Methodological norms for the minimum corporate income tax (IMCA) and for the micro-enterprise income tax, as well as amendments regarding the additional corporate income tax

After almost 1 year since the application of IMCA and ICAS, as well as since the change in the rules for the application of the microenterprise tax regime, we finally have Methodological Norms that clarify some technical aspects of the application of these provisions. We also have changes with regard to the minimum additional tax due by the banks and by the companies with activity in oil and gas sector, applicable starting 2025.

1.      Methodological rules on IMCA

GD 1393/2024, published in the Official Gazette 1125 of November 11, 2024, modifies the Norms given to the application of the Tax Code, approved by GD 1/2016, introducing rules for the application of the provisions on the minimum corporate income tax (“IMCA”) and the additional corporate income tax for legal entities carrying out activities in the oil and gas sector (“ICAS”), applicable starting with January 1, 2024, according to Law 296/2023 and GEO 115/2023.

Please be reminded that, starting with January 1, 2024 or the fiscal year starting after January 1, 2024:

• Corporate income tax payers who register in the previous year a turnover of more than EUR 50,000,000 and who determine a corporate income tax in the reporting year, cumulated from the beginning of the fiscal year/modified fiscal year to the end of the quarter/reporting year, lower than the minimum corporate income tax (IMCA), are obliged to pay the corporate income tax at the level of IMCA (art. 18¹ of the Tax Code).
• By the way of exception from art. 18¹ of the Tax Code, legal entities carrying out activities in the oil and gas sectors, established by order of the Minister of Finance, which register in the previous year a turnover of more than 50,000,000 euros, owe in addition to the corporate income tax a specific corporate income tax (ICAS) (art. 18³ of the Tax Code).

The minimum corporate income tax (IMCA), regulated by art. 18¹ of the Tax Code, is determined as follows:

IMCA = 1% x (VT – Vs – I – A).

Also, the additional tax for legal entities carrying out activities in the oil and gas sectors (ICAS), regulated by art. 18³ of the Tax Code, is determined as follows:

            ICAS = 0,5% x (VT – Vs – I – A).

VT – total revenues, determined cumulatively from the beginning of the fiscal year/modified fiscal year until the end of the quarter/year under reporting obligation, as the case may be;

Vs – revenues that are deducted from the total revenues, determined cumulatively from the beginning of the fiscal year/modified fiscal year until the end of the quarter/year under reporting obligation, as the case may be, representing:

(i) non-taxable revenues provided for in art. 23 and 24 of the Tax Code;

(ii) revenues related to the costs of finished products;

(iii) revenues related to the costs of services in progress;

(iv) income from the production of tangible and intangible assets;

(v) revenues regarding subsidies;

(vi) income from compensation, from insurance/reinsurance companies, for damages caused to goods (inventories or tangible assets owned by the taxpayer);

(vii) revenues representing excise duties that have been reflected simultaneously in the expense accounts.

I – the value of the assets in progress occasioned by the acquisition/production of assets, recorded in the accounting records starting with January 1, 2024, respectively starting with the first day of the modified fiscal year starting in 2024

A – accounting depreciation at the level of the historical cost related to the assets acquired/produced starting with January 1, 2024 / the first day of the amended fiscal year starting in 2024. This indicator does not include the accounting depreciation of assets included in the value of indicator I.

The methodological norms bring clarifications regarding:

a. Calculation of the Total Revenues (VT) indicator

VTs are defined in the Tax Code as total revenues determined cumulatively from the beginning of the fiscal year/amended fiscal year until the end of the quarter/year under reporting obligation, as the case may be. The new norms specify that the “total revenues (VT)” indicator represents the total revenues recorded according to the applicable accounting regulations, from which the commercial discounts granted after invoicing have been subtracted; in the same way, the “total revenues (VT)” indicator from the formula for calculating the additional tax for legal entities carrying out activities in oil and gas (ICAS) sectors is determined.

b. Who can subtract from the total revenues the revenues representing the excise duties that were reflected simultaneously in the expense accounts

The deduction is made by the excise duty payers, according to the provisions of Title VIII “Excise duties and other special taxes” of the Tax Code, as follows:

