Decree Law No. 115/2023 and the new tax changes from 1.1.2024 (Part I)

Decree Law No. 115/2023 published on December 15, 2023 significantly changes the Tax Code, and these changes to the Tax Code come into effect on January 1, 2024 (or relate to 2024 revenues and costs), with a few exceptions, which we will detail in detail during our analysis. 2023 has been a very convulsive year from the perspective of Romanian tax legislation with regulatory acts following one another in a confusing manner and creating a lot of uncertainty as evidenced by this Decree issued at the end of the year and effective immediately as of January 1, 2024 in addition to some regulations that we sincerely hope will be amended (such as the abbreviated filing of financial statements for micro enterprises).
The regulatory act makes changes to:
– Income tax on microenterprises;
– Ordinary profit tax;
– Taxation of non-wage income earned by individuals;
– Tax on income from wages and compulsory social insurance;
– Other laws, such as the RO-transport system, the Accounting Law and the Law on Financial Discipline and Cash Payments.

In this first part we analyze the tax changes made to the microenterprise tax regime:
1. As of January 1, 2024, a person may own shares or units worth more than 25 percent of the Soical Capital, directly or indirectly, of only one microenterprise. Correlatively, the microenterprise status is preserved by the company only if annual financial statements have been submitted within the legal deadlines (see point below).
2. The annual ceiling of 500,000 euros for the microenterprise is retained, but it becomes cumulative for all related microenterprises, a connection that we understand under Law No. 346/2004 on incentives for the establishment of small and medium-sized enterprises (a microenterprise may be associated with another microenterprise, in which case the ceiling will include both microenterprises.
3. The 500,000 euro cap will also apply to microenterprises in the HORECA sector, with compliance with all conditions, including the requirement to enroll one full-time employee or multiple part-time contracts for a total of one full-time contract/mandate with compensation equal to the gross minimum wage.
4. Secondary insurance and reinsurance intermediaries may be microenterprises provided that income from insurance/reinsurance distribution business does not account for more than 15 percent of total income.
5. Until March 31, 2024, shareholders of several microenterprises must decide which companies will be subject to profit tax and which will remain a microenterprise.
6. A company that is a taxpayer for corporate tax purposes on December 31, 2023 may be a microenterprise from January 1, 2024, if it no longer had microenterprise status after January 1, 2023. For HORECA companies, this condition is translated and applied from January 1, 2024.
7. The situation of micro-enterprises whose activity has been suspended at the Companies Registry is clarified, meaning that when activity resumes, it retains micro-enterprise status if it hires a person within 30 days of reactivation and if the object of activity allows it to be a micro-enterprise.
8. An obligation is established to pay profit tax by the microenterprise that has not submitted financial statements for the previous year. The profit tax will be paid from the quarter in which the budget should have been submitted.
9. For related microenterprises, the 500,000 euro ceiling is analyzed cumulatively, and if it is exceeded within the calendar year, both companies are subject to profit tax starting from the quarter in which the ceiling was exceeded.
10. Enterprises that are eligible to apply the microenterprise tax system in 2024 shall submit their Annual Financial Statements for the previous year by March 31, 2024.
11. As of January 1, 2024, the microenterprise’s right to reduce income tax by amounts representing sponsorships or the value of purchases of tax cash registers is repealed. The last fiscal year in which a microenterprise may reduce microenterprise income tax due to sponsorships or cash registers or redirect the tax is the year 2023.