GEO 115/2023, GD 1336/2023 – what new tax rules apply in 2024?

The Fiscal Code was amended starting with 01.01.2024, through several normative acts:

• Law 309/2022 (provisions on taxation of private, optional and occupational pensions)
• Law 282/2023 (provisions on taxation of contributory and non-contributory pensions)
• Law 296/2023 (measures regarding the minimum tax, modification of the microenterprise income tax, increase of VAT rates, amendments regarding the taxation of individuals, new excise duties, a new tax on luxury goods, etc.)
• GEO 115/2023, Chapter II “Provisions on fiscal consolidation” – published at the end of 2024, which brings new amendments regarding corporate income tax, microenterprise income tax, taxation of individuals, VAT).

The methodological norms for the application of the Fiscal Code (GD 1/2016) were also amended by GD 181/2023 and GD 1336/2023.

This article summarizes the main changes introduced by GEO 115/2023, respectively GD 1336/2023.

1. Corporate income tax

a. New rules for spending on early childhood education

• The tax treatment of expenses for the early education of employees’ children changes. Thus, expenses with the proper functioning of units managed by taxpayers, such as: nurseries and kindergartens are included in social expenses, deductible within the limit of 5% of the salary fund.
• The same tax treatment applies to the amounts paid by the taxpayer for the placement of employees’ children in early education units, according to the legal regulations in the field of national education, but not more than 1,500 lei / month for each child.
• For the employee, these amounts will be considered non-taxable benefits in kind, which are not included in the calculation base of social contributions, under the same conditions as other benefits that can be granted up to 33% of the gross base salary. The previous provisions on tax incentives for early education, which were suspended until 31.12.2023, are repealed.

b. Deduction restrictions for expenses related to the operation, maintenance and repair of certain buildings:

From 2024 onwards, new limits are in place for the deduction of expenses with:

• Operation, maintenance and repair of service housing (the increase, for fiscal purposes, by 10%, of the built areas provided by the Housing Law no. 114/1996 is eliminated)
• Operation, maintenance and repairs related to an office located in the personal property of a natural person, also used for personal purposes (these expenses are deducted only within the limit of 50% of the expenses corresponding to the areas made available to the taxpayer under contracts concluded between the parties for this purpose).
• Operation, maintenance and repairs related to a registered office purchased by the taxpayer in residential buildings or individual residential buildings, from residential complexes defined according to the legal provisions, which is not used exclusively for the purpose of economic activity (these expenses are deducted only within the limit of 50% of expenses). If the registered office is used only for personal purposes, the expenses are non-deductible and are considered to have been incurred on behalf of the shareholders. The same tax treatment applies to depreciation expenses for the registered office.
• Depreciation for a registered office that is not used exclusively for the purpose of economic activity, located in residential buildings or individual residential buildings, from residential complexes defined according to the legal provisions, registered in the taxpayer’s patrimony, is deductible at the level of 50%.

c. New tax treatment for private scholarships

• Starting with 01.01.2024, the tax treatment of private scholarships granted by corporate income tax payers changes.
• Thus, they can no longer be deducted from corporate tax, within the same limit as sponsorship or patronage expenses.
• Expenses with private scholarships, within the limit of 1,500 lei / each scholarship awarded, will be considered social expenses, deductible, together with other expenses in the same category, within the limit of 5% of the salary fund.

d. Remove tax credit for purchased cash registers

• Starting with 01.01.2024,  the value of purchased fiscal electronic cash registers is no longer deducted from the amount of corporate income tax payable. Consequently, the expense with the value of cash registers of the nature of small inventory objects, or with their depreciation, when they are considered fixed assets, will be considered tax deductible.
• The last fiscal year in which the amounts representing scholarships / fiscal electronic cash registers, remaining to be carried forward, according to the law, are deducted from the corporate tax is the fiscal year 2023, respectively the amended fiscal year ending in 2024.

e. The tax credit for sponsorship/patronage remains applicable, but the possibility for redirection of the amounts from corporate income tax due has a tighter deadline

• Redirecting the amounts from the profit tax, within the minimum amount between 0.75% of the turnover and, respectively, 20% of the profit tax, if this limit has not been consumed through sponsorships or acts of patronage, respectively through goods, financial means or services granted to UNICEF or other international organizations that carry out their activity according to the provisions of special agreements to which Romania is a party,  will be done only until the deadline for submitting the annual corporate income tax return (and not within 6 months from this deadline). This deadline also applies to the redirection of income tax amounts related to the year 2023 / amended tax year ending in 2024.
• Economic operators in which the state or administrative-territorial units are sole or majority shareholders or directly or  indirectly hold a majority participation, have a lower limit for the tax credit related to sponsorship and/or patronage expenses. Thus, those amounts are deducted from the corporate tax due at the level of the minimum of the following:

     a. the value calculated by applying 0.15% to turnover;

     b. the amount representing 20% of the corporate tax due.

f.  Lower deductibility for expenses with impairment adjustments of customer receivables incurred after January 1, 2024

• The deduction for impairment adjustments on receivables, recorded in accordance with applicable accounting regulations, representing amounts owed by internal and external customers for products,  semi-finished products, materials, goods sold, works performed and services rendered, is reduced from 50% of the value of receivables to 30% of the value of impairment adjustments.
• The provision applies to receivables registered after 1 January 2024, the conditions being the same as up until 31.12.2023.

g. Carry-forward of tax losses after 01.01.2024 – limited to only 5 years (instead of 7) and the possibility of offsetting tax losses with 70% of future profits

