Romania: Major amendment to Fiscal Code

16.11.2017

Government Emergency Ordinance no. 79/2017, published in the Romanian Official Gazette no. 885/10.11.2017, brings major amendments to the Romanian Fiscal Code, the most important of which are outlined below. The modifications enter into force on 1 January 2018.

Micro-enterprise tax

  • It is no longer possible for any company to opt for a profit tax payer status (16% profit tax rate applied to its taxable profits) instead of a micro-enterprise tax payer (1% or 3% tax rate applied to its revenue), even if the company has share capital of more than RON 45,000.
  • Any company with annual revenue less than or equal to EUR 1,000,000 (RON equivalent) must pay a 1% tax on its revenue if it has employees, or 3% if it has no employees.

Profit tax

  • New rules for deduction of interest have been established. For companies that are part of a group of companies (specific definition is given), interest expenses that exceed interest revenue are deductible up to EUR 200,000 (RON equivalent) or, if the interest expenses exceed interest revenue by more than EUR 200,000, the amount by which they exceed EUR 200,000 is deductible up to 10% of the accounting profit plus some fiscal adjustments. 
  • Profit tax has to be paid on a transfer of assets from Romania to a permanent establishment in other state or from a Romanian permanent establishment to another country, on a transfer of fiscal residence from Romania and/or on a transfer of the activity of a Romanian permanent establishment to another country.
  • In the case of foreign controlled companies, specific types of revenue are included in the computation of profit tax.

Income tax

  • Generally, the income tax rate applied to revenue obtained by individuals is decreased to 10% (except for specific cases).

Social contributions

  • The following social contributions apply to salaries:
    • 25% pension contribution – due by employee
    • 4% pension contribution for particular working conditions – due by employer
    • 8% pension contribution for special working conditions – due by employer
    • 10% health contribution – due by employee
    • 2.25% work contribution – due by employer
  • The employer has to pay to the tax authorities all of the above contributions (i.e. the employer withholds employees’ contributions from their gross salaries).
  • Freelancers performing independent activities can choose the monthly amount they wish to have covered by their pension insurance (but this amount cannot be less than the minimum gross salary), which is then subject to a 25% pension contribution. The monthly amount for health insurance purposes is the minimum gross salary (if revenue achieved exceeds the minimum gross salary), which is subject to a 10% health insurance contribution.