Here is a summary of the tax changes as of 2025, which have just been approved by the authorities a few days ago. We briefly explain below each important change and what each of them means for individuals and companies in Romania.
Romanian microenterprises have long benefited from a more favorable tax regime compared to regular corporate taxpayers. However, the upcoming tax changes as of 2025 aim to restrict who will be able to enjoy these lower tax rates. Here’s how:
As of 1 January 2025, the maximum annual revenue threshold for a company to qualify as a microenterprise will be cut from 500,000 EUR to 250,000 EUR. Then, as of 1 January 2026, this annual revenue threshold will drop even further, to 100,000 EUR.
To determine whether a company stays within this limit, authorities will check its revenue as of 31 December 2024 (for the 250,000 euro threshold), and then again on 31 December 2025 (for the 100,000 euro threshold). If a company’s revenue surpasses the new thresholds, it can no longer pay tax under the microenterprise regime (1% or 3% or annual revenue) and must transition to the standard corporate tax regime (16% on profit).
For some business owners who have grown comfortable with the microenterprise tax system, this shift could lead to higher tax costs starting with 2025 tax year.
Start considering whether your company will exceed these thresholds, not just based on current revenue, but also projections for 2024 and 2025. If you’re close to the cut-off, you may have to plan for future tax costs, or your overall growth plans. Surpassing the threshold by even a small margin could trigger a shift to a higher tax obligation. On the plus side, companies well under these thresholds can continue to enjoy the microenterprise taxation regime for a while longer, but start carefully planning for the future.
With the tax changes as of 2025 it is more and more difficult to manage a microenterprise company in Romania.
One of the most notable parts of the tax changes as of 2025 is the complete elimination of the salary tax incentives that have thus far supported employees in the software development, construction, and agri-food sectors. Historically, these tax incentives provided partial or sometimes full exemptions from certain payroll taxes (especially full exemption from income tax of 10%). They allowed companies to offer competitive take-home pay to skilled workers in these sectors.
Why the change?
From a government standpoint, continuing these exemptions indefinitely cuts deeply into the authorities’ tax revenues and makes it difficult to narrow the fiscal deficit. Coupled with mounting pressure from the European Commission, the newly formed Romanian government now feels under pressure to phase out these incentives.
Thus, as of the 1st of January 2025, any special exemptions on salary taxes in the software development, construction, and agri-food will be removed. This means employees in these sectors will see their net salaries affected if employers do not adjust the gross salaries to compensate.
Companies may choose to renegotiate salaries, provide additional benefits, or explore alternative perks (like health insurance, flexible schedules, or professional development programs) to offset the impact on employees.
Individual shareholders have enjoyed an 8% dividend income tax rate in Romania, which is notably lower than in many other European countries. Nevertheless, the government plans to raise the income tax due on dividends to 10%. This is one of the important tax changes as of 2025, and will apply starting with dividend distributions made starting with 1 January 2025. This measure will affect everyone who derives income from company dividends, whether Romanian residents, foreign residents, or legal entities.
If you rely on dividends for a portion of your income, this change might require you to reassess your investment strategies. While a 2% increase might not sound substantial in percentage points, it can add up quickly for high-volume investors or individuals who rely on dividend distributions for their day-to-day expenses.
The change may influence how businesses choose to distribute earnings, whether they make additional dividend payments in late 2024 or wait until 2025, but pay the higher tax rate. Some might opt to retain more profit within the company to fund business growth or guard against future downturns.
The authorities have chosen to extend a key benefit that helps employees who earn the minimum wage in Romania. For individuals whose gross pay is set at the national minimum, a 300 RON portion of their salary, that employers may choose to pay on top, will remain exempt from payroll taxes in 2025. This measure is designed to protect the most vulnerable employees. Essentially, it ensures that the lowest paid employees have some breathing room and can retain more of their paycheck.
For employers, maintaining this exemption might also help with turnover and morale, especially in industries where minimum wage is the norm. However, it’s worth noting that this continued exemption applies only to those strictly on the national minimum wage. If someone’s salary is even marginally above that threshold, the 300 RON paid extra won’t be tax-free anymore.
Founded in 2008 as TAX IQ, our company has gained extensive expertise over the years, allowing us to effectively utilize our experience to benefit our clients’ best interests. Over time, we have succeeded to build a solid reputation as trusted tax advisor for the entire community of Romanian expats.