• The tax treatment of tax losses changes. Thus, the annual tax losses established by the corporate tax return, registered starting with 2024 / amended fiscal year starting in 2024,  are recovered from taxable profits made starting with the following year, within the limit of 70% of those taxable profits, for the period of 5 consecutive years (instead of 7, as now). The same provision will apply to reorganizations (mergers, divisions), when entities that cease to exist  as a result of the reorganization transmit tax losses incurred as of 2024 / amended tax year starting in 2024,  as applicable, and for losses incurred by tax groups from 2024 onwards / amended tax year starting in 2024,   respectively for permanent establishments in Romania of non-resident taxpayers.
• The annual tax losses established by the corporate income tax return, related to the years preceding 2024 / the year starting in 2024, remaining to be recovered on 31 December 2023, shall be recovered from taxable profits made from 2024 onwards, up to a limit of 70% of those taxable profits, for the remaining period to be recovered from the 7 consecutive years following the year of recording those losses.
• If both annual tax losses incurred from 2024 onwards / amended tax year starting in 2024 and annual tax losses related to years preceding 2024 / year starting in 2024 are to be recovered, for the application of the 70% limit, these losses shall be cumulative.

h. New rules for deducting excess borrowing costs on the relationship with affiliates – limitation to EUR 500,000/year

• The rules on deductibility of interest are amended and new rules for net borrowing costs resulting from transactions with affiliates are introduced.

Thus, exceeding borrowing costs resulting from transactions / operations that do not finance the acquisition / production of assets in progress / assets taken into account in the calculation of indicators I and A from the calculation formula of IMCA, respectively ICAS, and which  are carried out with affiliated persons, are deducted, in a tax period, up to the deductible ceiling represented by the equivalent in lei of EUR 500,000. The total exceeding borrowing costs resulting from transactions/operations performed with both the respective affiliated persons and the unaffiliated persons, which can be deducted in a tax period, cannot exceed the deductible ceiling represented by the RON equivalent of EUR 1,000,000. The exchange rate used to determine the RON equivalent of the respective ceilings is the exchange rate communicated by the National Bank of Romania for the last day of the fiscal quarter/year. The ceiling of EUR 500,000 related to exceeding borrowing costs incurred with affiliated persons does not apply to credit institutions – Romanian legal entities, branches in Romania of credit institutions – foreign legal entities, non-banking financial institutions, branches in Romania of non-banking financial institutions and investment companies defined according to the law.

The following provisions shall remain applicable:

• exceeding borrowing costs are deductible up to EUR 1,000,000 (of which up to EUR 500,000 for the exceeding borrowing cost in relation to affiliates, from transactions other than financing assets included in the calculation of indicators I and A) plus 30% of tax-adjusted EBITDA.
• Exceeding borrowing costs which cannot be deducted in the tax period of calculation shall be carried forward, without time limitation, to subsequent tax years under the same conditions of deduction.

In order to be able to apply the new limits for deducting the exceeding borrowing cost, namely EUR 1,000,000 (of which a maximum of EUR 500,000 in relation to affiliates, from transactions other than financing assets included in the calculation of indicators I and A), a mechanism for calculating the exceeding borrowing cost on the relationship with affiliates is regulated, which is carried forward from previous periods.

The exceeding borrowing costs carried forward to December 31, 2023 according to the provisions of art. 402 is allocated to the deductible ceiling represented by the RON equivalent of EUR 1,000,000.

i. The computation formula of, IMCA / ICAS, as introduced by the Law 296/2023, was amended by GEO 115/2023

• When calculating IMCA and ICAS, respectively, the formula for calculating revenues subtracted from total revenues takes into account income from the production of tangible and intangible assets (those not included in indicator I are no longer eliminated).
• Taxpayers who decrease the value of assets under construction/assets according to indicators I and A have the obligation to keep those assets in patrimony for at least a period equal to half of the economic use period, established according to the applicable accounting regulations, but not more than 5 years. In case of non-compliance with this condition, for these amounts the additional tax is recalculated and ancillary tax receivables are collected according to the Fiscal Procedure Code, from the quarter of their decrease. In this case, the taxpayer has the obligation to submit the amending tax return, as the case may be. These provisions do not apply to assets that fall into any of the following situations:

      a. are transferred within the framework of reorganization operations, carried out according to the law;

      b. are alienated in liquidation/bankruptcy proceedings, according to the law;

      c. are destroyed, lost, stolen or defective and replaced, provided that these situations are duly demonstrated or confirmed by the taxpayer. In the case of stolen assets, the taxpayer demonstrates the theft on the basis of documentary evidence issued by judicial bodies;

     d. are removed from the patrimony as a result of fulfilling certain obligations provided by law.

• In the case of the tax group, the turnover of over EUR 50,000,000 is calculated by the responsible legal entity by summing up the turnover of the members of the tax group.

We also would like to inform you that Order no. 10/2024 for establishing assets to be included in indicators I and A provided in art. 181 para. (3) and Art. 183 para. (2) of the Tax Code was published in OG 6/04.01.2024. as well as that Order no. 5433/2023 on the establishment of legal entities carrying out activities in the oil and natural gas sectors according to art. 183 para. (1) of the Tax Code was published in the OG 1185 of 28 December 2023.

2.Microenterprise income tax

a. Maximum 1 micro-enterprise holding more than 25% of the shares / voting right

The application of the taxation regime for micro-enterprises is limited to a single legal person owned by a shareholder holding, directly or indirectly, more than 25% of the value/number of shares or voting rights. Shareholders of the Romanian legal person who hold, directly or indirectly, more than 25% of the value/number of shares or voting rights, both in the Romanian legal entity analysed and in other Romanian legal entities that meet the conditions for the microenterprise income tax system, must establish, by 31 March inclusive of the following fiscal year,  a single Romanian legal entity which is to apply the taxation regime of micro-enterprises, the other companies becoming profit tax payers.

The verification of the application of this condition is to be carried out on the basis of a procedure to be approved by order of the president of NATA.

b. Maximum income ceiling of EUR 500,000 – calculated together with the income of linked enterprises

The application of the micro-enterprises regime for companies with revenues up to EUR 500,000 is maintained, but, when calculating this ceiling, the revenues achieved are verified taking into account the revenues earned by the Romanian legal entity, cumulated with the income of enterprises linked to it. 

