Navigating Tax & VAT Changes: Analysis Of GEO No. 31 For Microenterprises In Romania – Sales Taxes: VAT, GST

The Romanian fiscal legislation governing microenterprise income
taxation has witnessed significant amendments with the enactment of
GEO no. 31 of 2024. This article provides a structured analysis of
the regulatory modifications, focusing on the maintenance of
taxable income ceilings, criteria for identifying related
companies, and revisions in Value-Added Tax (VAT) exemptions,
offering insights into their implications for taxpayers and
entities.

Maintenance of Taxable Income Ceilings for
Micro-enterprises

The fiscal legislation applicable to the taxation of income
obtained by micro-enterprises maintains the ceiling for taxable
income at €500,000. Individuals have the right to own only one
micro-enterprise, whether through direct or indirect ownership.
However, when determining the €500,000 euro ceiling, it’s
essential to consider that this limit also includes the income of
some ‘related’ companies. GEO no. 31 of 2024 defines the
concept of ‘related’ companies concerning microenterprise
income taxation.

Regulation of Related Companies in Microenterprise Income
Taxation

According to GEO no. 31 of 2024, companies are considered
“related” if one of the following scenarios applies:

• If a Romanian legal entity holds more than 25% of participation
  titles or voting rights in another Romanian legal entity, directly
  or indirectly, or has the authority to appoint or remove the
  administrator or the majority of board members, an affiliation
  relationship exists between the two companies. Additionally, the
  owner of the participation titles has decision-making power over
  the other company.




• When a Romanian legal entity is owned by another Romanian legal
  entity with over 25% ownership of participation titles or voting
  rights, directly or indirectly, or if the owning entity holds the
  right to appoint or remove administrators or the majority of board
  members, an affiliation relationship persists. The owner of the
  participation titles retains decision-making authority within the
  analyzed company.




• An affiliation exists between a Romanian legal entity and
  another entity if a person, directly or indirectly, holds more than
  25% ownership of participation titles or voting rights and has the
  authority to appoint or remove administrators or the majority of
  board members in both entities. If this person is also a Romanian
  legal entity, the verifying entity accumulates their income.
  Additionally, if the owner of the participation titles is also a
  Romanian legal entity, their income is accumulated within the
  €500,000 ceiling.




• A Romanian legal entity is affiliated if it has one or more
  shareholders/associates with over 25% ownership of shares or voting
  rights, directly or indirectly, and these shareholders/associates
  engage in economic activities through authorized natural
  persons/individual enterprises/family enterprises/other forms of
  organization without legal personality. In this scenario, the
  income recorded according to applicable accounting regulations is
  accumulated with that of the Romanian legal entity or other related
  enterprises. When determining the €500,000 ceiling, the income
  from independent activities of company participants, such as
  authorized trades or free professions, is also considered.

Implications for Taxpayers and Entities

The regulatory framework requires a thorough evaluation of
income aggregation, including revenues from related entities and
independent activities of stakeholders. For example, individuals
involved in authorized professions must report their gross
self-employment income, contributing to the overall revenue pool
for microenterprise taxation.

Additionally, declarations for fiscal vector modification for
the year 2024 must be submitted by April 15, 2024. Adhering to
regulatory criteria throughout the fiscal year emphasizes the
importance of retrospective analysis using December 31, 2023, data
to ensure compliance with legislation.

Revisions in VAT Exemptions

There have been notable changes in VAT exemptions related to
supplies to public hospitals, including the removal of exemptions
for certain activities through legislative measures. Prior to the
enforcement of these changes, there were differing interpretations
of procedures among hospitals, highlighting uncertainties in
regulatory execution.

Starting from March 29, 2024, VAT collection becomes mandatory
for certain types of supplies, leading to changes in compliance
standards in the healthcare sector. However, exemptions remain for
specific supplies to hospitals owned by entities with non-profit
objectives, promoting alignment with societal welfare goals.

To sum it up, the regulatory amendments within GEO no. 31 of
2024 signal a shift in fiscal governance, necessitating proactive
engagement and diligence from stakeholders to ensure compliance and
mitigate regulatory risks.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.