The Romanian government introduced a major change in the fiscal regime of large enterprises through Emergency Ordinance no. 115/2024 which amended the Fiscal Code at the end of September. This ordinance brings a significant novelty: the extension of tax facilities for research and development (RD) also to companies that have become obliged to pay the minimum turnover tax (MTO). Until now, these facilities were only available to companies paying corporate income tax.

The measure comes as a direct response to the challenges that large companies have encountered since the introduction of IMCA. Until now, companies that were forced to switch to this new tax regime could no longer benefit from tax incentives for research and development activities, which put them at a disadvantage compared to companies that still paid corporate tax. With the implementation of GEO 115/2024, this tax inequity has been eliminated and companies paying IMCA can now once again access the same CD facilities as before.

The extension of tax breaks for R&D and for companies paying MTO is a welcome change, allowing large businesses to once again benefit from tax incentives for such activities. This regulation comes at a crucial time, allowing companies to effectively plan their investments and reinvest funds in the development of innovative projects. In the context in which Romania wants to attract more research and development projects, this measure can have a considerable positive impact on the competitiveness of the national economy.

GEO 115/2024 provides that, starting from fiscal year 2024, companies that carry out research and development activities can apply an additional deduction of 50% of eligible expenses for CD when calculating the fiscal result. In addition, these companies can deduct from the minimum turnover tax the amount obtained by applying the 16% rate to the amount representing the additional 50% deduction. However, this reduction is only applied within the limit of the minimum tax due, thus providing companies with a significant fiscal incentive to continue or expand CD projects.

The facility applies for fiscal year 2024

The changes brought by GEO 115/2024 apply starting from fiscal year 2024, offering the opportunity for companies that pay MTO to benefit from deductions already this year. This is essential, given that many large businesses have not yet finalized their tax results for 2024, so they now have the opportunity to use the new deduction to reduce their tax burden under MTO.

The extension of these tax facilities is considered an important incentive for the relaunch of research and development activities among large companies. Practically, the measure encourages the reinvestment of the savings made from these deductions in new CD projects, thus contributing to the increase of investments and the development of the innovation sector in Romania.

Who can benefit from these deductions?

According to the tax law, companies carrying out applied research and/or experimental development activities can apply for this additional deduction. The activities must be relevant to the company’s object of activity and be included in a research and development project, which must be validated by an expert registered in the National Register of Experts for the certification of the research and development activity. According to art. 20 of the Fiscal Code, the expenses eligible for these deductions include the costs of equipment and apparatus used in research and development activities, for which the accelerated depreciation method can also be applied.

With this new measure, the Government wants to support large companies in their innovation efforts, even in the context of the application of the new MTO tax regime. The extension of fiscal facilities to IMCA payers allows them to access again the incentives that were available until the end of 2023, thus contributing to the continuity and even expansion of research and development projects implemented even before the sudden changes in the tax regime that had to assimilate the large companies paying profit tax, forced from 2024 to pay the new minimum turnover tax.

Article published in Business-Mark.ro