According to Law 346/2004 on stimulating the establishment and development of small and medium-sized enterprises, linked enterprises  are enterprises between which there is any of the following relationships:

    a. an undertaking holds a majority of the shareholders’ or members’ voting rights in the other undertaking;

    b. an undertaking has the right to appoint or remove a majority of the members of the administrative, management or supervisory board of the other undertaking;

    c. an undertaking has the right to exercise a dominant influence over the other undertaking by virtue of a contract concluded with that undertaking or a clause in its statutes;

    d. an enterprise is a shareholder in or member of the other enterprise and holds alone, pursuant to an agreement with other shareholders in or members of that enterprise, a majority of the shareholders’ or members’ voting rights in that enterprise.

Undertakings which have any of the relationships described above, through a natural person or a group of natural persons acting by mutual agreement, are also considered linked undertakings if they operate or part of their activity is on the same relevant market or adjacent markets. An adjacent market is a market for a product or service directly upstream or downstream of that market.

*Examples of situations in which enterprises can be considered linked can be found on the FNGCIMM website, in  the User Manual for the definition of SMEs (fngcimm.ro). The manual was drawn up on the basis of the Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises (2003/361/EC) (notified under document number C(2003) 1422).

c. A new condition for classification as a micro-enterprise – financial statements submitted on time

A new condition for classification in the category of micro-enterprises is added, respectively it is required that the micro-enterprise  has submitted annual financial statements in due time, if it has this obligation according to the law. If this condition is not met, the micro-enterprise will become a profit tax payer starting with the quarter in which it did not meet this condition. For the application of the microenterprise income tax system in fiscal year 2024, this condition is considered fulfilled if the annual financial statements are filed by March 31, 2024 inclusive, which reduces the deadline for filing financial statements for 2023 by approximately 60 days (the normal deadline is 150 days from the end of the financial year).

The verification of the application of this condition will be carried out on the basis of a procedure to be approved by order of the president of NATA, in within 60 days.

d. HoReCa companies will apply the regime only if they meet the conditions

The option of HoReCa companies to apply the taxation regime for micro-enterprises irrespective whether the conditions regarding the maximum level of turnover and the minimum number of employees are met, is repealed. For these companies, the condition of not having been subject to microenterprise income tax after 01.01.2023 is amended and it is required that they were not subject to microenterprise income tax after 01.01.2024.

e. Insurance/reinsurance intermediaries will be able to apply, under certain conditions, the regime

Secondary insurance and/or reinsurance intermediaries, defined according to the law, who have earned up to 15% of total revenues from insurance/reinsurance distribution activity will be able to apply the taxation regime of micro-enterprises.

f. No deductions from tax due, for sponsorships and cash registers

The provisions according to which micro-enterprises can deduct from the tax due the value of sponsorships /  acts of patronage / private scholarships, within the limit of 20% of the quarterly tax, as well as the possibility to redirect amounts from the tax, within the same limits, are repealed. Also, the possibility to deduct the value of purchased cash registers from tax due is repealed.

The microenterprise income tax for 2023 could still be redirected according to the provisions in force until December 31, 2023. The last fiscal year in which the amounts representing sponsorships/scholarships and the amounts representing the purchase of fiscal electronic cash registers, remaining to be carried forward, according to the law, are deducted from the microenterprise income tax, is the fiscal year 2023.

3. Income tax and social contributions

a. Application of tax incentives for salary income for IT, construction, agriculture and food industry sectors

• Starting with the income of January 2024, if, during the same month, the individual earns income from salaries and similar to wages for a fraction of the month, at the main place of work, at one or, as the case may be, at several employers successively, for the application of the exemption, each employer establishes the part of the ceiling of 10,000 lei per month corresponding to this period and grants the exemption for the gross monthly income achieved,  within the limit of the ceiling fraction thus established. These provisions shall apply accordingly for the purpose of determining the salary income to which the reduced social security rate applies.
• Starting with January 2024 income, individuals who earn salary income in the respective sectors can opt for the payment of the social security contribution due to the privately managed pension funds. GEO 115/2023 regulates the applicable procedure. Thus, it is mentioned that the option is submitted in writing to the employer, who withholds the related contribution according to the legal provisions, starting with the income of the month following that in which the option was registered. Employees may waive the expressed option by submitting a written request to the employer. This applies from the income for the month following the submission of the application. The rules for the application of these provisions shall be established by the employer in the internal regulations or, as the case may be, in another internal document issued by him.

b. Income from self-employment taxed in real system data (obligation to keep single entry bookkeeping)

Starting with 2024 revenues, the deductibility of some expenses will change, as follows:

• Expenses for granting private scholarships, made according to the law, are deductible up to a rate of 5% of the calculation base determined as the difference between gross income and deductible expenses, other than expenses for granting private scholarships and entertainment expenses.
• the equivalent value of subscriptions that include the right to use sports facilities, paid for the personal purpose of the taxpayer, regardless of whether the activity is carried out individually or in a form of association, are deductible within the limit of the equivalent in lei  of EUR 100 annually (instead of EUR 400 annually in 2023) for each person, offered by providers whose activities are classified under NACE codes 9311,  9312 or 9313, acting in their own name in the case of subscriptions which include the right to use sports facilities for the purpose of practicing sport and physical education for maintenance, prophylactic or therapeutic purposes, or as intermediaries for medical services, where such subscriptions also include medical services.
• The expenses with the acquisition cost of fiscal electronic cash registers are tax deductible from 2024 and can no longer be deducted as a tax credit from the income tax due.
• The expenses recorded in the accounting records, regardless of their nature, subsequently proven to be related to acts of corruption, according to the law, will be deemed as non-deductible expenses.
• Starting with 2024, sponsorship and/or patronage expenses, made according to the law, are non-deductible.

