The beginning of 2024 brings important changes in the tax legislation governing micro-enterprises. These novelties are crucial for entrepreneurs, having a significant impact on how or not they will be able to apply this tax regime starting next year.

Among other things, Romanian micro-enterprises will have to adapt to new major tax regulations that include not only the introduction of two tax rates, applicable according to certain criteria, but also the framework itself for the application of this income tax regime. From this perspective, the authorities have introduced new limitations and additional conditions that significantly restrict companies’ access to microenterprise status.

Here are the key points of these legislative changes:

Changes to tax rates for micro-enterprises

From January 1, 2024, two tax rates will be reintroduced: 1% for micro-enterprises with revenues below 60,000 euros and another, of 3%, for micro-enterprises with revenues over 60,000 euros or that carry out activity under certain CAEN codes, regardless if they are primary or secondary (5821, 5829, 6201, 6209 5510, 5520, 5530, 5590, 5610, 5621, 5629, 5630, 6910, 8621, 8622, 8623, 8690). In the event that micro-enterprises carrying out activities corresponding to CAEN codes that oblige them to apply the 3% rate also obtain income from other activities, the increased tax rate will be applied to all income, therefore including those from these other activities.

The transition from the 1% rate to the 3% rate and vice versa, during a fiscal year, will be made starting with the quarter in which the situations requiring the change of the tax rate occur, depending on how the new imposed limitations are respected or not by the tax legislation.

Limitation of holdings to a single micro-enterprise

From January 2024, a person who owns at least 25% of social shares or voting rights can be a shareholder/associate in only one micro-enterprise. The 25% percentage refers to both direct and indirect ownership. The annual ceiling for qualifying as a micro-enterprise will remain at 500,000 euros, but it becomes cumulative for all related micro-enterprises, as defined by Law no. 346/2004.

The submission of annual financial statements becomes an essential condition for operating as a micro-enterprise

The new fiscal rules applicable from next year establish that micro-enterprises will be forced to pay profit tax if they do not submit their financial statements for the previous year on time. The transition to profit taxation will be made starting from the quarter in which the balance sheets should have been submitted.

Moreover, for next year, an advance of the deadline for submitting the financial statements related to the year 2023 has been regulated. Thus, companies that can apply the micro-enterprise taxation system in 2024 must submit their annual financial statements to the authorities by March 31 at the latest 2024. In the absence of the balance sheets for 2023 submitted by the imposed deadline, the companies will be obliged to pay the profit tax.

Specific restrictions on certain fields of activity

From next year, secondary insurance and reinsurance intermediaries can operate as micro-enterprises, provided that the income from the distribution activity does not exceed 15% of the total income.

The authorities also eliminated the preferential regime of companies in the HORECA sector, in the context in which they had more flexible conditions for being classified as micro-enterprises. From 2024, micro-enterprises in the HORECA field must also register at least one full-time employee (or several equivalent part-time contracts) and respect the ceiling of 500,000 euros to qualify for this tax regime.

Elimination of some tax reductions

From the beginning of next year, micro-enterprises no longer have the right to reduce income tax with the amounts representing sponsorships or with the value of purchases of fiscal cash registers. The last tax year in which a micro-enterprise can reduce the micro-enterprise income tax on account of sponsorships or cash registers or redirect the tax will be the year 2023.

Article published in TaxMagazine