Fiscal changes effective January 1, 2024: An entrepreneur can own only one microenterprise

Fiscal amendments made in October and December 2023 lead to tax increases and require new investments by companies, while the unpredictability regarding the fiscal regime has disturbed the business environment at the end of the year. Changes at the microenterprise level and the elimination of tax optimization for entrepreneurs holding stakes in multiple microenterprises, doubling taxation for meal vouchers offered to employees, increasing VAT from 9 to 19% for certain tourism activities (including festival access), and mandatory enrollment in the RO e-Invoice system are just some of the changes that companies are still trying to process and implement, according to an analysis by Crowe Romania.

“2024 brings significant tax changes in all sectors, and managers and entrepreneurs have had to work with multiple business scenarios in the last two months. Business leaders’ decisions varied: from eliminating some employee benefits and replacing them with more advantageous ones to price increases aimed at covering tax hikes or finding solutions for new investments needed for digitalizing the relationship with authorities. For microenterprises, the situation is more difficult, and decisions are harder to make, which is also reflected in the statistics regarding enrollment in the RO e-Invoice system, with only 11% of the total 1.2 million companies in Romania enrolled so far. New investments are the first to suffer from such a flurry of tax changes, and the result of the lack of predictability will be seen in the 2024 company balance sheets,” explained Mitel Spataru, Tax Partner at Crowe Romania.

Crowe Romania compiled a list of the most important fiscal changes impacting the business environment, effective from January 1, 2024, regulated by two normative acts published in the Official Gazette in October and December 2023:

• A shareholder/associate can hold over 25% of the shares/social parts only in one microenterprise. Until now, the limit was holding over 25% of shares/social parts in 3 microenterprises. If an entrepreneur holds over 25% shares/social parts in multiple microenterprises in 2024, they must decide by March 31 which company will apply the microenterprise-specific tax system.

• A new condition for being a microenterprise: filing financial statements within the legal deadline, i.e., by March 31, 2024. This adds to previous fiscal changes to the microenterprise regime, such as taxing, starting in 2024, at 1% of revenues for those with receipts of 60,000 euros/year (5,000 euros/month) and 3% for those with receipts over 60,000 euros/year (up to 500,000 euros/year) or operating in certain sectors (IT, HoReCa, some legal activities, medical assistance, or dentistry, etc.).

• The RO e-Invoice system, through which invoices issued by a company reach the state authorities and the company/institution that must pay those invoices, becomes mandatory for most companies in Romania (with a few exceptions). In the first phase of implementing RO e-Invoice, i.e., from January 1 to June 30, 2024, companies are required to report in the national electronic invoice system RO e-Invoice all invoices issued in relation to other companies and public institutions. Subsequently, from July 1, 2024, companies are required to invoice directly through RO e-Invoice, otherwise, they will face penalties. The Monostry of Finance has provided a guide detailing what entrepreneurs and company managers need to do to enroll in this system designed to combat tax evasion.

• VAT increases from 5% to 19% for the following activities: use of sports facilities, touristic transportation (with historic vehicles, cable transport, animal traction, touristic vessels), delivery of bio-eco foods, mountain foods, and access to fairs, amusement parks. Also, VAT increases from 5 to 9% for the delivery of photovoltaic panels and the rest of the category of goods for generating green energy.

• Powdered milk for newborns, infants, and young children is added to the list of foods with added sugar that will continue to have a 9% VAT, alongside sweetbread and biscuits. For other products with added sugar, VAT increases to the standard rate of 19% (compared to 9% previously).

• Banks owe, in addition to corporate income tax, an additional tax of 2% of turnover. The additional 2% rate applies from January 1, 2024, to December 31, 2025, and will decrease to 1% from January 1, 2026.

• Freelancers earning income from independent activities, determined in a real system, can no longer have deductible sponsorship expenses. Also, they can deduct sports subscription expenses up to 100 euros per year (compared to 400 euros/year previously).

• Companies supporting early childhood education for employees’ children can offer up to 1,500 lei/month as a benefit for each child, meant to cover the fees for the child’s nursery/kindergarten. This amount is deductible for the employer, so corporate income tax will not be paid for it.

• Meal vouchers and vacation vouchers will no longer be exempt from health insurance contributions (CASS) and will thus be taxed at 10%. The total taxation for these benefits thus reaches 20%. Also, the Ministry of Labor announced that from February 2024, the maximum value of a meal voucher will increase by 14%, from 35 lei currently to 40 lei.

• The amount of 200 lei/month from the salaries of Romanian employees remains non-taxable in 2024. This will not be included in the monthly base for calculating social contributions. This facility has been in effect since January 1, 2023.

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