c. Salary income

• GEO 115/2023 clarifies the calculation method for the non-taxable daily allowance (delegation allowance, posting allowance, including the allowance specific to transnational posting, additional benefits received by mobile workers provided for in GD 38/2008), within the limit of 2.5 times the legal level established for the allowance, by Government decision, for the staff of public authorities and institutions, within the limit of 3 base salaries corresponding to the main workplace:
  • Thus, starting with 15.12.2023, the ceiling related to the value of 3 base salaries corresponding to the job occupied is calculated separately for , by reporting the  3 salaries to  the number of working days in that month, and the  result is multiplied by the number of days corresponding to each month of the period of delegation / posting / carrying out the activity in another locality,  in the country or abroad.
  • The same provision applies to indemnities and any other amounts of the same nature, other than those granted to cover travel and accommodation expenses received during travel to another locality, in the country and abroad, in the interest of carrying out the activity, as provided in the legal report, received by the administrators established according to the articles of incorporation, the administration / mandate contract,   by directors who carry out their activity under the mandate  contract according to the law, by the members of the executive board of the  companies managed in a two-tier system and of the supervisory board, according to  the law, as well as by managers, based on the management contract provided by law.
  • Starting with 15.12.2023, allowances and any other amounts of the same nature, received during the delegation period in another locality, in Romania and abroad, are considered income related to the month in which the settlement is approved. The tax is calculated and withheld by cumulating with income from salaries for the respective month.
  • The same provisions shall apply to the computation base for social security contribution, health insurance contribution and employer’s contribution to the workers’ compensation system.
• Starting with January 2024’s income,  the list of non-taxable benefits in kind within the monthly ceiling of no more than 33% of the base salary corresponding to the  job occupied or of the monthly salary granted according to the law, was modified as follows:
  • the favorable difference between the preferential interest rate established by negotiation and the interest charged on the market, for loans and deposits is no longer entirely non-taxable, but enters the list of those benefits in kind non-taxable within the monthly ceiling of no more than 33% of the base salary corresponding to the  job occupied or of the monthly salary granted according to the law;
  • the amounts paid by the employer for the early education of employees’ children are no longer entirely non-taxable, but enter into the list of those non-taxable benefits in kind within the monthly ceiling of no more than 33% of the base salary corresponding to the  job occupied or of the monthly salary granted according to the law; the non-taxable benefit in kind is limited to 1,500 lei/month for each child. In the case of amounts paid directly by the employee, they are granted by the employer, within the same ceiling, on the basis of justifying documents submitted by the employee. The amount is granted to only one parent, by only one employer, determined by submitting an affidavit from the parent. If he works for several employers, the employee has the obligation to declare that he does not benefit from such payments from another employer.
  • The non-taxable ceiling for the equivalent value of sport subscriptions borne by the employer for its own employees is reduced to the equivalent in lei  of 100 euros annually (instead of 400 euros) for each person, an advantage that also enters into the calculation of the monthly ceiling of no more than 33% of the base salary corresponding to the  job occupied or of the monthly salary granted according to the law.
  • The telework allowance of 400 lei / month is removed from the list of non-taxable advantages.
• The provisions on the calculation base for the social charges are amended so as to exclude from the calculation base these benefits in kind described above, within the same limits applicable for non-taxable income from an income tax perspective.
• GEO 115/2023 also clarifies the month for which a certain benefit in kind is considered granted. Thus, as of January 2024’s revenues:
  • The amounts representing the equivalent value of tourism and/or treatment services, including transport, during the period of leave, for their own employees and their family members, shall be considered income for the month in which the expense report is approved, respectively income for the month in which they are granted, if there is no obligation to submit justifying documents.
  • The amounts representing the favorable difference between the preferential interest rate established by negotiation and the market interest rate for loans and deposits shall be considered income for each of the months in which the loan is due, respectively the month in which the interest on the deposit is recorded in the books.
  • The following shall be regarded as income for months corresponding to those for which payment was made, on the basis of justifying documents:
    • amounts representing contributions to an optional pension fund borne by the employer for its own employees,
    • amounts representing voluntary health insurance premiums, as well as medical services provided as subscriptions borne by the employer for its own employees,
    • amounts representing the equivalent value of sports subscriptions borne by the employer for its own employees,
    • The amounts borne/granted by the employer for placing the children of its own employees in early education units, according to the law.
  • The tax due is calculated and withheld by cumulating with income from salaries and assimilated to wages for the month in which it is considered income.
• For employees who pay their own sports subscriptions, the amount that can be deducted from the calculation base of the salary income tax decreases from 400 euros annually to 100 euros annually, starting with 01.01.2024.
• The measure of non-taxation of an amount of 200 lei from salaries is extended in 2024, if several conditions are cumulatively met:
  • the level of the gross monthly base salary established according to the individual employment contract, without including bonuses and other additions, is equal to the level of the minimum gross salary per country guaranteed in payment,
  • gross income derived from wages and treated as wages, as defined in art. 76 para. (1)-(3) of the Fiscal Code, with subsequent amendments and completions, based on the same individual employment contract, for the same month, does not exceed the level of 4,000 lei inclusive,
  • The provision according to which social contributions are due at a calculation base that cannot be lower than the minimum gross national salary in force in the month for which the social contribution is due, corresponding to the number of working days in the month in which the contract was active, takes into account, for 2024, the decrease of the minimum wage by 200 lei / month.

