Micro-company tax
Companies that have had an annual income of less than 500,000 EUR (equivalent to 2,500,000 RON) have the option of opting for the micro-enterprise tax regime in place of corporate tax (1) .
Eligibility conditions
The company can opt for the micro-company regime provided that:
1. it achieves a turnover of less than 500,000 EUR
2. it has at least one full-time employee (or part-time employees for at least full-time equivalent)
3. it achieves less than 20% of its turnover in the areas of consulting and management.
4. No more than 25% of the company is owned by a partner who also owns more than 2 companies subject to the micro-enterprise regime.
Income tax for small businesses : micro-company tax
Companies having chosen this regime will have to declare and pay, each quarter, a tax equals to 3% of their income (and not of their profit) or even 1% if turnover is lower than 60.000 EUR.
Possible option for the corporate tax
However, companies have the possibility of preferring the profit tax regime, at the rate of 16% of profit (and not of income).
Is the micro-enterprise regime more attractive than the profit tax regime?
That actually depends on the situation and on the profitability of the company: an unprofitable company is favored when it is subject to corporate tax, while a very profitable company is favored when it is subject to micro-company income tax.
Let us assume that:
CA is the turnover of the company
R is the company's rate of return
As the corporate tax rate on profit is 16% (of profits) while the micro-company tax rate is 3% (of income), the company that pays the tax on micro-enterprises will be favored if CA x 3% < CA x R * 16%
By simplifying this equation, it gives 3 < R x 16 and therefore R > 3/16 or R > 18.75%.
This means that companies with a profitability higher than 18.75% are favored by the micro-company tax system.
(1) the threshold was EUR 1,000,000 until 31.12.2022