Decree No. 16/2022 on Amendments and Supplements to Law No. 227/2015 on the Tax Code, Repeal of Certain Regulations and Other Financial and Fiscal Measures
On July 15, Decree No. 16 was published in the Official Gazette, which makes major changes with regard to the repeal of certain regulations and other financial and fiscal measures.
The main changes made to the Tax Code include the following:
Tax
This Decree expands the scope of the profit reinvestment mechanism and assets used in manufacturing, processing and reengineering activities. Assets used in manufacturing, processing and reengineering activities are determined by an order of the Minister of Finance to be issued within 120 days from the date of publication of this Decree.
Dividend tax
- The tax rate on dividends is increased from 5% to 8% for all dividend recipients (Romanian and foreign individuals and legal entities), starting with dividends distributed as of January 1, 2023.
- The conditions that must be met by the beneficiary, respectively, the dividend payer, are clarified to apply the dividend tax exemption.
- With regard to dividend income received in Romania by pension funds (both residents and non-residents), the exemption from taxation is abolished.
Corporate income tax for micro-enterprises
From January 1, 2023, micro-enterprise income tax becomes optional. The 3% tax rate for micro-enterprises is abolished and the 1% flat tax rate is retained.
The conditions for classifying categories of micro- enterprises are also changed:
- The income ceiling is reduced from €1 million to €500,000;
- Income other than income from consultancy and/or management is generated in a proportion of more than 80% of total income;
- Presence of at least one employee;
- Associated persons/shareholders owning more than 25% of the value/number of shares or voting rights in not more than three Romanian legal entities that are eligible to apply the tax system to the income of micro-enterprises.
New rules for exiting the micro-enterpriseincome tax system during the year are clarified.
At the same time, as of January 1, 2023, Law no. 170/2016 on Special Tax for Certain Activities will be repealed. Romanian legal entities carrying out activities corresponding to CAEN HoReCa codes, starting from January 1, 2023, may choose to pay corporate income tax or profit tax.
In addition, the list of persons excluded from corporate income tax for micro-enterprises is extended for the following Romanian legal entities:
- A Romanian legal person operating in the banking sector
- A Romanian legal entity engaged in insurance, reinsurance and capital market activities, including intermediary activities in these fields
- A Romanian legal entity engaged in gambling activities;
- a Romanian legal entity engaged in the exploration, development and exploitation of oil and natural gas.
The possibility for micro-enterprises with a subscribed share capital of at least 45,000 lei and with at least 2 employees to apply the income tax system is abolished.
In addition, the procedure for the deduction of amounts representing income tax benefits for micro-enterprises is clarified. The tax reduction according to the provisions of GEO no. 153/2020 is applied to the amount received after deduction of all tax credits.
At the same time, the deadline for submitting the sponsorship declaration is clarified. Therefore, the deadline for submitting this declaration is June 25of the year following the year in which the sponsorship payment was made.
Income tax and social security contributions. Non-taxable income
- Compensation for cancer care is regulated as non-taxable income from July 19, 2022.
Income from wages and salaries:
From January 1, 2023, exemption from taxation of fringe benefits received by mobile workers (up to a statutory limit of 2.5 times for secondment of employees of public authorities and institutions) is limited to employees who perform mobile trucking activities.
From January 1, 2023, a 33% non-taxable monthly ceiling of the basic wage/salary corresponding to the position, subject to certain conditions and limits stipulated in the Decree, is introduced, for which income tax and social contributions are not applied.
Target income (the procedure for their exemption from wage/salary tax liability is determined by the employer) includes:
- Fringe benefits received by employees under a mobility clause, with the exception of benefits received by employees engaged in mobile trucking activities
- Cost of meals provided by the employer to employees
- Accommodation and the amount of rent for living quarters provided by employers to employees
- Tourism and/or health services, including transport, during the holiday period for employees and their families
- Contributions to the supplementary pension fund
- Voluntary health insurance premiums as well as medical subscriptions
- Amounts given to remote workers to cover costs
As of January 2023, the tax exemption for income earned under an individual employment contract concluded for a period of 12 months with legal entities carrying out seasonal activities in the HoReCa sector is abolished.
