Expert Advice

Currently, Romanian companies with a turnover of less than 1,000,000 EUR can opt for the micro-enterprise income tax system instead of the corporate income tax (CIT). Under this system, companies pay a 3% tax on their taxable income instead of the 16% CIT on their accounting profit, adjusted for non-taxable revenues and non-allowable expenses. If a company has at least one full-time employee, the tax rate is reduced to 1%. Companies using this system are termed micro-enterprises.

Effective January 1, 2023, changes to the micro-enterprise income taxation system will take effect. To qualify as a micro-enterprise income taxpayer, a company must meet the following criteria:

– Achieve income not exceeding the RON equivalent of 500,000 EUR (the government is still debating whether this threshold applies based on 2022 income or as a reference for 2023).
– Employ at least one full-time employee or have a management contract/mandate with at least the minimum gross salary, with an exception for newly established companies which have a 30-day grace period from their registration date.
– Ensure that associates/shareholders holding more than 25% of the value/number of participation titles or voting rights do not hold similar stakes in more than three Romanian legal entities qualifying for the micro-enterprise tax system.
– Not be in dissolution or liquidation, as recorded with the Trade Registry or courts.
– Generate more than 80% of total revenues from sources other than consulting and/or management.

Companies meeting these conditions will be subject to a single tax rate of 1% on their taxable income. The 3% tax rate will no longer apply.

Therefore, even if a company’s income did not exceed 500,000 EUR or 1,000,000 EUR (if the higher threshold remains for 2022), it must employ at least one full-time employee by the end of 2022 to avoid reverting to the 16% CIT in 2023. Additionally, if more than 20% of the company’s activities involve consulting or management, it will be ineligible for the micro-enterprise system in 2023, regardless of income or employee count.