Nearly 35pc of companies will close on mandatory minimum tax, says CCIR Deputy Chairman Dimitriu

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Nearly 35 percent of the existing companies in Romania will close as a result of the enforcement of the mandatory minimum tax, Deputy Chairman of the Chamber of Commerce and Industry of Romania (CCIR) Sorin Dimitriu told a conference on Tuesday on the mandatory minimum tax.

‘Out of the more than 600,000 existing small and medium-sized enterprises, only 12,000 are paying taxes, which make up 85 percent of the revenues collected by the Government.

When the mandatory minimum tax is enforced, nearly 35 percent of them will disappear. More than 200,000 companies are not making revenues, do not pay taxes, but they operate,’ said Dimitriu.

State Secretary with the Finance Ministry Gratiela Iordache said that ‘more than one third of the existing companies are already loss making. There are many taxpayers having sustained losses for 4-5 years in a row.’

‘Most of the companies in similar situations are operating in real estate, retail trading, wholesale trading, consultancy and accountancy. These are all profit making branches in times of economic prosperity. Nonetheless, they are reporting losses. On the other hand, the social security fund, which we are fuelling, is facing a deficit,’ said Iordache.

Given the context, the mandatory minimum tax could be a solution for the recovery of the Romanian business environment, said Dimitriu.
‘The mandatory minimum tax is a solution that helps tell viable and nonviable companies apart. At the same time, it is a way of boosting confidence in the business environment. Given the current economic context, the mandatory minioum tax is absolutekly necessary,’ said Dimitriu.

There are currently 110,000 companies reporting business turnovers smaller than RON 10,000 each, according to the CCIR official.

The business executives having attended the conference criticised the decision of enforcing a mandatory minimum tax on corporate revenues, as well as the tax table established for its payment. The mandatory minimum tax entered into force on May 1.

Companies will have to pay an annual tax of between RON 2,200 (some 500 euros), for annual revenues smaller than RON 52,000, and RON 43,000 (nearly 10,000 euros) for revenues in excess of RON 129 million.

The commercial companies still recording profits will continue to pay a 16-percent flat tax, which should not be smaller than the minimum limit for the annual revenues brackets where they fall.

For the computation of the mandatory minimum tax total revenues derived from any sources as recorded on December 31 of the preceding year will be considered minus stock variation revenues; revenues from corporeal and non-corporeal immobilisations, and operational revenues representing the share of Government subsidies and other investment financing resources; revenues from the reduction or cancellation of provisions for which no deduction has been granted; revenues derived from the cancellation of debts and other penalties due to the Government that were not deductible spending upon the computation of the taxable profit; revenues derived from insurance claims, as well as other non-taxable revenues expressly stated in agreements and memoranda approved under normative acts.

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