ANAF presents the main amendments to the Fiscal Code

ANAF presented a document in which it included the main changes made to the Tax Code since the beginning of this year:

I. PROFIT TAX

• The facility regarding the tax exemption of reinvested profit was also extended for investments in assets used in production and processing activity, the assets representing re-engineering.
The provisions of paragraph (4) of art. 22 of the Fiscal Code establish rules for the application of the facility regarding the tax exemption of reinvested profit for situations in which micro-enterprises become payers of profit tax during the year, in the cases provided for in art. 52 of the Fiscal Code.

• The dividend tax rate was increased, from 5% to 8%, for dividends distributed/paid between Romanian legal entities, as well as for those distributed/paid to non-residents (applicability for dividends distributed after January 1, 2023).

• In the case of dividends distributed based on interim financial statements prepared during 2022, the dividend tax rate is 5%, without recalculating the tax on the respective dividends, after their regularization based on the annual financial statements for the 2022 financial year, approved according to the law.

• Starting with January 1, 2023 and until December 31, 2023 inclusive, the application of the provisions of art. 25 paragraph (4) letters i) and i), art. 76 paragraph (4) letter x) and art. 142 letter z) of Law no. 227/2015, with subsequent amendments and supplements, is suspended.

During the suspension period, the expenses for the proper functioning of nurseries and kindergartens under the administration of taxpayers are considered expenses with limited deductibility of the nature of those provided for in art. 25 paragraph (3) letter b) of Law no. 227/2015, as subsequently amended and supplemented, and fall under the incidence of the 5% limit established for them, applied to the value of expenses for staff salaries, according to Law no. 53/2003 - Labor Code, republished, as subsequently amended and supplemented.

II. TAX ON MICRO-ENTERPRISE INCOME

• The conditions for being classified as microenterprise income tax payers have been modified, the new cumulative conditions being:

• the company achieved revenues that did not exceed the lei equivalent of 500,000 euros.
  The exchange rate for determining the equivalent in euros is the one valid at the close of the financial year in which the income was recorded (previously the ceiling was 1,000,000 euros)
• the provision applies starting with the income related to the year 2023;
• its share capital is owned by persons other than the state and administrative-territorial units;
• is not in dissolution, followed by liquidation, registered in the trade register or in the courts, according to the law;
• has achieved income, other than that from consultancy and/or management, in a proportion of over 80%, except for income from tax consultancy, corresponding to the CAEN code: 6920 – 'Accounting and financial auditing activities; tax consultancy' of the total income (new condition);
• has at least one employee, except for the situation provided for in art. 48 paragraph (3) (new condition);
• has associates/shareholders who hold over 25% of the value/number of participation titles or voting rights in at most three Romanian legal entities that qualify to apply the taxation system on microenterprise income, including the person who verifies the fulfillment of the conditions (new condition).

• The following were added to the category of legal entities exempt from paying the tax on microenterprise income:

• banking companies;
• companies in the fields of insurance and reinsurance, capital market, including intermediation;
• gambling companies;
• companies that carry out activities of exploration, development, exploitation of oil and natural gas deposits.

• The microenterprise income tax system becomes optional starting with 01.01.2023.
Romanian legal entities, except those in the HoReCa sector, may opt to apply the tax on microenterprise income starting with the fiscal year following the one in which they meet the microenterprise conditions provided for in art. 47 paragraph (1) and if they have not been paying tax on microenterprise income after January 1, 2023.
Starting with January 1, 2023, by way of exception to the provisions of art. 47 paragraph (1) of the Fiscal Code, Romanian legal entities carrying out activities in the HoReCa field may opt for paying the tax on microenterprise income, without applying the provisions of art. 52 of the Fiscal Code (art. 47 paragraph (2) of the Fiscal Code).
Microenterprises cannot opt for paying profit tax during the fiscal year, the option being able to be exercised starting with the following fiscal year, with the exceptions provided for in art. 52 of the Fiscal Code (rules for exiting the taxation system on microenterprise income during the year).