d. Revenue from rental of immovable property

• Starting with the revenues of 2024, the annual net income from rental of immovable property, other than that paid by legal entities or other entities that have the obligation to keep accounting records, from the lease of agricultural land, as well as from the rental of rooms located in personal property dwellings for tourism purposes, is established by deducting from gross income of a lamp sum deduction of 20% from the gross income (this deduction was 40% up until 31.12.2022 and 0% respectively in 2023 – GO 16/2022). The possibility to calculate the net income in the real system and, correspondingly, to carry forward tax losses is abolished.
• Starting with 2024’s income from rental of agricultural land, net rental income is determined at each payment, by deducting 20% from gross income (previously, the deduction was 40%).
• Starting with 01.01.2024, the obligation to calculate, withhold and pay income tax for income from rental of immovable property, other than those from the lease of agricultural land and from the rental of rooms located in personal property dwellings for tourism purposes, paid by legal entities or other entities that have the obligation to conduct accounting records stay with such income payers.  Net income shall be established at each payment by the income payers, legal entities or other entities required to keep accounting records, by deducting 20% from the gross income. The tax is calculated by applying the 10% rate on net income and is withheld at source. The tax calculated and withheld represents the final tax and is paid to the state budget until the 25th of the month following that in which it was withheld. For these incomes, taxpayers do not have, starting with 2024, the obligation to fill in the income tax section of the single declaration on income tax and social contributions.
• As a transitional measure, it is regulated that for income from the rental income of immovable properties related to fiscal years prior to 2024, tax liabilities are those in force in the year of income realization. The tax loss carried forward, not compensated, as well as the tax loss incurred in tax year 2023, represents a definitive loss of the taxpayer.

e. Pension income

• By Law 282/2023, starting with 01.01.2024, the following tax rates apply to pension income:
  • The monthly tax is determined by each payer of pension income, as follows:

1. a) for the monthly pension income determined as a result of applying the contributory principle, regardless of its level, from which the monthly non-taxable income ceiling of 2,000 lei is deducted, a tax rate of 10% shall be applied,
2. b) for the monthly pension income that has both a contributory and a non-contributory component, from which the monthly non-taxable income ceiling of 2,000 lei is deducted, for the contributory part the provisions of letter a), respectively a tax rate of 10%, shall apply, and for the non-contributory part, the following tax rates shall be applied progressively:

(i) 10 % for the part less than or equal to net average earnings,

(ii) 15%, for the part between the level of net average earnings and the level of average gross earnings used to substantiate the state social insurance budget or equal to it,

(iii) 20%, for the part exceeding the average gross salary used to substantiate the state social insurance budget,

c) for monthly pension income that has only a non-contributory component, from which the monthly non-taxable income ceiling of 2,000 lei is deducted, the following tax rates shall be progressively applied:

(i) 10 % for the part less than or equal to net average earnings,

(ii) 15%, for the part between the level of net average earnings and the level of average gross earnings used to substantiate the state social insurance budget or equal to it,

(iii) 20%, for the part exceeding the average gross salary used to substantiate the state social insurance budget.

• GEO 115/2023 establishes an exception to these rules, namely that the 10% tax rate is applied on the calculation base regulated by Law 309/2022 that amended the Fiscal Code, regarding the taxation of private, optional and occupational pension income. The tax calculation base is determined as follows:
  • For amounts received as a single payment by participants in privately managed pension funds and their legal heirs, taxable income consists of amounts exceeding the net contributions of participants to which each pension fund grants a single non-taxable income ceiling of RON 2,000.
  • For amounts received as instalment payments by participants in privately managed pension funds and their legal heirs, taxable income consists of amounts exceeding the net contributions of participants, to which the non-taxable income ceiling of RON 2,000 applies for each monthly instalment from each pension fund.
  • For the amounts received as a single payment by the participants in the optional pension funds and/or occupational pension funds and their legal heirs, the taxable income consists of the amounts exceeding the net contributions of the participants, to which each pension fund grants a single non-taxable income ceiling of 2,000 lei.
  • For the amounts received as instalment payments by the participants in the optional and/or occupational pension funds, as well as their legal heirs, the taxable income consists of the amounts exceeding the net contributions of the participants, to which the established non-taxable income ceiling of 2,000 lei is applied for each monthly installment from each pension fund.

f. Income from the transfer of immovable property from personal patrimony

• Public notaries have the obligation to submit monthly (instead of half-yearly), until the 25th of the month following that in which the authentication of the documents on the transfer of real estate from personal patrimony took place, to the territorial tax authority, an informative statement on transfers of real estate. The declaration will include additional information: the cadastral number of the real estate.
• The new measures apply to transfers of real estate from 1 January 2024. The declarative obligations of public notaries regarding the transfers of real estate properties made in the second semester of 2023 are those in force on December 31, 2023.

GD 1336/2023 brings several amendments to the Methodological Norms for the application of the provisions on taxation of income from the transfer of real estate from personal patrimony.

g. Rules for carrying forward tax losses

• The annual tax loss recorded on each source from independent activities, intellectual property rights and agricultural, forestry and fish farming activities, determined in the real system, is carried forward and compensated 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 (instead of 7 years).
• Tax losses from income categories: from independent activities, from intellectual property rights and from agricultural activities, forestry and fisheries, determined in the real system, derived from abroad are carried forward and compensated by the taxpayer within the limit of 70% of the annual net income of the same nature and source, obtained abroad, per country, obtained in the next 5 consecutive fiscal years.
• The same rules shall apply to the carry-forward of losses arising from transactions relating to the transfer of securities and any other operations in financial instruments, including derivatives, respectively relating to the transfer of investment gold.
• Annual tax losses incurred in years prior to 2024, remaining uncompensated as of December 31, 2023, are offset against annual net revenues or, as the case may be, annual net gains realized as of 2024, for the remaining 7 years, up to 70% of annual net revenues or, as the case may be, the respective net annual earnings. For the application of the 70% limit, the annual tax losses recorded in the years prior to 2024, remaining uncompensated on December 31, 2023, are cumulated with the annual tax losses registered starting with 2024.

h.  Cancellation, from 2024, of the possibility to deduct from the annual income tax, of the value of cash registers put into operation

