New fiscal measures adopted by the Government: OG no. 16/2022

Government Ordinance no. 16/2022 (OG no. 16/2022) introduced a series of amendments and completions to the Fiscal Code. Here are the main changes.

Fiscal Code

TITLE II − Profit tax

Tax exemption for reinvested profit − changes come into force on 1 January 2023

The tax exemption facility for reinvested profit is extended to also cover investments in assets used in retrofitting, production and processing activities which will be defined by an order of the Ministry of Finance which should be issued within 120 days from the publication of OG no. 16/2022.

The facility currently applies only to technological equipment, electronic computers and peripheral equipment, cash registers and other invoicing/control equipment  (those in the subgroup 2.1 and class 2.2.9 of the catalog of fixed assets), computer programs and the right to use computer programs.

Tax on dividends

• The dividend tax rate is to be increased from 5% to 8% on dividends distributed / paid between Romanian legal entities and for those distributed / paid to privately managed pension funds and/or optional pension funds. The 8% rate will apply to dividends distributed as of 1 January 2023.

• Dividend income received by a Romanian legal entity from EU member states is non-taxable when calculating the corporate income tax (“CIT”), regardless of its form of organisation, as long as it falls under Romanian legislation (this treatment was available before only to legal entities having the form stock company, company limited by shares, limited liability company or limited partnership) − the amendment applies within 3days as of the date of entry into force of OG no. 16/2022.

• The dividend tax exemption applies if both the beneficiary and the payer of the dividends are joint stock companies, companies limited by shares, limited liability companies or limited partnerships, as well as for other forms of legal entity under Romanian legislation. The amendment applies within 3 days as of the date of entry into force of OG no. 16/2022.

TITLE III − Micro-companies tax regime − changes enter into force on 1 January 2023

The micro-companies tax regime becomes optional.

A Romanian legal entity can opt for the application of micro-companies tax regime if it cumulatively meets the following conditions as at 31 December of the previous year:

• The maximum revenue at the end of the previous year obtained by the company is of RON equivalent of EUR 500,000 (modified condition − the limit was previously EUR 1,000,000);

• The social capital is owned by persons other than the state and administrative-territorial units (unmodified condition);

• It is not under dissolution, followed by liquidation (unmodified condition);

• At least 80% of its total revenues are generated from other than consulting and management activities (newly introduced condition);

• Has at least one employee (newly introduced condition);

• Has associates/shareholders who hold more than 25% of the value/number of participation titles or voting rights in no more than three Romanian legal entities that qualify to apply the micro-companies  (newly introduced condition).

Law no. 170/2016 regarding the specific tax for HORECA will be repealed as of 1 January 2023.

As of 1 January 2023, Romanian legal entities that carry out activities corresponding to the CAEN codes for HORECA (namely 5510, 5520, 5530, 5590, 5610, 5621, 5629 and 5630) can opt for the micro-companies tax regime (without having to fulfill the above conditions) or for the CIT regime.

The microenterprise regime cannot be applied by Romanian legal entities conducting activities in:

• banking;

• insurance and reinsurance, of the capital market, including intermediation activities in those fields;

• gambling;

• exploration, development or exploitation of oil and natural gas deposits.

The tax rate on microenterprise revenues is 1% (the 3% rate is thus repealed).

If a micro-company achieves revenues of more than EUR 500,000 or its revenues from consulting and management are 20% or more of the total during a fiscal year, it owes CIT as of the quarter in which they exceeded those limits.

The dividend income received from a subsidiary located in another member state of the EU can be deducted when calculating the micro-company tax, to the extent that both the micro-company and the subsidiary meet the EU Parent-Subsidiary Directive conditions.

TITLE IV − Income tax − changes take effect on 1 January 2023 (except where expressly indicated as taking effect on another date)

Exemptions

According to OG no. 16/2022, salary income and salary-related income obtained by individuals conducting activities based on an individual employment contract concluded for a period of 12 months with Romanian legal entities conducting seasonal activities under Law no. 170/2016 regarding the specific tax of certain activities during a year are no longer exempt from income tax. 

