Editorial by Miruna Enache, CCE-R Board Member | Transaction Tax Partner, CESA Tax Markets Leader, EY Romania

We are already well into the new year, and beyond the initial resolutions, February is a good time to reassess our plans and adjust them to the complex and sometimes surprising reality.

The Romanian government has announced a comprehensive fiscal reform plan aimed at reducing the budget deficit from 7.9% of GDP to 2.5% by 2031. This ambitious plan, part of the National Recovery and Resilience Plan (PNRR), includes sequential reforms designed to increase tax revenues and optimize budget expenditures. However, the sudden implementation of several tax measures in December 2024, without prior consultation with the business community, has raised concerns about their potential negative impact on investments, economic development, and the standard of living.

Increased Taxes and New Levies From January 2025, the dividend tax increased from 8% to 10%. This could discourage investments in the capital market and companies might face difficulties in attracting capital to finance development projects. Additionally, the threshold for micro-enterprises was reduced from 500K euros to 250K euros, with a further reduction to 100K euros in 2026. This will impact many small businesses, who need to reassess their financial strategies to comply with the new thresholds. The reintroduction of the construction tax calculated at 1% of the value of constructions, will affect companies that rent real estate assets, as well as companies in various industries that have a significant level of tangible immovable assets. This tax applies to the value of constructions existing in the taxpayers' patrimony as of December 31 of the previous year, excluding buildings for which building tax is due.

Elimination of Fiscal Benefits Fiscal benefits for employees in the IT, construction, agriculture, and food industry sectors are eliminated starting January 2025, as such increasing operating costs for companies in these sectors.

Mandatory Declarations and Compliance From January 2025, small taxpayers submit the D406 declaration (SAF-T), a tool for electronically transmitting accounting data to the tax authority. The use of the RO e-Invoice system for invoices issued to individuals in a Business-to-Consumer relationship becomes mandatory.

Excise Duties and Other Changes Excise duties on spirits, sparkling wines, gasoline, and diesel increase from January 1, 2025. Companies must also comply with a new version of the CAEN Nomenclature, requiring a review of current CAEN codes and possible modifications in the Trade Register.

Conclusion The emergency ordinance issued by the Romanian government in December 2024 has generated mixed reactions. While the government aims to increase revenues and optimize budget expenditures, the business community is concerned about the negative implications for the economy and their operations. The business community requested several clarifications and some of these requests are already subject to draft legislation that will soon be published (Norms for the Minimum Turnover Tax and Special Turnover Tax, as well as for the construction tax). While still optimistic about the evolution of Romanian tax legislation, I keep a prudent approach, ready for any challenges it may raise in the future!