The tax rate for a micro enterprise with one full-time employee amounts to 1% in Romania

The revenue threshold of a micro enterprise will be EUR 1 million, from January 1, 2018. The tax rate for a micro enterprise, with one full-time employee, amounts to 1%, whereas the tax rate for micro enterprises with no employees reaches 3%.

According to the latest changes in the Fiscal Code,  a newly established legal entity is required to follow the micro-enterprise tax regime starting with the first fiscal year and will remain under this tax regime if it meets all of the following criteria:

1.     The maximum threshold of annual turnover is EUR 1 million;

2.     Income generated from consultancy and management activities is not more than 20% of the annual turnover;

3.     It does not carry out any banking, insurance and reassurance, capital markets, gambling or upstream oil & gas activities;

4.     The share capital must be held by entities other than the state or the local authorities.

As long as the micro-enterprise continues to meet all of the above criteria, its status will remain.

Any newly registered legal entity with a share capital of at least RON 45,000 may choose to become a corporate income taxpayer as of its date of incorporation.

Any existing micro-enterprise with a share capital of at least RON 45,000, as well any existing micro-enterprise that increases its share capital up to this threshold may also opt to become a corporate income tax payer.

As from February 1, 2018, companies that are qualified as corporate income taxpayers, but their annual revenues fall below the threshold of EUR 1 million will have the obligation to apply the micro-enterprise tax regime.

Taxation on micro-enterprises

Micro-enterprises are taxed on their turnover. Micro-enterprises with at least one full-time employee are subject to a tax rate of 1% imposed on the business income, representing RON 1.000. Moreover, the firm has to pay to the state the imposed social contributions (pensions, health, work contribution) and the income tax for each employee. One should know that micro-enterprises with no employees are subject to the business income tax of 3% imposed on profits generated in one fiscal year.

Taxpayers of income tax like companies with a turnover of more than EUR 1 million may choose, according to the Fiscal Code, for the calculation, declaration, and payment of profit tax on a yearly basis or for quarterly instalments.

What is the threshold for micro-enterprises in Romania?

The modifications of the Fiscal Code for 2018 mention that the income tax is applicable for micro-enterprises with revenues under EUR 1 million registered in 2017. This rule does not apply for juridical entities with activities in the banking sector in Romania.

Tax deductions for micro-enterprises in Romania

According to the Fiscal Code for 2018, micro-enterprises in Romania can also benefit from tax deductions. More specifically, they may fall to 20% of tax for sponsorship, for the quarter in which the expenditures were registered. This feature is applicable starting with the second quarter of 2018. For a proper understanding of the new business and tax rules for micro-enterprises in Romania, it is best to talk to one of our accountants in Romania. They can help small, medium and large entrepreneurs align with the tax regulations imposed by the Fiscal Code and its modifications.

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