For the construction sector, the agricultural sector and the food industry, the application of the facility regarding the exemption from the payment of income tax on wages and income treated as such for activities conducted in Romania is limited to people employed on the basis of individual employment contracts. The previous regulation did not provide for such a limitation.

The amount of gross monthly income exceeding RON 10,000 is taxable income for which employers have to withhold the related income tax. Lowering the limit from RON 30,000 to RON 10,000 will also have an impact on ​​mandatory social contributions.

Regarding the construction area, the Fiscal Code contains the express specification according to which the indicator “turnover actually achieved from construction activity” includes only the income from the activity conducted on the territory of Romania. The indicator “total turnover” includes both the income from the activity conducted on the territory of Romania and outside Romania. The “activity conducted on the territory of Romania” means the activity conducted in Romania for the purpose of making products and providing services. The condition regarding a minimum 80% of the turnover from the mentioned activities for employers in construction existing on 1 January of each year has been modified. It will be calculated cumulatively for the corresponding period of the current year, including the month in which the exemption is applied, and the cumulative turnover for the previous fiscal year will no longer be considered as the basis for the calculation. The changes enter into force within three days as of the date of publication of OG no. 16/2022 in the Official Gazette.

Non-taxable income

Under OG no. 16/2022, allowances for the care of oncological patients are included in the category of non-taxable income. This change comes into force three days after the publication of OG no. 16/2022.

Income from self-employment

The limit up to which taxpayers who obtain income from independent activities can determine their net income based on income rules is to be reduced from the RON equivalent of EUR 100,000 to EUR 25,000. Those who earn an annual gross income above that threshold will have to determine their annual net income in the real system as of the next tax year.

Income from wages and salaries

A monthly non-taxable income limit has been introduced of no more than 33% of the basic salary corresponding to the job held, including accumulated monthly and some currently partially non-taxable salary benefits or some new ones, subject to the following conditions:

a) The additional benefits received by employees based on the mobility clause, according to the law, other than those provided for in art. 76 para. (2) letter k) of the Fiscal Code, within the limit of 2.5 times the legal level established for the delegation/posting allowance for the staff of public authorities and institutions.

b) The value of the food provided by the employer for its own employees, as provided in the employment contract or in the internal regulations, within the limit of the maximum value, according to the law, of a meal ticket per person per day, provided for on the date of awarding. This provision is not applicable to employees who benefit from meal vouchers.

c) Accommodation and the value of the rent for accommodation / living spaces made available by employers to their own employees, as provided for in the employment contract or in the internal regulations, within the limit of a non-taxable ceiling of 20% of the monthly gross minimum national basic salary. Certain conditions must be met and their fulfilment verified by the employer.

d) The consideration of tourist and/or treatment services, including transport, granted by the employer during the leave period for own employees and their family members, as provided in the employment contract, internal regulations or received on the basis of certain laws and/or financed from the budget. An annual limit is calculated for each employee based on the level of the average gross salary used for establishing the state social insurance budget for the year.

e) Contributions to an optional pension fund, under Law no. 204/2006, and to optional pension schemes, as defined by the Financial Supervisory Authority, administered by authorised entities established in EU member states or the European Economic Area (EEA) paid by the employer for its own employees of up to EUR 400 per year per person.

f) Subscription voluntary health insurance premiums and medical services paid for by the employer for its own employees up to the limit of EUR 400 per year per employee.

g) Contributions to the point-of-work utility expenses of employees who conduct remote working activities, including for electricity, heating, water and data subscriptions, and the purchase of office furniture and equipment, within the limits established by the employer through the employment contract or internal regulations, up to the monthly limit of RON 400 pro rata for the number of days the remote working activity is conducted. 

Employers granting these amounts establish the order of their inclusion in the non-taxable monthly limit.

