The much-awaited changes to the Romanian Fiscal Code introducing a minimum tax on turnover were published on October 27 2023 after several draft proposals.
According to these legislative amendments, the minimum tax on turnover will be due in Romania from January 1 2024 under certain conditions, while different rules and computation methods are applicable depending on the category of the taxpayer.
Minimum tax on turnover with general applicability
Taxpayers (except for credit institutions and companies from the oil and gas sector) are obliged to pay the minimum tax on turnover under the following cumulative conditions:
If the turnover recorded in the previous year was higher than €50 million – the turnover should be adjusted for tax purposes by subtracting certain types of revenues, and the accounting depreciation and the value of the assets in progress related to assets acquired/produced after January 1 2024; and
If the corporate income tax (CIT) computed under the current rules is lower than the minimum tax.
This means that taxpayers will have to compare the CIT computed under the current tax rules with the minimum tax on turnover at each payment deadline (i.e., quarterly and annually) and pay the minimum tax on turnover if the CIT amount is lower.
The minimum tax on turnover for all categories of taxpayers (except for credit institutions and companies from the oil and gas sector) is computed by applying 1% to the turnover, adjusted for tax purposes.
Credit institutions
In contrast to the minimum tax with general applicability described above, credit institutions will have to pay CIT and the minimum tax on turnover. There is no threshold for the application of the minimum tax to credit institutions and the turnover is computed differently than for other taxpayers, according to the specifics of the banking industry.
Different percentages will be due from credit institutions in the following years:
2% on turnover for the period January 1 2024–December 31 2025; and
1% on turnover starting from January 1 2026.
Companies carrying out activities in the oil and gas sector
Companies carrying out activities in the oil and gas sector and that have a turnover exceeding €50 million will have to pay CIT and the minimum tax on turnover for the period January 1 2024–December 31 2025. The percentage is 0.5% and is applied to the turnover, adjusted for tax purposes (computed according to the same formula used for the minimum tax with general applicability).
From January 1 2026, companies from the oil and gas sector will have to pay the minimum tax with general applicability.
Final thoughts
EY Romania recommends that companies analyse the potential impact of the minimum tax on turnover and be prepared for its application from January 1 2024, under the current form of the law. It is expected that before the end of 2023 there will be additional clarifications made to the tax legislation, or application norms, to help Romanian taxpayers on the practical side.
