Romania: micro-enterprise income taxation in 2023

Currently, companies with a turnover of less than 1.000.000 EUR can apply the tax on income system instead of CIT, hence the companies are paying 3% tax calculated at their taxable income instead of 16% CIT calculated at the accounting profit adjusted with non-taxable revenues and non-allowable expenses. In case the company has one full time employee, instead of 3% tax, it pays 1% tax. The companies applying this reduced taxation system are called micro-enterprises.

Starting with 1^st of Jan 2023, the tax on income taxation system will change. A company can be included in the category of micro-enterprise income taxpayers, if it cumulatively meets the following conditions:

• achieved income that did not exceed the equivalent in RON of 500.000 EURO ( the Government still argues, if the threshold is applicable based on the incomes registered in 2022 or it is the reference threshold for companies in 2023) ;
• has at least one full-time employee or management contract/mandate with the minimum gross salary, with the exception of newly established companies (these have a deadline of 30 days from the date of registration of the legal entity);
• has associates/shareholders, who hold more than 25% of the value/number of participation titles or voting rights in no more than three Romanian legal entities that qualify to apply the tax system on the income of micro-enterprises, including the person who verifies the fulfilment of the conditions;
• the company is not in dissolution, followed by liquidation, registered at the Trade Registry or the courts, according to the law;
• achieved revenues, other than those from consulting and/or management, in a proportion of more than 80% of total revenues;

Companies entitled to apply the reduced taxation system will have a single tax rate of 1% from their taxable income. The 3% tax rate will not be applied anymore.

Therefore, even though your company did not exceeded 500.000 EUR or 1.000.000 EUR ( in case the threshold is maintained for 2022 ) as income in 2022, in case there is no one employed full time by the end of 2022, the company will apply 16% CIT starting with 2023. Also, if the activity performed refers to consulting or management in a percentage of more than 20%, the company still cannot apply the micro-enterprise system in 2023, regardless the registered income and number of employees.