The correct application of the profit tax requires knowledge of the categories of taxpayers concerned, the tax rate, the rules regarding the deductibility of expenses and the applicable fiscal terms. Errors in determining the tax can lead to fiscal differences and ancillary obligations.
Next, the main rules regarding the profit tax are presented, with an emphasis on calculation, deadlines, applicable tax regimes and declaration obligations.
Summary:
- The profit tax is applied to the fiscal result, determined by adjusting the accounting result with non-taxable income, non-deductible expenses and tax deductions, according to the Fiscal Code.
- The standard tax rate is 16%, and the micro-enterprise regime is applied separately, depending on the income ceiling and the legal conditions, with automatic transfer to profit tax when the ceiling is exceeded.
- The calculation, declaration and payment of the tax are strictly monitored by ANAF, including through RO e-invoice and SAF-T, and errors or delays generate interest, penalties and increased risk of fiscal control.
What is corporate tax
The profit tax represents a direct tax applied to the gains obtained by legal entities from their economic activities carried out on the territory of Romania. This fiscal obligation is a main instrument for collecting revenues to the state budget, being regulated by the Fiscal Code and the Fiscal Procedure Code. In essence, the profit tax is a mandatory contribution that companies pay to the state, in proportion to the profit made.
According to the legislation in force, the following categories of taxpayers are obliged to pay profit tax:
– Romanian legal entities established according to national legislation;
– foreign legal entities with permanent establishment in Romania or with the seat of effective management in the country;
– foreign legal entities and non-resident natural persons who carry out economic activities through an association without legal personality;
– foreign legal entities that obtain income from real estate located on the national territory;
– resident natural persons associated with Romanian legal entities within associative structures.
Among the entities subject to this tax obligation are commercial companies regardless of the form of organization (joint-stock companies, limited liability companies, limited companies), autonomous governments, cooperative and agricultural companies, financial and credit institutions, organizations and associations with the status of a person legal, as well as foundations and other similar entities that carry out economic activities throughout the country.
However, there are also categories of taxpayers who benefit from exemptions from the payment of profit tax. These include public institutions financed entirely from the budget, the State Treasury, non-profit organizations that comply with the conditions provided by law, trade union and employer organizations, officially recognized religious cults, accredited private education institutions, the National Bank of Romania, the Romanian Academy and its research institutes, the compensation and guarantee funds established according to the specific legislation, as well as the owners’ associations established in the form of a legal entity, except for those that obtain income from the exploitation of the common property.
Tax rate and applicable tax regimes
The standard profit tax rate in Romania is set at 16%, positioning our country in a competitive area in relation to other member states of the European Union. It is applied to the taxable profit determined according to the provisions of the Fiscal Code and represents the basis of calculation for the majority of taxpayers subject to this fiscal obligation.
The Romanian fiscal system provides for special tax regimes for certain categories of companies. Micro-enterprises benefit from a preferential tax treatment, being exempt from paying profit tax and subject to micro-enterprise income tax instead. The special regime of micro-enterprises is applied through tax rates of 1% or 3%, calculated on the turnover achieved, depending on the level of income and the field of activity carried out. The 1% rate applies to micro-enterprises with incomes not exceeding the ceiling of 60,000 euros, while the 3% rate is applicable to micro-enterprises that exceed this level of income or that carry out activities corresponding to certain codes CAEN for which the legislation expressly provides for this quota.
In order to benefit from the micro-enterprise regime, companies must simultaneously meet several conditions:
– not to exceed the income ceiling established by law (updated periodically by Government decisions);
– not to carry out activities in areas excluded from this regime (banking activities, insurance, capital markets, gambling);
– to comply with the conditions regarding the shareholding structure and the social capital;
– not to be in special situations provided by the legislation (reorganization, liquidation).
The applicable tax regime can significantly influence the tax burden of a company, which is why choosing and maintaining the right regime requires a careful analysis of the specifics of the activity and the development prospects of the business. The transition from one regime to another implies the observance of specific procedures and may have important implications on future tax obligations.
Calculation of income tax and tax deductions
The determination of the fiscal result is the starting point in the calculation of the profit tax and involves the adjustment of the accounting result with the elements provided by the fiscal legislation. The taxable profit is obtained by applying the following formula: Accounting result + non-tax deductible expenses – non-taxable income – tax deductions = taxable profit.
