Decree Law No. 115/2023 published on December 15, 2023 significantly changes the Tax Code, and these changes to the Tax Code take effect on January 1, 2024.
In this third part, we look at the tax changes made to the payroll and personal income tax:
1. For persons who are self-employed or self-employed, sponsorship and patronage expenses become fully
non-deductible expenses and do not reduce income tax. As of January 1, 2024, only scholarship expenses are deductible from the professional or self-employed person’s income tax at the rate of 5% of a calculation base. Calculation basis = gross income – deductible expenses other than private scholarships and entertainment expenses.
2. Deductible expenses are reduced from 400 euros to 100 euros representing expenses with subscriptions and payments for access to sports halls.
3. New rules apply to the taxation of income from the transfer of use (e.g., rental of a property) to a legal person or any entity that is obliged to keep accounts. In this situation, the obligation to withhold tax rests as of January 1, 2024, with the legal person payer of the income, who will then have to withhold upon payment a withholding tax, liquidate and declare the withheld tax, similar to the current lease payment procedure.
There is also provision for a lump-sum deduction from income for expenses equal to 20% of gross income from the transfer of use of assets, and the tax rate is 10% of net income.
The tax withheld, by the payer tenant of the property or asset owned by an individual, on the income is then declared and paid by the taxpayer to the state budget until the 25th of the following month, the date by which the tax is paid.
4. When the tenant is an individual who has no obligation to maintain accounts, the tax is not withheld at the time of payment, and the owner retains the obligation to file and declare the income as before. Also in this situation, a flat deduction from income is granted for percentage expenses of 20%.
5. In the situation where a taxpayer is engaged in self-employed activities/professions and records a loss, the loss can be carried forward in the next 5 consecutive tax years
. Loss carryover is limited to a maximum of 70% of net income annually on the same category of income. This procedure also applies to
losses generated from farming, forestry, fish farming or income from intellectual property rights, when all these activities are taxed real system.
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