10.04.2024

THE REDUCTION OF THE THRESHOLD FOR CATEGORIZING MICRO-ENTERPRISES IN ROMANIA WILL HAVE A NEGATIVE IMPACT ON BUSINESS, WARNS THE NATIONAL COUNCIL OF SMALL AND MEDIUM ENTERPRISES

A shift to a corporate income tax after lowering the threshold for categorizing micro-enterprises to 100,000 euros would generate higher inflation by passing on the increase in costs to the prices of goods, Romania's National Council of Small and Medium Enterprises has warned. The press release of the National Council of Small and Medium-sized Enterprises also says that this will reduce the competitiveness of Romanian goods and services and slow down, and may even lead to the abandonment of modernization/digitalization of companies.

The National Council of Small and Medium Enterprises rejects the reduction of the threshold for inclusion in the category of micro-enterprises from €500,000 to €100,000, resulting in the application of a 16% profit rate instead of 3% on income for micro-enterprises.

"If there is a shift to 16% corporate tax, after the reduction of the threshold for micro-enterprises to €100,000, the change in the tax system will have a negative impact on business: the increase in costs will be passed on to the prices of goods and services, leading to more high inflation; the increase in production costs generates a decrease in the competitiveness of Romanian goods and services and a loss of markets; the lack of liquidity at the company level will lead to reduced investment and a delay/abandonment of modernization/digitalization," the document says.

Also, the National Council of Small and Medium Enterprises draws attention to the fact that the repeated and short-term amendment of the tax legislation for micro-enterprises, such as the introduction from April 1 of new conditions for inclusion in the category of micro-enterprises, by aggregating the income of related enterprises for the ceiling of 500,000 euros, generates uncertainty and a complete lack of predictability for the implementation of business plans. In fact, the introduction of related enterprises in the calculation of the ceiling for micro-enterprises will affect a greater number of enterprises that will apply income tax than those that had revenues above €100,000 in 2023, explained representatives of the National Council of Small and medium enterprises.

Provisions that negatively affect micro-enterprises were introduced without the participation of business representatives and especially SMEs, thus failing to properly identify the needs of businesses in relation to the objective of the National Recovery and Resilience Plan. Under these circumstances, the National Council of Small and Medium Enterprises rules out any new amendment to the Tax Code in 2024 and considers that the amendment to the taxation system for micro-enterprises proposed in the Recovery and Resilience Plan will have a negative impact on business due to the increase of taxation, which will have an impact on the entire economy.

In addition, the National Council of Small and Medium Enterprises calls for a reduction in taxation of the workforce and the launch of all national and regional programs for the private sector worth €6.1 billion to make up the package of programs to support SMEs, considers that they are most affected in the current context of increased taxation.