• The authorized warehouse keeper, the registered consignee or any other person who releases the excise goods from the excise duty suspension regime or on whose behalf such release is made, as provided for in Art. 341 para. (1) letter a) item 1 of the aa;
• the importer, as provided for in art. 341 para. (1) letter d) of the Tax Code;
• The certified consignee, as provided for in art. 341 para. (1) letter f) of the Tax Code;
• authorized distributors or redistributors of natural gas, as provided for in art. 356 para. (1) of the Tax Code;
• economic operators who produce or perform intra-community acquisitions or import of coal, coke and lignite, as provided for in art. 357 of the Tax Code;
• electricity producers, distributors or redistributors, as provided for in art. 358 para. (2) of the Tax Code;
• economic operators who produce and sale in Romania the products provided for in art. 439 of the Tax Code (i.e., products subject to non-harmonized excise duties), purchase from the territory of the European Union or import those products, as provided for in art. 444 para. (1) of the Tax Code.

c. Calculation of the sponsorship tax credit that is deducted from IMCA

According to art. 18¹ para. (10) of the Tax Code, taxpayers who carry out sponsorships and/or acts of patronage shall deduct the corresponding amounts from the minimum tax due at the level of the minimum amount of the following:

• the value calculated by applying 75% to the turnover; for situations in which the applicable accounting regulations do not define the turnover indicator, this limit is determined according to the norms.
• the value representing 20% of the profit tax.

The methodological norms bring clarifications regarding the calculation of the 2 limits, as follows:

• In order to establish the limit of 0.75% of the turnover, the methodological norms given in application of the provisions of art. 25 para. (4) letter i) of the Tax Code shall apply.

Thus, according to item 18 of the Norms for the application of art. 25 para. (4) letter i) of the Tax Code, for taxpayers who apply the accounting regulations in accordance with the International Financial Reporting Standards, with the exception of credit institutions – Romanian legal entities and Romanian branches of credit institutions – foreign legal entities, the “turnover” includes the income from the sale of goods and the provision of services from which the amounts representing commercial discounts granted are subtracted and to which the income from operating subsidies are added.

• To establish the limit of 20% of the corporate income tax, the percentage of 20% is applied to the corporate income tax determined according to the general rules provided for in Title II of the Tax Code, which would have been due if the taxpayers had not been obliged to pay IMCA.

Therefore, if the taxable profit *16% = 100 lei, and the IMCA = 150 lei, the taxpayer owes the IMCA of 150 lei but it can take a tax credit from the IMCA of 100 lei * 20%, but not more than 0.75% of the turnover.

d. Clarifications on the application of the external tax credit

• If taxpayers owe corporate income tax at the level of IMCA, the external tax credit that is deducted from it is the one determined according to the provisions of art. 39 of the Tax Code.

The tax paid to a foreign state is deducted from the corporate income tax, if the provisions of the double tax convention concluded between Romania and the foreign state are applied.

If a Romanian legal person obtains income from a foreign state through a permanent establishment or income subject to a withholding tax which, according to the provisions of the double tax convention concluded by Romania with another state, may be taxed in the other state, and that convention provides for the credit method as a method of double tax relief,  the tax paid to the foreign state, either directly or indirectly (i.e., WHT), is deducted from the corporate income tax or from the IMCA, as the case may be.

The credit granted for taxes paid to a foreign state in a fiscal year may not exceed the corporate income tax, calculated by applying the corporate tax rate of 16% to the taxable profit obtained in the foreign state, determined in accordance with the rules of Romania, or to the income obtained from the foreign state.

The credit is granted from the corporate income tax calculated for the year in which the tax was paid to the foreign state. The payment of the foreign tax is proved with a justifying document, issued by the competent authority of the foreign state or by the income payer/agent who withholds the tax at source, in the event that the competent authority of the foreign state does not issue such a document. For the self-declared income tax, the foreign tax is proven with a justifying document, issued by the competent authority of the foreign state, or with the copy of the tax return or similar document submitted with the foreign competent authority, accompanied by the documentation certifying its payment, in the event that the competent authority of the foreign state does not issue the justifying document.