Under the new regulations, the personal deduction includes the basic personal deduction and the additional deduction.

The basic deduction is granted as follows:

• For individuals with a gross monthly income of up to RON 2,000 above the level of the gross minimum national basic salary in force for the month the income is realised. For income exceeding that level, the basic personal deduction is not granted.

• It is established as a percentage varying from 45% to 0% depending on the level of gross monthly income and the number of dependants.

The additional deduction is granted as follows:

• At 15% of the gross minimum basic national salary individuals up to the age of 26 who obtain income from salaries of up to RON 2,000 above that level.

• Of RON 100 per month to the parent with wage income, regardless of the amount, for each child up to the age of 18 if enrolled in an educational institution. If the child is supported by both parents, the deduction will be granted to the one who presents the document attesting to the child’s enrollment in an educational institution and the self-responsible declaration of the beneficiary parent. In situations where the parent works for several employers, they have to declare that they do not benefit from such deductions at another employer. A declaration on own responsibility must be provided in this regard.

Income from the transfer of the use of goods

Under OG no. 16/2022, taxable income is established at the level of gross income for the income from the transfer of the use of goods other than for the leasing and rental for tourist purposes of rooms located in own homes. The flat rate of 40% is eliminated.

The obligation to register with the competent fiscal body the contract concluded between the parties, as well as any subsequent changes, within 30 days as of the signing of the contract or introduction of a change. Contracts in progress on 1 January 2023 have to be registered within 90 days as of the date on which the obligation arose for them to be registered. An order of the ANAF president will be issued detailing the registration procedure.

Investment income

The tax rate has been changed from 5% to 8% on dividends received by resident individuals, including in the form of earnings obtained as a result of holding shares in collective investment bodies. The increased rate also applies to non-resident individuals, subject to the applicable double taxation avoidance agreements.

Income from prizes and gambling

For gambling income, tax rates of between 3% and 40% will be applied as of income related to August 2022, as follows:

• For gross income up to and including RON 10,000 − 3% tax.

• For gross income over RON 10,000 up to and including RON 66,750 − the tax is due in a fixed amount of RON 300 + 20% of the amount exceeding RON 10,000.

• For gross income over RON 66,750 − the tax is due in a fixed amount of RON 11,650 + 40% of the amount exceeding RON 66,750.

Income from the transfer of real estate from the personal estate

For income obtained from the transfer of the right of ownership and its dismemberment through legal documents between individuals, the tax is due as follows:

• 3% for constructions of any kind and the related land, as well as for lands of any kind without constructions, held for a period of up to three years inclusive;

• 1% for the above properties owned for more than three years.

The non-taxable limit of RON 450,000, representing the amount that could be deducted from the value of the transaction carried out by a natural person, is thus eliminated.

TITLE V − Mandatory social contributions − the changes enter into force on 1 January 2023 (except for cases expressly indicated as entering into force on another date)

Income from wages and salaries

For social insurance contributions and social health insurance contributions in the construction sector, the agricultural sector and the food industry, the application of the facilities is limited to income from wages and income treated as obtained on the basis of the individual employment contract.

For social insurance contributions and social health insurance contributions, the same monthly limit has been introduced of no more than 33% of the basic salary corresponding to the employed position. Certain accumulated monthly incomes (similar to those from income tax and under certain conditions) are not included in the calculation base for those contributions. The part that exceeds the 33% ceiling will be included in the calculation base for the social insurance contribution and the social health insurance contribution.

As of the income related to the month of August 2022, for full-time and part-time individual employment contracts for which the level of the social insurance contribution and social health insurance contribution are below the level of contributions calculated for the national minimum gross salary in force in the month for which it is due, the contributions have to be paid at the rate required for the national minimum gross salary applicable for the respective month. Certain exceptions are provided for in the new provisions introduced.

