OG no. 16/2022 regarding the Fiscal Code approved with changes: Law no. 370/2022

The takeaway

Law no. 370/2022 approved Government Ordinance no. 16/2022 (OG no. 16/2022) regarding the amendment and completion of the Fiscal Code. It also repealed some normative acts and other financial-fiscal measures while bringing a series of changes to the Ordinance, which will apply as of 1 January 2023. The changes made by OG no. 16/2022 can be found at this Link.

In detail

According to Law no. 370/2022, the main changes or additions made to OG no. 16/2022 for the amendment and completion of the Fiscal Code are:

TITLE II Profit tax

Calculation of the fiscal result

The types of research and development activities eligible for an additional deduction of 50% when determining the fiscal result have been changed. These activities must be from the categories of applied research and/or experimental development relevant to the taxpayer’s activity. Therefore, technological development is excluded from the category of eligible activities, and experimental development is included.

Tax on dividends

It has been clarified the dividend tax is 5% for dividends distributed and unpaid based on the interim financial statements drawn up during the year 2022. Even after their regularization based on the annual financial statements for the financial year 2022, the 8% tax will not be recalculated for these dividends. Therefore, the dividend tax rate of 8% is applicable for dividends distributed after 1 January 2023.

TITLE III − Tax on microenterprise income

The conditions for applying the tax on microenterprise income established by OG no. 16/2022 (which you can consult at this Link).

More precisely, a Romanian legal entity can opt to apply the tax on microenterprise income if it met all the following conditions on 31 December of the previous year:

• The revenues achieved did not exceed the RON-equivalent of EUR 500,000 (condition applicable as of the fiscal year 2023) − legal entities that in 2022 obtain revenues over EUR 500,000 but below EUR 1,000,000 can opt to apply the tax on microenterprise income in 2023.

• The social capital is owned by other than the state and administrative-territorial units, according to the Fiscal Code.

• It is not in dissolution or liquidation, as registered in the commercial register or in the courts, according to the law.

• Generated more than 80% of total revenues from activities other than consulting and/or management, with the exception of revenues from tax consulting, corresponding to CAEN code: 6920 − “Accounting and financial audit activities; consulting in the tax field”.

• Has at least one employee.

• Has shareholders holding more than 25% of the value/number of participation titles or voting rights in no more than three Romanian legal entities that meet the conditions for the application of the taxation system for microenterprise income.

The rules have also been clarified for the application of the microenterprise income tax system by Romanian legal entities that carry out activities corresponding to CAEN codes for HORECA (namely 5510, 5520, 5530, 5590, 5610, 5621, 5629 and 5630).

More precisely, microenterprise income tax can be applied for the entire activity carried out according to the HORECA CAEN codes, even if the conditions mentioned above are not met.

If the same legal entity carries out activities other than HORECA, it can opt for the application of the microenterprise income tax system for those other branches of activity (non-HORECA) only if the conditions mentioned above for those non-HORECA branches of activity are met.

If in any quarter the above conditions are no longer met for those non-HORECA branches of activity, the taxpayer is obliged to pay profit tax as of that quarter for those activities. In subsequent quarters, it will no longer be possible to apply the microenterprise income tax for those non-HORECA branches of activity.

Title IV − Income tax

Changes have been made to the way the turnover ratio is calculated in the construction sector. Only, and all, activities conducted in Romania are included when determining the share of the total turnover achieved from construction activity for the purpose of making products and providing services. Thus, any activity carried out abroad is excluded when calculating the total turnover indicator.

In the article regulating the method of establishing and paying the annual tax due, the provisions relating to flat rates in the case of income from the transfer of the use of goods have been removed. Thus, an annual tax of 10% applied to the taxable income or the taxable net annual income, as the case may be, is owed by anyone who earns income from the transfer of the use of goods, other than those for which the annual net income is determined in real system, leasing and rental for tourist purpose of rooms located in personal homes, and who earn income from intellectual property rights.

Title V − Mandatory social contributions

The applicable CAS calculation base has been clarified, as follows:

i) The level of 12 gross national minimum monthly salaries in force on the date of submission of the single declaration in the case of income of between 12 and 24 gross national minimum monthly salaries.

ii) The level of 24 gross national minimum monthly salaries in force on the date of submission of the single declaration in the case of income at least equal to 24 gross national minimum monthly salaries.

The applicable CASS calculation base has been clarified, as follows:

i) The level of six gross national minimum monthly salaries in force on the date of submission of the single declaration in the case of income of between 6 and 12 gross national minimum monthly salaries.

ii) The level of 12 gross national minimum monthly salaries in force at the time of submission of the single declaration in the case of income of between 12 and 24 gross national minimum monthly salaries.

iii) The level of 24 gross national minimum monthly salaries in force at the time of submission of the single declaration in the case of income at least equal to 24 gross national minimum monthly salaries.

Title VIII − Excise duties and special taxes

As of 1 January 2024, the excise duty level for alcohol and alcoholic beverages (excisable products provided for in no. 1−5 of Annex no. 1 of the Fiscal Code) applicable on 1 January of each year is the prescribed level in Appendix no. 1 of the Fiscal Code, updated with the increase in consumer prices from the last 12 months, as calculated in September of the year before the one of application and officially communicated by the National Institute of Statistics by 15 October. The updated level of excise duties will be published on the Ministry of Finance website by October 20, but no later than 31 December of each year.

For beer, the annual update of the excise duty level described above as of 1 January 2024 will be limited to an annual percentage established by 31 October 2023.

Title IX − Local taxes and fees

You can find information on the changes regarding local taxes and fees provided for by OG no. 16/2022 at this Link.

A building tax exemption has been introduced for:

• Buildings of an institution or unit that operates under the coordination of the Ministry of Education, the Ministry of Research, Innovation and Digitisation, the Ministry of Family, Youth and Equal Opportunities or the Ministry of Sports, as well as buildings of national sports federations and the Romanian Olympic and Sports Committee, with the exception of rooms that are used for economic activities; and

• New or rehabilitated residential buildings for which the owners carry out, at their own expense, works to increase the energy performance, to install photovoltaic panels or for ecological systems for the collection and treatment of wastewater. This exemption is applied based on the decisions of the local Councils.

Mandatory acceptance of card payment methods

The ceiling above which legal entities that carry out retail and wholesale trade activities, as well as those that carry out service activities, are obliged to accept debit, credit or prepaid cards as a means of payment through a POS terminal and/or other modern acceptance solutions, including applications that facilitate the acceptance of electronic payments. Law no. 370/2022 raised the turnover ceiling to RON 50,000 (under OG no. 16/2022, the ceiling was the RON-equivalent of EUR 10,000). If the limit is not exceeded for two consecutive years, legal entities can continue to accept card payment instruments or refuse.

Source: [Law no. 370/2022 regarding the approval of 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. 1228 dated 20 December 2022]