• In the event that Romanian legal entities carrying out activities in the HoReCa field obtain income during the year from other activities other than those corresponding to the NACE codes related to this field, for income from other activities they apply the system of declaration and payment of profit tax provided for in Title II "Profit Tax", if they meet any of the following conditions:
a) generates income from consultancy and/or management in a proportion of over 20% including total income;
b) carries out the activities referred to in art. 47 para. (3) let. f)-i);
c) income from other activities exceeded the equivalent in lei of 500,000 euros. The exchange rate for determining the equivalent in euros is the one valid at the close of the financial year preceding the one in which the income was recorded. They owe profit tax on income from other activities starting with the quarter in which any of these conditions was met, for the entire period in which the taxpayer exists.

• The tax rate of 1% is maintained and the rate of 3%9 is eliminated (with the requirement of having at least one employee and compliance with all other conditions).

• The option for paying profit tax has been eliminated for micro-enterprises that have a subscribed share capital of at least 45,000 lei and have at least 2 employees.

• The order of reducing the tax on microenterprise income was established10:

1. sponsorships;
2. the cost of electronic fiscal cash registers;
3. reduction according to Government Emergency Ordinance no. 153/2020 for the establishment of fiscal measures to stimulate the maintenance/increase of equity, as well as for the completion of certain normative acts;
   During the period of application of the provisions of Government Emergency Ordinance No. 153/2020, the informative declaration 107 is submitted by June 25 of the following year inclusive.

• Starting with January 1, 2023, taxpayers who fell under the provisions of Law no. 170/2016 until December 31, 2022, may opt, by way of exception to the provisions of art. 47 paragraph (1) of the Fiscal Code, for the payment of tax on microenterprise income, according to Title III of the Fiscal Code, or for the payment of profit tax, according to Title II of the Fiscal Code.

• Law no. 170/2016 on the specific tax on certain activities was repealed starting from January 1, 2023 by art. VI paragraph (1) of Government Ordinance no. 16/2022 amending and supplementing Law no. 227/2 on the Fiscal Code, repealing certain normative acts and other financial and fiscal measures.

III. INCOME TAX AND SOCIAL CONTRIBUTIONS

• The exemption from income tax for individuals was eliminated, in the case of income earned from salaries as a result of carrying out activity based on an individual employment contract concluded for a period of 12 months, with Romanian legal entities carrying out seasonal activities in the field of hotels, restaurants, guesthouses or bars.

• It has been regulated that the exemption from income tax for the construction, agricultural and food industry sectors will be granted only to employees with individual employment contracts13 (applicability starting with incomes related to January 2023).

• The exemption from income tax for the construction sector is granted for gross income calculated at a gross salary for 8 hours of work/day of at least 4,000 lei per month (ceiling increased from 3,000 lei). The exemption applies to the amounts of gross monthly income up to and including 10,000 lei, obtained from salaries and assimilated to the salaries provided for in art. 76 para. (1) – (3), earned by individuals. The part of the gross monthly income exceeding 10,000 lei does not benefit from tax facilities (applicability starting with income related to January 2023).

• It was regulated that in order to determine the share of turnover actually achieved from construction activity in total turnover, the total turnover indicator includes income from the entire activity carried out only on the territory of Romania (previously, income from activity carried out outside Romania was also taken into account).

• Taxpayers for whom net income is determined based on income norms and who in the previous fiscal year recorded an annual gross income higher than the equivalent in lei of the amount of 25,000 euros (previously, the amount was 100,000 euros), starting with the following fiscal year, are required to determine their annual net income in the real system14 (applicability starting with the income of 2023).