If the social and health insurance contributions calculated on the earned income is lower than the minimum due under the new provisions, the difference is borne by the employer / income payer on behalf of the employee / income beneficiary.

The social security contribution owed by individuals who earn income from independent activities and from intellectual property rights

The annual basis for calculating the social insurance contribution is changed, in the case of people who estimate/realise income from independent activities and/or income from intellectual property rights from one or more sources or categories of income, to the cumulative value of 12 national minimum gross monthly salaries in force at the time of submission of the single declaration.

The annual basis for calculating the social insurance contribution is the income chosen by the taxpayer of not lower than:

• the level of 12 to 24 national minimum gross monthly salaries;

• the level of 24 national minimum gross monthly salaries. 

The social health insurance contribution in the case of individuals who do not fall into the categories of persons exempted from the payment of the social health insurance contribution

In the case of people who estimate/realise income from independent activities, income from intellectual property rights, income from association with a legal entity (payers of profit tax or microenterprise revenue tax), income from the transfer of the use of goods, income from agricultural activities, forestry and fish farming, investment income and income from other sources, from one or more sources and/or categories of income, the minimum limit for establishing the social health insurance contribution is to be reduced to a value at least equal to six national minimum gross salaries from twelve12, as previously regulated by OG no. 16/2022.

The annual basis for calculating the social health insurance contribution has been changed as follows:

• the level of six national minimum gross monthly wages in the case of incomes between six and 12 national minimum gross monthly wages;

• the level of 12 national minimum gross monthly wages, in the case of incomes between 12 and 24 national minimum gross monthly wages;

• the level of 24 national minimum gross monthly wages, in the case of incomes of more than 24 national minimum gross monthly wages.

For income from the transfer of the use of goods, for inclusion in the annual limit of 6, 12 or 24 national minimum gross monthly salaries, the gross income is taken into account, similar to for income tax, compared to the net income (gross income reduced by a flat rate for expenses of 40%) as stipulated by the Fiscal Code until the changes introduced by OG no. 16/2022.

TITLE VI - Tax on income obtained from Romania by non-residents

The withholding tax rate for dividends obtained by a non-resident is to be increased from 5% to 8% on dividends distributed after 1 January 2023.

The specific  withholding tax exemption for dividends obtained by pension funds as defined according to the legislation of an EU or EEA member state with which Romania has concluded a legal instrument on the basis of which the exchange of information is carried out, is eliminated as of 1 January 2023. The respective pension funds could claim the withholding tax exemption for dividends if they meet the EU Parent-Subsidiary Directive conditions.

TITLE VII - VAT − entry into force on 1 January 2023

The applicable VAT rate in the HORECA sector is to be increased from 5% to 9%. Thus, accommodation in the hotel sector or sectors with similar functions, including the rental of land set up for camping, and restaurant and catering services, will be subject to the 9% rate.

The application of the reduced rate of 9% is regulated for both chemical and non-chemical fertilisers and pesticides used in the agricultural sector. For deliveries of chemical fertilisers and pesticides, the reduced VAT rate of 9% applies until 31 December 2031 inclusive.

The VAT rate of 19% will be applied to the supply of alcoholic and non-alcoholic beverages containing added sugar or other sweeteners or flavourings falling under CN codes 2202 10 00 and 2202 99.

For firewood deliveries, a reduced VAT rate of 5% applies until 31 December 2029 inclusive.

The ceiling for the delivery of a home with a maximum useful surface of 120 square metres, excluding household annexes, purchased by an individual or jointly with others, is to be reduced from RON 700,000 to RON 600,000. Individuals who have concluded legal documents with the object of advance payment for the purchase of housing with a reduced VAT rate of 5%, prior to 1 January 2023, will benefit from the application of the reduced VAT rate under the applicable conditions until 31 December 2022.

The “Register of home purchases with a reduced VAT rate of 5%, as of 1 January 2023”, is being organised in electronic format. The procedure for organising the Register will be established by Order of the National Fiscal Administration Agency (ANAF) in consultation with the Union National Association of Notaries Public from Romania.

