Legislative News December 2023

I. Order no. 5308/2023 of the Ministry of Finance for the repeal of no. crt. 120 of the annex to the Order of the Minister of Public Finance no. 925/2017 on the approval of the Nomenclature of independent activities for which the net income can be determined based on the annual income rules

Published in the Official Gazette No. 1105/08.12.2023 

The Position 120 from the nomenclature, which includes services performed in the field of information technology, other than those generating copyright or related rights, with reference to the CAEN codes 6202 (information technology consultancy activities) and 6203 (management activities, i.e., administration and operation, of data processing equipment), is hereby repealed. 

In the case of conducting these activities as independent activities, the annual net income shall be determined, starting from the 2024 incomes (for which the declaration and payment of taxes are made in 2025), solely based on accounting data. In other words, self-employed individuals (PFA) active in the IT field can only use the actual taxation system. 

II. Order no. 1945/2023 of the National Agency for Fiscal Administration regarding the organization of the activity for the administration of large and medium-sized taxpayers 

Published in the Official Gazette No. 1097/06.12.2023 

The new regulatory act published in the Official Gazette addresses the following: 

• Regarding the administration of large taxpayers: 
  • abandonment of the continuity criterion; 
  • abandonment of the investment criterion; 
  • exclusion from the category of large taxpayers for those who were previously selected based on the continuity criterion; 
  • provisions regulating the exclusion from the category of large taxpayers for those who, by December 31^st 2023, are in one of the following states: insolvency, insolvability, fiscal inactivity. 

• Regarding medium-sized taxpayers: 
  • abandonment of the continuity criterion, as a result of the reduced contribution of these taxpayers to the total amount of budgetary revenues collected; 
  • completion of OPANAF no. 5610/2016, with subsequent modifications and completions, by similarity with the eligibility criteria for large taxpayers, including provisions regulating the exclusion from the category of medium-sized taxpayers for those who, by December 31^st 2023, are in one of the following states: insolvency, insolvability, fiscal inactivity. 

III. Order no. 1992/2023 of the National Agency for Fiscal Administration for the approval of the number of large and medium-sized taxpayers, the List of large taxpayers, and the List of medium-sized taxpayers 

Published on the institution’s website on December 7^th 2023 

The National Agency for Fiscal Administration has approved, through OPANAF no. 1992/2023, the lists of large and medium-sized taxpayers, valid from January 1^st 2024. 

The administration of taxpayers is modified, as follows: 

• Small taxpayers transitioning to medium-sized status from January 1 will commence SAF-T reporting from 2024; 
• For taxpayers exiting the list of medium-sized taxpayers on January 1, the submission of the informative Declaration D406 remains mandatory. 

Attention: Changing the competent tax authority leads to a change in the Treasury and the accounts used to pay fiscal obligations. 

IV. Law no. 360/2023 regarding the public pension system 

Published in the Official Gazette No. 1089/04.12.2023 

Among the new provisions of the law, we mention: 

• Starting from January 2024, an individual can opt, with the annual consent of the employer, between receiving the retirement pension and continuing employment until the age of 70; 
• The method of calculating the pension is modified from September 2024;  
• Pensions established under previous legislation will be automatically recalculated according to the new provisions within 6 months from the date of entry into force of the law; 
• It is determined that the standard retirement age for both women and men is 65 years; 
• Women with full contributory insurance coverage and who have raised children up to the age of 16 benefit from a reduction in the retirement age, ranging from 6 months for women with one child to 3 and a half years for those who have given birth and raised at least 7 children; 
• Individuals with five years of seniority beyond the full contributory insurance period can retire up to five years before reaching the standard retirement age. 

V. Emergency Ordinance no. 115/2023 regarding certain fiscal-budgetary measures in the field of public expenditures, for fiscal consolidation, combating tax evasion, amending and supplementing certain normative acts, as well as extending certain deadlines 

Published in the Official Gazette No. 1139/15.12.2023 

The main changes to the Fiscal Code: 

