Clarifications for the minimum tax and the specific tax on turnover, microenterprises and changes to VAT exemptions: GEO no. 31/2024

The takeaway 

The Government of Romania has adopted Emergency Ordinance no. 31/2024 (EOG no. 31/2024), which brings new amendments and additions to the Fiscal Code regarding the minimum turnover tax, the way to establish the ceiling of EUR 500,000 for inclusion in the category of microenterprises in the case of ‘related enterprises’ and new conditions for applying VAT exemptions.

In detail

Title II – Corporate income tax

Law no. 296/2023 introduced the minimum turnover tax (IMCA) for taxpayers with a turnover of over EUR 50 million in the previous year and registering corporate income tax is lower than the minimum turnover tax. They are obliged to pay profit tax at the level of the minimum turnover tax.

Legal entities that carry out activities in the oil and natural gas sectors and that register a turnover of over EUR 50 million in the previous year owe, in addition to the corporate income tax, a specific turnover tax.

According to Law no. 296/2023, taxpayers / economic operators which exclusively carry out activities of distribution/supply/transport of electricity and natural gas and which are regulated/licensed by the National Energy Regulatory Authority (ANRE).

The term ‘exclusive’ has been removed from GEO no. 31/2024, and it is clarified that taxpayers / economic operators regulated/licensed by ANRE which obtained income from distribution activities in the previous year are not subject to IMCA, i.e. the specific turnover tax supply/transport of electricity and natural gas in a proportion of over 95% of the total revenues from which the revenues contained in the Vs indicator are subtracted.

Title III – Tax on the income of micro-enterprises

According to GEO no. 115/2023, the limit of EUR 500,000 regarding the realised incomes is checked by taking into account the Romanian legal entity’s income, cumulated with the incomes of the enterprises related to it, as defined according to the provisions of Law no. 346/2004.

GEO no. 31/2024 adds clarifications regarding ‘related companies’.

A Romanian legal person is related to another person if:

• it owns directly or indirectly over 25% of the value/number of shares or voting rights in another Romanian legal entity, or it has the right to appoint or revoke the administrator / majority of the members of the board of directors, management times of supervision of that Romanian legal entity;

• it is owned by another Romanian legal person, directly or indirectly, with more than 25% of the value/number of shares or voting rights, or the other person has the right to appoint or revoke the administrator/majority of the board members administration, management or supervision;

• a person owns, directly or indirectly, more than 25% of the value/number of shares or voting rights or has the right to appoint or revoke the administrator / majority of the members of the board of directors, management or supervision both at the first legal entity and at the second legal entity. If the person holding the participation titles/voting or appointment/revocation rights is a Romanian legal person, the income of this person is also included;

• it has one or more shareholders/associates who own, directly or indirectly, more than 25% of the value/number of shares or voting rights of this Romanian legal entity, shareholders/associates who also carry out economic activity through a person authorised individual / individual enterprises / family enterprises / other forms of organisation of an economic activity, without legal personality, authorised. In this situation, the income of the authorised individual / individual enterprise / family enterprise / other form of organisation of an economic activity without legal personality is included.

Title VII – Value Added Tax

GEO no. 31/2024 clarifies that the VAT exemption with the right to deduct applies to the services of construction, rehabilitation, modernisation of hospital units from the public state network and to the delivery of medical equipment, instruments, devices and others, as well as the adaptation, repair, rental and leasing of such goods for the operations carried out by non-profit entities to state hospital units, including if they are made available free of charge / donated to hospital units in the public state network.

In addition, it is regulated that the exemption with the right to deduct also applies if the operations mentioned above are carried out to companies wholly owned by non-profit entities registered in the Public Register organised by the National Tax Administration Agency (ANAF), and the goods/services purchased by these companies are made available free of charge to hospital units in the public state network or are intended for hospital units owned and operated by these companies, with the following conditions to be fulfilled by the hospital units that the goods/services:

• do not to change their destination of hospital units,

• are not to be alienated,

• during the entire period of operation, provide medical services free of charge or settled by the social health insurance system, without charging hotel or other taxes.

When the conditions are no longer fulfilled, companies wholly owned by non-profit entities registered in the Public Register organised by ANAF owe VAT from the date from which they benefitted from the exemption by returning it.

Source: [Government emergency ordinance no. 31/2024 regarding the regulation of some fiscal-budgetary measures and for the modification and completion of some normative acts, published in the Official Gazette no. 274 dated 29 March 2024]