The taxable income includes all the receipts made by the company from its economic activities, including the income from the sale of goods and the provision of services, the income from the transfer of the use of the goods, the income from financial investments, the earnings from exchange rate differences and other similar incomes. On the other hand, certain categories of income benefit from preferential treatment, being considered non-taxable, such as dividends received from other Romanian legal entities, income from certain compliant restructuring operations or income from refurbished reserves and provisions that have not been deducted previous tax.
Deductible expenses represent those expenses incurred for the purpose of generating taxable income and which respect the principles of necessity, reality and documentary justification. These include:
– expenditure on wages and mandatory social contributions;
– expenses with raw materials, materials and energy;
– expenses for services performed by third parties;
– fiscal depreciation of tangible and intangible assets;
– financial expenses within the limits provided by the legislation;
– protocol expenses within the limit of 2% of the calculation base;
– Sponsorship and patronage expenses are deducted from the profit tax due within the limit of the minimum value between 20% of the profit tax due and the ceiling calculated by applying the rate provided by the Fiscal Code on the turnover, respectively 0.75% of the turnover.
The category of non-deductible expenses includes those expenses that, although they can be recorded in the accounting, are not accepted by the tax legislation for the determination of taxable profit. Relevant examples are fines and penalties to public authorities, protocol expenses exceeding legal limits, corporate income tax expenses, provisions that do not comply with tax conditions, expenses with goods of the nature of stocks or tangible assets missing from management, and other expenses that are not directly related to economic activity.
Payment, declaration and tax deadlines related to profit tax
The profit tax payment system in Romania offers taxpayers the flexibility to choose between two ways: quarterly payment or annual payment with advance payments. It is worth mentioning that this option must be exercised at the beginning of the fiscal year and maintained for at least two consecutive fiscal years, thus ensuring stability in the relationship with the tax authorities.
First of all, for taxpayers who opt for the quarterly payment, the calculation, declaration and payment of the tax are made up to and including the 25th of the first month following the end of each quarter. Thus, for the first quarter the declaration and payment deadline is April 25, for the second quarter it is July 25, for the third quarter it is October 25, and for the fourth quarter the obligation is finalized by the annual profit tax declaration, with a general term of Submission and payment March 25 of the following year. The declaration used in this case is Declaration 100, which must be completed with the actual data of the reporting period.
Taxpayers who choose the annual payment have the obligation to make quarterly advance payments calculated based on the estimated profit for the current year. Advance tax payments shall be made quarterly, up to and including the 25th of the last month of each quarter, respectively March 25, June 25, September 25 and December 25, in compliance with the rules applicable in the case of the amended fiscal year. And the final payment is made by March 25 of the year following the one for which the tax is calculated, using the 101 declaration. There are exceptions for certain categories of taxpayers, such as those who obtain income mainly from agricultural activities, for which the deadline for submitting the declaration Annual is February 25.
The declaration process involves the submission of the corresponding fiscal documents to the competent fiscal bodies, accompanied by the annual financial statements and other supporting documents. Declarations can be submitted in electronic format through the e-statement system or in physical format at the ANAF counters. Failure to comply with the declaration and payment deadlines attracts the application of interest and late penalties, calculated for each day of delay starting from the day immediately following the due date, according to the provisions of the Fiscal Procedure Code.
Micro-enterprises, ceilings and corporate tax transition
The fiscal regime of micro-enterprises represents an important facility offered by Romanian legislation to support the development of small businesses. In order to benefit from this regime, companies must comply with an annual income ceiling that is periodically updated through the normative acts in force. According to the current regulations, the ceiling is set at the equivalent in lei of 500,000 euros, calculated at the exchange rate communicated by the National Bank of Romania valid at the end of the financial year.
Exceeding the income ceiling automatically determines the transition from the microenterprise income tax to the profit tax, starting with the quarter in which the exceeding occurred. This transition involves the modification of tax obligations and the methods of calculation and declaration of due taxes. Companies must notify the tax authorities about the change in the tax regime by submitting the form 010 ‘Declaration of mentions’ within 30 days of the occurrence of the event.
The process of switching to the corporate tax requires special attention from the administrators, as it involves the adaptation of the accounting and tax record systems to the new requirements. Companies must ensure that they comply with all obligations related to the new tax statute, including:
– recalculation of the tax due for the quarter in which the exceeding occurred;
– Adjusting the accounting system to reflect the new requirements;
– modification of the internal fiscal reporting procedures;
– Updating medium and long-term fiscal planning.
The tax implications of the regime change can be significant, as the return to corporate tax requires a different basis of calculation and requires closer monitoring of deductible and non-deductible expenses. Also, companies must take into account the fact that the return to the micro-enterprise regime is possible only under certain conditions and after a minimum period of application of the profit tax.