• Corporate income tax – changes starting from January 1^st 2024.  
  • The acquisition costs of electronic fiscal cash registers are no longer deducted from the corporate income tax according to the old procedure; however, they may be eligible for a tax incentive representing an exemption from tax on reinvested profit. 
  • Limited deductible expenses (of a social nature) include the following categories: 
    • Expenses for the proper functioning of units managed by taxpayers, such as: daycares, kindergartens, schools, museums, libraries, canteens, sports facilities, clubs, dormitories for unmarried individuals, and similar entities; 
    • Amounts paid by the taxpayer for placing employees’ children in early education units, according to the legal regulations in the field of national education, but not exceeding 1,500 lei/month for each child. 
  • The provision regarding the deduction from corporate income tax, according to the old procedure, for early education expenses is repealed. 
  • There are modifications/additions regarding the limited deductibility of certain expenses: 
    • expenses for the operation, maintenance, and repair of company residences, deductible within the corresponding limit for the constructed areas; 
    • 50% of the expenses related to the operation, maintenance, and repairs of an office located in the personal residence of an individual, used for both business and personal purposes, corresponding to the areas made available to the taxpayer based on contracts concluded between the parties for this purpose; 
    • 50% of the expenses related to the operation, maintenance, and repairs of a registered office acquired by the taxpayer in residential buildings or individual dwellings within residential complexes defined according to legal provisions, which is not used exclusively for business purposes. In cases where the registered office, owned by the taxpayer, is used for personal purposes by shareholders or associates, the respective expenses are considered to be made for their benefit and are non-deductible in the calculation of the fiscal result (new provision). 
  • Expenses related to private scholarships are no longer deductible from corporate income tax. For the determination of the fiscal result, taxpayers incurring expenses for private scholarships aggregate these expenses up to a limit of 1,500 lei for each granted scholarship, combined with those of a social nature (provided for in art. 25 para. 3 letter b of the Fiscal Code), and the resulting sum is deductible within the limit of 5% of salary expenses. 
  • Expenses related to goods, financial resources, and services provided to the United Nations International Children’s Emergency Fund (UNICEF), as well as other international organizations operating in accordance with the provisions of specific agreements to which Romania is a party, aggregate with sponsorship expenses and reduce corporate income tax to the lesser of 0.75% of the turnover, without exceeding 20% of the corporate income tax. Both expenses are initially non-deductible in the calculation of corporate income tax. 
  • Annual tax losses established through the corporate income tax return, starting from the year 2024/the modified fiscal year beginning in 2024, as applicable, are recovered from taxable profits made, up to a limit of 70%, over the next 5 consecutive years. The recovery of losses will be carried out in the order of their registration, at each corporate income tax payment deadline. 
  • Annual tax losses from previous years before 2024, still to be recovered as of December 31^st 2023, will be recovered up to 70% of the respective taxable profits, over the remaining recovery period of the subsequent 7 consecutive years following the year of recording those losses. 
  • The taxpayer has the right to deduct, in a fiscal year, interest expenses on indebtedness up to the deductible limit represented by the equivalent in lei of 1,000,000 euros. Excess borrowing costs resulting from transactions/operations that do not finance the acquisition/production of work in progress/assets and are carried out with affiliated persons are deductible, in a fiscal year, up to the deductible limit represented by the equivalent in lei of 500,000 euros. The total excess borrowing costs resulting from transactions/operations with both affiliated and non-affiliated persons, which can be deducted in a fiscal year, cannot exceed the deductible limit represented by the equivalent in lei of 1,000,000 euros. 
  • For corporate income tax payers, the possibility of redirecting the amount representing sponsorship or patronage expenses, within the established ceilings, is maintained through the submission of the redirection form. In the case of taxpayers who are members of a tax group, redirection can only be instructed by the responsible legal entity. 
  • Adjustments for the depreciation of receivables, recorded in accordance with applicable accounting regulations, representing amounts owed by internal and external customers for products, semi-finished goods, materials, goods sold, works performed, and services rendered, are deductible up to a percentage of 30% of the value of these adjustments, provided that the receivables cumulatively meet the conditions stipulated by the Fiscal Code. 