Changes are made to the tax benefits applicable to workers in the construction, agriculture and food processing industries:
- Starting with wage/salary income relating to August 2022, the tax exemption ceiling is reduced from 30,000 lei to 10,000 lei.
- The provisions for determining the 80% turnover rate are updated from July 19, 2022.
- Starting with income relating to January 2023, tax exemptions will only apply to employees with individual employment contracts.
Starting with wages/salaries attributable to August 2022, social security and health insurance contributions due to full-time or part-time self-employed individuals may not be lower than the level applicable to the minimum gross basis for each country that is in force in the month for which they are due.However, the Decree also provides for exceptions to this liability.If such a liability still exists, the employer/payer will bear the difference between the contributions accrued on the wages/salaries earned and those due on the national gross minimum basic wage/salary.
- Changes are made to the personal deductions applicable to earnings from wages and salaries. In short, there are two types of personal deductions:
Basic deductions:
For gross monthly income up to 2,000 RON above the national minimum gross wage/salary (according to the table provided in the Decree).
Additional deductions:
- 15% of the national gross minimum basic wage/salary for individuals under 26 years of age with income from wages/salaries not exceeding 2,000 RON above the national gross minimum basic wage/salary;
- 100 RON per month for each child under 18 years of age, if the child is enrolled in an educational institution, regardless of the employee’s wage/salary.
Income from self-employment
Starting in 2023:
- The ceiling for transition from a taxation system based on income standards to the real system is reduced from €100,000 to €25,000.
- A different calculation basis is introduced, namely 24 national minimum gross wages/salaries on which the social security contribution is payable, in the case of people who derive income from independent activities and/or intellectual property rights, if the annual income exceeds 24 national minimum gross wages/salaries (in addition to the existing 12 wages/salaries);
- The annual basis for calculating the social health insurance contribution is also changed. Thus, the contribution will be calculated according to three ceilings, depending on the level of income: 6, 12 or 24 national gross minimum wages/salaries, depending on the realized income (the current base is 12 wages/salaries).
Dividend income
- The tax rate on dividend income received by individuals in or outside Romania is increased from 5% to 8%, starting with dividends distributed as of January 1, 2023.
Property transfer income
As of January 1, 2023, the non-taxable ceiling of 450,000 RON is removed and taxed as follows:
- 3% for buildings owned for up to and including 3 years;
- 1% for buildings held for more than 3 years.
Rental income
- For rental income received from January 1, 2023 (except for rental income for tourism purposes), tax will be payable on the gross income. Thus, the 40% flat rate, which is currently deductible in calculating taxable income, is excluded).
- Registration with the fiscal authority of contracts concluded since January 1, 2023 is reintroduced. Registration is mandatory within 30 days from the date of conclusion/amendment.
Social health insurance contributions
For income realized from January 1, 2023, three ceilings are introduced for the calculation of social health insurance contributions: 6, 12 or 24 national minimum gross wages/salaries (the current base is 12 wages/salaries).
Thus, persons who receive income which is the subject of this contribution (e.g. transfer of goods, investments, from other sources, self-employment) will pay 10% according to the new calculation bases, depending on the level of income received.
Changes in value added tax
The changes for VAT came into force on January 1, 2023.
Reduced VAT rates
- The supply of soft drinks under NC 2202 10 00 and 2202 99 codes is excluded from the reduced 9% rate as it is subject to the standard VAT rate.
- The supply of chemical fertilizers and pesticides normally used in agricultural production as stipulated in the Joint Order of the Minister of Finance and the Minister of Agriculture and Rural Development is subject to a reduced 9% VAT rate up to and including December 31, 2031.
- The following goods and services, for which a reduced 5% VAT rate is currently applied, are included in the category of goods and services subject to a reduced 9% rate:
- Accommodation in the hotel sector or sectors with a similar function, including the rental of land intended for camping
- Restaurant and catering services, excluding alcoholic and non-alcoholic beverages covered by KN 2202 10 00 and 2202 99 codes
- The reduced 5% VAT rate on the supply of firewood is valid until and including December 31, 2029.
