The Romanian microenterprise turnover tax: the new rules 3% taxes

March 2013 was a very busy month for Romanian microenterprises. “Regular” companies switching to “microenterprises” under the new tax rules in force as of 1 February 2013 had to notify the change in their applicable tax regime by the 25th of March and also to submit a corporate income tax return for their profit obtained during the year 2012.
The microenterprise turnover tax 
Brought back to life into the Romanian tax legislation in 2011, the microenterprise turnover tax regime was subject to numerous changes over the years, becoming compulsory as of 1 February 2013 for companies meeting the relevant conditions.
In a nutshell, the regime consisted in the option to pay a 3% tax on (adjusted) turnover, instead of 16% on taxable profits (as a regular company). When however any of the conditions for qualifying as a microenterprise was no longer met, the company became subject to the normal corporate income tax regime, without the possibility of going back to being a microenterprise.
In order for a company to qualify as a micro-enterprise, the conditions, up to January 2013, were as follows:

  • up to 9 employees;
  • turnover of up to EUR 100,000 at the end of the previous year;
  • share capital held by entities other than the state or the local authorities;
  • activities other than: banking, insurance and re-insurance, activities related to capital markets, gambling, consulting and management (with respect to consulting and management, under the legislation up to 2009, if such activities represented less than 50% of the turnover, the entity could still qualify as a microenterprise, however this was changed in 2011).

Starting 1 February 2013, new changes are introduced to the microenterprise turnover tax regime summarized above. The most important one is that the regime becomes compulsory for companies which meet the relevant conditions. As regards such conditions, two significant changes are introduced as follows:

  • the turnover threshold is reduced from EUR 100,000 to EUR 65,000;
  • the requirement to have up to 9 employees is eliminated.

The new rules
If, during the year, the EUR 65,000 threshold is exceeded, the company will become subject to corporate income tax on its profits from the beginning of the year (but taking into account the microenterprise tax paid), starting with the quarter in which the threshold is exceeded.
The microenterprise tax remains due quarterly, by the 25th of the month following the quarter for which the tax is calculated.
Newly set-up companies in Romania are required to apply the microenterprise turnover tax regime starting with their first year of operation, if the share capital condition mentioned above (i.e. private ownership), as declared at the Trade Registry, is fulfilled.
Aimed at fighting tax evasion, at a practical level, the measure will mean that not only newly-set up companies, but also companies on a tax loss position in previous periods may have to pay microenterprise tax.

Claudia Firulescu

KPMG Tax & Legal Advisers
Bourgetlaan - Avenue du Bourget 40
1130 Brussel - Bruxelles

Tel     +32 2 708 36 03
Fax    +32 2 708 44 44