One of the most important changes brought by the New Tax Code related to the income taxes. According to the new law, income taxes are due in the percentage of 16%, which is the general share.
Taxpayers who develop activities relating to night bars, nightclubs, discos and casinos, including legal persons that carry out such income under a contract of association, and in the case that the income tax due for these activities is less than 5% of those revenues are obliged to pay tax at the rate of 5% of such recorder revenues.
Tax result is calculated as the difference between revenues and expenses in accordance with applicable accounting regulations, minus non-taxable income and the tax deductions, to which the deductible expenses are added.
Deductible expenses meet a new definition under the New Tax Code, its provisions regulating that deductible expenses are those incurred in order to achieve economic activity.
Social spending may be granted of up to 5% of the salary expenses. Moreover, long-term loans from other entities witnessed a 4% reduction in terms of interest rate when it is in currency that can be deductible, being conditioned by the level of indebtedness.
One should also note the introduction of the Tax Code of a procedure similar to the correction of accounting errors in that if in the current year, an error of calculation of income tax relating to an exercise closed is identified and the error is insignificant, the correction is made on account of the current year’s profit. If the error is significant, it requires a correction on account of the fiscal result of the year at which the error refers ro.
Regarding dividends paid by a company, the dividends paid by a Romanian legal entity to another Romanian legal entity will be taxed at a rate of 16%.
It is useful to know that the dividend tax does not apply in the case that the person who collects dividends holds more than 10% of the share capital at the affiliated company, for a period exceeding one year.
Starting with January 1st 2017, the tax on dividends will be 5%.
On what concerns micro-enterprises, the New Fiscal Code brought significant changes regarding enterprises that meet certain criteria determined by law.
Firstly, it is useful to know that the definition of a micro-enterprise refers to a corporation:
▪ not engaged in banking, insurance and reinsurance, capital market, gambling or exploration, development, exploitation of oil and natural gas deposits;
▪ obtains revenues from providing services of consulting and management that do not exceed 20% of the total revenue;
▪ that realizes revenues which exceed the equivalent in lei of 65,000 euros;
▪ owns a capital that is held by persons other than the state and territorial administrative units;
▪ which does not find itself in dissolution followed by liquidation, registered in the trade register or the Courts, according to the law.
Micro-enterprise income tax is 3%.
However, the new provisions establish that what concerns Romanian legal persons that are newly founded, that have at least one employee and are constituted for a period exceeding 48 months and whose shareholders / associates did not hold equity in other legal entities, the tax rate is 1% for the first 24 months of the date of registration of the legal entity in accordance with the Romanian law.
This provision becomes applicable only in case that, within a period of 48 months starting from the date of the registration, the micro-enterprise is not in voluntary liquidation by the decision of the General Assembly, in dissolution without liquidation, temporary inactivity, did not declare on it’s own account that it does not develop activities at the headquarters / secondary offices, does not know a capital increase through contributions made by new shareholders / associates and the shareholders / associates do not sell / assign / change their held shares.
If the company has been established for a limited period, the minimum duration of the company is 48 months.
Among the changes introduced by the new Fiscal Code regarding companies, we can also mention the situation of companies owning constructions. Thus, it is provided that companies which own a construction will lodge a special declaration of enforcement, for the existing constructions in the company’s heritage on December 31st, 2015. Legal entities that own buildings in 2016 will pay a tax on buildings as follows:
a) for the owned residential constructions, the share is between 0.08% and 0.2% of the taxable value of the building;
b) for non-residential construction, the share is between 0.2% and 1.3% of the taxable value of the building.
Although the changes brought by the New Romanian Tax Code may seem discouraging at first, the law firm Darie, Manea & associates can pride itself with an experienced team of lawyers who are set to finding optimal solutions for their customers, providing up to date and complete information on the matter. Do not hesitate to contact us for further information or legal advice regarding the corporate tax law and how to open a company in Romania!