wages applicable in the construction and agriculture sectors is met.
Applies from November 1, 2023.
8. The health contribution for sporting activity withheld at source by taxpayers is deducted from the calculation of income tax on sporting activity. Previously, the amount was not deductible when determining income tax.
Tax procedure: When determining the income tax for sports activity withheld by the taxpayer, the amount due to the health contribution is deducted from gross income and then the sports activity income tax is applied at the rate of 10%. See the new health care contribution procedure in the material below.
Note: The current reporting requirement is maintained by filing Statement 112, but the format of this statement needs to be changed.
Applies from January 1, 2024.
9. Vacation pay (tourist or therapeutic benefits) is non-taxable income, up to 33% of monthly base pay, not to exceed the average gross salary in a year, if the employee does not benefit from vacation vouchers. Tax procedure: No vacation vouchers are granted to benefit from tax exemption or social security exemption for the settlement of vacation expenses. It is not prohibited to grant vacation expenses with vacation vouchers at the same time, but the vacation amounts are subject to payroll tax and social insurance.
Remember: a tax simulation is recommended, if it is more appropriate to grant vacation vouchers (which are taxed only with the 10% tax and more recently with the 10% health care contribution and are not subject to social insurance-the pension contribution), against the settlement of vacation and care expenses.
Applies from January 1, 2024.
10. A 70 percent tax is introduced on income whose source is not identified by the tax inspection body in the course of assessments in which individuals are assessed.
Tax procedure: the legislature retains the current tax procedure related to the verification of the personal status of individuals. It only increases the tax from 16%, as it is at present, to 70%, as it will be from 01.07.2024. Here the analysis should be extended to the non-retroactive application of the law, respectively, to the taxation in force on the date of income.
Note: Submission, even late, of the tax return to the Internal Revenue Service identifies a source of income also for income from other sources.
Applies from July 1, 2024.
11. Taxpayers, individuals, who earn income from independent activities taxed in the real system have the right to deduct the contribution to health insurance and the contribution to social insurance – pension in the calculation of income tax. Previously, the health contribution could not be deducted.
Fiscal procedure: The change is due to the fact that an individual who earns extra income will pay more health care contributions differentiated by income bracket, and we are not referring to the increase in the calculation base, but to the fact that this person, if he or she earns income from self-employment pays a health care contribution with minimum value equal to 6 gross minimum wages and ceiling equal to 60 gross minimum wages, but if in the same fiscal year he or she also earns income from dividends, etc., he or she also pays another health care contribution with calculation base from 6 to 24 minimum wages.
Note: The Single Declaration will probably change for the health insurance section where the amount related to self-employment and the amount related to other non-salary income will be submitted.
It applies from January 1, 2024.
12. In the calculation of tax on copyright income, for which income is determined in the royalty system, the deduction of the health care contribution is allowed.
Tax procedure: the determination of taxable income from the transfer of intellectual property rights/copyrights in the real system, with accounting management in this system, is less common, but it is possible. Therefore, in the income tax calculation, the health contribution is deductible. We appreciate that the single statement for apportioning the health care contribution for royalties is also changed in this situation. It applies from January 1, 2024.
13. Contribution to the privately managed pension fund – Pillar II – is not mandatory for employees in the computer software creation, construction and agriculture sectors. This regulation is extended to employees who make appointments.
Tax Procedure: In the year 2023, Pillar II is 3.75% and the contribution to the public system is 21.25%. Applies from November 1, 2023.
In 2024, the contribution to Pillar II is 4.25%, if the current regulatory framework is not changed-article 43 par. (4) from Law No. 411/2004 regarding privately administered pensions. Therefore, the contribution to the public pension system is 20.75%.
Note: These employees have the option of opting in writing through a request submitted to the employer to contribute to Pillar II, in which case the pension contribution is 25 percent.
14. The quality of persons exempted from the employee health contribution in the field of activity of construction and agriculture is repealed.
Tax procedure: It is a correlation with the repeal of the health care contribution exemption, now repealing the status of a person who is not required to pay the health care contribution.
It applies from November 1, 2023.
15. The health insurance exemption is maintained for income earned by prosumers, individuals, but only for this category of income.
Fiscal Procedure: Electricity distribution companies that pay/compensate payment obligations to prosumers, individuals, do not withhold or pay the health contribution.
16. The 10% health contribution requirement for food stamps and vacation vouchers is introduced.
Tax procedure: The health contribution for food stamps or vacation vouchers is calculated at face value. The salary software needs to be modified to take into account that for cash salary the basis of calculation is gross salary with withholding, for vouchers it is the face value.
Applies from January 1, 2024.
Note: For meal vouchers and vouchers allocated in cash on the card, withholding tax can be applied, but if allocated in paper format the health contribution is withheld from the remaining net salary. In both situations, the net salary is reduced.
17. Net income from self-employment becomes a separate amount from other non-salary income, and the contribution for health insurance is due separately.
Tax procedure: individuals engaged in taxed self-employment, either in the real system or by income installment, owe a contribution to the health care system as a percentage equal to 10% of the amount of net income or the amount of income installment, and the maximum basis for calculating the annual health care contribution is 60 guaranteed gross minimum wage in payment.As of the date of this analysis, the guaranteed minimum wage in payment is 3,300 lei. The net income ceiling under the health care contribution is 3,300 x 60 = 198,000 lei. The contribution due for payment is 19,800 lei. This contribution is due even if the individual is also employed and separate from other non-dependent income.
Note: The same declarative procedure is maintained with the submission of the single declaration until May 25 of the following year.
It applies from January 1, 2024.
18. The amount of other non-wage income (transfer of the use of assets, dividends and interest, profit from the sale of stocks or shares, other sources, etc.) falls within the scope of the health contribution and is the basis of the calculation is 6 or 12 or 24 gross minimum wages.
Fiscal procedure: the sum of these extra-wage incomes is compared with the 3 ceilings, and the contribution is paid after exceeding the ceiling of 6 minimum wages.
Note: The same declarative procedure is maintained with the submission of the single declaration until May 25 of the following year. Applies from January 1, 2024.
19. The health contribution for sports activities is withheld at source when the taxpayer pays income. It withholds the contribution and remits it to the budget. This is the main rule, but there are other situations where the individual makes the declaration.
Tax procedure: It is declared through the 112 declaration and payment is made by the 25th of the following month.
Applies from January 1, 2024.