• The corporate income tax at the level of IMCA represents the corporate income tax for the application of the double tax conventions (i.e., represents income tax covered by the double tax conventions).

e. Clarifications on the comparison between corporate income tax and IMCA

According to art. 18¹, para. (5) of the Tax Code, in order to make the comparison between the corporate income tax and the IMCA, the quarterly/annual corporate income tax represents the corporate income tax before the deduction of the amounts according to the law, adjusted as follows:

From this corporate income tax, the following are deducted:

• the tax credit for sponsorship/patronage,
• other amounts that are deducted from the corporate income tax, according to special laws,
• reduction of corporate income tax, according to GEO 153/2020, for the establishment of tax measures to stimulate the maintenance/increase of equity,

and the following items must not be deducted:

• the amounts representing the external tax credit,
• exempt corporate income tax according to 22
• exempt corporate income tax according to the Agricultural Cooperative Law 566/2004.

The methodological norms clarify that:

• If, following the comparison made between the corporate income tax and the IMCA, the taxpayer is obliged to pay the corporate income tax, this is also due in the situation where, after subtracting the amounts representing the foreign tax credit, the corporate income tax exempted according to the provisions of art. 22 of the Tax Code and the corporate income tax exempted according to the Agricultural Cooperative Law 566/2004, as the case may be,  the reduced amount of the corporate income tax falls below the amount of IMC.

If the taxpayer owes IMCA, from it:

The following shall not be subtracted:

• exempt, reduced corporate income tax
• other amounts that are deducted from the corporate income tax, according to special laws,
• the reduction of corporate income tax according to GEO 153/2020,

but the following shall be subtracted:

• external tax credit
• sponsorship tax credit
• the value obtained by applying the 16% tax rate on the amount representing the additional deduction of 50% of the eligible expenses for research and development activities (art. 18¹ (111) of the Tax Code, as introduced by GEO 115/2024).

The methodological norms clarify that:

• If, following the comparison made between the corporate income tax and the IMCA, the taxpayer is obliged to pay the IMCA, IMCA is also due if, after subtracting the amounts representing external tax credit, sponsorships/patronage, and the amounts determined according to the provisions of art. 18¹ (111) of the Tax Code, the reduced value of IMCA falls below the amount of corporate income tax.

f. Calculation of the turnover indicator (VT-Vs) for economic operators regulated/licensed by ANRE who, in the previous year, obtained revenues from electricity and natural gas distribution/supply/transmission activities

According to art. 18¹ para (14) of the Tax Code, IMCA does not apply to the economic operators regulated/licensed by ANRE who, in the previous year, obtained revenues from electricity and natural gas distribution/supply/transmission activities in a proportion of more than 95% of the total revenues from which the revenues included in the Vs.

Also, according to art. 18³ para. (10) and (11) of the Tax Code, in the case of taxpayers who carry out activities in the oil and natural gas sectors and electricity and natural gas distribution/supply/transmission activities and who are regulated/licensed by ANRE, for the determination of the specific tax, they do not include, within the indicators VT, Vs, I and A of the ICAS calculation formula,  elements related to the activities of electricity and natural gas distribution/supply/transmission. Taxpayers regulated/licensed by ANRE who, in the previous year, obtained revenues from electricity and natural gas distribution/supply/transmission activities in a proportion of more than 95% of the total revenues from which the revenues included in the Vs indicator are subtracted, are not subject to ICAS. 

The methodological norms clarify that:

• In order to determine the turnover, the revenues related to the entire activity are taken into account, without excluding the revenues related to the activities of electricity and natural gas distribution/supply/transmission.
• The following activities, carried out as a result of the taxpayers’ compliance with the obligations incumbent on them as holders of the electricity distribution license and other regulations in areas such as telecommunications, environment and the like, are included in the scope of the electricity distribution activity:

1. electricity distribution service based on regulated tariffs,
2. activities of connection of consumption and/or production places, which also include the services of issuing permits and studies necessary in the process of connecting users to the electricity distribution networks,
3. other activities carried out at the request of users, but based on the obligations provided for in the regulations, for example: on-demand connection-disconnection services, on-demand metering group verification services and the like,
4. other activities that are generally related to the assets owned and used for the provision of the distribution service, for example: rental of poles for the placement of telecommunications networks, activity regulated by specific normative acts in the field of telecommunications, waste recovery.