• Microenterprise income tax –  changes starting from January 1^st 2024 
  • One of the conditions for applying the microenterprise income tax is modified, in the sense that for the condition regarding associates, indirect holdings are also taken into account. Additionally, a single legal entity, whose associates hold, directly or indirectly, over 25% of the value/number of shares or voting rights, can apply for this tax system. Thus, to pay the microenterprise income tax, the company must have associates/shareholders who hold, directly or indirectly, over 25% of the value/number of shares or voting rights, and it is the only legal entity established by the associates/shareholders to apply the provisions of this title. 
  • The limit regarding the revenues generated (the 500,000 euro threshold – microenterprise tax condition) is verified by taking into account the revenues generated by the Romanian legal entity, combined with the revenues of the enterprises linked to it. 
  • A Romanian legal entity engaged in activities in the insurance and reinsurance sector, capital market, as well as a Romanian legal entity engaged in intermediary/distribution activities in these fields, with the exception of secondary insurance and/or reinsurance intermediaries, defined according to the law, who have generated income from insurance/reinsurance distribution activities in a proportion of up to 15% inclusive of total revenues, cannot apply for this taxation system. 
  • Associates/shareholders of the Romanian legal entity holding, directly or indirectly, over 25% of the value/number of shares or voting rights, both in the analyzed Romanian legal entity and in other Romanian legal entities that meet the conditions for the microenterprise income tax system, must establish, by March 31 of the following fiscal year, a single Romanian legal entity applying the provisions of this title. Note! Romanian legal entities that have not been established by associates/shareholders by the deadline of March 31 fall under the provisions of corporate income tax. 
  • A new condition is introduced regarding the possibility of applying for the microenterprise system, namely the timely submission of annual financial statements if the entity is obligated to do so under the law. 
  • The provision allowing HORECA companies to opt for this taxation system, regardless of meeting conditions (revenue threshold, employees, etc.), is repealed. Additionally, these companies can exit the system if the respective conditions are no longer met. 
  • Romanian legal entities can choose to apply the microenterprise income tax starting from the fiscal year following the one in which they meet the microenterprise conditions, provided they have not been taxpayers of the microenterprise income tax after January 1^st 2023. 
  • A microenterprise that is temporarily inactive, as registered in the Trade Registry according to legal provisions, continues to be a taxpayer of the microenterprise income tax for the entire period during which it records this temporary inactivity situation. 
    
    A microenterprise that has been temporarily inactive, as registered in the Trade Registry according to legal provisions, continues to be a taxpayer of the microenterprise income tax from the date of entry in the Trade Registry of the mention of resuming activity, if it hires a full-time employee within 30 days, inclusive, from the date of registration of the mention in the Trade Registry, and if it fulfills the other conditions. 
    If, during a fiscal year, a microenterprise no longer meets the condition regarding the employee and/or has not timely submitted annual financial statements for the previous financial year if it had this obligation under the law, the microenterprise is liable for corporate income tax starting from the quarter in which any of these conditions is no longer met. 
  • In the case of related enterprises, regarding the exit from the system of a microenterprise, the fiscal limit concerning the 500,000 euro threshold is verified by taking into account its revenues combined with the revenues of the related enterprises. 
  • In the event that, during the fiscal year, any of the associates/shareholders of a microenterprise holds, directly or indirectly, over 25% of the value/number of shares or voting rights in both the analyzed microenterprise and other microenterprises, the associates/shareholders must establish the microenterprise/microenterprises that exit/exempt from the provisions of this title and that will apply the corporate income tax starting from the quarter in which the respective situation is recorded, so that the condition of holding a single microenterprise is fulfilled. 
  • For the application of the microenterprise income tax system in the fiscal year 2024, the condition regarding the timely submission of annual financial statements is considered fulfilled if the annual financial statements are submitted by March 31^st 2024, inclusive. 
  • The microenterprise income tax for the year 2023 is redirected according to the provisions in force until December 31^st 2023. 
    
    The last fiscal year in which amounts representing sponsorships/scholarships and amounts representing the purchase of electronic cash registers, remaining to be carried forward according to the law, can be deducted from the microenterprise income tax is the fiscal year 2023. 

