The micro enterprise with 1 percent tax till 1 million euro creates possibilities in Romania

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Nr. 20180503

For company creation in romania mail: frjacobs@telenet.be

What taxes do investors in Romania pay for a micro enterprise created in Romania ?

In 2019, Romanian micro-enterprises pay income tax, according to Title III of the Fiscal Code. The tax rate is 1% for micro-enterprises with at least one employee and 3% for those that do not have employees. Company creation in Romania becomes interesting from a tax point of view.

With this measure the Romanian governament wants to stimulate the investmens in Romania and accelerate company creation in Romanoa.

Larger companies pay 16% corporate tax, or if they are hotels, restaurants, bars, etc.

In 2019, as a micro enterprise, a Romanian legal person fulfilling cumulatively the following conditions on 31 December 2018:

  • The company has achieved revenues that did not exceed the equivalent in lei of 1,000,000 euros. The exchange rate for determining the euro equivalent is the one applicable at the end of the financial year in which the revenue was recorded;
  • The share capital is held by persons other than the state and the administrative-territorial units;
  • The company is not in dissolution, followed by liquidation, registered in the trade register or in the courts, according to the law.

The exchange rate used is 4.6639 for one euro. This means that the ceiling for the tax on the income of the micro-enterprise is of 4,663,900 lei, income realized in 2018.

What is the income of the micro-enterprise?

The taxable base is the income from any source, less the following:

  • Product revenue costs;
  • Income related to the costs of services in progress;
  • Income from the production of tangible and intangible assets;
  • Subsidy income;
  • Income from provisions, impairment adjustments or loss of value, which were non-deductible expenses for the calculation of taxable profit or were established during the period when the Romanian legal person was subject to the tax on the income of the micro-enterprises;
  • Income arising from the repayment or cancellation of interest and / or late payment penalties, which were non-deductible expenses when calculating taxable profit;
  • Income from indemnities, from insurance / reinsurance companies, for the damages caused to the goods of the nature of the stocks or of the own tangible assets;
  • Income from exchange rate fluctuations;
  • Financial incomes related to debts and debts subject to a currency exchange rate resulting from their valuation or settlement;
  • The amount of trade discounts granted after invoicing, registered in account "709", according to the applicable accounting regulations;
  • Income from payment titles obtained by entitled persons, according to the law, initial titles of the Central Compensation Commission or their legal heirs;
  • Damages received on the basis of the judgments of the European Court of Human Rights;
  • Incomes obtained from a foreign state with which Romania has concluded a convention for the avoidance of double taxation, if they were taxed in the foreign state.

 

Exception

Micro businesses can opt for 16% corporate tax if they have subscribed a minimum share capital of 45,000 lei and have at least 2 employees. They can opt once to apply corporate tax, starting with the quarter in which these conditions are met cumulatively, the option being final. If these conditions are not met, the company applies the tax on micro enterprise income from the fiscal year following that in which the share capital is reduced to less than 45,000 lei and / or the number of employees falls below 2.

If, during the period in which the legal entity applying the income tax, the number of employees varies in the course of the year, downwards to 2, the condition must be re-completed within 60 days, which is extended also in the next fiscal year . The exit from the taxation system on the income of micro-enterprises as a result of the option is communicated to the competent tax authorities, according to the provisions of the Fiscal Procedure Code. The calculation and payment of tax on profits by microenterprises that opt ​​to apply corporate tax is made taking into account the revenues and expenses incurred since that quarter.

Thus, for companies that have not made profits and have made large investments, it is more convenient to pass the 16% profit tax.

For company creation in romania mail: frjacobs@telenet.be

 

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