New mandatory income tax for small Romanian companies may lead to bankruptcy

The recent news about the planned introduction of a 3 percent income tax for companies of up to EUR 65,000 turnover will most likely lead to bankruptcy for many small and medium companies, according to the National Council of Small and Medium Enterprises. In Romania, around 250,000 companies post losses, and the introduction of the mandatory 3 percent of income tax, instead of the profit tax will mean their end. “We're asking the Finance Ministry to commission an impact study because last year 250,000 companies were on a loss. This is real loss, not accounting loss. If you enforce the micro tax on income, you either trigger a drop in activity, or bankruptcy for these firms,” said Ovidiu Nicolescu, president of the National Council of Small and Medium Enterprises. Some other 100,000 companies had zero profit, and if only 10 percent of these go bankrupt, at an average of two employees per firm, around 100,000 people will be unemployed, according to the Council. The Council was not consulted prior to the proposed changes to the Fiscal Code. The Romanian Government recently decided to limit the turnover ceiling for microenterprises from EUR 100,000 to EUR 65,000, making it mandatory to pay the 3 percent tax on income below EUR 65,000 turnover. The new rule applies to companies which complied with the needed conditions as of December 31, 2012. Companies no longer need to have at least one employee and maximum nine to be considered as micro-enterprises. If a company exceeds the EUR 65,000 threshold during the year, it will pay the profit tax starting with the trimester when the revenue increase was noted, but the calculation will be made over the entire year. Romania has around one million companies, and after the Government announcement commentators argued the measure may lead to the bankruptcy of many small and medium enterprises. editor@romania-insider.com