• The following activities are included in the scope of natural gas distribution activities, being considered activities carried out based on the obligations incumbent on the holders of natural gas distribution licenses:

1. natural gas distribution activities,
2. connection activities to the natural gas distribution system,
3. provision of related services; The following activities are included in the category of related activities: issuing permits regarding the distribution system according to the legal provisions regarding the authorization of the execution of construction works, commissioning of the use of natural gas installations belonging to end customers, issuing copies of technical documentation and the like,
4. The regularization of the differences between the quantities of natural gas allocated and those distributed is an activity related to natural gas distribution services.

2. Amendments to ICAS and the additional tax for credit institutions, with effect from 1 January 2025

Law 290/2024, published in Official Gazette 1163 of November 21, 2024, repeals articles 18² and 18³ of the Tax Code and regulates the additional tax for credit institutions, respectively the additional tax for the oil and natural gas sectors in a separate title of the Tax Code: Title II¹ “Additional tax”, i.e. as a tax distinct from the corporate income tax. The new title II¹ contains 2 articles:

• 46¹ “Additional tax for credit institutions – Romanian legal entities and Romanian branches of credit institutions – foreign legal entities”
• 46² “Additional tax for legal entities carrying out activities in the oil and natural gas sectors”

The additional tax represents income to the state budget. Also, art. 25, para. (4), letters u) and v) expressly mention as non-deductible expenses the minimum corporate income tax (IMCA) due according to art. 18¹ of the Tax Code, and the specific additional tax determined according to art. 46¹ and 46² of the Tax Code.

Although the additional tax for legal entities carrying out activities in the oil and natural gas sectors is also called ICAS in art. 46² of the Tax Code, there are differences between the way ICAS is regulated for 2024 and the way it is regulated starting with 2025:

• Both legal provisions (the one from 2024, and the one applicable from 2025) refer to a limited applicability, until 31.12.2025, respectively the end of the amended fiscal year that starts in 2025 and ends in 2026). The new ICAS applies for the period January 1, 2025 – December 31, 2025, and for taxpayers with a fiscal year related to the calendar year, it applies for the period between the modified fiscal year starting in 2025 and the modified fiscal year ending in 2026.
• In 2024, ICAS is payable only by legal entities carrying out activities in the oil and natural gas sectors, established by the order of the Minister of Finance, which register a turnover of over 50,000,000 euros in the previous year. In 2025, the new ICAS applies to Romanian or foreign legal entities that individually or in a form of association deliver goods or provide services on the territory of Romania, carrying out activities in the oil and natural gas sectors, established by order of the Minister of Finance. Thus, the turnover ceiling of EUR 50 million disappears, and both Romanian and foreign legal entities are expressly included, as well as the situation of obtaining income from oil & gas activities in a joint venture.
• In 2024, ICAS was due by exception to the IMCA provisions (i.e. oil & gas companies that owed ICAS were not obliged to compare the profit tax with IMCA and pay the higher of the two). Starting with 2025, oil & gas taxpayers are obliged to apply both the provisions on IMCA (art. 18¹ of the Tax Code) and the provisions on ICAS (art. 46² of the Tax Code).
• For the calculation of indicators I and A in the ICAS calculation formula, only the assets acquired/produced/realized or in progress as of January 1, 2025 shall be taken into account.
• Taxpayers who exclusively carry out electricity and natural gas distribution/supply/transmission activities and who are regulated/licensed by ANRE are not subject to ICAS starting with 2025.
• The income obtained by non-residents from transactions that generate the obligation to pay ICAS from 2025 is not part of the scope of the double tax conventions concluded by Romania with another state. Therefore, the amounts paid from 2025 by non-residents, as well as ICAS, will not be able to be deducted as a tax credit from the corporate income tax due by non-residents in their state of residence, and the Romanian tax authority will not issue certificates proving the tax paid in Romania for these amounts.

Within 30 days (January 31, 2025) from the entry into force (January 1, 2025) of Law no. 290/2024, the norms for registration, declaration and payment of the additional tax for taxpayers, Romanian or foreign legal entities who, individually or in a form of association, deliver goods or provide services on the territory of Romania, carrying out activities in the oil and gas sectors, will be approved by order of the Minister of Public Finances.

