Tax changes in Romania starting with 1 January 2025

The changes in question have been adopted given the significant budget deficit and the need to balance it.

The main fiscal changes include an increase in the dividend tax, changes to the microenterprise tax regime which limits its application going forward, elimination of tax exemptions in the IT, construction, and agriculture sectors, and the reintroduction of the tax on special constructions. Their general applicability began on 01.01.2025, with some exceptions.

Almost all the newly introduced tax changes were previously outlined within the World Bank's report on Romania’s fiscal system published in March 2023 and assumed within the National Recovery and Resilience Plan (PNRR).

The World Bank report recommended several improvements to the tax system, out of which we highlight the following:

• Revising the threshold for applying the microenterprise tax regime and lowering it to align with the VAT registration threshold.
• Increasing the dividend tax rate to 10% to align it with the nominal personal income tax rate, thereby reducing the gap between salary taxes and taxes on company earnings.
• Eliminating tax exemptions for workers in IT, construction, and agriculture sectors.

A new additional measure is the reintroduction of the tax on special constructions, which was previously applicable in Romania between 2014 and 2016.

Dividend tax

The dividend tax rate has increased from 8% to 10% for dividends distributed starting with 2025.

For dividends distributed from interim profits and not paid during 2024, the tax rate remains at 8%.

Microenterprise tax regime

The threshold for the application of the simplified tax regime has been reduced from €500,000 to €250,000 starting 1 January 2025 and will be further reduced to  €100,000 from 1 January 2026.

The threshold for applying the microenterprise tax regime should be checked both at the end of the previous fiscal year and during each quarter of the fiscal year. If the threshold is exceeded in a fiscal period, the Corporate Income Tax regime becomes mandatory starting from the respective fiscal period, without the possibility of reverting to the microenterprise tax regime. Companies must take into consideration that when assessing if the revenue threshold is exceeded, one must consider also the anti-fragmentation rule which looks at revenues registered by related entities.

Another important change is the repeal of the condition that companies must have consulting and/or management services of no more than 20% of total income to apply the microenterprise tax regime. Therefore, starting with 2025, such companies may also opt for applying a microenterprise tax regime if all other conditions provided by the law are fulfilled.

Elimination of sector-specific tax exemptions

Tax exemptions applicable for employees in the construction, agriculture, and IT (development of computer programs) sectors have been repealed. Thus, starting with the income earned from January 2025 by employees in these sectors, the income tax exemption, respectively exemption from social security contributions are no longer applicable.

(Re)introduction of the construction tax

The construction tax, previously applicable in Romania between 2014 and 2016, has been reintroduced by GEO no. 156/2024.

Construction tax is due by:

• Romanian legal entities.
• Non-resident legal entities carrying activities through a permanent establishment in Romania.
• Legal entities with a registered office in Romania, incorporated under EU legislation.

For constructions part of the public/private domain of the state or administrative-territorial units, the tax is due by taxpayers who have such constructions in administration, concession, free use, or lease.

The tax is computed by applying a 1% rate to the value of constructions existing in the taxpayers' patrimony as of 31 December of the previous year. The value of buildings for which local taxes are due to local tax authorities is deducted from the value of constructions subject to construction tax.

The Construction tax is declared and paid in two equal installments by 30 June and 31 October to the state budget.

Within 90 days, the Ministry of Finance will issue methodological norms regarding the application of the provisions regarding the construction tax.

Considering all the abovementioned provisions are effective starting with 1 January 2025, taxpayers must be aware and prepare for efficient management in the context of an unpredictable tax environment.

Moreover, considering that Romania’s budget deficit is estimated by the Ministry of Finance to be approximately 8.6%, there is an expectation for further tax changes to be adopted in 2025 by the Romanian Government.