Rules are changing for microenterprises: Entrepreneurs could opt to pay profit tax if they fulfill two conditions. See all changes and expert opinion

The Romanian Ministry of Finance proposes to change rules for microenterprises, allowing owners to opt for tax profit instead of revenue tax if two conditions are fulfilled: having at least two employees and a minimum share capital of RON 45,000 (around EUR 10,000).

The proposals are included in an Emergency Ordinance project published on ministry’s website.

“Microenterprises which have subscribed a minimum share capital of RON 45,000 and have at least two employees may opt, only once, to apply the provisions of Title II (profit tax), starting with the quarter in which these conditions are met cumulatively, the option being definitive,” the project says.

If the number of employees falls below two during the period in which the company applies profit tax, the condition must be re-fulfilled within 60 days.

Romania currently tax profits with 16 percent, and microenterprises pay now a revenue tax of 1 or 3 percent of their global revenues, depending on their number of employees.

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On March 22, the minister of finance, Eugen Teodorovici, announced that the state will allow microenterprises to opt for the payment of the profit tax or the revenue tax under certain conditions.

The minister said the changes might be approved soon by the government through an emergency ordinance.

“The threshold below EUR 1 million under which firms can opt for the payment of the profit or turnover tax, with two cumulative conditions – to have a share capital of RON 45,000 and to employ at least two people,” Teodorovici said.

Boosting investments

Experts say the new rules will have a good impact on small businesses in Romania.

“The changes were extremely necessary for SMEs that have an elaborate investment plan. This measure will boost investments and encourage small companies to expand,” KPMG Fiscal Assistance manager Dragos Doros told Business Review.

Last year, the government rose of the threshold up to which a company is considered a microenterprise, from EUR 100,000 up to EUR 500,000, and since January 2018 allowed microenterprises to have revenues up to EUR 1 million.

Microenterprises pay revenue tax of 1 percent if they have one or more employees and of 3 percent if they don’t have employees.

The Ministry of Finance also clarifies what means to have two employees in Romania: microenterprises could have two full-time employees, but also four half-time employees, according to the project.

If the administrator of the microenterprise is paid with at least the minimum wage (RON 1,900 gross in 2018), he is considered an employee too.