• The possibility to deduct the acquisition cost of fiscal electronic cash registers, thus put into operation in that year, from the annual tax due, is repealed.
• As a transitional measure, the amounts representing the acquisition cost of fiscal electronic cash registers, put into operation in 2023, as well as amounts of the same nature carried forward from years prior to 2023, are deducted from the annual income tax due for 2023. The remaining amounts that are not deducted from the annual income tax due for 2023 are not carried forward and represent deductible expenses when determining the annual net income, determined in real system, based on accounting data, starting with the income for 2024.

i. Cancellation, from 2024, of the possibility to redirect 3.5% of income tax, to support nonprofit entities and cult units

• As of 2024, this provision no longer applies to income from sports activity contracts, income from intellectual property rights paid by legal persons or other entities required to keep accounts. Also, the option is no longer valid neither  for taxpayers who, until 31.12.2023, could dispose of the destination of 3.5% of the income tax through the single declaration to support non-profit entities, nor for taxpayers who earned income from independent activities /  agricultural activities, imposed on the basis of income norms and / or from the rental of immovable property,  as well as income from intellectual property rights, which are not required to submit the single declaration. The possibility was also abolished for taxpayers who obtain income from abroad of the nature of those for which, previously, they were entitled to dispose of the destination of the amount of 3.5% of the annual tax. The possibility of redirection is also cancelled for taxpayers receiving pension income.
• Basically, taxpayers can no longer decide on the destination of an amount representing up to 3.5% of the income tax, to support nonprofit entities that are established and operate under the law and cult units, as well as to grant private scholarships, according to the law.

j. Minimum wage to be taken into account in the calculation of social security contribution and health insurance contribution for income other than income from wages

• Starting with the revenues of 2024, if, by Government decision, during the same year several values of the gross minimum wage per country are used, to verify the compliance of the income in the annual ceilings for the payment of social security contribution, respectively health insurance contribution, as well as to establish the annual basis for calculating the social security contribution, respectively the health insurance contribution due,  the value of the gross minimum wage in force on May 25 of the year of income for which social contributions are established is taken into account. The provision also applies to contributions due by individuals who opt for the payment of the contribution.
• In order to establish the social security contribution and the health insurance contribution due for 2023, through the single declaration on income tax and social contributions due by individuals, for which the submission deadline is until May 25, 2024, when verifying the compliance of income with the annual ceilings, as well as when determining the annual calculation base, the level of the minimum gross salary per country guaranteed in payment of 3,000 lei is used. If, when submitting the single declaration on estimated income for 2023, another level of the minimum wage was used, the situation will be regularized by the single declaration on income earned and social contributions, which is submitted by May 25, 2024.
• Individuals who during 2023 earned income from intellectual property rights, income based on sports activity contracts,  or rental income, or income from associations with taxpayer legal entities under Titles II or III of the Tax Code, for which the tax is withheld at source, have the obligation to submit the single declaration on income tax and social contributions due by individuals for whom the submission deadline is until May 25, 2024,  including, if the income payers, when verifying the compliance of the income in the annual ceilings for CAS and CASS, as well as when determining the annual basis for calculating the social security contribution and the social health insurance contribution, due for 2023, used a different level of the gross minimum wage per country than  3,000 lei. The contribution withheld at source by the income payer represents an advance payment on account of the annual contribution. The CAS withheld at source in excess is not returned but is capitalized when establishing the elements necessary to determine the pension, according to the law. Income payers have the obligation to issue to income beneficiaries, until the last day of February including 2024, for 2023, a document on the level of CAS, respectively of CASS withheld at source, as well as the level of gross minimum wage per country used to calculate them.

k. CASS on sick leave allowances

• The exception from the health insurance contribution payment for sick leaves granted under GEO 158/2023 is eliminated. The exception is maintained for temporary incapacity to work granted as a result of accidents at work or occupational diseases, based on Law nr. 346/2002 on insurance for accidents at work and occupational diseases, for indemnities related to medical certificates.
• The provisions apply starting with the social health insurance benefits related to January 2024.

I. CASS on other income (other than from salaries and self-employment)

• If the beneficiaries of these incomes obtain, starting with 2024, cumulative incomes below the ceiling  of 6 minimum wages, and, in the same year  (previously Law 296/2023 mentioned the income obtained in the previous year), do not obtain income from salaries / independent activities, of at least 6 minimum wages or are not part of the category of persons insured in the public health system without payment of insurance,  will owe CASS at 6 minimum wages, being obliged to submit the single declaration.

4. VAT

a. Limitation of the right to deduct input VAT

• The right to deduct the input VAT related to the purchase, rental or leasing of buildings/dwellings, regardless of their purpose, located in residential areas or blocks of flats and the input VAT related to the expenses related to these buildings/dwellings, if they are not used exclusively for the purpose of economic activity, is limited to 50%.

This measure shall enter into force on the 1st day of the month following the date from which Romania is authorised to apply a special measure derogating from the  provisions of Directive 2006/112/EC on the common system of value added tax.

b. Conditions under which VAT due in custom is not actually paid on importation of goods have changed.

• The list of situations in which the taxpayer will not actually pay VAT on imports is amended.
• The first situation is when a taxpayer holds a certificate of deferral of VAT payment in customs. For obtaining it, an additional condition is added: the taxpayer must not register overdue budgetary obligations, other than those due to ANAF or registered in ANAF records, which must be proven on the basis of an affidavit made available to the customs authority.

In this regard, OMF 5454/2023 was published to supplement the Rules on the procedure for granting the certificate of deferment from customs payment of value added tax and release of the guarantee for imports of goods, approved by OMF 3225/2020.