3. Methodological norms on the application of the micro-enterprise tax regime

GD 1393/2024, published in the Official Gazette 1125 of November 11, 2024, introduces in the Norms to the Tax Code, approved by GD 1/2016, new norms for the application of the provisions on microenterprise income tax, respectively the new qualification criteria for the application of the regime, applicable starting with January 1, 2024, according to Law 296/2023 and GEO 115/2023.

a. The notion of indirect ownership is clarified

Please be reminded that, starting with 2024, an individual can hold, directly or indirectly, more than 25% of the value/number of shares or voting rights in a maximum of one company that applies the micro-enterprise tax regime.

The methodological norms clarify the method of calculating the ownership percentages:

• Indirect holding refers to the situation in which a person holds a share of the share capital or of the total voting rights in a legal person, through another legal person in which that person holds shares or voting rights. The indirect holding is calculated by multiplying the percentages of ownership, starting with the percentage of its direct holding in the first Romanian legal entity owned and continuing with the percentages of holding, on the chain of legal entities, up to the one for which the status of micro-enterprise is verified.
• The provisions of art. 47 para. (1¹) of the Tax Code regarding the calculation of the total income ceiling by cumulation with the income of linked enterprises are applicable if the percentage of indirect ownership, thus calculated, is over 25% or if the result of the sum of the percentages of direct and indirect ownership is over 25%.
• For the associates/shareholders of the respective legal entity, the percentage of ownership of the value/number of shares or voting rights is calculated on the basis of the holdings existing on December 31 of the previous fiscal year.

b. Clarifications on how total income is calculated, if a legal person is considered to be a linked enterprise with a PFA/II/FI (self-employed)

Please be reminded that, from 2024, the maximum total income ceiling, of 500,000 euros, is verified by cumulation with the income of linked undertakings. If the individual shareholder who holds more than 25% of the share capital / voting rights of a company, also has a form of organization as an independent activity, this constitutes a linked undertaking.

The methodological norms clarify how we calculate the income of PFA/II/IF/other form of organization as an independent activity, for the purposes of verifying the ceiling of 500,000 euros:

• the income of the authorized natural person/sole proprietorship/family enterprise/other form of organization of an economic activity without legal personality, authorized according to the laws in force, which is cumulated with that earned by the Romanian legal person/other related enterprises, are those provided for in art. 53 of the Tax Code, collected and recorded in the journal register of receipts and payments, according to the applicable accounting regulations (e. gross income).

c. Clarifications regarding the financial statements whose timely submission is verified for classification as a micro-enterprise

Please be reminded that, starting with 2024, one of the new conditions for the application of the micro-enterprise tax regime refers to the timely submission of the annual financial statements.

The methodological norms clarify the years to which the financial statements refer for the company for which the classification as a micro-enterprise is verified, depending on the moment in the fiscal year in which this verification is made:

• For the application in fiscal year N of the micro-enterprise income tax regime, as regards the fulfillment of the conditions provided for in art. 47 para. (1) letter i) of the Tax Code, the reference to the annual financial statements refers only to the Romanian legal entity that has not submitted the financial statements corresponding to the financial year N – 2 and/or those corresponding to the years prior to year N – 2 of the period of existence of the respective Romanian legal entity.
• During the fiscal year N, the provisions of art. 52 para. (2) of the Tax Code shall apply by reference to the annual financial statements for the financial year N – 1 and to the deadline for submission to the competent tax authorities, according to the Accounting Law no. 82/1991.

d. Clarifications on the types of companies that cannot apply the micro-enterprise regime

The methodological norms detail these companies as:

• legal entities – credit institutions, defined according to the special laws on organization and functioning in the banking field, such as: banks, cooperative credit organizations, savings and lending banks in the housing sector and mortgage credit banks,
• legal entities that are organized and operate according to the special laws in the field of insurance and reinsurance, respectively in the field of capital market, such as: insurance companies, reinsurance companies, insurance-insurance companies, stock or commodity exchanges, financial investment services companies, registry companies, depository companies,
• Romanian legal entities that carry out intermediation/distribution activities in the field of insurance and reinsurance, respectively of the capital market, with the exception of secondary insurance and/or reinsurance intermediaries, defined according to the law, which have earned income from the insurance/reinsurance distribution activity in a proportion of up to 15% inclusive of the total revenues,
• legal entities that carry out activities in the field of gambling, according to the applicable special law,
• legal entities that carry out activities of exploration, development, exploitation of oil and natural gas deposits, according to the applicable special laws.