• In order to determine the annual net income from independent activities, Law no. 34/2023 introduced, in the category of limited deductible expenses 15, the equivalent value of subscriptions for the use of sports facilities for the practice of sports and physical education for maintenance, prophylactic or therapeutic purposes offered by providers whose activities are classified under CAEN codes 9311, 9312 or 9313, paid for the personal purposes of the taxpayer, regardless of whether the activity is carried out individually or in a form of association, as well as the equivalent value of subscriptions, offered by the same provider acting in its own name or as an intermediary, which include both medical services and the right to use sports facilities, for the practice of sports and physical education for maintenance, prophylactic or therapeutic purposes, paid for the personal purposes of the taxpayer, regardless of whether the activity is carried out individually or in a form of association, within the limit of the equivalent in lei of 400 euros annually for each person (applies to amounts paid starting with January 15 2023).

• In the case of income from salaries and similar to salaries, a monthly ceiling of non-taxable income is introduced, which is not included in the calculation bases of mandatory social contributions, of no more than 33% of the basic salary corresponding to the job held, under the conditions established by law, for the following monthly cumulative income:
a) additional benefits received by employees based on the mobility clause according to the law, other than the additional benefits received by mobile workers provided for by Government Decision No. 38/2008 on the organization of working time of persons performing mobile road transport activities, with subsequent amendments and supplements, within the limit of 2.5 times the legal level established by the Government Decision;
b) the value of the food within the maximum value, according to the law, of a meal ticket/person/day;
c) accommodation and the equivalent value of the rent for accommodation/living spaces made available by employers to their employees, within the limit of a non-taxable ceiling of 20% of the minimum gross basic salary per country guaranteed in payment/month/person, under certain conditions provided by law;
d) the equivalent value of tourist and/or treatment services, within the limit of an annual ceiling, for each employee, representing the level of an average gross salary used to substantiate the state social insurance budget for the year in which they were granted;
e) contributions to a voluntary pension fund and those representing contributions to voluntary pension schemes, within the limit of 400 euros annually for each person;
f) voluntary health insurance premiums, as well as medical services provided in the form of a subscription, so that the annual amount does not exceed
the equivalent in lei of the amount of 400 euros, for each person;
g) amounts granted to employees who carry out teleworking activities, within a monthly ceiling of 400 lei corresponding to the number of days in the month in which the individual carries out teleworking activities;
h) the equivalent value of subscriptions for the use of sports facilities for the purpose of practicing sports and physical education for maintenance, prophylactic or therapeutic purposes offered by suppliers whose activities are classified under CAEN codes 9311, 9312 or 9313, as well as the equivalent value of subscriptions, offered by the same supplier acting in its own name or as an intermediary, which include both medical services and the right to use sports facilities, for the purpose of practicing sports and physical education for maintenance, prophylactic or therapeutic purposes, borne by the employer for its own employees, in
the limit of the equivalent in lei of 400 euros annually for each person.
Letters a) -g) enter into force as of January 1, 2023, and letter h) applies starting with the income related to the month following the publication of Law no. 34/2023, respectively starting with the income related to February 2023.

• The ceiling of gross salary income for which the basic personal deduction is granted has been increased. The basic personal deduction is granted for the gross monthly income of
up to 2000 lei above the minimum gross basic salary level per country, in force in the month of income generation (applicability starting with incomes related to January 2023), the amount of increased income, for which deductions are granted, is currently 4550 lei, compared to 3000 lei as it was previously.

• Additional deductions have been introduced:

• 15% of the minimum gross basic salary per country guaranteed in payment for individuals up to 26 years of age who earn income from salaries whose level is up to 2,000 lei above the minimum gross basic salary;
• 100 lei per month for each child up to 18 years of age, if enrolled in an educational institution (applicability starting with incomes related to January 2023).

• Starting with the income related to February 2023, according to Law no. 34/2023, when determining the tax on income from salaries, the value of subscriptions for the use of sports facilities for the practice of sports and physical education for maintenance, prophylactic or therapeutic purposes offered by suppliers whose activities are classified under NACE codes 9311, 9312 or 9313, as well as the value of subscriptions, offered by the same supplier acting in its own name or as an intermediary, which include both medical services and the right to use sports facilities, for the practice of sports and physical education for maintenance, prophylactic or therapeutic purposes, borne by the employer for its own employees, within the limit of the equivalent in lei of 400 euros annually for each person, is deducted from the gross income.