• Income tax – changes starting from January 1^st 2024. 
  • For taxpayers in the IT, construction, agriculture, and food industry sectors, in the situation where, during the same month, an individual earns income from salaries and assimilated to salaries for a fraction of the month, at the main job, with one or, as the case may be, with several employers successively, to apply the exemption, each employer establishes the part of the monthly limit of 10,000 lei corresponding to this period and grants the exemption for the monthly gross income earned, within the limit of the fraction of the established limit. 
  • Starting from January 1^st 2024, for employees working under an individual employment contract, full-time, at the location of their main position, no income tax is due, and the amount of 200 lei/month, representing income from salaries and assimilated to salaries, is not included in the monthly basis for calculating mandatory social contributions if the following conditions are cumulatively met: 
    • the level of the gross monthly base salary established according to the individual employment contract, without including allowances and other additions, is equal to the gross minimum wage in the country, 
    • the gross income earned from salaries and assimilated to salaries, under the same individual employment contract, for the same month, does not exceed the level of 4,000 lei inclusive. 
  • For individuals carrying out independent activities: 
    • expenses for granting private scholarships are limitedly deductible for the income tax calculation, up to a rate of 5% of the taxable base, 
    • expenses related to the acquisition cost of electronic fiscal cash registers are not deductible; 
    • sponsorship and/or patronage expenses, made in accordance with the law, are not deductible 
    • expenses recorded in the accounting records, regardless of their nature, are not deductible if later proven to be related to acts of corruption, in accordance with the law. 
  • Taxpayers can no longer allocate a sum representing up to 3.5% of the assessed tax for supporting nonprofit entities established and functioning under the law, religious denominations, as well as for granting private scholarships. 
  • The annual fiscal loss recorded for each source from independent activities, intellectual property rights, and agricultural, forestry, and fishery activities, determined in the real system, is carried forward and offset by the taxpayer within the limit of 70% of the annual net income obtained from the same source of income in the next 5 consecutive fiscal years. 
  • Amounts granted to employees performing telework for supporting utility expenses at the location where employees carry out their activity are taxable income for income tax purposes. 
  • The value of subscriptions paid by the employer for its employees, within the non-taxable limit of 33% (cumulative income), is maintained. However, it is limited to the equivalent in lei of 100 euros annually for each person, provided by suppliers whose activities are classified under CAEN codes 9311, 9312, or 9313. These suppliers operate either on their own behalf in the case of subscriptions that include the right to use sports facilities for the purpose of practicing sports and physical education for maintenance, prophylactic, or therapeutic purposes, or as intermediaries for medical services in cases where the subscriptions include medical services. 
  • Amounts paid by the employer for placing the children of its own employees in early education units, according to the law, fall within the non-taxable limit of 33% (cumulative income). However, this is subject to the limit set by the employer, but not exceeding 1,500 lei per month for each child. 
  • Allowances and any other similar amounts received during a delegation to another location are considered income for the month in which the expense report is approved. 
    
    The amounts representing the value of tourist and/or treatment services, including transportation, during the leave for own employees and their family members are considered income for the month in which the expense report is approved, or income for the month in which they are granted, in the absence of the obligation to present supporting documents. 
    
    The amounts representing contributions to an optional pension fund covered by the employer for its own employees are considered income for the months corresponding to those for which the payment was made, based on supporting documents. 
    
    The amounts representing voluntary health insurance premiums, as well as medical services provided in the form of a subscription covered by the employer for its own employees, are considered income for the months corresponding to those for which the payment was made, based on supporting documents. 
    
    The amounts representing the cost of subscriptions covered by the employer for its own employees are considered income for the months for which payment is made, based on supporting documents. The cost of subscriptions for sports facilities, or as intermediaries for medical services, if the respective subscriptions include medical services, is deductible within the limit equivalent to 100 euros annually. 
    
    The amounts borne/granted by the employer for placing the children of its own employees in early education units are considered income for the months for which payment is made, based on supporting documents. 
    
    The amounts representing the favorable difference between the preferential interest negotiated and the market interest for loans and deposits are considered income for each month in which the loan is due, respectively the month in which the interest related to the deposit is recorded in the account. 
    