TITLE VIII - Excise and special taxes - the changes enter into force on 1 August 2022

The level of excise duties

The exception for updating the level of excise duty in line with increased consumer prices will also apply to fine-cut rolling tobacco, other smoking tobacco, cigarettes and rolling cigarettes, tobacco contained in heated tobacco products and nicotine-containing liquid. The excise duty level for these products is as provided by the Fiscal Code that applies as of 1 April each year.

That exception also applies to gasoline and diesel for the period 1 January 2023 to 31 December 2023. However, if the excise duty level for these products is lower than the minimum level provided by Directive 2003/96/EC on the restructuring of the community framework for taxation of energy products and electricity, the minimum level provided by the Directive applies.

For cigarettes, as of 1 August 2022:

• the specific excise duty is to be RON 459.386/1,000 cigarettes until 31 March 2023;

• the total excise duty is to RON 594.97/1,000 cigarettes, following successive annual increases according to the calendar provided in Annex 1 to the Fiscal Code;

• the minimum excise duty due cannot be lower than the level of the total excise duty provided for in Annex 1 to the Fiscal Code;

• the legal percentage used to calculate the ad valorem excise duty is to be reduced to 13% until 31 March 2023, with gradual annual decreases of one percentage point.

As of 1 August 2022, excise duties will be increased for alcohol, alcoholic beverages and non-harmonised excisable products such as liquids containing nicotine and tobacco contained in heated tobacco products. The excise duty level for these products will be increased annually according to the calendar provided in the Fiscal Code.

In the period 1 August 2022 to 31 December 2022 inclusive, according to Annex 1 to the Fiscal Code, the excise duty level will be decreased for the following product categories: gasoline (leaded and unleaded), diesel, fuel oil, liquefied petroleum gas, natural gas and electricity, lamp oil, coal and coke.

TITLE IX − Local taxes − the changes enter into force on 1 January 2023

For buildings that include residential and non-residential spaces, the taxes and fees are determined by measuring which of those spaces is larger and applying the tax applicable to that type of space to the value of the entire building.

Calculation of buildings tax

Tax of at least 0.1% (for residential buildings) or at least 0,5% (for non-residential buildings) applies to the value of the building (the previous regulation provided for 0.08% to 0.2% for residential buildings and 0.2% to 1.3% for non-residential buildings, applied to the taxable value of the building).

For buildings used for agricultural activities, the buildings tax is calculated by applying a rate of 0.4% to the value of the building.

The value is calculated as the total value of the buildings, including any annexes, and the land areas covered by them included in the market studies of the indicative values ​​of real estate administered by the National Union of Notaries Public in Romania.

If the indicative values ​​for real estate properties in Romania provided by market studies by the National Union of Notaries Public in Romania are lower than the taxable values ​​determined according to the provisions in force as at 31 December 2022, buildings tax is calculated as the applicable minimum rate (of 0.1% or 0.5%, as appropriate) on the taxable amount determined according to the provisions in force as at 31 December 2022.

Calculation of land area and related tax

To calculate the area of ​​land located in an urban area, the land area covered by buildings is subtracted from the total land area. For non-urban land, correction coefficients have been introduced for determining the tax area and related tax.

The obligation to accept card payments comes into force on 1 January 2023

As of the quarter following that in which the annual turnover of legal entities that conduct retail and wholesale trade activities, and those that conduct service activities, exceeds  the RON equivalent of EUR 10,000, those entities have to accept credit cards as a means of debit, credit or prepaid payment through a point-of-sale terminal or other modern acceptance solutions, including applications that facilitate the acceptance of electronic payments. The current threshold is EUR 50,000.

Source: [Government Ordinance no. 16/2022 for the amendment and completion of the Fiscal Code, the repeal of some normative acts and other financial-fiscal measures, published in the Official Gazette no. 716 dated 15 July 2022]