• The second situation in which the taxpayer may not pay VAT on imports is when the importer is a taxable person registered for VAT purposes according to article 316 of the Tax Code, who submits customs declarations using the centralized clearance procedure, according to article 179 of Regulation (EU) No 952/2013 laying down the Union Customs Code. The possibility for AEO certified taxpayers (i.e., taxable persons registered for VAT purposes according to art. 316, who have obtained an authorized economic operator certificate, according to art. 38 of Regulation (EU) no. 952/2013 establishing the Union Customs Code) not to pay customs VAT on imports is eliminated.
• The third situation in which the taxpayer may not be obliged to pay VAT on imports is for imports made by taxable persons registered for VAT purposes in accordance with article 316 of the Tax Code, who have obtained authorization to lodge a customs declaration in the form of an entry in the declarant’s records, in accordance with Article 182 of Regulation (EU) No 952/2013 laying down the Union Customs Code.

c. Further suspension of some VAT reporting obligations

• The suspension of the submission of forms 392A, 392B and 393 is extended up until 31 December 2026.

d. Reduced VAT rate for powdered milk for newborns, infants and young children and clarifications for applying the 9% rate to food 

• A new exception to the application of the standard rate of 19% VAT will be added for foods with added sugar, whose total sugar content is at least 10 g / 100 g product, respectively, the rate of 9% VAT will also apply for powdered milk for newborns, infants and young children, not only for Easter bread (“cozonac” in Romanian) and biscuits.
• The definition of added sugar is amended to remove from the definition sugars in unsweetened fruit juices, fruit juice concentrate, fruit smoothie sugars.
• The methodological norms (approved by GD 1/2016, as amended by GD 1336/2023) detail the list of CN codes for the application of the reduced VAT rate of 9% and for:
  • infant powder, infant and young children and infant formula, falling within CN codes 0402 and 1901 10;
  • Easter bread sold under that name and falling within CN code 1905;
  • biscuits sold under that name and falling within CN codes 1905 31, 1905 90 45 and 2309.
• The Methodological Norms also specify that, on the basis of the list of ingredients, it is determined whether foods have added sugar, regardless of the amount, and the total sugar content is that stipulated in the nutrition information. Where the total sugar content is expressed in grams/unit of measurement by volume, taxable persons shall carry out the conversion from the unit of measurement for volume to the unit of measurement for mass.
• According to the Methodological Norms, the reduced VAT rate of 9% does not apply to the supply, import or intra-Community acquisition of food supplements.

e. Clarifications brought by the Methodological Norms (GD 1336/2023) on VAT registration

• In the case of taxable persons who apply together with registration in the trade register and registration for VAT purposes according to art. 316 para. (1) letter a) of the Tax Code, registration for VAT purposes shall be considered valid starting with the date of registration of the taxable person in the Trade Register.
• Applications for registration for VAT purposes submitted according to art. 316 para. (1) letter a) of the Tax Code, with subsequent amendments and completions, by taxable persons who requested registration for VAT purposes together with registration in the Trade Register, during 2023, and who do not present themselves at the headquarters of the competent tax body to pick up the VAT registration certificate shall be canceled at the end of a period of 60 days from the date of entry into force of GD 1336/2023 (01.01.2024).
• VAT registration will be considered valid starting with the date of communication of the VAT registration certificate for taxable persons who requested VAT registration together with registration in the Trade Register, during 2023, and who present themselves at the headquarters of the competent tax body to pick up the VAT registration certificate within 60 days from the date of entry into force of GD 1336/2023.

f. Organization of the Register of purchase of dwellings with reduced VAT rate

Order No. 2080/2023 for the approval of the Procedure for the organization of the Register of housing acquisitions with reduced VAT rate was published in MO 1190 of December 29, 2023. 

5. Excise duty

• Special rules on the level of excise duties are introduced in 2024.

Other normative acts amended by GEO 115 / 2023

1.  Use of cash registers (GEO 28/1999)

• The sanctioning of economic operators who make supplies of goods or services through commercial vending machines operating on the basis of card payments, as well as acceptors of banknotes or coins, as the case may be, for not equipping them with cash registers, is postponed until October 1, 2024.

2. Cash payment ceilings (Law 70/2015)

• The ceiling for payments for advances to employees has been changed again. Starting with December 25, 2023 (10 days from the date of publication of GEO 115/2023 in the MO), these payments can be made within a daily ceiling of RON 5,000, established for each person who received advances for settlement. Law 296/2023 temporarily reduced this ceiling to 1,000 lei / day / person.
• Operations of receipts and payments made with individuals, representing the receipt or repayment of loans or other financing, regardless of their nature and purpose, shall be carried out only by non-cash payment instruments. Previously, Law 296/2023 prohibited cash loan operations only in relation to individuals acting as shareholders/administrators/individuals/other creditors, excluding institutional creditors. Failure to comply with this provision is sanctioned with a fine of 25% of the amount collected/paid in cash, but not less than 500 lei.
• In the case of cash and carry stores, superstores and hyperstores that are organized and operate under the legislation in force, the cash amounts in the cashier cannot exceed, at the end of each day, the ceiling of 500,000 lei.
• The provision according to which, in the case of economic agents that have organized several cashiers, the ceilings of cash receipts and payments are applicable for each cashier, is repealed, but it is stipulated that branches and other secondary offices of legal entities that have their own cashier and/or account opened with a credit institution apply accordingly the provisions of the Law 70/2015,  for each cashier.