• In the case of income from the transfer of the use of goods, other than income from rent and from the rental for tourist purposes of rooms located in personally owned homes, the gross income represents taxable income (applicability starting with income related to 2023), previously a flat rate of 40% was deducted from the gross income.

• Taxpayers who obtain income from the transfer of the use of personal property, other than income from leasing and from the rental for tourist purposes of rooms located in personally owned homes, are obliged to register the contract concluded between the parties, as well as any subsequent changes, within 30 days of its conclusion/provision of the change, with the competent tax authority (applies to rental contracts concluded as of 01.01.2023).

• In the case of rental contracts in progress on January 1, 2023, the registration, with the competent fiscal body, of the contract concluded between the parties and the changes that have occurred is carried out within a maximum period of 90 days from the date on which the obligation to register them arose.

• The tax rate for dividend income earned by individuals has been changed from 5% to 8%. The measure applies to dividend income distributed after January 1, 2023.

• When transferring ownership and its dismemberments, through legal acts between residents on constructions of any kind and the land related to them, such as
and on land of any kind without buildings, taxpayers owe a tax that is calculated on the value of the transaction by applying the following rates:
a) 3% for constructions of any kind and their related land, as well as on land of any kind without constructions, held for a period of up to 3 years
inclusive;
b) 1% for real estate described in letter a) held for a period longer than 3 years, (previously the tax was 3% and was applied after deducting the non-taxable value of 450,000 lei).

• The reduced CAS rate of 21,25% will apply only to individuals who earn income from salaries and similar salaries based on individual employment contracts.
concluded with employers carrying out activities in the construction, agricultural and food industry sectors (applicability starting with incomes related to January 2023).

• The annual calculation basis for the CAS has been modified for persons who earn income from independent activities and/or income from intellectual property rights, from one or more sources and/or categories of income, the cumulative value of which is at least equal to 12 gross minimum salaries, in force at the deadline for submitting the declaration provided for in art. 120.
The annual calculation base for the social security contribution in the case of income from independent activities and/or intellectual property rights is the income chosen by the taxpayer, which cannot be lower than:
a) the level of 12 gross minimum salaries per country, in force at the deadline for submitting the declaration provided for in art. 120, in the case of income earned between 12 gross minimum salaries per country inclusive and 24 gross minimum salaries per country;
b) the level of 24 gross minimum salaries per country, in force at the deadline for submitting the declaration provided for in art. 120, in the case of income earned at least equal to 24 gross minimum salaries per country (applicability starting with incomes related to the year 2023).

• The CASS exemption in the construction, agricultural and food sectors will apply only to employees with individual employment contracts27 (applicability starting with income related to January 2023).

• The ceiling from which CASS is due and the annual calculation base of CASS have been modified in the case of persons who earn income from independent activities, income from intellectual property rights, income from association with a legal entity, taxpayer according to the provisions of Title II or Title III, income from the transfer of the use of goods, income from agricultural, forestry and pisciculture activities, income from investments and income from other sources, from one or more sources and/or categories of income, whose cumulative annual value is at least equal to 6 gross minimum salaries per country, in force at the deadline for submitting the declaration provided for in art. 120 (previously the ceiling from which CASS was due was 12 gross minimum salaries per country).
The annual calculation base of the CASS for persons who earn income from those provided for in art. 155 para. (1) let. b)-h) is:
a) the level of 6 gross minimum salaries per country, in force at the deadline for submitting the declaration provided for in art. 120, in the case of income earned between 6 gross minimum salaries per country inclusive and 12 gross minimum salaries per country;
b) the level of 12 gross minimum salaries per country, in force at the deadline for submitting the declaration provided for in art. 120, in the case of income earned between 12 gross minimum salaries per country inclusive and 24 gross minimum salaries per country;
c) the level of 24 gross minimum salaries per country, in force at the deadline for submitting the declaration provided for in art. 120, in the case of income earned at least equal to 24 gross minimum salaries per country (applicability starting with incomes related to the year 2023).