  • Regarding income from the lease of assets: 
    • the provision according to which individuals who generate income from the lease of assets through more than 5 lease contracts at the end of the fiscal year, starting with the next fiscal year, qualify these incomes as independent activities is repealed; 
    • the annual net income from leasing assets, other than that paid by legal entities or other entities obligated to keep accounting records, from leasing agricultural assets, as well as from renting rooms located in personally owned residences for tourist purposes, is determined by deducting expenses resulting from applying the 20% rate to gross income; 
    • the net income from lease is determined at each payment by deducting from the gross income the expenses calculated by applying the 20% rate to the gross income; 
    • income payers, legal entities, or other entities with the obligation to keep accounting records also have the obligation to calculate, withhold, declare, and pay the tax corresponding to the amounts paid. The tax is calculated by applying the 10% rate to the net income and is withheld at source by these income payers at the time of payment of the income; 
    • if the tenant is a natural person, the obligation to submit the single declaration by the owner is maintained; 
    • taxpayers who earn income from the lease of personal assets, other than income from leasing, from the tourist rental of rooms in personally owned homes, as well as from the lease of personal assets paid by legal entities or other entities required to keep accounting records, for which taxation is final, are required to complete and submit the single declaration for income tax and social contributions due from individuals within 30 days from the conclusion of the contract between parties and by May 25th, inclusive, of each year for ongoing contracts, in the case of those who entered into such contracts in previous years. For contracts in which the rent represents the equivalent in lei of an amount in foreign currency, the determination of the annual net income is made based on the exchange rate of the foreign exchange market communicated by the National Bank of Romania on the day before the submission of the single declaration for income tax and social contributions due from individuals. 
  • Amendments are made regarding the calculation of the per diem–  changes starting from December 15th 2023. 
    
    The calculation method of the non-taxable threshold for travel and secondment allowances (per diem) is clarified from a tax perspective. The non-taxable amount remains at 2.5 times the level for public institutions, within the limit of 3 base salaries corresponding to the occupied position. 
    
    The limit related to the value of 3 base salaries corresponding to the occupied position is calculated separately for each month by relating the 3 salaries to the number of working days in that month. The result is then multiplied by the number of days corresponding to each month during the delegation/secondment/conducting activities in another location, whether within the country or abroad. 
  • Social Contributions – changes starting January 1st 2024. 
    • In the situation where, by government decision or other normative acts, multiple values of the gross minimum wage are simultaneously used, for the calculation of social contributions related to the minimum wage, the lowest value of the gross minimum wage is taken into account, unless the law provides otherwise. 
      
      Note: For the year 2023, the minimum wage of 3,000 lei will be used. 
      
  • Health insurance contributions are also paid for social health insurance benefits. 
  • Individuals on sick leave due to temporary incapacity for work resulting from work accidents or occupational diseases are exempt from paying health insurance contributions. 

• Value added tax – changes starting January 1st 2024. 

• Deductibility Limit on Residential Real Estate: The right to deduct the VAT related to the purchase, lease, or leasing of buildings/dwellings, regardless of their destination, located in residential areas or apartment buildings, is restricted to 50%. This also applies to the VAT related to expenses related to these buildings/dwellings if they are not used exclusively for economic activity purposes. 
• Some conditions for applying the VAT exemption at customs are modified as follows: 
  • not to record outstanding tax obligations managed by the National Agency for Fiscal Administration and any other budgetary claims individualized in enforceable titles issued according to the law and existing in the records of the central tax authority for recovery; 
  • not to record outstanding budgetary obligations, other than those mentioned at letter a), a fact proven based on a self-declaration made available to the customs authority. 

• Excise duties 

• In 2024, the excise duty rates for gasoline and diesel will be updated based on the increase in consumer prices over the last 12 months, calculated in September of 2023, compared to the period from October 2014 to September 2015, as follows: 
  • Starting from January 1st 2024, with 50% of the consumer price increase; 
  • Starting from July 1st 2024, with 50% of the consumer price increase. 

• New regulations regarding the marking of energy products are introduced starting from January 18th 2024. 

VI. Order No. 1.994/880/1.181/4.594/2023 of the National Agency for Fiscal Administration, the National House of Public Pensions, the National Health Insurance House, and the National Employment Agency for the approval of the model, content, submission method, and management of Form 112 “Declaration regarding the payment obligations for social contributions, income tax, and the nominal record of insured persons.” 

Published in the Official Gazette No. 1112/11.12.2023 

Approves the new model of Form 112 “Declaration regarding the payment obligations for social contributions, income tax, and the nominal record of insured persons.” The new form is applicable starting with the declaration of incomes for the month of November 2023. 

VII. Law no. 388/2023 approving Emergency Ordinance no. 188/2022 amending and supplementing Law no. 207/2015 regarding the Fiscal Procedure Code and amending Emergency Ordinance no. 74/2013 on some measures to improve and reorganize the activity of the National Agency for Fiscal Administration, as well as amending and supplementing certain normative acts 

Published in the Official Gazette No. 1123/13.12.2023 

The amendments include provisions stipulating that the single control register must be completed by inspectors even when tax inspections are carried out at the headquarters of the National Agency for Fiscal Administration.