3. RO e-Invoice (OUG 120/2021)

• The deadline for submitting invoices issued on the B2B relationship RO e-Invoice system is of 5 calendar days from the date of issuing the invoice, but not later than 5 calendar days from the deadline for issuing the invoice provided in art. 319 para. (16) of the Tax Code. We remind you that, starting with 01.07.2024, in the B2B commercial relationship, between taxable persons established in Romania according to art. 266 para. (2) of the Fiscal Code, the issuer of the electronic invoice has the obligation to transmit it to the recipient by using the national system regarding the electronic invoice RO e-Invoice, respecting the electronic structure of the invoice. Exceptions are regulated for simplified invoices issued according to art. 319 para. (12) Tax Code. Failure to comply with this deadline is sanctioned with a fine ranging from 5,000 lei to 10,000 lei, for legal entities classified in the category of large taxpayers, defined according to the law, with a fine ranging from 2,500 lei to 5,000 lei, for legal entities classified in the category of medium size taxpayers, defined according to the law, and with a fine ranging from 1,000 lei to 2,500 lei, for other legal entities,  as well as for individuals.
• If the national system regarding the electronic invoice RO e-Invoice is not functional for at least 24 hours, the obligation to send invoices on the B2B relationship starting with 01.07.2024 is suspended until the system is put back into operation and the provisions of art. 319 of the Tax Code apply for transmitting invoices to customers, subject to subsequent transmission,  in the national system regarding the electronic invoice RO e-Invoice, of the issued electronic invoices. The downtime of the national electronic invoice system RO e-Invoice will be published on the websites of NAT and Ministry of Finance.
• Also, starting with 01.07.2024, both the non-transmission by issuers of invoices on the B2B relationship through RO e-Invoice, as well as the receipt and registration by the recipient – taxable person established in Romania, of invoices that have not been transmitted through RO e-Invoice, is sanctioned with a fine of 15% of the invoice value. Fining with the amount of input VAT deducted from the invoice received by the purchaser is repealed.
• New exceptions are added to the obligation to report invoices issued on the B2B relationship in RO e-Invoice, for supplies of goods / services made to taxable persons that are neither established nor registered for VAT purposes in Romania, supplies of goods / services for which simplified invoices are issued according to the provisions of art. 319 para. (12) of the Fiscal Code, respectively the services for which the issuance of the invoice is not subject to the invoicing rules applicable in Romania according to art. 319 para. (5) of the Tax Code. Previously, exceptions only concerned exports and intra-Community supplies.
• Starting with 01.07.2024, simplified invoices (i.e. tax receipts under EUR 100 that have entered the buyer’s tax code) will not be sent to the customer through RO e-Invoice.

4. RO e-Transport (GEO 41/2022)

• From 15.12.2023, through the RO e-Transport System, international road transport of goods are monitored, in addition to road transport on the national territory of goods with high fiscal risk and.
• The obligation to declare in the RO e-Transport System the data regarding the international transport of goods belongs to the following users:

a. the consignee entered in the customs import declaration, respectively to the consignor entered in the customs export declaration, in the case of goods subject to import or export operations, as the case may be,

b. the beneficiary in Romania, in case of intra-Community acquisitions of goods,

c. the supplier in Romania, in case of intra-Community supplies of goods,

d. the depositary, in the case of goods subject to intra-Community transactions in transit, both for goods unloaded on the territory of Romania for storage or for the formation of a new consignment from one or more consignments of goods, and for goods loaded after storage or after the formation of a new transport on the national territory from one or more consignments of goods.

• These users are obliged to declare in the RO e-Transport System the data regarding the international transport of goods, so that they can be identified by the ITU code. In order to generate the ITU code, users can declare in the RO e-Transport System the data regarding the transport of goods, up to 3 calendar days before the  declared date for the start of the transport, but until the presentation at the road border crossing point at the entry into Romania or at the place of import, respectively the actual setting in motion of the vehicle,  where applicable.
• The road transport operator shall be obliged to:

a. ensure the transfer of the current positioning data of the transport vehicle, which are the subject of the declaration, throughout the transport route of the goods subject to monitoring through the RO e-Transport System,

b. equip transport vehicles with telecommunications terminal devices using satellite positioning and data transmission technologies. The provisions do not apply if the positioning data of the transport vehicle is transferred by its devices.

c. provide the driver with the ITU code received.

• The driver of the transport vehicle shall:

a. switch on the positioning device before the start of transport within the national territory, and stop the positioning device only after delivery of the goods to the declared place of delivery on the national territory or after leaving the national territory.

b. submit, at the request of the competent bodies within the National Agency for Tax Administration or within the Romanian Customs Authority, respectively at the request of officers and police agents within the Romanian Police, the documents accompanying the transport of goods subject to monitoring through the RO e-Transport system together with the ITU code.

• Non-compliance with the new obligations by road transport operators and drivers of the transport vehicle is sanctioned starting with 01.07.2024 with fines.

5. Amendments to the Accounting Law (Law 82/1991)

• Not for profit legal entities which, in the reporting financial year, received amounts representing subsidies, sponsorships, amounts redirected, according to the law, from corporate income tax, microenterprise income tax, respectively from income tax due by individuals, as well as other similar forms of financing, regardless of their cumulative value, draw up a statement accompanying the annual financial statements and  showing the amounts thus received and used. The provision applies starting with the annual financial statements for the financial year 2023.
• The fines for contraventions to the Accounting Law are considerably increased. We remind you that, by Law 296/2023, the possibility of paying half of the minimum of these fines within 15 days from the communication of the report of finding and sanctioning the contravention was eliminated.

News about Tax & Training

As usual, we are pleased to keep you updated with the latest projects we are involved in.

In this newsletter, we have chosen to include a video material from the  online seminar organized together with Pluxee Romania in December  2023, which summarizes the tax changes introduced by Law 296/2023, so that you have an overview of the tax changes applicable from 2024: https://youtu.be/QhKYN7-VNQs.

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This information does not constitute tax or accounting advice. Nadia Oanea or Tax & Training SRL does not assume responsibility for applying tax and accounting provisions in cases specific to each taxpayer. This information shall not be provided with the intention of contributing to the illegal avoidance or reduction of taxes, duties or ancillary obligations imposed by the authorities.

For personalized advice or personalized training proposals, you can contact us by e-mail at nadia.oanea@taxandtraining.com

Nadia Oanea | CCFR, CECCAR, ADIT