Special rules for renting accommodation
- The ceiling for renting houses subject to the reduced 5% rate (which have a usable area not exceeding 120 square metres, excluding extensions and cost, including the land on which they are built, added tax is purchased by individuals separately or jointly with other individuals) is changed so that it may not exceed the amount of 600,000 RON.
- As of January 1, 2023, any individual can purchase a house separately or jointly with another individual at a preferential 5% rate.
- Updates are made to the Register of Housing Purchases with a reduced 5% VAT rate starting from January 1, 2023, including references to the procedure for organizing this Register in accordance with the ANAF Order issued in agreement with the National Union of Notaries Public fromRomania.
As an exception to the newly introduced provisions on the criteria for the application of the reduced 5% rate on residential property, transitional measures are provided for contracts concluded before January 1, 2023. These rules also apply to the Register of Housing Purchases with the reduced 5% VAT rate from January 1, 2023 and the duties of public notaries.
Changes in excise duties
As of August 1, 2022, the following changes to the Tax Code regarding excise duties came into force:
- Processed tobacco:
- The specific excise duty increases for cigarettes (from 459.386 RON/1000 cigarettes until March 31, 2023; the total excise duty increases to 594.97 RON/1000 cigarettes after consecutive yearly increases according to the calendar in Annex 1).
- The legal percentage used to calculate the ad valorem excise tax applied to the retail price of cigarettes issued for consumption is reduced to 13% between August 1, 2022 and March 31, 2023, and thereafter by one percentage point per year, thus being 10% from April 1, 2025.
- Exemption from the adjustment of the excise duty with increases in consumer prices is applied to finely cut tobacco intended for rolling cigarettes, other smoking tobacco, cigarettes and leaf cigarettes, tobacco contained in heated tobacco products and liquids containing nicotine. For these goods, the excise duty is given in Annex 1 and will apply from April 1 of each year.
- Alcohol and alcoholic drinks:
- Excise duty on alcohol and alcoholic drinks increases by about 5% (e.g., excise duty on beer increases from 3.77 to 3.96 RON/gl/1-degree Plateau and on ethyl alcohol from 3778.89 to 3968.38 RON/gl of pure alcohol).
- Energy products:
- The excise tax specified in Annex 1 is lower for the following categories: gasoline (leaded/unleaded), diesel, fuel oil, LPG, natural gas and electricity, lamp oil, coal and coke.
- In addition, there is an exemption for gasoline and diesel, i.e. the excise rate will not be updated with increases in consumer prices for the period from January 1, 2023 to December 31, 2023. If the excise rate for these products is below the minimum level provided for by Directive 2003/96/EC on the restructuring the Community for the Taxation of Energy Products and Electricity, the minimum level of the Directive will be applied.
- Excisable non-harmonized goods:
- Excise duty on liquid containing nicotine (from 0.57 to 0.64 fractions/ml) and tobacco contained in heated tobacco products (from 438.8 to 594.97 fractions/kg) is increased.
- There is an annual increase in excise tax according to the calendar in Annex 2 for the period 2023-2026.
Building tax
From January 1, 2023, the tax rate is not less than 0.1% and 0.5% of the building value for residential and non-residential buildings, respectively. As an exception, non-residential buildings used for agricultural purposes will be taxed at a 0.4% rate of the building value.
The tax rate on buildings is determined by a local council decision. At the level of the Municipality of Bucharest, the General Council of the Municipality of Bucharest is entitled thereto.
For buildings comprising both residential and non-residential premises, the building tax/tax is determined according to the purpose of the surfaces with a weight over 50% and is calculated by applying the rate corresponding to the majority of the purpose to the value of the whole building.
Changes are also introduced to the taxable value of the building. Thus, it will be established according to the market research on the estimate value of real estate in Romania, carried out by the National Union of Notaries Public from Romania.
If the market research value performed by the National Union of Notaries Public from Romania is lower than the taxable value recorded on December 31, 2022, according to the regulations in force at that time, the minimum rates of 0.1% and 0.5% for residential and non-residential buildings, respectively, will be applied to the value recorded on December 31, 2022.
This eliminates differences in taxation depending on the status of the owner (individual or legal entity).
For more information, please refer to the Official Gazette No. 716 dated July 15, 2022.
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