Tax treatment of micro enterprises looks the best right now, but it is accompanied by a number of conditions which, if they are not longer met, the company will be taxed on profit. Contexpert intends to explain both situations a company may confront with: the transition from income tax to profit tax and vice versa.
Thus, the transition from profit tax to microenterprises tax regime is compulsory for Romanian legal persons who, on 31 December of the preceding fiscal year, in case the following conditions are met:
• realize income, other than those obtained from carrying out activities in the banking, insurance and reinsurance, capital market (excluding brokerage activities), in gambling, in the exploration, development and exploitation of oil deposits and natural gas;
• obtain revenues from management and consultancy less than 20% of the total income;
• have realized revenues exceeding the equivalent in RON of EUR 100,000 (exchange rate prevailing at the close of the financial year in which revenues were recorded);
• share capital is held by other persons than the state and territorial administrative units;
• not in dissolution followed by liquidation, registered in the Trade Register or courts of law.
The companies that no longer meet the condition to be taxed on profit have to notify the fiscal authorities by filing declaration 010 mentions, until 31 March of the year they must apply micro-enterprise regime.
The micro-enterprise regime is mandatory for the newly established companies, with the following exceptions:
Which are the rules for each taxation regime?
If a microenterprise no longer meets one of the following conditions in a year:
the fiscal regime will be changed starting next year. The term for notification of the fiscal authorities will be 31 March of the following year, by submitting a declaration 010.
The companies must change the microenterprise fiscal regime during a fiscal year in case:
Transition from micro enterprise to profit tax takes place during the fiscal year in case one or more of the three conditions mentioned above is no longer met. The companies must notify the fiscal authorities by submitting the declaration 010, within 15 days.
The limits regarding the income and the share of revenue from management and consultancy activities must be checked according to the registered revenue accumulated from the beginning of the fiscal year.
How to calculate revenues for transition to profit tax?
Beginning with the quarter the micro enterprises no longer meet all the conditions, they will owe profit tax, with the obligation to amend the fiscal vector. Profit tax calculation is made taking into consideration income and spending made since the quarter they no longer meet the conditions..
The tax profit must be paid and declared quarterly until the 25th of the first month following the end of the quarter (form 100), with the exception of the last quarter when the term is the 25th of March.
Tax rates for microenterprises are differentiated depending on the number of employees (1% of the revenues for 2 or more employees, 2% for one employee or 3% with no employees) and may change during the year depending on the number of employees.
The newly established micro-enterprises make an exception, being taxed with 1% if they are owned by Romanian individuals who have never owned other businesses. The tax rate of 1% applies for two years, in case the companies meet other conditions over a period of 48 months:
Do not declare headquarters / workstations without activity
Do not declare temporary inactivity
No capital increases by contributions from new associates / shareholders
Not sold / transferred shares
Voluntary liquidation is not required
The regime of microenterprises is advantageous due to the tax rates, but we must keep in mind that any change in the number of employees means switching to another rate, which can happen several times during the year, with related implications on tax records in Revisal records. Therefore, the tax system may imply higher administrative costs.
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