Fiscal errors, penalties and non-compliance risks regarding the declaration of profit tax
Incorrect declaration of income tax can generate important financial and legal consequences for companies. Among the most common errors in practice are:
- the wrong calculation of the taxable profit by including non-deductible expenses as deductible;
- omitting taxable income from tax returns;
- incorrect application of tax deductions and facilities provided by law;
- non-compliance with the deadlines for declaring and paying tax obligations;
- insufficient documentation of tax deducted expenses;
- Errors in the application of tax treatment of related party operations.
In the current context of fiscal digitization, these risks are amplified by the interconnection of the reporting systems used by the tax authorities. Data transmitted through the system ro e-invoice They are used by ANAF in the risk analysis processes, including to verify the correctness of the declared income for the purpose of the profit tax. Inconsistencies between the invoices reported in the system and the information in the accounting records or in the tax returns can lead to adjustments to the taxable base and the initiation of tax controls.
SAF-T reporting (Declaration D406) introduces the obligation to periodically provide detailed information on transactions, accounting balances, revenues and expenses, structured according to the technical requirements established by the tax authority. Broadly speaking, a correctly implemented SAF-T reporting solution allows the automatic correlation of accounting data with those used to determine the tax result, contributing to reducing the risk of errors in the calculation and declaration of profit tax.
The tax sanction system provides for penalties that are calculated as a percentage of the amount due, to which are added late interest for each day of delay. According to the Fiscal Procedure Code, late penalties are calculated with a rate of 0.01% per day of delay, applied to the amount not paid on time. These sanctions can significantly increase the final cost of tax obligations and can seriously affect the company’s financial situation, especially in the case of prolonged delays.
The use of RO e-invoice and SAF-T systems determines a high degree of fiscal transparency, and the reported information may be used by the authorities for cross-checks between accounting records, tax returns and supporting documents. In this context, the lack of correlation between the data reported through these systems and the calculation of the profit tax can be qualified as a significant fiscal risk.
In order to minimize non-compliance risks, companies must implement rigorous internal tax control procedures, ensure that the accounting data used in the corporate tax calculation are aligned with the information reported by RO e-invoice and SAF-T and that the staff responsible for tax reporting It is constantly updated on the applicable legislative and technical requirements.
In the situation where errors are identified in the submitted declarations, they can be corrected by submitting rectification statements. It is important that these corrections are made as quickly as possible to limit the impact of late penalties and interest rates. The rectification statements must be accompanied by the appropriate supporting documentation and detailed explanations of the nature and reasons for the corrections made, including by correlation with the data previously reported through the ANAF electronic systems.
Income Tax Optimization – Strategies and Recommendations
Effective management of corporate income tax is not only limited to compliance, but also to the identification of legal tax optimization strategies. A proactive approach can significantly reduce the tax burden and release resources for investment and development. Here are some key recommendations:
- Strategic Tax Planning: Analyze the structure of income and expenses in detail to identify optimization opportunities.
- Full use of deductions: Be sure to benefit from all tax deductions permitted by law by properly documenting each expense.
- Depreciation optimization: Choose the most advantageous tax depreciation methods for the company’s assets.
- Provision management: Set up tax deductible provisions for future risks and expenses, respecting the legal conditions.
- Monitoring of legislative changes: Keep up to date with legislative changes and adapt your tax strategies accordingly.
In conclusion, the profit tax represents a major tax obligation for legal entity taxpayers, with direct implications on the tax result, cash flows and the level of fiscal risk assumed. The correct determination of the taxable base, the proper application of the deductibility rules and compliance with the declaration and payment obligations are essential for ensuring compliance with the provisions of the Fiscal Code and the Fiscal Procedure Code.
The rigorous management of the profit tax, correlated with the accounting records and the mandatory fiscal reports, including those made through the electronic systems of ANAF, contribute to limiting the exposure to tax adjustments, penalties and controls. In essence, only a structured approach to taxation allows companies to effectively manage tax obligations and maintain an adequate level of financial predictability, in accordance with the applicable legal framework.
References:
- https://lege5.ro/gratuit/g43donzvgi/cota-de-impozitare-codul-fiscal;
- https://www.mfinante.gov.ro/static/10/mfp/legislatie/cod_fiscal/titlul_2.htm;
- https://static.anaf.ro/static/10/iasi/material_informativ_28-01-2025.pdf.
