PM Boc: The minimum business tax has achieved its goal, will be replaced with a mandatory annual tax in certain areas

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The minimum business tax has achieved its goal of eliminating non-tax companies, but it will be replaced as from January 1, 2010 with a mandatory tax in certain areas where tax evasion is harder to quantify, Prime Minister Emil Boc said on Wednesday at the Government House.

The minimum tax is levied proportional to the business turnover of companies, whereas in levying the new mandatory business tax the activity of the companies will be considered. For instance, in the case of restaurants, the tax could be computed against the number of tables waited.

Since May 1, 2009, the companies have been paying a minimum business tax of between RON 2,200 (nearly 500 euros), for total annual revenues smaller than RON 52,000, and RON 43,000 (nearly 10,000 euros) for revenues in excess of RON 129 million.

The companies reporting total annual revenues of between RON 52,001 and RON 215,000 are paying a minimum annual tax of RON 4,300 (nearly 1,000 euro), while the companies deriving between RON 215,001 and RON 430,000 in revenues have to pay a minimum tax of RON 6,500 (nearly 1,500 euros).

For the RON 430,001 – RON 4.3 million earnings bracket, the minimum tax is set at RON 8,600 (nearly 2,000 euros); for the companies on total annual revenues of between RON 4.3 million and RON 21.5 million the minimum tax is set at RON 11,000 (2,500 euros), while companies making between RON 21.5 million and RON 129 million a year are paying RON 22,000 (5,000 euros) in the annual business tax.

Commercial companies working on a profit may still choose to pay a flat tax of 16 percent of their earning if such a tax does not go below the minimum tax for the earnings bracket within which the company in question falls.

When computing the minimum tax, total revenues derived from all sources, as recorded on December 31 of the preceding year, are considered minus earning from stock variations;

the production of corporeal and incorporeal assets; operational revenues as a ratio to the Government subsidies and other resources for investment funding;

revenues from the cancellation or annulation of provisions for which no deduction has been awarded, revenues from the cancellation of debts and penalties due to the Government that were not considered deductibles when taxable profit was computed, as well as earnings from insurance claims awarded by insurance companies, and other non¬taxable earnings expressly mentioned in agreements and memoranda approved under normative acts.

A recent analysis by the Finance Ministry indicates that 2,000 out of the 617,525 corporate tax payers in existence in 2007 were generating 85 percent of the public revenues.

The number of companies having reported losses in 2007 stood at 242,106, or 39.2 percent of the total number of registered companies, for a business turnover of RON 134 billion.

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