Romanian government’s newly proposed fiscal measures for 2024 have been revealed in mid-September, are set to have significant implications for both private entities and everyday citizens. These measures, igniting spirited debates in Parliament, are seen as a double-edged sword.

Detailed information regarding these changes can be found on HotNews.ro (Romanian).

1. Micro-Enterprises Taxation Adjusted: Micro-enterprises with a turnover above €60,000 or those falling under specific CAEN codes will be taxed at 3%, while others face a 1% tax. This new taxation policy takes effect on January 1, 2024.
2. Special Taxes for Larger Corporations: Companies with turnovers exceeding €50 million will pay a 1% turnover tax if this amount is higher than their 16% profit tax.
3. Banking Sector Faces Additional Taxes: Besides profit tax, credit institutions will pay an extra turnover tax—2% in 2024 and 2025, reducing to 1% in 2026.
4. Taxation on IT Sector: Tax exemption on income for IT employees will be eliminated for salaries exceeding RON 10,000 gross, effective until December 31, 2028.
5. VAT Increases:
   • Social housing, high-quality foods, photovoltaic panels, thermal solar panels, and high-efficiency heating systems see VAT increase from 5% to 9%.
   • Fitness centers, amusement parks, and recreational activities will now be taxed at 19% up from 5%.
   • Non-alcoholic beverages and foods with added sugar content (minimum 10g per 100g of product) also see a VAT increase from 5% to 19%.
6. New Sugar Tax Introduced: Non-alcoholic beverages with added sugar will be taxed RON 40/hl (for 5-8g/100 ml of sugar) and RON 60/hl (for over 8g/100 ml).
7. Meal Vouchers: These will now be subjected to CASS (health insurance contribution).
8. Excise Taxes: There will be increases on tobacco and alcohol.
9. Luxury Tax: Special taxes will be imposed on luxury homes and cars.
10. Freelancers (PFA): A new 10% health insurance contribution tax is introduced for freelancers, capped for those earning less than 60 minimum wages.
11. Holiday Vouchers: These are now exclusive to public sector employees earning less than RON 14,000 gross, with an increase in their value from RON 1,450 to RON 1,600.

Expert Analysis

In an article on Panorama.ro, Daniel Anghel from PwC Romania voiced concerns over the measures. Anghel underscored the increased burden on the private sector, the potential disincentive for investments, the risk of companies migrating, and a blow to Romania’s competitiveness on the international stage. The absence of in-depth impact studies further compounds these issues, casting a shadow over the government’s revenue predictions intended to offset the budget deficit

He informed that, the business turnover tax will have the most significant impact on companies, with sectors like energy, auto, tobacco, pharmaceutical, and construction being most affected. This form of taxation is rarely practiced in developed countries since high turnover does not necessarily translate to high profits.

The absence of rigorous analysis over time has led to a diminishing tax base with fewer contributors to the state budget and health fund, impacting expenses negatively. Fiscal facilities should be time-limited, evaluated, and possibly eliminated to prevent fiscal inequity.

He also explained that the proposed fiscal measures were announced without genuine consultation, and the government is fast-tracking them to control the deficit. There is a need for fiscal consolidation; however, tax increase should not be the sole solution.

With Romania’s fiscal landscape undergoing significant alterations, the coming months will undoubtedly be crucial. As the government navigates through implementing these measures, the private sector and the Romanian citizens brace for the impending economic shifts