IV. TAX ON INCOME OBTAINED IN ROMANIA BY NON-RESIDENTS

• The tax rate for dividend income from a resident has been changed from 5% to 8%. The measure applies to dividend income distributed after 1
January 2023
.
V. VALUE ADDED TAX

• Starting with January 1, 2023, non-alcoholic beverages falling under CN code 2202 10 00 and 2202 99, respectively non-alcoholic beverages containing added sugar or other sweeteners or flavoured, will be excluded from the application of the reduced VAT rate of 9% (the standard VAT rate will apply).

• For restaurant and catering services, as well as for hotel accommodation activities, the VAT rate was increased from 5% to 9%, starting with January 1, 2023.

• During the period January 1, 2023 – December 31, 2031 inclusive, the reduced VAT rate of 9% will be applied for the delivery of chemical fertilizers and chemical pesticides of the type normally used in agricultural production, provided for by joint order of the Minister of Finance and the Minister of Agriculture and Rural Development.

• Starting with January 1, 2023, a ceiling of 600,000 lei, excluding VAT, was established for the delivery of housing as part of social policy, to individuals, with the quota
VAT of 5%, under the conditions of the law (previously the ceiling was 450,000, respectively 700,000 lei).

Individuals who have concluded legal acts between living persons whose object is the advance payment for the purchase of housing with the reduced VAT rate of 5%, prior to January 1, 2023, benefit from the application of the reduced VAT rate in 2023 under the legal conditions in force on the date of conclusion of these acts.

• For deliveries of firewood to individuals, legal entities or other entities, regardless of their legal form of organization, including schools, hospitals, medical dispensaries and social assistance units, in the form of trunks, logs, twigs, branches or similar forms, falling under CN codes 4401 11 00 and 4401 12 00, the reduced VAT rate of 5% will apply until December 31, 2029 inclusive.

• Starting with January 1, 2023 and until December 31, 2023 inclusive, the application of the provisions of art. 324 para. (4)-(6) of Law no. 227/2015 is suspended, respectively the term for suspension of reporting obligations is extended (information statements code 392A, 392B and 393).

• Starting with January 16, 2023, the VAT rate is reduced from 19% to 5% for:

• the supply and installation of photovoltaic panels, solar thermal panels, high-efficiency low-emission heating systems that meet the reference values for PM emissions set out in Annex V to Commission Regulation (EU) 2015/1.189 of 28 April 2015 implementing Directive 2009/125/EC of the European Parliament and of the Council with regard to ecodesign requirements for solid fuel boilers and in Annex V to Commission Regulation (EU) 2015/1.185 of 24 April 2015 implementing Directive 2009/125/EC of the European Parliament and of the Council with regard to ecodesign requirements for solid fuel local space heaters and which have been awarded a European Union energy label to demonstrate compliance with the criterion referred to in Article 7(1) (2) of Regulation (EU) 2017/1.369 of the European Parliament and of the Council of 4 July 2017 establishing a framework for energy labelling and repealing Directive 2010/30/EU, intended for residential use, including installation kits, components and complete solutions, as appropriate;
• the delivery and installation of photovoltaic panels, solar thermal panels, high-efficiency low-emission heating systems that fall within the reference values for PM emissions set out in Annex V to Commission Regulation (EU) 2015/1.189 and in Annex V to Commission Regulation (EU) 2015/1.185 and which have been awarded a European Union energy label to demonstrate compliance with the criterion referred to in Article 7(2) of Regulation (EU) 2017/1.369 of the European Parliament and of the Council, including installation kits, components and complete solutions, as appropriate, intended for central or local public administration buildings, buildings of entities under their coordination/subordination, with the exception of commercial companies.