Taxation of micro-enterprises, the bone of contention between Brussels and Bucharest

The European Commission asked the Ciolacu government to reduce the turnover ceiling for the taxation of micro-enterprises from 500,000 euros to 88,500 euros, in accordance with the recommendations of the World Bank, according to sources from the Bucharest Executive cited by G4Media, Economedia and Hotnews. If this measure is not implemented in the next six months, our country risks permanently losing 300 million euros from the PNRR (National Recovery and Resilience Plan) funds for not fulfilling the respective milestone of the assumed fiscal reform.

This proposal comes in the context where, in 2023, the PSD-PNL coalition has already reduced the ceiling for micro-enterprises from 1 million euros to 500,000 euros, imposing a 16% profit tax on SMEs that exceed this amount, instead of the 1% tax applied to micro-enterprises. The negotiations between the Government and the European Commission continue, and the final decision must be taken in the short term by the authorities in Bucharest to avoid the loss of funding from the PNRR.

Regarding the taxation of micro-enterprises, several changes have taken place since 2018. Before 2023, the turnover ceiling for micro-enterprise taxation was 1 million euros, with a tax of 1% on turnover. In 2023, this ceiling was reduced to 500,000 euros, and companies with a turnover between 500,000 and 1 million euros pay a profit tax of 16%. In the fall of last year, the Government decided that, from January 1, 2024, micro-enterprises with revenues below 60,000 euros should pay 1% tax, and those that exceed this threshold up to the level of 500,000 euros and that carry out certain specific activities should pay a tax of only 3%. This tax is paid by micro-enterprises carrying out the following activities: publishing of computer games; editing of software products; creation of custom software (customer-oriented software); information technology services; hotels and other similar accommodation facilities; accommodation facilities for holidays and short periods; caravan parks, campsites and camps; other accommodation services; restaurants; catering for events; other food services; bars and other beverage service activities; legal activities - only for companies with legal personality that are not fiscally transparent entities, established by lawyers according to the law; general medical assistance; specialized medical assistance; dental assistance; other activities related to human health.

We note that the number of companies that have the micro-enterprise regime has been greatly reduced in 2023, following the entry into force of the provisions of Ordinance 16/2022, which reduces the turnover threshold for taxation to 500,000 euros. According to ANAF data, if in 2022 there were 876,182 active micro-enterprises, in 2023 their number decreased to 495,488, and at the end of the first quarter of 2024 it was reduced to 459,417.